Another Newbie question

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rc51rob

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Been lurking around this and other trader message boards for a while now and first off I'd like to say that I have learned more form this board than anything else I've read or seen, everyone one seems to be very helpful and gracious. First off I like most here (either now or in the past) want to be able to quit my day job to trade full-time. Capital is a problem as is lack of experience and education. I have about $5000 that I can start off with but in order to meet my obligations (wife), I would have to make around 20% per week to offset my current income. Before everyone chastises me for having my head in the clouds let me reassure you that I understand this is almost impossible for someone to start off doing from day one which is what brings me to plan B. I thought if I could use this stock picking site http://www.bestdaytrader.com/data_out.php long enough to build my capital and gain more knowlege and experience that I could at least breathe easier knowing I'm heading in the right direction. Now I like doing research and TA and my own homework and that is my goal but as of now that is just not possible. I guess my question how can I weed out the multitude of scams, and is $195/mo for 4-5 trades a day with a profit of 19% per trade reasonable? Thanks in advance and I look forward to getting to know you all.

Rob
 
Hi Rob,

First of all congratulations for thinking of starting by looking at the US markets,where in my opinion any trader has so much more of an edge.Nasdaq stocks in particular have the volatility needed for the short term trader to make a living.

I fully understand why one would want to use a stock picking service.It is a natural progression for many to use these services first of all.I don't see anything wrong with that.

However give ten people a possible move and all will trade it differently with different levels of success or failure.For me only part of the trade is the set up,the major part is how its traded.

This is where someones natural trading tendencies come to light.
We all naturally think that we will be very good at this,but then we all would wouldn't we.Actually i know from tests that i've done that about 70-80% of beginners cannot naturally manage a trade.So even if we are given the perfect set up an awful lot of people will not trade it to its full potential and many will end up with losses.

I notice from the site you mention that they are showing level 2.This is obviously correct of them to do so as most of their trades seem to be on Nasdaq stocks.

You might like to look at a thread on t2w called t/a and level 2, http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4523 which might help.Other than that my courses are on the home page of t2w and i would be delighted if you decided to come and see me at some stage.Good luck.

Naz
 
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rc51rob - welcome to T2W!

I would avoid any stock picking service or software - there are many reasons why I believe this is just pure money down the drain. However, irrespective of my beliefs, for you and your pot size of trading capital the sums just do not add up for you to use a stock picking service.

You may not be aware that to trade more than 4 times in five days (I believe) you will need a minimum of $25,000 in your account. Therefore, your first few trades will have to be profitable otherwise you will continually need to top up your $25,000 in order to trade.

If there are 5 or 6 picks a day you will just run out of funds, as you will need to invest a sufficient amount in each of those picks to recoup a) your monthly fee of $195 to the service b) your monthly data and software fees c) your round-trip commission costs d) your trading overheads such as telephone, ISP, etc e) accountancy and tax advice for IR returns, etc.

And on top of that you will need to ensure you make a sufficient return on investment (ROI) to generate the profits to keep you and your wife with a roof over your heads and food in your tummies.

If I was in your shoes I would forget about trying to make trading pay, and just concentrate on spending 2-3 years to learn the tricks of the trade before even considering whether you can make a living from it.

With $5,000 in an account your only options are to either trade futures (very hairy unless you really know what you are doing) or swing trade equities. Swing trading is where you are trading the trends and staying in from 1-3 days usually and sometimes a lot longer.

Then you should find a pattern that you like, and concentrate on it. Just find that pattern forming in equities by scanning them each night, and build your skill level so that you know all the nuances of that pattern formation inside out and the other way around. Patterns could be double bottoms, triangles, pennants, wedges, head and shoulders. Just take one pattern only.

If you are swing trading and only looking at your stocks once a day (I presume you will be carrying on with the day job) you will need some EOD (end of day) software such as TC2000 from Worden Brothers. www.tc2000.com This is relatively cheap ($29.75 per month for the data feed) and you will learn so much from just spending a couple of hours looking at the data each night. You can also use the software to scan for patterns, and formations, and of course indicators.

Then paper trade for a few months (I bet you won't!) to see how well you go. And only then consider opening a brokerage account.

You will learn far far more by spending $29.75 per month on your software and data feeds, and reading these boards than you will by spending the outrageous amount of $195 per month for any stock picking service.

