New to trading

[ptnov]

Hey everybody!

I'm rather new to this trading thing. I've been reading up on chartingschool and babypips and also a lot of Swedish trading books (I'm from Sweden).

I'm a student so my account is rather limited (4000 usd). I've read that trading with low sums does not work out. So is it best to learn to trade with mini futures to ger leverage or with stocks even though the fees will likely "eat up" som percentage earnings.

Thanks!

 

[tomorton]

I don't know how true it is that trading with small accounts doesn't work. The people who try trading generally don't have much money so they have small accounts. The people who have large amounts of money have usually found another way to make money - that's how they got it - so they don't even need to try trading.

Its probably true that whether you start large or small, trading eats money.

Keeping the money risked per trade is vital in all cases, and high leverage makes it harder to control risk. Meantime, whatever you trade, through whichever means, make sure your fees are tight.

 

[LON:RMG]

I started my equities portfolio with a similar amount of money, so I wouldn't let starting with a small amount of capital put you off.

If you are going to trade equities:

My strategy with equities was a 2 - 6 month holding period, so I was paying £6 transaction fees but it didn't perceptibly hurt my profits. Diversify, but as sensibly as possible. Split your portfolio into 3 parts for the moment, with each part buying into a different company in a different sector. Let each part (hopefully) compound until you have enough capital to diversify into 4 parts.

I was very lucky from the outset though, I went all in on my first investment and doubled my money. I then did my '3 parts' suggestion above and doubled my money in all 3 once again, so I had a very lucky start with no early drawdowns to shrink my funds.

Edit: I should probably add that while the leveraged futures trading you mention seems attractive, it can put you in the red very quickly. If you take this route make sure you know what you are doing before you trade real money. Build your strategy around risk management and keep losses as small as possible. (I have just realised this is what tomorton said, but I'll leave this edit just to reiterate the important point).

 

[CityTrader]

I wouldn't worry about small trading capital to start- you just have to expect your profits & ( hopefully) your losses to be commensurate. If someone starts with $4mil they aren't going to be happy making $500 on a trade. You make $500 thats a great return on your capital. Start small, keep it disciplined.

 

[CityTrader]

All in on your 1st trade??? Sorry that's either gambling or insider dealing. Neither of which have a place here...

I started my equities portfolio with a similar amount of money, so I wouldn't let starting with a small amount of capital put you off.

If you are going to trade equities:

My strategy with equities was a 2 - 6 month holding period, so I was paying £6 transaction fees but it didn't perceptibly hurt my profits. Diversify, but as sensibly as possible. Split your portfolio into 3 parts for the moment, with each part buying into a different company in a different sector. Let each part (hopefully) compound until you have enough capital to diversify into 4 parts.

I was very lucky from the outset though, I went all in on my first investment and doubled my money. I then did my '3 parts' suggestion above and doubled my money in all 3 once again, so I had a very lucky start with no early drawdowns to shrink my funds.

Edit: I should probably add that while the leveraged futures trading you mention seems attractive, it can put you in the red very quickly. If you take this route make sure you know what you are doing before you trade real money. Build your strategy around risk management and keep losses as small as possible. (I have just realised this is what tomorton said, but I'll leave this edit just to reiterate the important point).

 

[hhiusa]

I started my equities portfolio with a similar amount of money, so I wouldn't let starting with a small amount of capital put you off.

If you are going to trade equities:

My strategy with equities was a 2 - 6 month holding period, so I was paying £6 transaction fees but it didn't perceptibly hurt my profits. Diversify, but as sensibly as possible. Split your portfolio into 3 parts for the moment, with each part buying into a different company in a different sector. Let each part (hopefully) compound until you have enough capital to diversify into 4 parts.

I was very lucky from the outset though, I went all in on my first investment and doubled my money. I then did my '3 parts' suggestion above and doubled my money in all 3 once again, so I had a very lucky start with no early drawdowns to shrink my funds.

