Thinking about playing the stocks...

[Miramonti]

Originally posted by: ricochet

Originally posted by: TheNinja
I just jumped into it and it took a lot of mistakes on my part unfortunately. I probably should have gone 6 months with fake money instead but I didn't. Oh well, live and learn and now I"m a smarter investor. I guess what I'm saying is that you should read up in general and then maybe get some experience with small amounts of money or with fake money.

I made a lot of mistakes too. All with real money. I dabbed with virtual stocks for awhile, but felt I wasn't really into it because the inherent risk wasn't there.

Making actual investments/trades is the best way to learn imo because it provides the inherent adrenaline, excitement, and disappointments that drive the desire to learn more and get better.

People should start SMALL tho because losses will almost always happen in the beginning, but we learn the most (and are driven to learn more) when things don't go well as opposed to when they do. Consider it the cost for a good education, but keep the costs down by investing only a little to start with.

 

[compnovice]

Invest for the longterm..... 15% capital gains tax vs >30% tax for short term...

 

[krunchykrome]

Im very happy with Ameritrade.

 

[EPCrew]

Buy high, sell low.

 

[Scarpozzi]

Originally posted by: EPCrew
Buy high, sell low.

.....speaking of high, have you been smoking something?

 

[Descartes]

A few things:

1) Learn the difference between investing and trading.
2) Ignore the people that cry, "No one makes money trading!" In truth, the majority don't.
3) Decide whether or not you want to invest the time it takes to learn how to properly invest and/or trade. If not, take the advice of someone like DaveSimmons and focus your time elsewhere.

If you do want to trade, then you need to do the following:

1) Ignore ALL stock tips.
2) Ignore ALL systems unless they can furnish a historical P&L. Everyone claims 30%+, but few people achieve it with any regularity.
3) Learn the fundamentals. Don't spend your time reading countless technical analysis books thinking some pattern established a posteriori is going to make you successful.
4) Learn about options, how to use them as hedges or as part of the strategy itself.

Finally, I would read the following books:

Understanding Wall Street. You have to know how the markets actually work, right? This is a good start.

Intelligent Investor. This book has little to do with trading, but it will give you a nice foundation in asset allocation, some fundamental analysis, etc. It's also so dry that you'll quickly find out whether or not you're really interested in investing.

Trading in the Zone. This probably won't make a lot of sense unless you've actually traded, but I think it's a good idea to read before you start trading. You have to start with the correct mindset, and this is the best book to understand it. It's an easy read (it's actually really repetitive, but it's still good).

Also, look to forums like EliteTrader.com where actual traders do discuss strategy, share P&Ls, etc. I would also look to your city to find trading groups. I'm in an options trading group, and money managers routinely share P&Ls, strategies, etc.

 

[Descartes]

Originally posted by: compnovice
Invest for the longterm..... 15% capital gains tax vs >30% tax for short term...

While that is mostly true, there are tax strategies that can be part of the overall money management strategy. Section 1256 defines the "60/40 rule" that gives greater tax efficiency to contracts being held for the short-term. It's still not as tax efficient as a long-term capital gain would be, but presumably anyone involved any short-term trading is achieving a return more than sufficient to compensate.

 

[Descartes]

Originally posted by: arrfep
I'm a casual investor, with only a couple thousand dollars in only one or two or three stocks at a time. I've been at it for six months and this is what I've learned:

1.) Make lots of mistakes. Seriously. Nothing will make you learn faster and harder than seeing your hard-earned cash go down the drain with the click of a mouse.

2.) Be willing to lose the money. The aforementioned mistakes that you will make will make your life terrible if you can't fully accept the idea of losing money. Which leads to

3.) Don't panic. If you believe in a security, whether through research or gut instinct, don't panic if it drops a few points. In my first month I panicked a couple times and sold on a dip, lower than I bought, because I was afraid of a continued decline. Well if I'd stuck through, I would have doubled my investment on each of these occasions. Instead I lost money. About three weeks ago, I was down 25% on my original investment. As of market closing today, I've gained that all back and am now up about 23% on top of that. Gotta stick with it.

4.) Take everything with a grain of salt. Consult multiple sources. Do your homework. But most importantly...

5.) Do not listen to anything anyone says on a message board about a particular stock.

Good luck.

I agree with almost everything you're saying, but panic shouldn't even be a consideration. If any decisions are made subjectively, then there's simply no way to build a successful system. This refers primarily to trading of course, because if you're having panic over a few points you're likely looking at immediate price action rather than something fundamental.

If you're not objectively identifying plays, then there's no way to establish a realistic probability of success on any play; only with a reasonable sample size of plays based on the same entry and exit criteria (including same calculated position size, stop-loss strategies if any, turnover, hold time, etc.) can you identify the probability, and only with that can you find a risk to return ratio that actually works. From that, it's a relatively simple matter of risk and money management.

In short: If you're asking yourself, "Should I sell here?" then it's already too late.

imo.

 

[fisheerman]

I have been a life time subscriber to the Motley Fools hidden gems newsletter and it has done really well.

But the past couple of years has been a tear for small cap stocks.

I'm not expecting to repeat the past 3 years performance.

I think the newsletter is touting 60+% returns for the past 3.

I've found that it is more like 40+% if you don't buy right at the time the stock is rec'ed because you miss the initial pop of the stock

overall work the $199 a year though.

-fish

 

[johnjbruin]

Change your mental philosophy first of all. You will not the playing or betting. You will be intelligently investing. If you treat your money like play money in the stock market and just keep following momentum, you will usually lose big money and sometimes make big money. Just start thinking differently.

 

[WildHorse]

Start by reading your way through these letters, or at least read a few of them:

BERKSHIRE HATHAWAY INC. SHAREHOLDER LETTERS by Warren Buffett

 

[Fritzo]

Best advice I've gotten is: you need at least $10000 to start with stocks, and put $2000 into 5 different companies. Invest in things you like so you'll be more inclined to track/support your stocks. Finally, look at 5 year growth- if you see a 2% gain each year and then a sudden 10% gain, that's a good sign something is taking off.

If you have less than $10000, get an S&P Index Fund. It's pre-diversified and no fuss-no muss.

 

[LS20]

1. use common sense
2. dont listen to anybody