As opposed to dollar-cost averaging for long-term investments...
Day trading chimps?
- Thread starter mandown
- Start date
Yes and no. When trading (see short-term gain), most retail "investors" put on risk positions with non-risk capital. If you are putting $5k to work looking to trade for some short-term gains, you need to be willing to end up underwater on that capital for some extended period of time. It's classic 'get rich quick' mentality that causes people to take freak out and realize losses when they are losing money on a trade.
On a long-term trade/investment, you are not looking for a quick (high-risk) payout. Therefore you have more flexibility on your entry/exit points, especially if it is a dividend generating stock. If you do it right, you can buy a high yielding stock and have your initial capital re-payed very quickly.
The three of us have all experienced and fully understand the risk of losing 100% of your capital if things go wrong - most aren't. There are also a lot of people who see successful retail traders like ridiculous who thing they can do it too, because it looks so easy. Most don't realize the amount of time that goes into learning the math behind options or the methodology behind momo trading.
On the flip side to momo trading, you have long-term investors who will invest their short-term capital into short-term treasuries and *high* yielding saving/CD's. Risk capital is best left for long-term position taking.
Taking profits on long-term positions is also critically important, which most people don't do - we can all agree on this. Then there is bringing up the discussion of balancing between Fixed and Equity, Domestic and International, Yield and Growth...
Everybody here is right, but in different contexts of trading and investing.
Mandown - just remember and make sure you are absolutely comfortable with this -you need to be able to lose 100% of that cash without it impacting you. If you need that cash as your emergency savings, don't trade with it. You can/should read my financial diatribe from a few years back because the main principles stand.
1) Pay off all debt - interest is a losing investment
2) Save minimum 6 months of expenses (all expenses) in cash
3) Max your 401k and IRA - 401k to max match from your company, then IRA, then 401k to max.
4) use only 10% of your funds for investments in speculative trading (this excludes 401k funds)
+1 to what Stoney said. When I'm "investing", I find a company/sector/commodity/ETF/whatever that I think is undervalued in relation to it's share price, or attractive in some other way (strong management, good dividends, strong growth potential, etc). I buy some of it. If the stock goes down, I can either buy more (dollar-cost-averaging), hold (wait and see) or sell (long-term implications have changed). If it continues to have the attractiveness that I originally felt it had and yet the price continues to go down for 6mo, I can keep buying it. I can let it rise/fall/etc. Basically you build yourself a portfolio of good stocks that appreciate in value. This is investment, and in my mind the size of it is reflected in the value of the portfolio (stocks/bonds/cash/etc).
"Trading" focuses on short-term momentum trying to gain the biggest bang for your buck. You jump into aapl or goog or msft because you think that there's going to be a fast jump in the stock price, so you grab some, hold it for a week, a day, a couple hours before dumping it for another momentum stock. If you buy goog at $500 and it goes up to $550, great, sell everything and lock in the 10% gain and then go chase whatever else is moving that day. You care less what the management at goog is like, or what their long-term strategies are, you just know that goog is releasing a business version of it's G+ today and the market's going to approve.
The biggest problem with trading is that you have to accept more risk to generate the returns. An investor would be happy with 10% per year, while the trader is trying for that per day. He wants to get 10% today so that if tomorrow's a bad day (and he loses 9%), he's up 1% for the two days... The only way to generate higher returns is through higher risk, whether it's a smaller/more worthless stock (which is why people play penny stocks) or options on the bigger stocks. If you're trying to daytrade high-priced stocks like goog/aapl/etc, the costs of trading is going to wipe out any meager gains you get.
"Trading" focuses on short-term momentum trying to gain the biggest bang for your buck. You jump into aapl or goog or msft because you think that there's going to be a fast jump in the stock price, so you grab some, hold it for a week, a day, a couple hours before dumping it for another momentum stock. If you buy goog at $500 and it goes up to $550, great, sell everything and lock in the 10% gain and then go chase whatever else is moving that day. You care less what the management at goog is like, or what their long-term strategies are, you just know that goog is releasing a business version of it's G+ today and the market's going to approve.
