Getting started in stock markets: Advice required

The_Sophisticate said:
Mixed in with a technical analysis of shareprice history and earnings and a general comparrison to the FTSE, should give a rough insight into how a company will perform in the future.
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Mistake one: Historical price is not an indicator of a company's future value.


What I think I'm asking is, what different kinds of trading are there? I have heard of swing trade, day trading, penny shares, scalping and so many more.
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These aren't 'kinds of trading'. You trade in shares, equities, physicals, ETFs, ETCs, bonds, gilts, notes and futures. You trade these items using some kind of mechanism or vector: shares, spread betting, contract for difference, etc.


I'm thinking pretty short term on trades, so more technical than fundamental, perhaps not quite as short as daytrading, but not longer than a week. Or maybe a mix of both.
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Then what you will be doing is speculating, not investing. Do not confuse the two.


Intelligence wise I think I qualify.
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Screw intelligence, you need experience. Also, do not think that any kind of set-at-home trading will be anything like what you would do in the industry - an interviewer probably wouldn't any pay attention to your claimed 'successes' while gambling on the stock market from home (you might as well tell him you spent your time betting on horses - you have a better chance of returns).


which is just absurd. I am in the 3 figure league :rolleyes:
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No chance. You'll be looking at ~ £10 commission per buy and sell (and add to that 0.5% stamp duty on each buy). If you buy 100 shares at £1.00 for £100, you will automatically be about 12% down (and if you sold at the same price, you'd be 22% down) because of the commissions. Even with rolled up share buys like Halifax's ShareBuilder, you get charged £2.50 per trade which as a proportion of your capital is still quite a bit.


So, just some advice, recommended sites/books, cautions.
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It is impossible to day trade with less than £1k. I started off with £10k, and day trading is nigh impossible (admittedly it was easier over 2009 with high volumes), but you just cannot make the returns to negate the cost of commission with such a small amount of capital.

As far as recommended reading, buy the "Intelligent Investor", read it and learn the difference between investing and speculating.


Mixed in with a technical analysis of shareprice history and earnings and a general comparrison to the FTSE
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No. With less than £1k you need to be looking at least 6 months (if you are very lucky and you put money into a very undervalued company) to 3 years to make any kind of reasonable return. As far as 'technical analysis' goes, you will be competing against computers and algorithms which process volumes of data which you'll struggle to get your head around. As I said, with such a small amount of initial capital, you don't stand much chance of 'investing'.

Either up your capital, don't do it at all, or swallow the fact you are gambling on a horse and speculate. Pick a crashed stock (such as when the LSE price crashed following the Dubai news), consider the chances of it rebounding on upcoming good news, buy and then see if that good news comes.
 
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I don't mean to get defensive, but Warren Buffet starting trading with $100. :p

Based on costs, I can see how daytrading is not viable for my level of investment, so I would be looking at longer term (~1 month) positions.

I would eventually like to get into daytrading, since it gives flexibility that, since you close out all positions at the end of the day, you don't have to pay attention to the markets constantly, and thus, you can have a day off if you don't feel like earning.

Some good advice, and some appreciated cautions :) I'm taking it all in, as well as everything else I'm reading!
 
Hatter The Mad said:
/snip
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I've read the Intelligent Investor, and am fully aware of speculating/investing. I'm just after a little more frequent interaction than investing for 6 months/3 years etc. Is speculating purely technical? Surely mixing fundamental analysis will tip the odds more towards your favour with more information available.

Thanks for your input :)
 
The_Sophisticate said:
Based on costs, I can see how daytrading is not viable for my level of investment, so I would be looking at longer term (~1 month) positions.
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Even then, lets say you pick two stocks (a dangerously narrow portfolio spread) and buy £200 of each. That stock would need to increase by at least 12% to break even (including the sale commission), let alone make any gains. How often do you think companies swing by these kinds of amounts within a month? Or within two, three, four months?
 
Let's assume you have £999 and let's assume you're as good as the world's leading hedge fund managers and can make 65%pa. The maximum you'll make is £650 a year, if you can live on that then good luck :p. A good year trading for me is a 24% return, with far more invested than you, and I'm struggling to pay bills.

Buffett didn't start with $100, he started with the equivalent of $10m in todays money and charged fees for managing it, so read the fine print.
 
mcast123 said:
Let's assume you have £999 and let's assume you're as good as the world's leading hedge fund managers and can make 65%pa. The maximum you'll make is £650 a year, if you can live on that then good luck :p. A good year trading for me is a 24% return, with far more invested than you, and I'm struggling to pay bills.
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Unless we double-dip, they won't be making a 65% PAR any time soon ;)
 
I don't quite see how you expect to compete against the 1000's of others (human and AI) that have:


Years of on the job training and experience
Years of reading the theory
Bloomberg subscriptions
"Connections"
Computer modelling (costing millions of pounds)
Economies of scale such that trading costs are insignificant
Some serious cash to play with
Reseach teams


I admit you may be able to spot something that could gather you a return over a long period of time. But for day trading, you may aswell hit a casino.

Good luck though!
 
You're not going to make a living out of this trading your own capital as you've not got any tbh....

First get some money together....

Its not hard to get a few grand together - an average chav living on benefits probably spends a few grand each year on fags, beers and betting at the local bookies - if general scumbags have that sort of disposable income then it is trivial for any normal human being to raise a few thousand within say 6 months.

Either get a relevant job or look at this as a part time endevour. I wouldn't bother speculating using UK stocks (transaction costs will kill you) and spread betting & CFDs are complete spank too. You'd have to look at futures and options tbh... and you really do need to do some research first as it is very easy to blow your entire account and more if you're recless or don't know what you're doing. If I were you I'd look into market neutral strategies and start from there. There is no point scalping any of the liquid instruments from home as your connection won't be quick enough and even if it was you'd most likely not be able to. Also using technical analysis to pick out directional trades on a particular instrument is a mugs game - you don't have a crystal ball and despite what you've posted in your first post, you can't spot a breakout you're just kidding yourself.

Basically do this as a part time hobby or go get a job in the city. If you can't land a front office job at a bank (don't worry most grads can't) then you could try proprietary trading firms (barrier for entry is much lower). Otherwise do this part time don't start thinking that your few thousand in your trading account is going to provide for your future - it won't!

edit - maybe take a look at the simulator provided by options express - also perhpas look at either interactive brokers or as mentioned earlier think or swim.....
 
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