Newbie sanity check required.

[soulsong]

Hi all,

Quick Intro: my name's Tess. I've been fascinated with daytrading since I was little but I never really had the courage to try it for myself. I currently work as a software developer for a city trading firm, and I spend all day writing code to analyse option portfolios for the traders. This is about as close as I've come to the razor's edge, as it were.

In maybe 6-9 months I'm likely to be emigrating to the US to marry my fiance, and the last thing I want to do is get another job as a coding monkey. I probably wont have a US work permit for a while anyway. What I do have is a large chunk of capital from selling my house. So suddenly I have the means, motive and opportunity to daytrade, and here I am reading up on all the latest developments and wondering (once again) if it's really for me.

Initially I looked at spreadbetting, in particular CMC (deal4free.com) since it's tax free etc. After a short while doing sb paper trades I soon realised that my natural preference for scalping did not sit well with spreads like 5c for MSFT etc. Obviously lack of experience on my part was a very significant factor, but really I found the spreads 'depressing' and it put me off making any trades when I realised how much I'd be instantly down.

After this I downloaded Cybertrader's simulator, and discovered that direct access is much more liberating. I could have tight stops I was comfortable with, and I found it much easier to keep my discipline. (When spread betting it was hard to set tight stops, because it felt like I'd lost so much already.)

Having decided to try the direct access route, I looked for brokers. It seems everyone uses IB. I've looked and looked and really I dont see much alternative to them. At the moment I'm part way through their application procedure. I'm trying to figure out what on earth a W-3 form is, which one I need, and how to fill it in. They really need to make it easier.

At some point on this journey of discovery I decided I really liked Medved's QuoteTracker, which I've been playing with courtesy of free real-time quotes from scottrade.com.

Also, maybe because I'm coming to this from a standing start with no prior trading bias, I instantly fell in love with the Nasdaq Level II screen and got myself a live feed to play with from marketfeed.com. ($40/mth) I understand Level II is being replaced with something new and sexy later this year, but for now I'm all agog with tales of the Ax and her deviousness. I am sure Naz will be gratified, especially when the time comes for me to avail myself of his course. . Frankly I dont know how anyone trades without Level II data!

So my current plan is to open an IB account and use their TWS software (or QuoteTracker integration) to learn how to trade the Nasdaq Level II on small, small stakes until I feel like I have half a clue. Once I'm consistent with the profit, then I might feel better about using more of my capital. Then maybe when I quit my job and move abroad, I'll still have a small income. Maybe I'll even be able to avoid working for someone else in the future.

So really I'm looking for a sanity check here. Are there any alternatives I've missed? Any other brokers I should consider? What about software? Is it worth (as a beginner) investing in something like Tradestation, or is that just a luxury for those who are experienced enough to use it? Anyone want to convince me I'm better off sticking to sb, or swing trading, or doing TA on the FTSE?

thanks for any advice,
~Tess

ps Superb site, good community. well done :cheesy:

 

[Helenqu]

Hi Tess,

If you've fallen in love with Nasdaq L2 then go for it You need a real passion for what you do to get you through the tough times

You seem pretty sorted to me.


Good luck

 

[FTSE Beater]

Hi Soulsong

Welcome to T2W

You wanted a sanity check so here it is - WHAT ARE DOING UP AT 1:45 IN THE MORNING

I would only go with a spreadbetter to test the water and see how you could trade, but if your going to be trading US Stocks, then don't bother with SB's - Go straight for IB and trade in 100 lots to get used to everything. You would need to put $25,000 into the account, to trade more than 3 times a week.

If you fancy Level 2, give it a try and go on Naz's course - if you find it's not for you then look into TA, or a combination of the 2.

HTH

 

[Naz]

Hi Tess,

Its great that you've seen the light re NL2.If you are going to the US to trade you'll find that most daytraders use it to trade Nasdaq stocks.If you get a little knowledge about it before you go it'll put you streets ahead of the game when you get there.

Having that live data feed giving you level 2 is a great beginning.Just find a reasonable charting package so that as a beginner you can look at both at key turning points.

You said

"I downloaded Cybertrader's simulator, and discovered that direct access is much more liberating. I could have tight stops I was comfortable with, and I found it much easier to keep my discipline. (When spread betting it was hard to set tight stops, because it felt like I'd lost so much already."

As a daytrader you need every edge you can get. As you said direct access gives you edge to take your trades.The level 2 screen will show you in advance the next possible move before it happens.

You dont need $25k to open accounts to trade the Nasdaq,if you do your homework you'll find companies doing it for much less.Companies for instance that let you trade within their own major company account.You just need to talk to them and find out what they're offering.

 

[Trader333]

Hi Soulsong,

The form for tax that needs to be filled in for IB is W8-BEN the others do not apply.

The advantage, for you intending to move to the US, is that an IB account will be ideal but do bear in mind that their telephone support is not good.

Tradestation: You cannot get version 7 in the UK and I would ask why do you want it anyway ? I do use it but it is expensive and there are other very good packages out there. The only reason I can think that would be of benefit for you is if you want to write systems in code and extensively backtest them.

If you have already established that you want to use Level II then a visit to Naz is probably as important as anything else at the moment.

Good Luck


Paul

 

[soulsong]

Originally posted by FTSE Beater
You wanted a sanity check so here it is - WHAT ARE DOING UP AT 1:45 IN THE MORNING

This is what comes of having a boyfriend who lives 8 hours behind you!

Thanks to everyone for the advice and welcome.

~Tess

 

[FTSE Beater]

You dont need $25k to open accounts to trade the Nasdaq,if you do your homework you'll find companies doing it for much less.Companies for instance that let you trade within their own major company account.You just need to talk to them and find out what they're offering.