The biggest problem with trading is that you have to accept more risk to generate the returns. An investor would be happy with 10% per year, while the trader is trying for that per day. He wants to get 10% today so that if tomorrow's a bad day (and he loses 9%), he's up 1% for the two days... The only way to generate higher returns is through higher risk, whether it's a smaller/more worthless stock (which is why people play penny stocks) or options on the bigger stocks. If you're trying to daytrade high-priced stocks like goog/aapl/etc, the costs of trading is going to wipe out any meager gains you get.
Done and done. I do need to turn my 401k back on, as I stopped contributions while on medical leave.
This is very true and takes a while to get accustomed with, it's also why learning how to position size and set targets and stop losses are paramount when trading. It's a numbers game through and through, it's a second JOB for me, not a hobby and I am obsessed with what I do. My goal in life is to forever hate the weekends and make the same trading as I do as an engineer.
Speaking of make, congrats on today!
Stop-losses set tonight. What a fun exercise in human emotion. The brain knew what it wanted, but the gut had a tougher time accepting it. How long did that type of experience hang with y'all regular traders? I'm assuming it dulls.
Money will become useless, buy gold
Ummm... gold IS money.
hijack the plane going to Venezuela?
It will dull when you get a sound understanding of how the market behaves (trends, understand support and resistance, irrationality etc.) and when you grasp that trading/investing should be an emotionless activity. Along the way you will make an assumption and get burned for it. Those assumptions become expensive mistakes to learn from, eventually you will minimize them
. It's taken me 2.5 years to get where I am now and I still get shaken by emotion from time to time, but it's also been 2.5 years for me and that alone is something to be proud of as 92% of day traders fail within their first couple years. Also consider that I am by myself, I am my own trader, technician, speculator, manager etc.Some things that helped me drastically.*
Remember: The market can remain irrational longer than you can remain solvent.
Don't beat yourself up, be humble.
Follow whatever rules you set for yourself.
If you treat this like a hobby, you will lose money like its a hobby.
Trade conditionally. I personally don't execute any trade with out knowing an entry point and at least two exits, 1 price target and 1 ideal stop loss. I set up market orders based on these three prices to help minimize risk and an influx of emotion.
Make mistakes (small, hopefully simulator mistakes).
*Remember that I trade exclusively by technical analysis, I say this just so you know where my advice is coming from. I don't care about fundamentals of a company at all, hell I don't even care what the company name is, if what I see on the chart is what I want, I trade it. Period.
...and my Apple stock just got interesting.
Prepare to have your face ripped off tomorrow. Expect the hedge funds to pile into that short heavily.
Might need to bump my stop-loss on that to a higher number and hope for the best.
Complete overreaction.
What's funnier is the Warren Buffet move in BAC this morning. Makes me wonder what the Bernank is going to say in tomorrows Fed speech.
What's funnier is the Warren Buffet move in BAC this morning. Makes me wonder what the Bernank is going to say in tomorrows Fed speech.
http://www.gurufocus.com/news/143905/weekly-top-insider-sells-intu-hans-rovi-coh-and-vrsk
So, if company insiders are selling the stock (as happened with Hansen) is it typically indicative of them believing the value is near the top of the climb, or do these guys just want some cash? The earnings reports for Hansen are still favorable, and the market price is up today (but so is the whole market).
So, if company insiders are selling the stock (as happened with Hansen) is it typically indicative of them believing the value is near the top of the climb, or do these guys just want some cash? The earnings reports for Hansen are still favorable, and the market price is up today (but so is the whole market).
Yes and no. Look at historical insider sales for a better perspective. If they are regular sales of the same amount, they are likely part of a plan or tax sales. If they are large block sales with no prior history of such, than yes, you should be very cognizant. They might not think that earnings will drop, but something like AAPL is very momentum driven.
Correct me if I am wrong here but don't company executives only have certain windows each year where they are able to dump their positions?
IE the CEO of NFLX can't trade his portfolio after leaving a meeting that discussed business expenditures going up 50%. Basically most CEO's know the behavior of their company before shareholders, so in an effort to make it fair the SEC/board members govern them to certain windows each year ...right?
