New to Share Trading

[pompey11]

Hi

I really want to get into share trading and have been ready a couple of books.

Could anybody give me use good pointers of further books to read, etc.

Should I sign up for a education course by the likes of Australian Stock Report/Hometrader/Knowledge to Action etc. Are these good value for money, to get me into the market quickly.

What software should I buy?

Anybody keen to share their trading plans with me?

Anybody successful and keen to be a mentor?

Cheers for now

Pomps

 

[Gun It]

Hey Pomps,

You can't go past Benjamin Graham's 'The Intelligent Investor'. It isn't the easiest book to read (very dry and quite technical) but if you can get through it you will probably learn more from that one book than 20 more 'easy to read' stock investment books.

It is a book on fundamental, value based stock investing (i.e. you look for the intrinsic value in a stock rather that at charts etc).

If you buy the copy which has commentary on each chapter by Jason Zweig (it's the cheapest unabridged version out there) then skip the commentary on each section - in my opinion it doesn't add a whole lot of value.

I'll get around to reviewing it properly at some point - but it is definitely my favourite book on stock investing.

Gun It

 

[Sunfish]

Pointer No 1: Don't do it .... YET!

No 2: It's 75% psychology, 25% experience. Ease your way into it to gain the experience and to train your mind.

No 3: If you are a property investor DON'T do as many beginners do and go out and buy the banks. That gives you no diversity.

No 4: Remember that we are in a resource super-cycle and that world banking is on the verge of collapse.

No 5: Don't put too much faith in fundamentals or dismiss charts.

No 6: Trust your cape. http://www.youtube.com/watch?v=j4q-Q6LSfuI

Can't recommend any books. Don't read them.

 

[Sheryn]

Pompey


Have a look at The Chartist you can join up for a 2 week trial for $19.00.

Spend your $19 wisely by reading everything you can on the website.


Two points to remember...

1. You have to understand money management and not be under capitalised eg. have adequate funds to trade.

2. It will take you years to gain your experience.

http://www.thechartist.com.au/


Kind Regards
Sheryn


If you do join up for longer than the trial let them know I recommended the service to you as I think I may get an extra month's subscription or something.

 

[Cdro]

I spent several years trading stock options and would suggest that there is no substitute for experience. Start paper trading when the markets open tomorrow. Do that for a while before you start using your hard earned cash!

I also did a technical analysis course with SIA (now FINSIA or Kaplan I think?) that helped for my type of trading (although it's not for everyone - I was more into price patterns than fundamentals, and it worked well for me but many people prefer to know more about the company they are buying. I think both approaches are fine. Go with the approach you are most interested in as you'll probably be more likely to learn it and do well at it).

When I first started, the ASX used to run a competition where all the entrants were give a hypothetical $50K to trade for 8 weeks. Whoever had made the most at the end of the competition was the winner. This is how I started and I found it an enjoyable way to learn. Not sure if they still run it - this was 10 years ago now.

Good luck!

 

[willair]

Hi

I really want to get into share trading and have been ready a couple of books.

Could anybody give me use good pointers of further books to read, etc.

May take a bit to get your head around someone like this ,i had to read his Books several times, but once it's sinks in it will help you trade..
BTW I don't use any software just a large second hand whiteboard and make up my own charts,entry-exit points..


http://www.fooledbyrandomness.com/


http://www.edge.org/q2011/q11_3.html#taleb

 

[Belbo]

Can't recommend any books. Don't read them.

Right. The less well-read you are is certain to be to your long-term benefit. Look at the Catholic Church! You didn't hear about them advocating universal education in Latin in the 4th century, did you?

 

[BuildingBlocks]

Any share forum recommendations?

I did a bit of a search on these forums but wasn't having much luck

 

[Vesuprop]

Any share forum recommendations?

I did a bit of a search on these forums but wasn't having much luck

http://www.aussiestockforums.com
http://www.hotcopper.com.au

Those are two that I have found so far. As per any investment forums, posts are of varying quality / usefulness.

 

[Sunfish]

Any share forum recommendations?

It isn't that easy. I'm a long time hotcopper member but I've developed a pretty good BS filter.

I call it a gold mine but you must remember that gold mines have to dig and process a ton of dirt to get a couple of grams of gold. The odds are about the same on HC.

I must admit that, like here, I'm more interested in the social chat.

 

[BuildingBlocks]

Thanks all.

SF - I watched a season of the tv show "Gold Rush Alaska", so know how much dirt you need to process to see the gold flakes

 

[Sunfish]

Guess I should add that HC is the only place you'll get a heads-up on some penny dreadful with promise.