Hi Naz

I do apologize. I remember you saying a while ago companies were starting to do this - I didn't realize they had taken off already

 

[soulsong]

The form for tax that needs to be filled in for IB is W8-BEN the others do not apply.

Hi Paul,

I don't suppose you'd know what Question 11 in Part III of form W8-BEN means?

"I have provided or will provide a statement that identifies those notional principal contracts from which the income is not effectively connected with the conduct of a trade or business in the United States. I agree to update this statement as required."

Should I check the box, or not? I can't figure it out.

thanks,
~Tess

 

[Trader333]

W8-BEN

Hi Again Soulsong,

I would tick "Yes" for this as it is just agreeing to notification of a change in circumstances if appropriate. Unlikely that it will apply but if you tick no then you may find you dont get the account opened.


Paul

 

[soulsong]

Re: W8-BEN

Hi Again Soulsong,

I would tick "Yes" for this as it is just agreeing to notification of a change in circumstances if appropriate. Unlikely that it will apply but if you tick no then you may find you dont get the account opened.
Paul

Well I ticked yes and it immediately said "We cannot open an account if you tick yes." So I said no... Duh.

~Tess

 

[Trader333]

D'oh

Hi Soulsong,

I apologise, as you say a lot of filling this in is not clear in terms of what the understanding is and in this case I obviously got it wrong. But no harm done as at least you were not cast out into the wilderness never to be able to use IB. It seems like they get a lot of wrong answers as they do give the option to change your mind. Have you completed the trading questions and answers course yet ?

Good Luck


Paul

 

[soulsong]

Yes the exam sections were easy enough - just had to bear in mind that the correct answer was always "if anything goes wrong, it's your fault, unless we accidentally allow you to trade past your margin, in which case it's ours."

It reminds me of Microsoft certification exams where the correct answer is always the one that makes Microsoft look best...

Now I just have to decide if I have the courage to transfer $25000+ into an account and actually DO this...

~Tess

 

[RogerM]

Now I just have to decide if I have the courage to transfer $25000+ into an account and actually DO this...

~Tess

Ahhh! Now that is a different question altogether I have heard Mr Charts suggest that you should restrict your trades to 100 shares at a time until you can CONSISTENTLY make $50 per day. Then increase to 200 shares and $100 per day, 300 shares and $150 per day and so on. That way you get to keep your account intact until you have a track record of success.

Keeping trades small and losses small means that you can have a whole string of losses without it being anything more than tedious. For example, a 20c loss on a trade of 100 shares is just $20, or about £13 - hardly a catastrophe to a $25k account.

If you have the resources I would suggest transferring a bit more than $25K into the account so that the first $10 loss doesn't take you below $25k and so unable to trade when you want to.

Good luck.

 

[soulsong]

Hi Roger,

Your advice confirms and encourages me in what I had already decided to do. Thankyou. The first goal of $50 a day trading 100 shares a time is a good one. It will be interesting to see the impact of the execution issue, relative to my paper trading where I buy instantly at the offer and sell at the bid.

Your point regarding putting "a bit more" than $25000 into the account is well taken. I was intending to start with $30000. I imagine that if I managed to lose $5000, then probably I should decide that trading aint my thing.

~Tess

 

[JonnyT]

Hi Tess,

I think you need to be more realistic. You should budget for a 50% drawdown before you decide this aint your thing. This game isn't easy.

JonnyT

 

[soulsong]

Thanks, I'll bear that in mind.

~Tess

 

[Mr. Charts]

Hi soulsong,
Welcome to the world of those of us who trade the US intraday for a living - and enjoy it.
I have to strongly disagree with the last poster who talked about a 50% drawdown. You should never be in a situation where your drawdown is more than 3%-4%. That has certainly been my experience over the years.
Have a good read through:

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=5026

for some up-to date US intraday share trading comments.

Lucky lady emigrating to the US - I hope you have a great life ;-)

 

[soulsong]

Hi soulsong,
Welcome to the world of those of us who trade the US intraday for a living - and enjoy it.
...
Have a good read through:

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=5026

for some up-to date US intraday share trading comments.

Lucky lady emigrating to the US - I hope you have a great life ;-)

Thankyou very much!

I'd read those threads a while ago but actually prior to seeing what level II can do, and on re-reading they are much more useful.

~Tess

 

[Trader333]

Level II Screen

Hi Soulsong,

I have been looking at the L2 that you use but they do not give a large or good enough screenshot on their site. What options are available in terms of can you band prices by say 3c and can you also highlight a market maker and is there the option to see a + sign when a MM increases their bid etc ? I would appreciate your comments on this or even a pasted screenshot if possible.

Thanks



Paul

 

[soulsong]

Re: Level II Screen

Hi Soulsong,

I have been looking at the L2 that you use but they do not give a large or good enough screenshot on their site. What options are available in terms of can you band prices by say 3c and can you also highlight a market maker and is there the option to see a + sign when a MM increases their bid etc ? I would appreciate your comments on this or even a pasted screenshot if possible.

Thanks
Paul

Hi Paul,

I wasn't using marketfeed.com's own L2 screen, but just the data as a feed to Quotetracker. As it happens I decided to switch to money.net for my L2 feed because I could get L1 and L2 together for almost the same price as L2 alone with marketfeed (which limited the number of symbols to about 4 as far as I could tell).

Both money.net and marketfeed.com have their own java-based L2 applets. Neither are particularly good. Neither show MM price changes, nor #Best, nor banding of prices. The money.net one does do MM highlighting, and offers several other free tools which are interesting.

Let me know if you find something that shows price changes and #Best, other than the major trading systems.

I could always write an L2 viewer for myself I suppose!

~Tess