Just want to vent and hear some advice

[Paul71]

It's that last bit that's the catch. If you've just started trading and blew up your initial 20k account, should you be borrowing 50k? I think at that point it's pretty fair to say the "knows they can trade" part must come into serious question.

I agree Rhody. I think i've probably diverted away from the original thread start. Newbies must not borrow money to trade, it's a big no no, very big.

 

[Paul71]

Quick question?

If you had x amount, how long would it take for you to double the amount?

 

[Paul71]

NT, how long to 2xX, bud? Let me guess, you are over 50, the inlaws dropped dead and left you and the missus 250k. You bribed the other half for 20k, and put it into a futures account. You trade bare minimum and try to average out every loser in sight, making not much more than an interest account would. Good trading NT, well worth it!

And yet you you've got the audacity to slag off people who borrow money to trade! You're not adding up buddy!

How long does it take for you to double you're money?

Sleep on it NT.

 

[new_trader]

Why would anyone trade with their own money, especially if the individual knows they can trade? It doesn't matter who's bloody money it is. The underlying psychology of the 'no to credit' brigade is what?

Anyone on this thread who has posted against credit/loans/debt, should not be advising people on a chat site for traders, imho.

I think it shows a deep running vein of insecurity in their own abilities. Maybe trading IS one big gamble for these people?

Trader 333, Paul, you are my exception in this post, i understand what you were saying.

You were the one who said "If trading with credit, never get the house involved, that's a nobrainer." So, why wouldn't you get the house involved? Let me guess, it is a secured loan and you have something to lose...maybe? Sure, it would be great to trade on borrowed money if you have nothing to lose but the money itself. I'd borrow $millions...no....$billions...no...$125 million billion!

I know I can swim but I didn't find out by diving into the middle of the ocean. Tell me how someone "knows" they can trade? They must start out spending some money or do they find out only through paper trading? I had to spend my own money learning the trading game. I've lost plenty in the process yet I do not owe anything to anyone, not a single penny. Perhaps I'm not as gifted as all the credit traders, still, I'd like to know on whose money they gained their expertise.

If someone "knows" how to trade then they should be able to turn $5000 into $millions using a leveraged investment, which is sort of like borrowing money anyway. If they need to borrow then either they can't trade, they are greedy or they are being reckless among other things etc..

 

[Rhody Trader]

Quick question?

If you had x amount, how long would it take for you to double the amount?

How much risk are you willing to take? I mean with the right leverage I could do it in one trade, but that's basically no better than going to the casino.

 

[new_trader]

How much risk are you willing to take? I mean with the right leverage I could do it in one trade, but that's basically no better than going to the casino.

Exactly. Albert Einstein said "The most powerful force in the universe is compound interest". I think anyone who feels the need to borrow money isn't very good at maths, let alone trading.

 

[Paul71]

You were the one who said "If trading with credit, never get the house involved, that's a nobrainer." So, why wouldn't you get the house involved? Let me guess, it is a secured loan and you have something to lose...maybe? Sure, it would be great to trade on borrowed money if you have nothing to lose but the money itself. I'd borrow $millions...no....$billions...no...$125 million billion!

I know I can swim but I didn't find out by diving into the middle of the ocean. Tell me how someone "knows" they can trade? They must start out spending some money or do they find out only through paper trading? I had to spend my own money learning the trading game. I've lost plenty in the process yet I do not owe anything to anyone, not a single penny. Perhaps I'm not as gifted as all the credit traders, still, I'd like to know on whose money they gained their expertise.

If someone "knows" how to trade then they should be able to turn $5000 into $millions using a leveraged investment, which is sort of like borrowing money anyway. If they need to borrow then either they can't trade, they are greedy or they are being reckless among other things etc..

Again, i understand what you are saying NT. I lost money at first, because i didn't have a clue, i wish i could start again in some ways, i would go about it so differently, it's wasted time and money.

I don't think people have to learn the hard way, but sometimes it's the only way, especially for retailers.

As for the, "need to borrow" comment, please, don't try and turn the table, your arguement looks shabby to say the least (no offence).