Edit: I should probably add that while the leveraged futures trading you mention seems attractive, it can put you in the red very quickly. If you take this route make sure you know what you are doing before you trade real money. Build your strategy around risk management and keep losses as small as possible. (I have just realised this is what tomorton said, but I'll leave this edit just to reiterate the important point).

If you diversify three ways being charged £6/trade, then that is £6/trade x3 for the buy trades and £36/round trip (£6/trade * 3 portfolios * 2 transactions (buy & sell)) for the entire portfolio. £36 is 1% of £3,600, which means that those are expensive commissions. To me, 1% per trade would noticeably affect you. That is, unless you are working with more than £3,600. To make it imperceptible, you would need to be working with at least £36,000. That would still be a 0.1% opportunity cost each time. If you made a trade in each of the three portfolios you mentioned each day for a month, then you would experience an opportunity cost across the entire portfolio of 1.001^30 = 1.0304 or 3.04%. 1.0304^12 = 1.4324 or 43.24% opportunity cost in a year.

Your strategy is not the best for someone working with $4,000.

 

[ptnov]

If you diversify three ways being charged £6/trade, then that is £6/trade x3 for the buy trades and £36/round trip (£6/trade * 3 portfolios * 2 transactions (buy & sell)) for the entire portfolio. £36 is 1% of £3,600, which means that those are expensive commissions. To me, 1% per trade would noticeably affect you. That is, unless you are working with more than £3,600. To make it imperceptible, you would need to be working with at least £36,000. That would still be a 0.1% opportunity cost each time. If you made a trade in each of the three portfolios you mentioned each day for a month, then you would experience an opportunity cost across the entire portfolio of 1.001^30 = 1.0304 or 3.04%. 1.0304^12 = 1.4324 or 43.24% opportunity cost in a year.

Your strategy is not the best for someone working with $4,000.

The commission here in Sweden is not a problem. The stock commission with our most common internet stock dealer is 0.25 % with minimum commission of 1SEK (roughly 0.1usd).

Would you guys advise hold swing positions in the beginning or head directly intraday trading? Is it correct to assume that these two time perspective of trading are quite different and that I would need experience from both to know what fits me?

Thanks!

 

[ptnov]

I wouldn't worry about small trading capital to start- you just have to expect your profits & ( hopefully) your losses to be commensurate. If someone starts with $4mil they aren't going to be happy making $500 on a trade. You make $500 thats a great return on your capital. Start small, keep it disciplined.

Thanks! sounds like a good plan!

 

[LON:RMG]

All in on your 1st trade??? Sorry that's either gambling or insider dealing. Neither of which have a place here...

Hi again citytrader haha, It was the Royal Mail IPO - hence my username. You'll notice I used the words "very lucky" twice when referring to this trade. What I am trying to get across is, I had a lucky start and have not had to deal with the daunting initial prospect of losing on my first few trades - so I give my advice while making that clear. This is what I did, and this is what worked for me.

If you diversify three ways being charged £6/trade, then that is £6/trade x3 for the buy trades and £36/round trip (£6/trade * 3 portfolios * 2 transactions (buy & sell)) for the entire portfolio. £36 is 1% of £3,600, which means that those are expensive commissions. To me, 1% per trade would noticeably affect you. That is, unless you are working with more than £3,600. To make it imperceptible, you would need to be working with at least £36,000. That would still be a 0.1% opportunity cost each time. If you made a trade in each of the three portfolios you mentioned each day for a month, then you would experience an opportunity cost across the entire portfolio of 1.001^30 = 1.0304 or 3.04%. 1.0304^12 = 1.4324 or 43.24% opportunity cost in a year.

Your strategy is not the best for someone working with $4,000.

Hi hhiusa and thanks for your great critique. I wholly understand where you are coming from, and to be honest I totally agree with you. My original use of the word "perceptibly" was in reference to my own psychology and trading strategy. I won't go into describing the way I traded, but it was (as becomes increasingly clear to me) somewhat unusual and I may have been wrong to assume that the strategy that suited my trading would suit others. You have to remember, though, with the 3 way split and an average holding period of 3 - 6 months, I am spending less than £100 in trading fees for the full year.

