Stock Market/Day Trading

[DocLogic77]

I have always been interested in the stock market but never had the time to educate myself. In a former life I was series 6 licensed and really enjoyed that field. Recently, a friend turned me onto wallstreet survivor for fantasy trading. I really would like to learn. Anyone really experienced with the stock willing to give me a few online/and or book references for learning? I'm not looking to invest money anytime soon but would like to learn. Any help would be appreciated.

[BobbyRitz]

Maybe "shortsqueeze" knows a little something. Just a hunch.

I dabble, but have decided that index mutual funds are the extent that I'm interested in investing in the market.

In full disclosure...I am COMPLETELY out of the market right now. I moved everything to the sidelines when the Dow was at 10,400.

[shortsqueeze]

Shawn,

Best advice I can give you is to stay away.

I am an equity trader by profession, but not currently "practicing". In my heyday, I ran index arbitrage trading and was one of the largest market makers by volume in Diamonds and other Exchange Traded Funds (ETFs). I also traded as both a listed market maker and proprietary trader various Dow/S&P components and American Depository Receipts (ADRs) in all sectors.

What type of trading you are interested in doing? What is your time horizon? Intraday, overnight, weekly, monthly - how often are you planning on getting in and out of your positions? Are you looking to time the market / use technical indicators or pick stocks based on fundamentals?

I would start reading anything by Frank Fabozzi. You are going to want to stick to the academic material and not the "get rich quick trading" type stuff that is out there a dime a dozen.

I might also fish around online for an MBA or graduate degree program in investment management and its syllabus. You want introductory texts that cover capital markets infrastructure and products.

It's a start. I'd be happy to answer any questions general or specific.

[DocLogic77]

Shawn,

Best advice I can give you is to stay away.

I am an equity trader by profession, but not currently "practicing". In my heyday, I ran index arbitrage trading and was one of the largest market makers by volume in Diamonds and other Exchange Traded Funds (ETFs). I also traded as both a listed market maker and proprietary trader various Dow/S&P components and American Depository Receipts (ADRs) in all sectors.

What type of trading you are interested in doing? What is your time horizon? Intraday, overnight, weekly, monthly - how often are you planning on getting in and out of your positions? Are you looking to time the market / use technical indicators or pick stocks based on fundamentals?

I would start reading anything by Frank Fabozzi. You are going to want to stick to the academic material and not the "get rich quick trading" type stuff that is out there a dime a dozen.

I might also fish around online for an MBA or graduate degree program in investment management and its syllabus. You want introductory texts that cover capital markets infrastructure and products.

It's a start. I'd be happy to answer any questions general or specific.

Thanks a ton for pointing me in the right direction. Since my schedule is erratic and I don't want to be tied to a pc and tv all day I would think that swing trading would be where I wanted to start. Maybe? I'm mainly looking to learn as a hobby and eventually do some investing with expendable income. I would probably study for 6-12 months before I even made a small investment. I kinda look at it like poker...educated gambling. And when I first get in I will playing against people alot better than me. I will probably even lose money at first in my education. I'm not looking at making a living at it but would love to get good at it.

If my aim was 20%/year how realistic is that goal within a year or so of playing the market and committing myself to learning? Are there solid swing trading strategies or is it all TA and feel? And was the stay away advice said tongue in cheek or is it really that difficult to make decent returns on my investments? I am so green that when reading this stuff it reminds of the first time I opened up a medical textbook. It's overwhelming and I have no idea what they are talking about. The stuff I have been reading doesn't explain the terms they use. I really need to start from the beginning.

Thanks for the advice and any future advice you can give on the subject. I will check out that author tonight and see what I can find.

[shortsqueeze]

It's TA and feel. You'll find your rhythm. There are successful examples on both ends of the spectrum and in between.

Tongue in cheek, yes, but you need to be well prepared and very dedicated. Anything but your best effort and you will get run over in short order, much faster and much deeper than an online cash game!

Swing trading is much more doable than day trading. I know you aren't interested in day trading, but in case you ever get the urge to do so, here's why you shouldn't:

What used to be a centralized market on the NYSE, AMEX or NASDAQ is now a fractured, decentralized amalgam of venues. The primary market maker no longer has control of his stock's price. What this means is price discovery is next to impossible. Rapid swings for no apparent reason. High frequency traders. Some stocks you can trade hundreds of thousands of shares on a penny, others could move a buck on 5,000 shares. The institutions hold all the cards. They trade in "size". You could be a Chartered Market Technician (CMT designation) and have every indication a stock is going to tank. Next thing you know it moves higher over the next week. You are left scratching your head. Why? Because Fidelity Magellan was buying 80 million shares over that week and the portfolio manager needed to get into the name. Or Goldman just bought a shitload of options at a song and the options market maker needs to hedge his short position by buying the underlying stock. My point is the institutions buy and sell in size, and only other institutions and their counterparties know this is happening in real time. The day traders and individual investors are left wondering what the hell happened when all their models and paper trades were bouncing off the wall with sell signals. It's for this reason I generally steer people away from day trading but even swing traders can get spooked.

