The way NOT to trade

Well Ive started an interesting discussion on risk.
To put things into perspective with my trades, we are talking a few hundred pounds not thousands.

My experiment, so too speak, was brought on by claims of people making big gains every day,week, month etc starting with only small amounts of capital i.e. £250.

I made over 30% today and I won 2 out of 3 trades. The 2nd trade was just plain stupid and came more out of greed than any kind of rational thinking.
 
I know what you are saying. If its a few hundred quid risk capital and you lose the lot, you can feasibly replace that straight away with another few hundred so low % risk per trade is not really required (or possible really).

However, when you get to an amount that you consider to be a "trading account" then it becomes much more of an issue. By this I suppose I mean an account of sufficient size that would take time to replace if you blow it.

Although my account is not "large" it certainly fits the above description. I do not beleive I am taking undue risk by using 3% per trade.
 
If by chance this account got to a decent size, I would not carry on risking such stupid amounts.

A friend of mine traded near the end of the tech stock boom and with very bad money management saw his entire savings wiped out. He lost about £20,000 that he had taken years to save up, he had no stop losses, no experience and had risked all of his capital. He was drawn in by promises of riches from tech stocks and it was the first (and last) time he invested money.
 
I remember hearing people boasting that they were making more money "trading" in the tech boom - ie buying any old stock and they were making more by holding these stocks than they were from their day job.

They never speak about trading/ investing any more! nuff said.
 
What's the difference between investing and trading, and don't say time scale 'cause that's bollocks!
 
My view on this:-

Investing = buying and holding a stock (or any asset) on the basis that it's value will increase over the longer term or produce an investment income.

Trading = buying (or selling) an asset/ instrument on the basis that you are speculating that it's value will increase/ (decrease) and you can cash in for a profit. entry and exit points determined by a set of rules.

These points could be argued and I am sure they will be- but hey it's a starter for 10!
 
PS I don't think timescale is bollocks

Have you ever heard of an intraday value investor, frantically trading in and out of the markets based on fundamental analysis?

You can of course have a trader who holds positions long term- months is quite possible.
 
DF, look at what you have stated, and then tell me you cannot apply this to any time frame, with any stock, with any security. Personally i'm not bothered it's just talk, youv'e got to do it for real, it's like the majority of this forum it's all just words on a screen. What we all need is reallity, but as they say, IT'S GOOD TO TALK!
 
I would agree you can apply a trading methodology to pretty much any timescale and any market/ instrument.

However, I do not think the same is true of investing
 
Personally DF i think the difference between buy and hold, and trading( investing and trading )if you like, is the difference between knowing and not knowing. I may be wrong, but if you know why Buy and Hold. And don't give me any shit about HEDGING!
 
I invest in something because I believe its future value to be more than it is now. i.e. a good investment

I trade in something because I believe the price will go in the direction which i trade over a period of time, irrespective of what I believe its future value to be.
 
The truth is no one "knows"

Trader or investor, no one knows what the markets will do next. I doubt any credible trader will claim this.

How about this:-

An investor buys an asset based on its perceived value and the belief that it will either increase and/ or produce an income.

A trader exploits an edge over the market with the aim of extracting a profit over a large number of trades.
 
to be fair, what aa99 is saying is almost identical to myself.

Take property as an example of an investment. property is a common investment as it generally goes up in value over time and can also produce a rental income, ie a good investment over the long term (usually).

However, take trading a stock or index as an example of trading. You may beleive that the FTSE will reach 5000 sometime this year. However, if your trading rules say go short, the correct thing to do is go short. Really, forming an opinion of where you think the market should be when trading should be avoided if at all possible. trade what you see as they say!
 
well,

exploiting an edge means using a set of trading rules which gives a greater probability of profit v loss over a large number of trades.

exploitling on the other hand is probably alcohol related :LOL:
 
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