I'll give an example of BS: Goto the SBL thread and read the number of posts, the passion of the believers and the heat generated. But the bloody thing is 2.2 cents and has been in the cellar for years. I've made a dollar trading it in the past but it's chart is awful and I've been out of it for months. Chat sites can be useful contra-indicators.

The big winner I've had is listed on the TSX so I go to Stockhouse to pick up news and gossip. BEAUTIFUL chart. Rising for years but sometimes weeks between posts. Take no notice of the noise, or lack of it.

 

[BuildingBlocks]

On HC is there any way to change the forums so that you see threads (like SS has) rather than just a list of individual posts?

Or is this just the way it is?

 

[Amadio]

Take the online courses that the ASX offers.

Read Richard Farleigh's very short book on investing called Taming the Lion. This gives you an overview of global market forces, not just shares.

Don't jump on any online forums - they are appalling and full of pump-and-dumps.

Learn what a stop loss is.

Good luck.

 

[Telejazzer]

I used to trade options. I'll probably go back to trading when I feel like it and when I get some play money which I don't at the time being.

Anyway, have you read 'Trading in a Nutshell' by Stuart McPhee? I found it helpful when I started.

I used to do virtual trading with optionsXpress but not sure if they still exist.

It's up to you when it comes to reading. Some people learn by reading, some people learn by listening and some people learn by doing. Personally, when I go back to trading, I will do no less then six months paper trading before going live, or a virtual trading platform to practice on.

I used to attend ASX seminars which doesn't cost much (around $20 or something like that). The sessions are more technical in nature. I used to go to get a feel of what 'traders' think and listen to the questions they ask. They are after all, your competition.

 

[greedy2000]

Generally this is how most people get started on the market and why they lose money:

“I hate my job, I want to retire. But I need money to retire… how do I make money without working?…hmmmm…I hear the guys on Wallstreet make heaps of money… it cant be that hard?...I’ll Google it…..hey these guys will teach me to invest….I’ll do a weekend course and I’ll make millions…its easy…there’s a lot of reading… I can’t be bothered … I just want to invest now….I’m just going to stick my money in XYZ, Joe Bloggs said it was good at that BBQ 6 months ago….”


As a stockbroker, I can give you some advice:

-You will lose money, be prepared for that.

-There is no magic ticket, trading technique, secret system or one sure fire way to make a million dollars on the market. Just a lot of blood, sweat and tears.

-Get educated, if you are going to be successful you can’t be lazy, you need to read everything and have a strong passion for trading. You can’t learn everything you need to know in a weekend course or by googling a few sites (I wouldn’t waste my time with an “education provider”). Most education “providers” don’t equip you with enough ability to successfully trade the market. Most of my clients come from a background of having paid thousands for education, lost a stack of cash and pretty much have given up on doing it themselves.

-Don’t rush in, the market is happy to take your money, but when you don’t know what you are doing its hard to get it back.

-The “market” is a psychopath and will always find a way to screw you, so be warned. i.e. if you think you have discovered a guaranteed way to make money, generally you’re wrong. (if you do manage to find a way, keep it secret and you’ll be a billionaire in no time)

-Take everything with a grain of salt. Most research reports etc are marketing tools for us brokers to sell you stocks and earn a commission. Buy recommendations far outweigh sell recommendations… So if you read a report that says BHP will be $60 in 12 months time, that isn’t a guarantee that it will get there.

-Hot tips from mates, 9 times out of 10 end in tears. Your mates will generally only tell you about something they have already made a lot of money on it, by the time you look at it, the opportunity is lost and the probability is high that you will lose.

-Have multiple strategies. Buy and hold only works in a rising market, you need multiple ways to make money whether the market is going up, going down or going sideways.

-Technical analysis is a load of rubbish and so is fundamental analysis. So many people swear by one or the other. People like technical analysis because its easy to teach and is a way for people to trade something that they don’t know what it does or why its going up or down. Really its just reading tea leaves. Fundamental analysis is harder to teach, requires more skill but in the end its not a guarantee either. To be fair they are both useful to a degree, but the market is predominantly driven by greed and fear. You just need to be able to identify which wave to ride and when to get off.


-Trading shares isn’t a passive activity, it’s a second job.


If that is all too hard:

-Stick you cash in a managed fund / index fund and cross your fingers.

-Get yourself a full service broker and hope that he/she is better than a managed fund and still cross your fingers. You pay a premium for a full service broker, but a good one is well worth it.

 

[Gun It]

+ 1 to nearly everything greedy2000 said.

