Newb to trading, a little help with the basics long post

Discussion in 'Professional Trading' started by jomama, Apr 26, 2005.

  1. jomama

    jomama

    Alright, first post here so go easy on me. Maybe a little bit of my experience so far can help you guys better understand where I'm at and warn of any problems I might have in the near future. Who knows I could be doing something everyone knows to be too risky or idiotic and you could save me the trouble. I've embedded some of my newbie questions starting at the 4th paragraph, feel free to skim, the first couple paragraphs is background info that you can skip if you want.

    I've been interested in trading since high school. Read a book about it, not an entertaining "trading for dummies" book, but a hardcore technical analysis book. I was a bit pumped up and then I lost $500 in a joint ameritrade account with a friend by investing in Calpine Corp (CPN). Yes, an energy company, right before Enron and 9/11 wiped out everything thereafter, and getting fee-ed to death by ameritrade brought the account to negative. (they let us go with $0 though). Yeah, $500 is a pretty substantial amount of money when you are flipping burgers.

    So now in the middle of college I get challenged by a friend at MIT to a virtual stock competition with him and his MIT stock buddies. I treat it as a game, and without knowing it stumble upon a "pattern" of selling short on short term nasdaq stocks that seems to work, and I win (never holding anything overnight).

    So I decide maybe I could try this with real money. So after 6 months of research (is this enough?) and hundreds of charts printed out from a very specific group of stocks, I fine-tune my short selling, test it by paper-trading for a month (is this long enough?) and open up an ameritrade account (probably a bad choice for broker??). My short selling strategy seems to go through about 30 mutations before reaching a competent form usable with real money and real-time trading. Only prob is I don't have a job or the ability to trade short, so I try "reversing" my short selling method (I have stacks of charts where the short-sell failed which I use to form the basis of a long strategy.) Made about $300 in a couple of weeks with $3000 starting up. Stupidly held something overnight but luckily it went up and made me a profit. But I hate going long, I'm a pessimist.

    So anyway, a relative opened up a short account on ameritrade and I started with $7,000 in there (100% of my cash), shorted for 3 weeks and make a 23.8% gain, nearly orgasming after an 8% gain in one day. As it works, I lost 3% immediately thereafter to balance out the significant gain, and had to stop trading due to school. So I'm about to graduate and have no clue what to do....is it possible to work a 9-5 job in the U.S. and trade? How do I trade the other markets if I want to trade overnight? Should I go balls out and see what happens with just trading a few months?

    What I've learned so far (what else should I learn? any tips?):
    1) Be a robot, picking the right stock to short is a lot easier than knowing when to cover. So always have a set point where you are going to buy to cover. One unforeseen problem I had was I focused SO MUCH on picking the right short stock that I completely ignored when to cover.
    2) Never trade anything below $9-10, unless you are able to stomach the intraday swings.
    3) Don't think about how much you could have made if you had bought to cover earlier or later, you'll rarely do it perfectly.
    4) Don't be greedy, stick with a preset gameplan as human tendencies are the traders enemy.
    5) Only risk how much you can lose, and never think about the money. If you trade because you care about the money it'll cloud your mind and you will do things you normally wouldn't (hold over night).
    6) Waiting twice a week for that perfect situation to short is usually a lot better than trading many inferior stocks that don't fit a criteria perfectly just because you feel you "need to trade"
    7) Have someone hold you accountable, a method you might be trying may only seem to work on paper because you WANT to believe it works.
    8) Don't trade before 10:30 EST, it's too volatile and you'll never get your price.
    9) If you can trade without staring at the chart all day, go ahead and let your stops take care of it, just make sure your position is closed at the end of the day.

    So now a few questions:
    They say beginners get creamed at the start, and lose a large amount of money....does my -$500 calpine experience count for that?

    Where can I find data with regards to stocks that are currently shortable? I hate trying to short a stock over $10 then finding it's not available to short. I sent ameritrade a query and they couldn't point me in the right direction. Google is my friend but he sometimes fails me.

    I've researched the types of stocks I short for about a year and a half now, and they haven't "disappeared" or changed in activity. I've also actively investigated other methods/patterns and one seems to work, I don't think subsisting on one method is smart. I do everything by hand and with a homemade "chart ruler" to write down data points of interest on hundreds of charts. I use bigcharts, is there a better site? Such as one that allows me to zoom in on past weeks with one day resolution. Um...I know this is like an essay, sorry. Oh yeah and I don't have enough $ for day-trading margin so I'm stuck with the 3 round trips in a rolling 5 day period.

    Also, I have concerns about how much money I could invest in a single stock.....I mean for a stock who by the minute volume is about 10,000 shares with spikes up to 100,000 early on, is it possible to invest $100,000 or $500,000 in one of these stocks without altering the price? (maybe spread out into many separate orders) Is there a formula to figure out the most $ you can invest in a stock given it's average volume per minute?
     
