New to trading and think I have worked out how to start. But is this practical?

[richy96]

Hi folks

I've spent a great deal of time on this site the last 10 days or so studying and reading and absorbing

Thanks to all the advice I have read here I now have a pretty good idea of what kind of trader I *could* be

What I would like to ask now is if, given my personal circumstances have I have worked this out right - or should I rethink

OK a bit about me. Im not young (md 50's) and come from a very technical background (electronics)

I've worked full time both as an electronics engineer (reverse engineering and repairing industrial electronics down to component level - often with no circuit diagrams)

I also worked for a good few years full time as a Computer Programmer

I've been self employed now for 21 years and kept my head above the water.... and a roof over it!! In this time I have been a PC builder/retailer and AV/Satellite engineer/installer/supplier

I've also (during a particularly bad 'transitional period' downturn in my business that lasted a couple years) traded antiques and collectables bought in House Clearance Auctions and sold on line which I did successfully enough to stay solvent if not earning a full living from it.

I am still self employed and I've been interested in trading for a while, but got really interested when one of my customers put me onto this as he is a day trader/swing trader - in fact tomorrrow I am going to spend a couple of hours with him as he kindly said he would show me around his setup

The nature of my full time business is that it earns a good income but I probably only have to 'work' about two-three days a week to earn that. A lot of it is is repeat business/renewals which does not take a lot of effort. This is seasonal of course, sometimes I am working flat out, then for a few months I need do pretty much nothing at all

When I am 'working' my free time is much more likey to be in afternoons into the evening

I want to trade initially to earn extra money for 'nice things' rather than need to earn a living. I am into classic cars (restoration and showing), and that as a hobby is not cheap so if I could help finance that it would be a start!

OK so that's me

I've pretty much come to the decision that I would be most comfortable as a day trader, using TA as my main tool (I am very scientifically/ mathematically minded) and trading short term positions (as in short-time not necessarily as in short selling)

I also am thinking that US shares would best suit me due to most of my spare time being afternoon onwards

However i don't have a enough capital to trade directly because of PDT - probably I would be most comfortable with a £4000 - £5000 margin account - however if I could turn this profitable I would be happy to increase that, maybe by putting in another £1000 per month from my main income to build up a good pot of money (plus assumedly whatever i was making from trades)

Because of that I am thinking that a CFD account would be best as I understand I can then trade that market with less capital (bypassing the PDT rule).

Also I am not a gambler and want to have only the market itself to worry about, not a dealer who is my counterpart making up prices against me i.e MM or Spreadbet company) so I am thinking a DMA CFD account is the way to go. Plus it is more like trading 'proper' share prices? Or am I being to cynical regards MM and Spread Bet brokers?

So what I am mainly asking is, whether given the amount of free time and capital I could reasonably invest into this, is this the best route for me to start my journey?

If so could anyone recommend a good low commision DMA CFD broker which I can use to trade my chosen market? Also of course one who offers a 'paper account' to practice one

Or, given what info I have supplied here (and ask away if you feel I should say more - or maybe i talked too much already lol).... then if you feel I am getting this all wrong and should be looking at another path then please let me know your thoughts

Looking forward to hearing some responses and views

Cheers
Rich

 

[NVP]

Rich ....honestly ?

the us market is not geared really to helping you ..we in europe get it a little easier regarding regulations and available methods to trade .........

it doesnt make trading any easier though !

personally I would suggest you take it steady and spend another 6 months researching the markets and your realistic chances of finding a practical way to make money here

if its a hobby then welcome - its a fascinating subject and will give you something to become absorbed in and keep the mind active (I am 55)

as a realistic way to make regular income it is a minefield .......and will turn you inside out if you allow it .........so the odds are greatly against you

good hunting
N

 

[richy96]

@NVP
Thanks for taking the time to reply. My thoughts towards the US market were mostly because of the nature of my business (the one that makes me a decent living) I am much more likely to be free in the afternoons so I was picking up on info and advice I had read in the many FAQs and Tutorials suggesting it was a suitable place to trade

I'd be very interested to hear the downside of that market, is it that the entry criteria are more difficult and outside the range of my available capital and/or method of trading? Or more about these 'restrictive regulations' you mention

I'm going to spend a couple hours this morning with the guy who is one of my customers (completely non related to trading) and as I mentioned he has been trading for about six years now and is profitable. That should be an interesting meeting and I am looking forward to it very much and seeing his setup in action. BTW he's a bit older still and used his pension fund when he retired to get started.

He doesnt' trade the US markets (I already asked) but I have a zillion other questions about how he selects his markets, how he determines his entry and exit points and how he manages risks.

One thing I hope this site has taught me already is at least what questions I should be asking

It's great I think, that I have someone who is very enthusiastic and willing to show me the ropes. And this site of course

Rich
PS - what is the demographic of retail traders, are they mainly young (and graduates?) or are they more mature... or just getting old like me lol?

 

[Splitlink]

I do not want to pour cold water on your ambitions but I must have my say, here, as someone who started much like you, the difference being that I had retired.