You'll still need sophisticated tools, as good as the pros. Excellent market data and order execution providers.

I would suggest you go to the MTA website (http://www.mta.org/eweb/StartPage.aspx) and look through the syllabus. Start to get involved in the material, maybe buy some of the Level 1 texts. In conjunction with my earlier suggestion for basic capital markets material, you should start to get a good feel for things, and you'll be building a solid foundation of knowledge in the way of the pros. Start to think like a pro and you'll be able to take advantage of the same opportunities they do. Don't worry about ROI right now. Start with the fundamentals and let your enthusiasm take you as fast as you can absorb the material. You will find the introductory academic material fairly approachable and not overwhelming.

The stuff I have been reading doesn't explain the terms they use.

You could do a search on Amazon for something like Wall Street Words. There is a text with that name, but you don't have to get that one. Find one that seems suitable to you and reasonably comprehensive.

[DocLogic77]

I really appreciate the advice. Thanks!

[shortsqueeze]

My pleasure. Here to help, be a sounding board, whatever you need.

[daboose]

I highly recommend the book "The Ivy Portfolio." (Google the title...available at Amazon.) It fits your schedule and is risk adjusted; missing every "black swan."

Only one "tool" is required and this is NOT "sophisticated." It's simple.

The tool? Be able to produce a monthly chart.

Schedule-wise:- you only check how your 5 asset classes are doing at the end of the month, and the rest of the month ... light up a smoke. Ha!

Riske-wise: I think a 20% is not realistic (IMHO) but 10+% is doable, especially with this approach as they demonstrate in the book; going back to the 1970's and 1800's.

Cost: buy the book.

I've been trading/investing as a 'hobby' since the 70's and really like this approach, especially when I retire. The book will give you more detail but it's VERY simple and straightforward. It's very boring but I know I'll be able to sleep at night when I implement this approach.

The book is worth a read.

Good luck!

[Rock Star]

If your gonna do this..Your gonna need to learn some technical analysis..
Read books of Charting, Candlesticks..Learn how to read charts and find trends in well ran companies..Stocks that move..Only stocks that move good in channels are good for daily trading..Most day traders do multiple trades a day. Usually never staying in threw the next trading day..I dont suggest getting into that unless your into sitting in front of a computer all day..I like to do longer trades using daily charts and only trading during earnings season..when going into earnings season, that is when stocks move the best..read books like.

Technical analysis by Martin Pring..has a cd with it that lets you take test on chart reading.. stochastics and moving averages..

Japanese Candlestick Charting techniques by Steve Nison

Also need to read Mind set books like

The Rich Dad poor Dad books..Theyre good..

Boomeromics

The Golfer and the Millionaire..My favorite.

The key is to be informed what is going on in a stock..pick like 5 to 10 well ran companies and study them..Know them like your own kids..Check theyre history..See how they move during earnings season, holidays..Know how the news effects them. Then when you use that with the technical analysis you have some reason to trade them..Trade with discipline and dont get greedy..Go on Optionsxpress.com and use theyre virtual trading for practice..practice practice practice til your sick of being right..then maybe you can put real $ in..Good luck bro..

[DocLogic77]

I really appreciate all this advice. Thanks guys!

[Jamie]

Bloomberg.com has a great financial glossary. When you go to the page near the top is a tool bar . One of the choices is personal finance. The glossary is the last option listed under personal finance.

[FireDigger]

Hi Shortsqueeze, thank you for the posts. I find it interesting that you use to trade ADRs. What are your thoughts on China and Brazil ADRs right now? Do you concentrate more on fundamental or technical analysis?

I'm currently reading through Steve Nison's Beyond Candlesticks. If interested, there's an online version of Japanese Candlestick Charting Techniques online.

[shortsqueeze]

I took a Merrill course in candlestick charting years ago, I found it useful throughout my career. I used to use 5 and 15 minute S&P futures charts, same with the Dow, I'd also watch the OIX (oil) and gold, among others.

I'm not trading regularly now, so I haven't been watching the markets adequately to advise. There aren't as many arb opportunities in the ADRs as there used to be, or I should say there are a lot more people capitalizing on them quickly today. You really need to watch how firms are pricing their inventory in the ADRs, GDRs and local shares to capture opportunities effectively.

I was always a mix between tech and fund analysis, but mostly my specialty was fast markets. I would often trade stocks in the news or those subject to earnings or news volatility. Thin stocks too. I might trade in one or two names with one or two brokerage houses working anywhere from 25-50% of the daily volume in a very thinly traded name. Quite tricky and very risky, much more so than fast markets where there's always size to at least get you out of a position, even at a loss. More like a chess match than anything else.