 

[Rhody Trader]

Exactly. Albert Einstein said "The most powerful force in the universe is compound interest". I think anyone who feels the need to borrow money isn't very good at maths, let alone trading.

If you can earn a consistent return of 20% per year, why not borrow all you can at 10%?

 

[shadowninja]

On reflection, I can see Paul71's point.

A newbie: do not borrow money.

An experienced trader with a good track performance: you'll be able to use it effectively to make bigger profits.

 

[dannyegg4575]

If you followed all the rules, if you were "in the zone", and if you understand risk management, how did you manage to lose 115,000?

In response to dbphoenix question, because of BIDU. I placed a market order on BIDU that one morning when it was $347. The price then climbed to $350 and I did not put a stop on time. It then plummetted to $300 within 45minutes and my market orders did not execute.

It's not so much that BIDU was dropping. The drop of BIDU caused a ripple effect throughout the whole market. Everything that I was holding was dropping along with it. I had to sell off most of my holdings that very day. the drop was took out 1/2 of my porfolio. Everything that i held was sold off immediately because of the stops. I bought back most of the stocks that were doing well. the very next day, most of the stocks recovered but by late afternoon, everything started falling. And the day after. I was on a business trip and did not have a chance to monitor my account and so, i was left with $50000 left in my account. With that $50000, I wanted soooo much to get it all back so I took revenge on the market. I overtraded and overbought. Thus, now, I'm left with nothing.

I hope that helps.

I'm writing this story not because I want to tell you how stupid i was. I tell you that the market is a pretty mean and nasty place. I remember that very day when BIDU dropped. there was no news on it. In fact, everything was very bullish as the news were comparing them to GOOG and how much stronger BIDU is... blah blah blah. After the drop, their CFO was questioned as to what happened. The only answer they got from them was, "I don't know". how convenient...

 

[nine]

There is an important lesson for many in your last post too danny.

Stock markets become highly correlated when they fall. People invest in multiple stocks with some illusion of diversification .... which comes apart just when they most need it.

 

[arabianights]

If you over leverage yourself then you can't take anything like so much of a drawdown before wiping yourself out. But if you don't leverage then your opportunities for making any money are limited. See long term capital management (or, I suppose, the OP) for examples of both.

Can't see why there's any arguement here really, both sides are right.

 

[dbphoenix]

In response to dbphoenix question, because of BIDU. I placed a market order on BIDU that one morning when it was $347. The price then climbed to $350 and I did not put a stop on time. It then plummetted to $300 within 45minutes and my market orders did not execute.

It's not so much that BIDU was dropping. The drop of BIDU caused a ripple effect throughout the whole market. Everything that I was holding was dropping along with it. I had to sell off most of my holdings that very day. the drop was took out 1/2 of my porfolio. Everything that i held was sold off immediately because of the stops. I bought back most of the stocks that were doing well. the very next day, most of the stocks recovered but by late afternoon, everything started falling. And the day after. I was on a business trip and did not have a chance to monitor my account and so, i was left with $50000 left in my account. With that $50000, I wanted soooo much to get it all back so I took revenge on the market. I overtraded and overbought. Thus, now, I'm left with nothing.

I hope that helps.

I'm writing this story not because I want to tell you how stupid i was. I tell you that the market is a pretty mean and nasty place. I remember that very day when BIDU dropped. there was no news on it. In fact, everything was very bullish as the news were comparing them to GOOG and how much stronger BIDU is... blah blah blah. After the drop, their CFO was questioned as to what happened. The only answer they got from them was, "I don't know". how convenient...

In a nutshell, then, you didn't follow the rules, you weren't "in the zone", and you did not manage your risk. To compound your errors, you "took revenge" on the market by overtrading and overbuying.

Who, then, is responsible for what happened to you? (Hint: it's not BIDU nor anyone connected with BIDU)

Db

 

[dbphoenix]

There is an important lesson for many in your last post too danny.

Stock markets become highly correlated when they fall. People invest in multiple stocks with some illusion of diversification .... which comes apart just when they most need it.

