Bottom line, I need enough capital to get started in the game. If you don’t mind me asking, what type of minimum have you all brought in? I was thinking at least 10k, probably more like 20k. Any thoughts…[/quote]
Depends on what you are trading.
A couple of rules of thumb for smallest lot size (i.e. 100 shares, 1 contract).
The distance between you entry point and a stop loss point based on TA needs to expose no more than 2% (maybe up to 5% to start with but this is tightrope walking) of you capital. Stops not based on TA (i.e. money stops) get eaten all too often. Don’t I know about this!
More expensive markets need more capital to practice proper money management.
As well as capital you need to give you self time to learn. You are going to make mistakes, I did everybody does just survive and learn from them with money management and trading records. Don’t budget in being a pro (i.e. 20% + pa return) today.
Goals in order:
1 don’t lose money (difference between risking and losing i.e. losing is more than 2% of you capital at a time).
2 breakeven
3 get a good rate of return
I don’t know much about equities or options but I assume:
1 You are going to by shares
2 You are going to write options against the shares you own (i.e. covered calls
3 You are going to buy option (either outright puts or calls or a combination of the two i.e. spreads) to trade using leverage
I’ll give you the perspective from the industry side. I was a registered options principal for 10 yrs. at a wirehouse.
Most brokers do not understand options. Most professional traders will eat your lunch trading options. By professional Imean those that are paid by others to trade. Not day traders or private individuals.
Active stock traders almost never make money. A buy and hold strategy is better for most individuals. As for options. Use them to leverage your position. Covered calls, maybe a spread or a combination if the trend is with you. That’s about it.
Technical analysis is not valid in my opinion. Lot’s of guys believe in it on the street but I just don’t see the validity behinf it and they always seem to have a rationalization if it does not work.
I managed a lot of active accounts over the years. Eventually the options traders came to me after they had problems with the brker they were with. Almost 100% of the time I reduced the trading activity and got more conservative with the account to turn it around.
Good Luck. Remember you are trading against professionals. It is as stacked against you as playing golf with a professional. You may win a hole now and then if you are really good but you have no chance of winning the match as an amatuer.
[quote]bluey wrote:
Investing in Schering-Plough (i.e. buy and hold for some time) would mean that you are going backwards in terms of real money. Not what I would call ?value?. The only way you could make money is to trade in and out (i.e shorter time horizion).
The dividends of most stocks and interest rates on most bonds are much the same (i.e. negative real rate of return).
In general individual stocks will be carried up and down by the market as a whole, so if the market as a whole has little value to be found?
Not sure how Buffet and Graham measure value, but to mean dividends are the key if following a buy and hold investing approach as opposed to a trading approach.
[quote]
I Understand your point about dividends and inflation eating up yields…However I did’t purchase shares of sgp for 1% yield…I purchased it b/c I thought the co has the potential to double in a 2-3yr span…if you look at that chart you showed of the historical prices of sgp you can see that its been as high as $60…Now maybe SGP was overvalued at 60 but I Don?t think 30 is out of question(I purchased at 16 and change) with the new mgmt and cost structure being deployed…since I bought the co it is up 20%…if I sell now…taxes will eat up a large chunk of profits…in addition to the fact that I project much greater capital appreciation in the future…remember you pay a high price for a cheery consensus-warren buffet
Zepellin your right about the pay services. But you can also lose your ass just as bad if not worse with brokers(salesmen)and free advice. At least if you lose from the free advice you didn’t pay too much for it.
Your tougher me if you can trade the options and make a regular profit, slow executions large spread between bid and ask and poor liquidity. IMHO options are for the pro’s with deep pockets. Actually my emini daytrading was profitable when I take out the trades I followed on the pay services. I was a dumb ass on that one but will never make that mistake again. It would be harder to daytrade now though with the smaller trading ranges you see most days.
bigarrow: I didn’t trade options, I traded commodity futures. I never stayed with one commodity or group, I was all over the place. One week or day it may have been gold and the other it could be sugar or the Swiss Franc. I stayed away from smaller less liquid markets like lumber. Someday I’d like to get back into it but it will be when I’m retired and can afford it financially and have more time to devote to it.