And (I'm going to be cynical here - no surprises there) why do you think that anyone would provide a supposed stock picking service if they could actually trade themselves in the first place? The answer is that all vendors are just that - they are selling you products/services because they will make far more money that way than by trading themselves because they are just not up to it.

Sorry for the rambling, but there are lots of vendors out there who are just out to suck you dry of funds. With time and effort you can become far more skillful than any vendor, so start small and look on trading as a hobby. Only when you really have a cracking system should you ever consider taking it a stage further.

And good prosperity in whatever you choose!
 
TC2000

Skim,

With TC2000, if you pay the monthly subscription fee of around $29 you get the ability to update your data during the day. It is not realtime but the nearest you will get without a lot more cost.


Paul
 
Pro-Trader

Hi Kent,

I just looked at this site and noted that the times in which they lost money they lost a lot more than they would have otherwise gained. In one case they lost the equivalent of 4 months profit. The other thing that is not included is how much money you would maybe be down to get the gains. This is important as I have developed systems that give a good monthly return if you were to look at pure profit. But the account drawdown meant it was psychologically untradeable.

The way it is structured looks like it is probably a curve fitted system because if it wasnt then I would expect far more detail of trades taken and how they were managed.

They also use SB companies which are not an option for US based citizens.


Paul
 
Hullo Skimbleshanks

Wise words.

Quick question. You wrote:

If you are swing trading and only looking at your stocks once a day (I presume you will be carrying on with the day job) you will need some EOD (end of day) software such as TC2000 from Worden Brothers. www.tc2000.com This is relatively cheap ($29.75 per month for the data feed) and you will learn so much from just spending a couple of hours looking at the data each night. You can also use the software to scan for patterns, and formations, and of course indicators.
Click to expand...

I am at the paper stage (yes, really!, although now my FINs account with £100 is open…) and am EOD trading by looking at charts on FT.com in the evening when I get home from work.

Could you expand on what exactly TC2000 does? And why this is better then looking at charts on free internet sites. Will it help identify potential stocks to look at in the first place, as this is part of my difficulty at the moment (I’m looking at charts of the biggest gainers/loser of the day...).

TIA

SoldierofOne
 
TC2000

Hi Soldier,

I hope Skim doesnt mind me answering this in advance of his own reply. TC2000 allows you to scan stocks in seconds that meet criteria you have specified. The CD is free to order and will only cost you $10 shipping from the US so you may as well order it anyway. The $29 per month subscription is for getting live updates which you can get during the day. It is very good from the standpoint of giving a commentary on a stock. I have got a copy but it doesnt quite fit my own requirments but it may well do yours. I am not sure that it can be used for UK stocks and you would need to check this.

Good Luck

Paul
 
Trader 333 - age before beauty!

TC2000 just does US equities and indices - 8,000 of them I believe as a rough count (too lazy to check). A similar program for the UK is Sharescope (but this has severely reduced scanning ability).

Soldier:

You can have 12 different views for each stock on TC2000, so you can experiment with different indicators, moving averages, etc so you get a feeling for what works within your trading parameters. You can't do this on a free Internet site, and neither can you save them for looking at later. You can add text annotations as well, so in the future you can look back and see how well your 'paper' trading would have done. All in all, it's just miles better to have a charting program on your PC rather than use the free Internet ones. Horses for courses obviously, but when I started out my trading turned a corner for the positive when I realised just what benefits there are from software.

Even if you spent $10 shipping on getting the CD-rom, you can play around with it and see if you like what you see before signing up for the $29.75 (£18.80) per month data feed.

Trader 333 is right, of course, about the real-time delay - you can dial in during the day and pick up 20 min delayed data. But this just gives you a shorter end of day bar as the data is not complete, which is why I've never used it as such.
 
Hi Trader333 and Skimbleshanks
Thanks for the quick replies.

I shall send away from the CD as it sounds as it will benefit me educationally – i.e. improve understanding of trends, support, resistance and perhaps look at some indicators.

Whilst looking at UK stocks at the moment, this is more ‘mmm…what shall I look at’ rather than a thought out strategy (note to self – have a look and see if can trade US stocks on FINs).

What do the two of you trade and which instruments did you start out trading with ?

Have a good weekend.

SoldierofOne
 
My first trades were many many moons ago, when I really didn't know what I was doing.