  2. ET attacked by newbs!
    And a good sign too- the more new blood the better.

    Edit: No, $500 does not count as a large amount of money.
     
  3. zdreg

    zdreg

    in this particular case you are being unfair.
    jomama has posted a well written message. if he continues to do his research he may have a future in trading.
    in general as far as newbies go, you have to accept the fact that there is a general dumbing down of this board.
    sometimes there may be a gem in the writings of the newbie. unfortunately you need alot of time to find them.



    my recent favoirite


    Registered: Oct 2004
    Posts: 31


    04-25-05 10:42 AM

    how do i find if a trading firm has a membership to an exchange?



    :D
     
  4. John47

    John47

    hey, I'll give you my advice on the questions I remember out of all that....

    Probably the most important...asking if you should trade fulltime 9-5 or get a job when you graduate.....DEFINITLEY do not trade fulltime!!! You have to think about it like this....would you be willing to try to make money as a chemical engineer after 6 months of treating it as a hobby?

    If you look into prop trading...perhaps that would be an option...but I would not recommend it for you.

    I believe the best option for you is to get a job when you graduate while continueing to work on trading w/ no financial burdens upon the outcome.

    Sorry for the abbrieviated response, I'll try to post some of my own expiriences soon....but you seem like the most level headed newb around and I wanted to give you these quick important bits because you seem like you have the brains to consider them !
     
  5. FredBloggs

    FredBloggs Guest


    you'll go far kid.


    keep up the work and dont give up after a few bum trades.
     
  6. jomama

    jomama

    Good point, due to parent pressure I would probably have to get a job out of college no matter what. But because of the job market I'm looking at 2-5 months of applications and interviews (my friend with the exact same field of study took that long to find one). So I guess during that time I could explore trading.

    Problem is....the jobs I apply for will most definitely be 8am-4pm or 9am-5pm. So the only way I could trade is through another market during the evening/night hours as a hobby. Any tips on what foreign market to trade and what brokerage would allow me to easily trade there?

    Also this presents a crisis....what if the patterns and two systems that I have used in the nasdaq don't carry over to foreign markets? Anyone have experience in that area?

    I'm not too worried about losing a lot of money though, I can only trade a maximum of 3 round trips a week and each time I trade I stand to lose 1% and stand to gain 1%. And I'm not using any leverage for the first 6 months....I guess one solution is to get a 9-5 job in a foreign country.....just kidding.
     
  7. Whoa, yes you certainly are new to the game. I am just going to add a few things from my experience that may be of some help.
    First off, it is of the utmost importance that you lose your short bias. Believe me, when the market is weak, shorts are fantastic but when you get the reversals or the market is strong, you wont be able to trade and may even take bad trades because of your bias. Learn to love the long side just as you do the short side and trade according to what the market tells you.
    Also, stocks beclow $10 are usually much less volitile than stocks over $10. I trade a lot of $70 and higher stocks are believe me, the intraday swings on them are much greater than the cheap stocks.
    As far as the $500 you lost, yes thats a lot of money to you relatively speaking, but in the world of trading its a very small sum to lose. Think of how much money is out there to be made and that will put a meager $500 loss into perspective. You will, most likely take bigger losses in your trading career and thats just part of the game. Its a marathon, not a sprint. But if you keep to a solid trading plan, you should be able to overcome.
    Anyways, good luck to you. If you think trading is what you really want to do, and that there is nothing else in the world that would make you happier than being a full time trader, then I suggest looking into going prop. If you arent 100% commited and arent 100% passionate about the markets, then I suggest getting a 9-5 and trading on the side.


     
  8. nkhoi

    nkhoi Moderator

    I know first hand a case of person take only 8 months of paper trade to quit job and became successful full time trader (ES) , so it can be done.

    according to that person, this is a myth.

    ps. this person has classical music training background
     
  9. %%

    JoMama;
    Agree with your mama & dad-get a job.

    Also agree with the way most of the money is made in all most ALL markets ;
    its not intraday /not daytrading.

    So even when you get your 9-5 job;
    that leaves 5 hours perday + to research your swing /position trades.

    Jack Schwager top traders books are excellant;
    Joshua Lukeman, market maker's edge book is excellant,
    ignore the daytrading title.

    :cool:


    In all labor there is profit-Solomon,trader king
     
  10. JoMama,

    I for one think you have a great future trading. You clearly recognize patterns including the example of how long it took your friend in the same field to get a job. I would not get a job. I would try my hand at trtading. i also would not force myself to get rid of the short bias. That will come with time. It is harder to learn to short than it is to learn to buy worthless crap. Your 9 lessons are dead on. You have a discipline that if you stick to while you get more experience should keep you in some small amount of money.

    Good luck kid. PM me if you ever need advice or have questions.
     
    #10     Apr 26, 2005