stock question

[al77]

Re: 30 bucks.........

Originally posted by cave dweller
1....I would not pay 30 bucks a month for investors.com...(that is just me)..

2....Why pay, when you can get all of the investing and stock market info, for free, on the web.

cave dweller,

I started reading into stocks, ETFs etc. Every time I find a new approach of entry, I do a simple computer simulatiuon with a random price data (any stock basically: MSFT etc) - I simulate the trading according to the new entry rule. (Exit is simply stoploss with 1-3% of the trade)

What I notice is very odd: either the systems gain very large sum of money in a very short period of time 70-150% per year, or it loses money (10-50%) no matter how I tweak it.
Can you share some systems that you trade (i.e. entry&exit)?

 

[cinephile]

It does'nt work that way

While in theory, it sounds great, the idea that you can just keep compounding your returns into the stratosphere does'nt work. There are a lot of traders who do manage to make 2% to 7% a day on their capital because they use leverage.

When you are a small trader like myself, it is easy to get sometimes as much as 50 to 1 in leverage. The higher the amount of your capital you have, though, the smaller amount of leverage you are given. The reason being is that it is a way for the major brokerages to help control their risk. They do not want to lend someone 10 million for a trade and find it go bad. Most likely they won't see that money ever again.

Besides that, there are things like commisions, taxes, and the fact that it would be highly unlikely anyone could maintain a win streak that long.

It is very possible though to make $200K a year on an account of 50K. I hope to be at that level soon.

 

[cinephile]

Here is a simple one

Try buying on only higher highs and selling on lower lows.

Go to the Wealth-Lab site if you want to see some analysis of various trading strategies

 

[al77]

Re: It does'nt work that way

Originally posted by cinephile
The higher the amount of your capital you have, though, the smaller amount of leverage you are given.

Besides that, there are things like commisions, taxes, and the fact that it would be highly unlikely anyone could maintain a win streak that long.

It is very possible though to make $200K a year on an account of 50K. I hope to be at that level soon.

I thought we were talking about pretax profits, plus 2-7% gain you said was on average, i.e. including losing streaks. I also thought that commision are pretty low in out internet days...

Anyway, seems you refered to futures\forex trading (leverage). Stock trading can be "enhanced" just by margin, which is usually fixed I guess at no more than 50%. Does it mean futures are much more profitable (and risky) than stock traiding?

I also did not quite get what is "buy on higher high". Is it a local maximum?

 

[Bible_Belt]

Futures are riskier in that they are heavily leveraged, yes. And 50:1? Wow. With stocks, we were happy to get 10:1 - you had to be special to get that. Most people only get 2:1. IRAs are non-marginable.

Cinephile is talking about owning a very strong security/futures position that is trending upward and setting new highs all the time. Think oil. This method made a lot of money with stocks when the market was making huge runs one way or the other. It works on the down side as well in that you can short lower lows. It is harder to do this today in stocks, because reversals are as common as sustained trends. The US equity markets have gone mostly sideways for the past few years. There are trading strategies for a sideways market, though. You trade against extended runs trying to catch a big reversal. These days there is more action and probably more money in futures. Whatever the market, stop losses and personal discipline will slow down the rate at which you initially lose money so that hopefully you will turn it around before you run out of capital.

 

[al77]

Originally posted by Bible_Belt
With stocks, we were happy to get 10:1 - you had to be special to get that.

The US equity markets have gone mostly sideways for the past few years.

There are trading strategies for a sideways market, though. You trade against extended runs trying to catch a big reversal.

Interesting. How, i.e. where you can get 10:1 or simply more than 2:1 with stocks?

Don't knwo about the whole US equity market, but if you look at Dow or SP&P they are have a trend up since 2003. What do you mean than by "gone mostly sideways"?

In your trading system what kind of entry signal you use?

 

[Double]

cinephile: thanks man, i will PM you in case new questions arise


thissucks003:yeah man i know that i have to know how to read chart, it's really hard to learn all these words and techniques but thats the price of learning something new=) thanks for the good luck!

Bible_Belt: awesome post man, stuff like it's a zen journey that parellels life is exactly what i love to hear =) i understand that i have to start small...it's a journey that parellels starting from skinny guy at the gym =D

 

[Bible_Belt]

The 10:1 margin is for licensed traders with Series 63,7,55 licences and used for intraday positions only. And when I say sideways, I am comparing it to the market of 1996-2001, the boom and bust days.

There are as many systems as traders, and if that did not make it complex enough, different systems work and then stop working over time. The market changes all the time. Cinephile hinted at owning the strongest positions, and that is a good idea. Try buying what keeps going up, and timing your entry for when the stock/future has a rare pullback. It's good to own what is setting new 52 wk highs and be short what is setting new 52 week lows.

 

[Double]

what are you guys paying for your online depot? i gotta pay 0,55%comission + 10¤ depot fee + 0,40% for foreign stocks(including US stocks) + courtage(unknown lol!)

****ing ****

 

[Bible_Belt]

I have not used them, but Interactive Brokers is highly regarded.
http://www.interactivebrokers.com/en/main.php

http://www.elitetrader.com/br/?action=view&R_FirmID=43

 

[A-Unit]

Originally posted by Double
http://www.investors.com/learn/b01b.asp



i dont understand this, i was always thinking that companies first invest their earnings to pay less taxes. and that would mean that the earnings AFTER taxes dont mean much.......but the article says so.

help plz - cavedweller, speculator and others!

Earnings are earnings period. Corporations because they can write off expenses (i.e. computers, leases on automobiles, employee salaries) can't get the same tax 'deferral' benefits you are describing.


Taxes get paid. HOWEVER...if a company wanted to 'invest' said money, they could boost their R&D budget and 'invest' in future projects, that would keep cash from getting taxed since it would be an expense to the corporation, and therefore no taxation would occur.


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A-Unit