Trading for n00bs

I thought I'd ask a trading question in its own thread rather than the existing thread re "Self fulfilling prophecy".

I have almost finished reading my first book on trading, "share Trading" by Guppy. It has answered the question that was in my mind and the purpose for my reading the book. That question being " Is share trading something I have the ability and the desire to pursue ?" The answer seems to be "Yes".

Now rather than read twenty books before I start paper trading, I want to start paper trading now so I can reinforce my learning and see my increasing knowledge being enacted. This will make it easier to carry on learning.

And this leads me to my questions.

1. While I am just paper trading is there a source of data that I can obtain for free rather than fork out $500 per annum. If I have to pay so be it.

2. Guppy talks about trading a sector that you know / have an interest in. He had an interest in propsecting and so felt comfortable with mining stocks. I have work in property for 12 yrs in varying capacities, the assets mostly being owned by LPTs. I guess I could look at this sector. I am curious as how others have chosen a sector or if you trade asx 200 etc. Just looking for a different perspective.

Cheers.

 

What's up doc?

1) For data, I believe you can get a free year long subscription to Datastream through purchasing some books. One I know of is Investments: Concepts and Applications - 2nd Edition. Datastream is pretty cool; you can access historic data for stocks, indices, currencies, commodities, etc.

Otherwise, by becoming a client of a broker (I'm talking online/discount brokers here) you may get access to a lot of free data. If you plan on trading shares, options, CFDs, etc, it may be worthwhile to start setting up those accounts now.

If you're still testing the waters, go for a 14 day trial of charting/scanning software and use that to extract the data you need. Try Paratech.

2) According to some work I did at uni, LPTs offer the best return/risk profile of the regular asset classes (over the period 1982-2005). I belive the group included ASX300, direct property, intl equities, etc. Obviously though, people are smarter than these studies and they probably don't stick with an asset class while others are thriving. But it does say something positive about LPTs.

I personally have been looking at the ASX200 and particularly stocks with reasonable liquidity in their options. But I'm still very much a novice, so I'll defer to the others.

Good luck!

 

I am not aware of any good free data feed. You may consider DTHQ. It is not very expensive and you can choose next day data which even costs less. Free data may not be clean ie. does not adjust for splits, name changes, consolidations, reconstructions ect and leave plenty of room for errors.
Not sure how your experience with property may help you in successful trading specific indices or shares. You can not compare oranges with apples. As far as I remember, I never chose specific sector but shares on the move. You, as a trader should be able to trade anything which moves in the right direction incl. penny stocks.
Of course, it's nothing wrong to trade the same basket of shares if you feel like it.
Another book you may consider is " Trading For A Living " written by Dr. Alexander Elder.

 

I guess while I'm in a testing phase and not using real $$$S, if the data is delayed it doesn't matter. I just want to see if I'm interpreting the trends etc etc the right way.

I'm not sure if my experience with property is going to help either. I guess it just means that I won't struggle to understand the fundamentals of the companies, but if I'm trading on a technical basis it probably doesn't matter.

I'm really enjoying gaining all this new knowledge, that's surprising me.

 

I guess while I'm in a testing phase and not using real $$$S, if the data is delayed it doesn't matter. I just want to see if I'm interpreting the trends etc etc the right way.
You are correct.

I guess it just means that I won't struggle to understand the fundamentals of the companies, but if I'm trading on a technical basis it probably doesn't matter.
Understanding fundamentals is a one story. TA trading is another. If you are willing to trade on TA basis why worry about fundamentals ?.

I'm really enjoying gaining all this new knowledge, that's surprising me.
It's just a first small step.
Happy trading.

 

Even if you intend on trading TA, you can use fundamentals as part of your setups, or as a stock filter ala Navra style.

Either way, i would HIGHLY recommend reading Van Tharp's book.

It very clearly shows that no matter how 'good' your system is (setups, entries, exits) its mostly the money management (answering the question of "How much to trade") that actually makes the largest difference to your returns.

Cheers,
Tom.

 

If you are not worried about a time delay free weekly data is available here http://www.stideas.com/ASX%20Historical%20Data.htm, they also offer historical data back to 1996 for $10

 

Incredible charts offer data services from $18 a month and its free to try.

 

I have an Information resource but it/he cost me untold sums of money, hard labour and anguish-- it is my geoligist son-- the anguish,not just through raising him , but the every day anxiety of his being in a third World Country, going into the Jungle where you can choose your "danger de jour"- maybe the jaguars or the mud miners who will kill you for tuppence-not to mention after years of avoiding malaria he has now prone to recurring bouts. He can read reports and give me a sound assessment of prospects.He at the same time is still a refined true gentleman.

 

Hi,

Depends on the data you want. If you want 'streaming' data ie, as it happens so that you can 'intraday trade', I doubt very much you'll find a free source.

If it's just eod stuff you're after check out float.com.au or cooltrader.com.au The former is free and the latter is pretty cheap.

What some people recommend is just following 1 or 2 stocks, getting to know their patterns intimately, before graduating onto a wider 'universe'. If you havent already, make sure you learn as much as you can about charting patterns - support / resistance lines, moving averages, volume, etc

I strongly recommend you join the bulletinboard forum at reefcap.com and read some of the old posts on this topic.

Cheers,

 

Thanks for you input everyone.

Whilst I am a member of Reefcap I do not post on there, I just wade through the posts attempting to glean any info I can. The problem I have found with that strategy is that unless you have some knowledge you don't know which posts to read and how the posts you do read apply, That is due to the level of assumed knowledge and the different levels of knowledge people have.