I consider myself intelligent in business but have never, truly, mastered trading and, being retired, have spent a lot of time on it. I make some money, or I would not have survived as long as I have, but nothing to shout about.

I hope that, if you do go ahead, you are prudent with account management. Personally, having been with a broker, I think it is a very fast way to lose a lot, because you are dealing with full contracts and, at 10 pounds per point minimum, losing can be a nasty experience. Now,I'm spreadbetting and happier.

I warn you in a friendly manner-- trading gets to you, control it or it will control you! Regardless of what many say, there is a very thin line between trading sensibly and gambling and, when I read debates on this point my only conclusion is that it all depends on the individual.

 

[ffsear]

I warn you in a friendly manner-- trading gets to you, control it or it will control you! Regardless of what many say, there is a very thin line between trading sensibly and gambling and, when I read debates on this point my only conclusion is that it all depends on the individual.

Wise words!

 

[timsk]

Hi richy96,
Welcome to T2W.

You've covered a lot of ground in your two posts, so I'll just address a few of your points that stand out . . .

. . .I'd be very interested to hear the downside of that market, is it that the entry criteria are more difficult and outside the range of my available capital and/or method of trading? Or more about these 'restrictive regulations' you mention?. . .

Every asset class has its pros and cons. The problem is that what one trader likes about a given market and cites as their reasons for trading it, another trader will dislike and give as their reasons for not trading it. For example, U.S. equities traders say they have 4,000+ stocks available to them to trade on any given day and that, from such a large selection, they can always find a few that are trending - or range bound - or whatever it is they want. While futures traders are going out of their minds on the days when the ES has barely moved a single point in an hour or more, equities traders are happy as Larry. On the other hand, futures traders will say that having 4,000 stocks to trade is all well and good, but you've got to find the right ones to trade! Needles and haystacks. Even if you have a watch list of just 20 or so - you've then got to track them. Sods law dictates that the best one to trade is never the one you're looking at! And so it goes on. One man's meat . . .

Each market has distinct characteristics which you must understand and be in tune with. One major one with equities is position size. It's very easy to end the day or week up in terms of points won - but with a negative PnL. This results from losing more on the losing trades than you make on the winning ones. So, having a methodology that ensures you're trading the correct position size is vital. It's easy to get it wrong when you trade a $5.00 stock one minute and a $80.00 stock the next. Allied to this is volatility. You could trade two $50.00 dollar stocks, the first typically moves no more than $0.50 cents in a day and the second might have a range of $5.00. If you treat them both the same you'll get into trouble. Generally, speaking, futures traders don't have these worries. However, as per my last paragraph, they do have worries of their own that the equities traders don't have.

As NVP says, spend some time learning about all the major markets and how they correlate and impact one another. When you do eventually decide which is the best one for you, you'll do so based on your own research and preferences - and not because of what someone else has pointed you towards.

. . .I'm going to spend a couple hours this morning with the guy who is one of my customers (completely non related to trading) and as I mentioned he has been trading for about six years now and is profitable. That should be an interesting meeting and I am looking forward to it very much and seeing his setup in action. BTW he's a bit older still and used his pension fund when he retired to get started. . .

Assuming this chap knows his stuff - he could be a real asset. The caveat is don't trade the same market he does and in the style he does without making sure that it suits you. Think of it in terms of shoe size: If he's a 9 and you're a 10, you're never going to get into his shoes. Also, don't accept what he says blindly without questioning it. It's entirely possible to have two very successful and highly profitable traders with polar opposite views about the markets and how they function. No matter how impressed you are with this chap, always do your own research and try to verify what he tells you from another source.

. . .PS - what is the demographic of retail traders, are they mainly young (and graduates?) or are they more mature... or just getting old like me lol?

On T2W the demographic is pretty broad. The one major common denominator is that most of us are male. We have very few female members and, generally, there are very few female traders. The most common reason offered for this is that women have less appetite for risk than men; the latter like to gamble more than women.

Anyway, I look forward to hearing how you get on with your trading friend - and seeing where you go from here. Enjoy the journey!
Tim.

 

[richy96]

Hi Tim et al
Thanks for the responses once again. I appreciate that and feel at least I must be asking the right questions

Heres a few more thoughts and a bit about todays meet.

Hi richy96,
Every asset class has its pros and cons. The problem is that what one trader likes about a given market and cites as their reasons for trading it, another trader will dislike and give as their reasons for not trading it.

If I am understanding correctly then there is not necessarily an advantage or disavantage to a chosen market, it's more 'one man's meat is another man's poison'

Assuming this chap knows his stuff - he could be a real asset. The caveat is don't trade the same market he does and in the style he does without making sure that it suits you. Think of it in terms of shoe size: If he's a 9 and you're a 10, you're never going to get into his shoes. Also, don't accept what he says blindly without questioning it. It's entirely possible to have two very successful and highly profitable traders with polar opposite views about the markets and how they function. No matter how impressed you are with this chap, always do your own research and try to verify what he tells you from another source.

OK spent a couple of hours today - and it turns out what you say is very pertinent.