- Totally agree with going for index funds if it's all too much trouble but you still want to invest in the stock market. Beating the market is definitely not as simple as some education providers make it out to be and the low fees associated with index funds (especially ETFs) are quite tempting.

- Agree with the grain of salt with respect to broker reports. In the disclaimer section at the back (normally small print which runs for 2 - 3 pages) there is normally a section which covers what % of their stock recommendations are buy, hold and sell - a real eye opener!

- Don't necessarily agree with the multiple strategies point as trying to make money in all markets tends to be a fools game (the number of absolute return funds that blow up relative to long only funds tends to support this argument). Work out what you're comfortable with and stick with that (and if that's long only positions then do this until you're comfortable to do something more complicated).

- Interested in your view of technical and fundamental analysis. You state that should ride the wave (e.g. like the tech wave in the early 2000s) but know where to get off. Interested in how you know where to get off without having a framework to assess value.

 

[greedy2000]

- Don't necessarily agree with the multiple strategies point as trying to make money in all markets tends to be a fools game (the number of absolute return funds that blow up relative to long only funds tends to support this argument). Work out what you're comfortable with and stick with that (and if that's long only positions then do this until you're comfortable to do something more complicated).

Its highly unlikely that a single strategy will work in all market conditions and if your goal is to make money each month for your income you need something to fall back on when your main strategy isn't working. As an example in a flat market where shares are range bound selling options for income can provide an additional return used in conjuction with Buy and hold.

- Interested in your view of technical and fundamental analysis. You state that should ride the wave (e.g. like the tech wave in the early 2000s) but know where to get off. Interested in how you know where to get off without having a framework to assess value.

identifying the trends isn't the hard part, the hard part is as you suggested, identifying when to get off. I don't think there is a hard and fast rule but when a trend is taken over by the retail end of town that’s when to get off in my view.

What do i mean by this? well as an example a trend is generally set in place when the big boys starts buying a “sector” or a “stock” at a low. They then tell their institutional clients to buy, which then propels the price higher, this then gets feed to the brokers and the media who buy more pushing the price up higher, the last guys on board are your retail investors who are the last guys to invest before it all goes pear shaped.

Not all trends are the same but in short when your taxi driver is telling you buy something, its time to get out.

I have another rule which I call the "today tonight" or the "A Current Affair" rule. if you see someting on TT or ACA, like a guy sipping champange outside his mansion on the gold coast talking about how you should invest in...... the bubble is about to burst and get out.

 

[random]

edit - I should add too that just as your trading will turn out for you if your serious , this " has " worked well for "me" but that is just me.
And , I wouldn't read too much personally, eventually it just messed me up. Scan for your thing and then hone in. I wouldn't share my methods but on starting out, below worked well for me .

First and foremost , figure out what type of trading interests you. This is no 1. Without a firm idea , focus and direction , you'll just go in circles, do your head in and your dough .
2 , find info relating exactly, to the type of trading your interested in and from that , sort through and choose only the best one or two. One will stand out to you , add up , one is better than two , or 10 .
There's so much out there now and then all the advisory joints on top of that , they will tempt you, your head will spin and you'll lose all focus.
3 , chose and set up a platform , search out the stocks that suit your " chosen " technique and start following them , study their moves as apposed to what you are learning .
4 When you feel your ready , just put the minimum into your account and find your first trade that matches your technique exactly, don't stray . Stay from your ideas and learnings , without self discipline and your screwed.

Notes , you don't need that much info , you only need to know about your chosen technique.
Growth and spreading your wings from there, development, will happen naturally as your skill and understanding evolve .
Starting with the minimum account is good , it teaches you respect and because that's all that's in that account , it forces you to be smart with a trade and to insist on profit . Too much money in there and all discipline will fly out the window - because there's always more money- until it's all gone .
Your aim is to build up your account , not to load up your account. You use their money to trade , not yours.

For what it's worth , that's it . These principals have served me well for four years now and the one time I come undone , was when I began to stray , joined an advisory , and started listening to too many people .

Good luck

 

[random]

PS , be careful of the clubs too . Just use them for chat and light stock discussion . They'll also do you in otherwise as there's just so many ideals , techniques and opinions out there that again, it's just all too easy to get messed up.

You'll notice the best traders will only lightly discuss stocks or throw out the odd comment , market whatever .

2nd PS , I'd be careful right now too , we have no idea where the market is headed right now , or anything else for that matter. But there is one thing , it hasn't had it's second dive yet . But eh , as long as your accounts only the min' and your dying to get started , that doesn't really matter for now I spose . If it dumps on a small account , no biggie and you know the reason.