The advice I gave was simply what worked for me in the early stages of my first equity portfolio - I don't know what the best strategy is, but can merely speak from my experiences. I have been extremely lucky so far - and the fact that I have not had many big draw-downs or losses may translate to a lesson still to be learnt on my part. I have heard many great traders say that your best lessons come from losses - and maybe my lessons are still yet to come. Maybe due to this, you would have some better advice to contribute for the benefit of us all?

 

[hhiusa]

Hi again citytrader haha, It was the Royal Mail IPO - hence my username. You'll notice I used the words "very lucky" twice when referring to this trade. What I am trying to get across is, I had a lucky start and have not had to deal with the daunting initial prospect of losing on my first few trades - so I give my advice while making that clear. This is what I did, and this is what worked for me.



Hi hhiusa and thanks for your great critique. I wholly understand where you are coming from, and to be honest I totally agree with you. My original use of the word "perceptibly" was in reference to my own psychology and trading strategy. I won't go into describing the way I traded, but it was (as becomes increasingly clear to me) somewhat unusual and I may have been wrong to assume that the strategy that suited my trading would suit others. You have to remember, though, with the 3 way split and an average holding period of 3 - 6 months, I am spending less than £100 in trading fees for the full year.

The advice I gave was simply what worked for me in the early stages of my first equity portfolio - I don't know what the best strategy is, but can merely speak from my experiences. I have been extremely lucky so far - and the fact that I have not had many big draw-downs or losses may translate to a lesson still to be learnt on my part. I have heard many great traders say that your best lessons come from losses - and maybe my lessons are still yet to come. Maybe due to this, you would have some better advice to contribute for the benefit of us all?

Are you saying that you are no longer investing long term? What broker do you use? What financial instruments do you invest in?

 

[LON:RMG]

Are you saying that you are no longer investing long term? What broker do you use? What financial instruments do you invest in?

"Are you saying that you are no longer investing long term?" - What are you referring to here hhiusa?

Broker = Jarvisim, and in the portfolio that I have been referring to in this thread I trade UK equities only.

 

[hhiusa]

"Are you saying that you are no longer investing long term?" - What are you referring to here hhiusa?

Broker = Jarvisim, and in the portfolio that I have been referring to in this thread I trade UK equities only.

You said your holding period is six months. That's long-term, not day trading so do you daytrade or do you invest long-term? How much do you work with? Are your commissions still £6/trade?

When I said "what instruments do you trade", I was hoping for a specific answer. Futures? Options? Stocks? Forex? CFDs?

I thought Jarvis International Management did not do self-directed trading, hence the name investment management? There product listing only shows ISAs, junior ISAs, signature ISA and SIPPDEAL XTRA?

 

[LON:RMG]

You said your holding period is six months. That's long-term, not day trading so do you daytrade or do you invest long-term? How much do you work with? Are your commissions still £6/trade?

When I said "what instruments do you trade", I was hoping for a specific answer. Futures? Options? Stocks? Forex? CFDs?

I thought Jarvis International Management did not do self-directed trading, hence the name investment management? There product listing only shows ISAs, junior ISAs, signature ISA and SIPPDEAL XTRA?

I would still call a holding period of a few months 'trading'. A very small portion of equities traders trade intra-day or even intra-week for that matter. I understand your confusion though, and I am sorry I wasn't more clear in my previous posts.

UK equities would fall into the "Stocks" category in your list. When you trade through options, spread-betting and CFDs, you aren't trading the equity - you're betting on the price movements (as I am sure you know). And I don't know how you can trade equities through Forex haha, I assume that was a typo.

And Jarvis do execution only share dealing too. They own ShareDeal and X-O, their lesser-known subsidiaries.