Having read thru Guppy's Share Trading book, Allan Hull's Active Investing book and being part way thru Guppy's Trading Tactics book I am starting to get a better feel for what I want to do. I will definitely be taking on one of the at home courses to quicken my learning.

A strategy has been building in my mind in terms of learning in an environment that is not the pure classroom learning experience. I am considering subscribing to Hull's newsletter and starting to trade his recommendations. My objective here is to understand why the recommendations are made, trade real money to get used to the difference between putting it all on red when its just pretend. I'm hoping that this will be like learning to ride a bike with the training wheels on. Ultimately I would like to be in a position where I can trade my own SMSF. I need to wait a year to do this so i can maintain my current super account which provides me with insurance benefits and obtain a critical mass of $100k as a minimun for my SMSF.

Any comments on this strategy will be appreciated.

 

Subscribing to Hull's newsletter and starting to trade (active investing) his recommendations may be a good idea. But this may not give you a trading edge even if you fully understand Hull's idea.
I would recommend to devote small amount of money (amount you can easily afford to lose) and trade your own way in variety of shares in different time spans. This may give you a better understanding of the market. Paper trading is good to get to know your system but putting your money on the line will teach you a lot more about yourself and market.
I sincerely believe that you will NOT be able to trade your own SMSF successfully, having only one year experience. One year of "practise" may be not enough to successfully trade $100K account - unless you have been born to be a trader. But this is only my opinion and I may be wrong.
Attend good courses or seminars is a very good idea. By doing this you will speed up your learning process.
Happy trading !!.

 

Again, seriously, buy Van Tharp's "Trade your way to Financial Freedom" book.

It helps you answer the question of "How much" to trade.

Alan Hull has some excellent ideas, but if you want to really understand these sort of things, and if you want to remain in the game for a long time without getting burnt, then you HAVE to be able to do proper position sizing.

The point is ... newsletters, and black box systems will NEVER be able to tell you how much of a stock to buy, and that is EXACTLTY where you will blow up if you dont know what you are doing.

You have to know things like expectancy, risk, stop losses, exits, position sizing etc etc.

And typically, when you are new to the game you tend to focus on ENTRIES alone, and confuse them with a viable system. Entries are a very small part of a trading system(s). There are much more important aspects you need to get right to survive long term.

*EDIT* Just reviewed my Alan Hull material, At least Alan touches on position sizing ... but you still need to understand why you are doing it. I think its one of the reason i was impressed by AH in the first place.

Oh and Tropo ... I do believe that AH gives you a trading edge .. as long as you implement his position sizing rule. it will keep you in the game far longer than the average punter imho... and that IS an edge.

T.

PS .. one of my systems is actually based around A.Hulls ROAR and ROAD indicators.

 

Sorry, it appears my message was not as clear as it should have been. I don't expect to successfully trade a $100k account in one year. I may trade a portion of my SMSF and as I get more comfortable trade an increasing % of the SMSF. i would probably always keep a chunk in some managed funds if I can, and my future employer contributions quarrantined in another fund that is not self managed.

 

I would still suggest to trade small amount of money (savings, spare cash etc) "you can afford" to loose.
Until you are comfortable with your trading leave your Super money with your employer.
But again this is only my opinion.
Happy trading

 

Oh and Tropo ... I do believe that AH gives you a trading edge .. as long as you implement his position sizing rule. it will keep you in the game far longer than the average punter imho... and that IS an edge. \

Tom&Don

If the person psychologically is not suited to this game nobody can give him/her an edge.
As you know, trading is approx. 80% about psychology and the rest is position sizing, stop losses etc ... as you said in your post above.

 

Could you please elaborate, I am forming a view but would be interested to hear the opinion of people that actually do trade.

 

Statistically 7 traders out of 10 consistently loose money so the majority of profits go to a minority of traders. The question is what advantage minority have that make them winners most of the time (not all the time)? The answer is - the trading edge.

Basically, trading edge is a point of view, plan etc, different to the rest of players.
Another word - you should have your own opinion at all times no matter what others think or do. Your trading decisions should not be affected by anybody including: other traders opinion, TV 'gurus', newspapers, taxi drivers etc... Some traders think that complicated trading system will give them an edge (long time ago I thought the same way). Apply KISS principle to the trading and with time you will develop your own system. Accept what chart is telling you and try to avoid seeing what you would like to see.

Accept that you can not always be right and you have only yourself to blame if things go wrong. Develop your own system and trade your system. Very often when people trade their own money their personality changes and greed is taking over, so all rules are out and all rationale gone. That's why it is very important to stick to your own rules.

I would recommend you a book 'How I Made $ 2,000,000 in the Stock Market', written by Nicolas Darvas who developed well known 'Darvas Box' pattern. Very interesting reading.

Happy Trading

 

Trading

Hi Tropo, what markets did/does Nicolas Darvas trade. Thought the % of traders who lost their money was higher than 70%, certainly is among intra- day traders in the futures markets. Know any successful intra-day US T Bond traders, be pleased to catch up with them if you do. Cheers Pudsa

 

Hi Pudsa,

Hi Tropo, what markets did/does Nicolas Darvas trade.

US Stock Market.

Thought the % of traders who lost their money was higher than 70%, certainly is among intra- day traders in the futures markets.

Can not comment on this because I do not trade futures market...

Know any successful intra-day US T Bond traders, be pleased to catch up with them if you do.

None of the few guys I know (even in US) trade US T Bonds. Can't help you here.