IMO they are just people, looking into their actions is just as risky as playing with securities around earnings.
Reed Hastings has been selling 5,000 shares a week or every two weeks for months and months now.
That is a pre-planned sales. Once the plan is set in place, the plan can continue despite any company volatility.
drop in the sand.
Started looking at some div paying socks today. Considering diversifying industries too. P&G, Gen Mills, Unilever.
The cheaper you buy a dividend paying stock, the higher the dividend payout ratio is for you. Make a point of buying low on those, if you can. Also, dividends tax at current cap gains if you take them as cash (iirc) vs. reinvesting in shares.
Favorite new term I learned - Fibonacci Extensions
Don't understand it, but love saying it.
Don't understand it, but love saying it.
Fibs are awesome tools, also good for bar talk.
...So now that we are looking more bearish, what's your plan?
...So now that we are looking more bearish, what's your plan?
Well, I'm not sure I'm ready to move. In fact, I'm thinking about going deeper and buying cheap. I'm interested in the upcoming Obama statements. I'm in no hurry.
The good news is that I timed my buys well and my Apple/Google/Hansen/Starbucks positions are up. In fact Hansen is climbing today - go Monster! The stocks that are down right now are my buy-hold for div yield like General Mills and Proctor, so my return on them won't be great, but I wasn't planning to trade those soon.
Time to do a bit more reading up on strategy in a bearish market. I still think my plan to hold Apple until the next iPhone release will bring me a few dollars.
Any suggestions?
The good news is that I timed my buys well and my Apple/Google/Hansen/Starbucks positions are up. In fact Hansen is climbing today - go Monster! The stocks that are down right now are my buy-hold for div yield like General Mills and Proctor, so my return on them won't be great, but I wasn't planning to trade those soon.
Time to do a bit more reading up on strategy in a bearish market. I still think my plan to hold Apple until the next iPhone release will bring me a few dollars.
Any suggestions?
I'm pretty much the opposite trader as you currently, I'm not holding anything long other than SQQQ, which is again the opposite of what you are in. Ive also got a short position on a couple large "financial" institutions. But differences are what makes a market a market. You have much more long term strategies than I do so I cant really comment or offer suggestions.
My speculation, however, is bullish strength is weak. At the most we are in a range bound market similar to that of early 2008. All I can say is watch the financials and the indices from a technical stand point. This market will not go up or make new highs without a strong financial market or one boosted with gov intervention helping it along. Don't buy into what talking heads have to say, even if it's the president. So in short, (cheap pun intended) remember that there are 2 directions you can play in a market.
My speculation, however, is bullish strength is weak. At the most we are in a range bound market similar to that of early 2008. All I can say is watch the financials and the indices from a technical stand point. This market will not go up or make new highs without a strong financial market or one boosted with gov intervention helping it along. Don't buy into what talking heads have to say, even if it's the president. So in short, (cheap pun intended) remember that there are 2 directions you can play in a market.
I think the rest of us should start gambling on which of you is the dumb/smart money. I may start offering swaps to others based on your guys positions. 
mandown has a much higher market cap.
Markets are upward bound from the spook earlier. JNJ my get added today, though the price isn't uber-attractive (plan to hold for divs), it isn't bad.
Apple is also up as they leak the iPhone5. Nice work guys.
Lots of cool stuff going on in the retail arena today. LULU, AMZN, UA, TIF, COH have my attention.
AMZN has mine too. $177 a couple weeks back, up to $216 with a 52 week high of $227. With a down economy and low consumer confidence/spending, and no new jobs, not to mention state tax issues, what could be driving the price? The speculation of their new Android tablet? Srsly?
LULU just split and is still riding high, with profits in their statements?!
Momentum and stupidity. the market is no longer about investing in companies based on their merits. It is 100% about momentum.
Who cares, momentum is there.
Edit: haha sniped.
Edit: haha sniped.
HANS is up from my buy 6.66% Evil.
Damn, should have bought yesterday. Looks like the insanity of the market is matched by the determination.
What is your sell px/%? You need to know this before you ever buy the stock. Know your targets, use them, and don't get greedy.