Markets in general do not become highly correlated when they fall. But if one buys stocks that are related to begin with, then, yes, they will likely fall together. Diversification does imply investing in a variety of stocks. But, as you point out, this particular basket provided only the illusion of diversification.

Db

 

[new_trader]

If you can earn a consistent return of 20% per year, why not borrow all you can at 10%?

If you can earn a consistent return of 20% per year through investments then yes, it makes sense to borrow at 10%. But I make a very a very big distinction between investing and trading. Maybe this is where the confusion lies. Every 3rd moron who bought a house in 1998 has made money on their 'investment'. Could they do the same trading with an equally leveraged account?

I trade the ES contract which is $50 X the Standard & Poor's 500 Stock Index. This means 1 contract is currently valued at around US$75,000 [at time of writing]. Yet you only need US$5000 to open a trading account and maintain a margin of $3500 ($500 daytrading) to keep a position open. It is a hugely leveraged investment as it stands. You are effectively borrowing US$70,000 when you trade 1 contract.

Starting out with $5000, a trader, assuming they "know" how to trade (ie/ignoring the the tuition fees associated with attaining proficiency), with a very conservative target of 10%/month compounded will triple their money in 12 months. In 5 years they will have over $1.5 Million. Now remember, this is a conservative trader who knows how to trade.

 

[new_trader]

There is an important lesson for many in your last post too danny.

Stock markets become highly correlated when they fall. People invest in multiple stocks with some illusion of diversification .... which comes apart just when they most need it.

Investing in multiple stocks provides protection against a single company going bust or performing badly and destroying your portfolio. Only a fool would think that multiple stocks protects against a complete stock market crash/fall. Diversification of investment means spreading your risk across things like Cash investments, Bonds, Property and Stocks.

 

[Glenn]

"When the tide goes out in the harbour, the good ships go down along with the bad."

Glenn

 

[Rhody Trader]

If you can earn a consistent return of 20% per year through investments then yes, it makes sense to borrow at 10%. But I make a very a very big distinction between investing and trading. Maybe this is where the confusion lies. Every 3rd moron who bought a house in 1998 has made money on their 'investment'. Could they do the same trading with an equally leveraged account?

Uh, who said anything about investing? I was talking about trading and just throwing number out there for the sake of example. If you can consistently make x% per year trading and could borrow for x/2%, it would certainly make sense to do so.

I trade the ES contract which is $50 X the Standard & Poor's 500 Stock Index. This means 1 contract is currently valued at around US$75,000 [at time of writing]. Yet you only need US$5000 to open a trading account and maintain a margin of $3500 ($500 daytrading) to keep a position open. It is a hugely leveraged investment as it stands. You are effectively borrowing US$70,000 when you trade 1 contract.

Starting out with $5000, a trader, assuming they "know" how to trade (ie/ignoring the the tuition fees associated with attaining proficiency), with a very conservative target of 10%/month compounded will triple their money in 12 months. In 5 years they will have over $1.5 Million. Now remember, this is a conservative trader who knows how to trade.

I'm not sure what your point is here.

 

[dbphoenix]

Given the number of posts related to the subject of borrowing money to trade, I suppose I should point out that that was not the source of dannyegg's problems. If he had known anything about trading and had traded responsibly, he'd have been more likely to end up a hero.

Db

 

[dannyegg4575]

Given the number of posts related to the subject of borrowing money to trade, I suppose I should point out that that was not the source of dannyegg's problems. If he had known anything about trading and had traded responsibly, he'd have been more likely to end up a hero.

Db

It's silly to look back in hindsight now. In your opinion, what is the best way to trade? Buy and hold? or day trade? My personal preference is to swing trade... but then again, I could be wrong.

Do you guys have the link to learners center from this site? I would love to learn from all the experience traders here. I don't care how long it takes but I will do it.

I think at one point of our life, we thought we can beat the market. I've recently read Winner Take All. They have a very interesting point about the 2% rule. In that book, the author debated 2% is too little to see the fruit of your trade. You have to be pretty darn right to begin with when you put on the trade.