 

[hhiusa]

I would still call a holding period of a few months 'trading'. A very small portion of equities traders trade intra-day or even intra-week for that matter. I understand your confusion though, and I am sorry I wasn't more clear in my previous posts.

UK equities would fall into the "Stocks" category in your list. When you trade through options, spread-betting and CFDs, you aren't trading the equity - you're betting on the price movements (as I am sure you know). And I don't know how you can trade equities through Forex haha, I assume that was a typo.

And Jarvis do execution only share dealing too. They own ShareDeal and X-O, their lesser-known subsidiaries.

I was not referring to forex as an equity. I was referring to financial instruments of any kind (Futures, Options, FOPs, Warrants, CDOs, structured products, metals, warrants ...)

So you only invest in equities? A few month holding period is not trading to me, it is more like investing.

You never answered the question about commissions.

 

[LON:RMG]

I was not referring to forex as an equity. I was referring to financial instruments of any kind (Futures, Options, FOPs, Warrants, CDOs, structured products, metals, warrants ...)

So you only invest in equities? A few month holding period is not trading to me, it is more like investing.

You never answered the question about commissions.

My mistake haha.

As an individual I trade, or invest I should say (you've changed me) my equities portfolio, and also a macro futures portfolio. I am playing about with a fully systematic portfolio too I have developed with a partner, which is still being played about with and tested before I put meaningful money in - it's pretty fun stuff though.

Sorry, I missed your commissions question - yes I still pay £6 per trade on my own equities portfolio.

You seem to have a real attention to detail - which I am sure is a virtue that serves you well in trading.

 

[hhiusa]

My mistake haha.

As an individual I trade, or invest I should say (you've changed me) my equities portfolio, and also a macro futures portfolio. I am playing about with a fully systematic portfolio too I have developed with a partner, which is still being played about with and tested before I put meaningful money in - it's pretty fun stuff though.

Sorry, I missed your commissions question - yes I still pay £6 per trade on my own equities portfolio.

You seem to have a real attention to detail - which I am sure is a virtue that serves you well in trading.

So you have a portfolio for equities and a portfolio for futures? What do you mean by macro futures? Does it have anything to do with macroeconomic principles? Macroeconomics was one of my favorite courses for my economics degree before I switched to biochemistry.

The Global Macro Strategy is pretty vague. I do not trade based upon the news.

I am interested in what you mean by fully systematic portfolio. I do not know if it is anything like this, but I am also working on streamlining an application that scans, backtests, determines how much to buy and talks to the exchanges directly.

I still see a problem with paying £6/trade. That means you are investing more than £6,000 per financial instrument per trade to be charged 0.2% commission per round trip trade. You did say that you are working out the bugs, so I guess it does not matter at this stage.

Are you only using Jarvisim as a clearing house? IB offers their service called IB Cleared, but it requires $1,000,000 in your account. There are also other providers like Clearnet.

 

[CityTrader]

Hi again citytrader haha, It was the Royal Mail IPO - hence my username. You'll notice I used the words "very lucky" twice when referring to this trade. What I am trying to get across is, I had a lucky start and have not had to deal with the daunting initial prospect of losing on my first few trades - so I give my advice while making that clear. This is what I did, and this is what worked for me.



Hi hhiusa and thanks for your great critique. I wholly understand where you are coming from, and to be honest I totally agree with you. My original use of the word "perceptibly" was in reference to my own psychology and trading strategy. I won't go into describing the way I traded, but it was (as becomes increasingly clear to me) somewhat unusual and I may have been wrong to assume that the strategy that suited my trading would suit others. You have to remember, though, with the 3 way split and an average holding period of 3 - 6 months, I am spending less than £100 in trading fees for the full year.

The advice I gave was simply what worked for me in the early stages of my first equity portfolio - I don't know what the best strategy is, but can merely speak from my experiences. I have been extremely lucky so far - and the fact that I have not had many big draw-downs or losses may translate to a lesson still to be learnt on my part. I have heard many great traders say that your best lessons come from losses - and maybe my lessons are still yet to come. Maybe due to this, you would have some better advice to contribute for the benefit of us all?