About five years ago I decided that trading would provide me with the style of work that would suit me best - I can live anywhere, be independent from routine, and not have to answer to anybody. So I set about engineering my life to achieve my aim. You only live once, and if you don't go after what you want, you'll only regret not attempting it. So therefore I had little to lose.

If you remove any financial pressure (such as earning sufficient profits to pay a mortgate) when you are learning, then you become more relaxed. And that's when the penny drops and you begin to understand the psychology of how to win and, more importantly, how to lose.

The key to winning really is learning how to lose. If you can master how to lose then the wins just seem to follow on without too much effort.

It is now so much easier to learn how to trade - when I started there just wasn't the information widely available on technical analysis, market language and etiquette. In all, I spent about £5K on my trading education (courses, books, software, etc). However, virtually everthing you need to know is now on this website!
 
Hi Skimbleshanks,

In all, I spent about £5K on my trading education (courses, books, software, etc)
Click to expand...

Did the 5k include the losses you took during this time? 5k seems quite a bit for just courses, books and software.
 
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Very Hairy from Hull

Damn, I just spilt my cocoa over the keyboard.....
 
I haven't added it up before and it's an interesting exercise to do. Excluding things like Mytrack and Sharescope subs and modem costs I think I've spent about £1200 so far. That includes about £300 of losses in total too (mainly on my Fins account).
 
Thats an interesting exercise.I just looked at the amount of trading books i've accumulated over the years and its over 150.At an average cost of say $30 thats $4,500.

Then i look at 5 folders of t/a courses that i did years ago thats about $2000.

Then i think back to the costs of visiting just one US trader.Thats about $2,500.

Then i think of managing just one good Nasdaq trade for a few days thats a profit of about $2,000-$4,000.

-------------------------

Now thinking of the books.They really just gave me an overall general picture.The t/a courses gave me patterns to look for in my set ups and an understanding of what might happen.Working with decent traders gave me the skills to trade those potential moves.

Trading the Nasdaq with level 2 direct access gave me the tools to put the whole story together.
 
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Skimbleshanks

First of all, I appreciate the honest comments, I am still undecided but feel I need to clarify some points. If I were to use the service I mentioned (which is a swing trading service), I would "cherry pick" the best one or two a week to trade, which does not qualify
as a PDT. My goal (for now) is to build capital while learning as much as I can so that in a couple of years when I feel like I can make a living, I will hopefully have the capital and knowledge to start, I started paper trading this week and was impressed with the outcome until I realized that a 7-year old with AOL and last weeks paper could have made money this week. If a stock is already poised to make a gain and you add the additional demand of 1000 subscribers of a service, don't you give that stock a better chance of follow-through? I am mainly looking at US markets because I live in the US so my options are a little limited.
 
Rob,

I personally would not touch the bestdaytrader.com service. The results table shows the gain you would have made if you managed to exit the trade right at the top/bottom, although they have so kindly incorporated a '1/2 of Max Profit' column for the 'skeptics' among us.

Why is there no third column showing the result if you exited at their target or stop level?

If you are intending to 'cherry pick' the best trades, why not go the extra yard and do it all yourself?

I appreciate your time may be limited so the use a basic piece of stock scanning software such as TC2000 should give a list of potential candidates from which you can 'cherry pick' the best opportunities. It may necessitate a little extra work, yet the feeling of smugness & self-satisfaction if you succeed will surely be worth the effort?

Anyway, good luck with whichever route you select.
 
The points Simon has made are exactly what I would have said - if you're going to cherry pick the stocks you are not following the strategy fully, therefore you can just cherry pick the stocks at the outset. Just put the $195 towards your software and data feeds and a really nice meal out to celebrate your wins.


rc51rob said:
If a stock is already poised to make a gain and you add the additional demand of 1000 subscribers of a service, don't you give that stock a better chance of follow-through?
Click to expand...

Errr ... no.

There's a very good and profitable strategy which certainly operates in the UK and I have no doubt that it operates in the US as well. It's this: you wait until a buy recommendation comes out, wait until about lunchtime and then do the opposite to the recommendation.

So if a certain monthly publication says to its readers to buy ABCXYZ then on the day of publication you can expect the stock to rise in price as everyone buys it and the price goes up for a couple of days until all the buyers are exhausted. Then it drops like a rock and all those who shorted make wheelbarrow loads of dosh, and those poor punters who dutifully followed the recommendations get left holding stocks whose price is a lot less than they paid.
 
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