He is not a friend as such just an acquaintance and obviously (at least to me) this guy is trading successfully having done it for 6 yrs+ and made money from it however though I found the meeting very informative and he was keen to show me, I couldn't see me trading in the same way. He is (to my mind) a swing trader come position trader. One trade he was showing me he is currently 50p per share down a long Barclays position of 8000 shares.

He doesn't seem at all worried about this, he's just keeping the position open. Apparently he bought them around £2.85 expecting them to rise and they carried on down but he says he isn't about to lose £4k on the deal so he is sitting with them until they go back up which he reckons they will at some point. Then he was explaining how he would by some more shares at various steps as they rise which effectively would reduce his break even price to maybe £2.70.

I could understand the maths and the logic but personally I could never see myself trading that way or getting into such a position to start with, I'd have cut my losses a long time ago. But then I am getting way ahead of myself here, this guy is the trader I'm just a wannabee!

Of course I didn't voice this opinion! but instead I thought of a method to stop such a situation arising in the first place however it seems so simple it can't possibly work, there must be some basic flaw... I'd feel embarassed to post it here, but then again I suppose what is the worse that could happen other than make myself look silly

On T2W the demographic is pretty broad. The one major common denominator is that most of us are male. We have very few female members and, generally, there are very few female traders. The most common reason offered for this is that women have less appetite for risk than men; the latter like to gamble more than women.

Interesting.... my wife is also very intersted in trading. At least I suppose that means I don't have to worry about repercussions from her if/when I mess it up!!

Actually she thinks her female way of thinking could be advantagious


Rich

 

[timsk]

Hi Rich,

. . .If I am understanding correctly then there is not necessarily an advantage or disavantage to a chosen market, it's more 'one man's meat is another man's poison'. . .

Broadly speaking, this is my view, yes. Others may reply differently. Here's another example, but instead of comparing/contrasting two different markets, it focuses on the pros and cons of just one: Forex.

. . . .One trade he was showing me he is currently 50p per share down a long Barclays position of 8000 shares.

He may have a large account and this 'drawdown' may be well within his risk parameters. You might be uncomfortable with the trade - but he might not be. In and of itself, it doesn't mean necessarily that the trade was bad at the start or, even, that it's turned bad now. On the other hand . . . ;-)

. . . . He doesn't seem at all worried about this, he's just keeping the position open. Apparently he bought them around £2.85 expecting them to rise and they carried on down but he says he isn't about to lose £4k on the deal so he is sitting with them until they go back up which he reckons they will at some point. Then he was explaining how he would by some more shares at various steps as they rise which effectively would reduce his break even price to maybe £2.70. . .

This is more contentious and many members will advise against averaging down in the strongest terms possible. That said, it's a common tactic in the world of buy and hold investors.

. . . . I could understand the maths and the logic but personally I could never see myself trading that way or getting into such a position to start with, I'd have cut my losses a long time ago. But then I am getting way ahead of myself here, this guy is the trader I'm just a wannabee! . . .

Prepare to be shocked about the positions you get into that you think could never happen! Generally speaking, most members would advocate cutting losses early. However, if you have a trading plan that allows for trades to go against you by this amount (and, hopefully, the chap you saw today does), then it may be fine.

. . . . Of course I didn't voice this opinion! but instead I thought of a method to stop such a situation arising in the first place however it seems so simple it can't possibly work, there must be some basic flaw... I'd feel embarassed to post it here, but then again I suppose what is the worse that could happen other than make myself look silly. . .

Absolutely! It's probably a perfectly sound idea - so let's hear it.

. . . . Interesting.... my wife is also very interested in trading. At least I suppose that means I don't have to worry about repercussions from her if/when I mess it up!!. . .

Unless you do something she told you not to do or, conversely, fail to do something she instructed you to do!

. . . . Actually she thinks her female way of thinking could be advantageous. . .

Two minds are better than one and having a sounding board from someone who has your best interests at heart is helpful. The potential problem is if either of you are competitive and wants to beat the other. That could be destructive and bad news for you as, allegedly, women make better traders than men!

Tim.

 

[richy96]

OK Tim - in the morning - too late to explain it tonight and without doubt I can't imagine there is nothing new in my way of thinking which makes me think there is a massive flaw that I don't see.... but then again I think there is 'enough' in it to give a P.E. and can't for the life of me see why there would not be

So why not tomorrow I'll post up and lets see... or I should maybe try it on a 'paper money' account first and let you all know if it went wrong (I will own up honestly) and ask why it failed too

By the way got around today to trying my first attempt on a paper trade today - it almost went compeltely bad by 1cent I would have been stopped out with a £75 loss

As it was I scraped it by the seat of my pants - prices rallied and I'm currently £8.36 down and now waiting for open of trade tomorrow. If i do get away with this one, as far as I am concerned I will be pretty damn lucky as I already see what I did wrong (bought into a bull market at too high a price) but hey ho let's let's learn that's wh ywe are here yes?

And OK so it's just 'paper' money but to me it is still plenty real enough!!

Rich
Oh PS - thanks for explaining an example of 'averaging down. I had read this in the FAQs and also seen it stated as a big no-no but didn't understand it until your reply. Now it is clear what it means. Cheers