 

[tomorton]

Would you guys advise hold swing positions in the beginning or head directly intraday trading? Is it correct to assume that these two time perspective of trading are quite different and that I would need experience from both to know what fits me?

Thanks!

I would definitely recommend staying away from daytrading until you have strategies that you are 100% familiar with and which have a proven track record - so that you can trade by automatic reflex almost.

Swing positions offer more time for consideration of the right entry but a good entry without an exit strategy is pointless - too many people starting out in daytrading just recognise entry patterns and forget they will have to exit fast at some point. Swing positions also demand you become psychologically and emotionally comfortable with holding overnight and across weekends, this is a real test of your own convictions and demands a more thorough analysis of opportunities.

 

[CityTrader]

I agree with Tom

The upside of day trading, is easier sleep ( NEVER have an o/n postion) better margin requirements, better feel for markets as trading more frequently.

Downside is intense concentration needed, and self imposed restriction of observance of nor 1 cardinal rule for day traders: Never, ever run a position overnight.

I would definitely recommend staying away from day trading until you have strategies that you are 100% familiar with and which have a proven track record - so that you can trade by automatic reflex almost.

Swing positions offer more time for consideration of the right entry but a good entry without an exit strategy is pointless - too many people starting out in daytrading just recognise entry patterns and forget they will have to exit fast at some point. Swing positions also demand you become psychologically and emotionally comfortable with holding overnight and across weekends, this is a real test of your own convictions and demands a more thorough analysis of opportunities.

 

[LON:RMG]

So you have a portfolio for equities and a portfolio for futures? What do you mean by macro futures? Does it have anything to do with macroeconomic principles? Macroeconomics was one of my favorite courses for my economics degree before I switched to biochemistry.

The Global Macro Strategy is pretty vague. I do not trade based upon the news.

I am interested in what you mean by fully systematic portfolio. I do not know if it is anything like this, but I am also working on streamlining an application that scans, backtests, determines how much to buy and talks to the exchanges directly.

I still see a problem with paying £6/trade. That means you are investing more than £6,000 per financial instrument per trade to be charged 0.2% commission per round trip trade. You did say that you are working out the bugs, so I guess it does not matter at this stage.

Are you only using Jarvisim as a clearing house? IB offers their service called IB Cleared, but it requires $1,000,000 in your account. There are also other providers like Clearnet.

The futures strategy is macroeconomic yeah, I don't trade on the news but instead have a rough 'equilibrium' in mind of the correlation of different asset classes. The core of my strategy basically looks for price discrepancies in these correlations. There are a few other things I incorporate but this is the main principle. I am midway through an economics degree now, how useful did you find your macroeconomic principles? The stuff I do as part of my degree is all mathematical models and to be honest it is useless as far as trading goes.

The fully systematic portfolio is as you have interpreted. It runs through a Ruby application (I used Ruby because I picked it up a few years ago when I started developing web apps for other projects). It basically uses historical price data that it grabs from yahoo api and I scrape the company information of the exchange website. It also incorporates some secondary variables which pertain to some companies, where the theory I have is - it is somewhat predictive of price in the right circumstances - and it has shown positive results so far. The biggest pitfall I have at the moment is that the data I scrape from the exchanges doesn't contain companies that went bust - and yahoo api doesn't store price data for these companies either. This has caused a survivorship bias when I am backtesting it so I am currently looking for solutions to this. It can run itself completely though, I have all the parameters for trade entry working and am looking at the best way to implement a trade exit now. More than anything, though, the project is a lot of fun.

The £6 is fine or I would have changed it, Jarvis are a great company and have always worked well for me. I would pay the small premium of £6 just for the peace of mind that I am using a good company. I trade through one of their subsidiaries, XO. I said Jarvis as XO is lesser known, and they operate under the name Jarvis in all correspondence.