The switch from investor to day trading

[vicb]

The switch from investor to day trading

I have been contemplating making the switch from investor to trader.
To make the move I will have to cash in about 30% of my current holdings to raise capital keeping the remaining 70% for long term stock.
On the capital I will have for short term trade I figure I will need to make a return of minimum of 2% a week (averaged out over 1 year).
One of the main reasons for making the change will be for tax advantages.
Has anybody else made the change and if so what problems have you come across or tips of the trade do you have?
Thanks

[tech/a]

(1) A complete shift in thinking from investor thinking.
(2) Must have live data.
(3) Must have discount brokerage.
(4) Must have sound knowledge of technical analysis,in particular but not limited to.

(1) Volume,Support and resistance,consolidation areas and patterns.
Elliot Wave analysis or Steidelmayer--a great tool/s.Gives you the ability to read "Where" the trade is at! becoming proficient in either or both will take years---but well worth it.
(5) Must have search functions on intraday software.
(6) Must have atleast a basic charting package in realtime.
(7) Must have a strong understanding and methodology to assure a positive expectancy.
(8) A black and white mindset---its either right (you stay in) or your wrong (your out)---no MAYBE's
(9) Ability to know when to load to the hilt!2,3 or more trades on run away winners.

Much more but that will do.


Finally Boring is good.
I love the $$$s that can be made but hate the time consumption and the need to be vigilant the whole time your trading.

[sam76]

(1) A complete shift in thinking from investor thinking.
(2) Must have live data.
(3) Must have discount brokerage.
(4) Must have sound knowledge of technical analysis,in particular but not limited to.

(1) Volume,Support and resistance,consolidation areas and patterns.
Elliot Wave analysis or Steidelmayer--a great tool/s.Gives you the ability to read "Where" the trade is at! becoming proficient in either or both will take years---but well worth it.
(5) Must have search functions on intraday software.
(6) Must have atleast a basic charting package in realtime.
(7) Must have a strong understanding and methodology to assure a positive expectancy.
(8) A black and white mindset---its either right (you stay in) or your wrong (your out)---no MAYBE's
(9) Ability to know when to load to the hilt!2,3 or more trades on run away winners.

Much more but that will do.


Finally Boring is good.
I love the $$$s that can be made but hate the time consumption and the need to be vigilant the whole time your trading.

Tech, mate a sincere thankyou for what you do here.

[vicb]

Yes,
Thank you for your time and for the reply tech/a.
Great response, I really need to work on my chart reading.
The info from members like tech/a make this site.
All the best

[Wysiwyg]

Tech, mate a sincere thankyou for what you do here.

That is the best avatar you have there sam....soooooo coooool :bigthumb:

[clowboy]

On the capital I will have for short term trade I figure I will need to make a return of minimum of 2% a week (averaged out over 1 year).


One of the main reasons for making the change will be for tax advantages.
Thanks

1)

Why and how? 104% PA is alot (more if you account for compounding?)

2) Assuming that you came to the figure above then what tax advantages?

How much deductions can you claim in a year? I would argue much more than 5k without trading fulltime (add paying office rent etc) is a stretch. If you are returning 104% PA and holding longterm (ie claiming 50% CGT reduction) it is hard to see the tax advantage of paying tax on your full profits just to claim some deductions.

Granted I dont know your bank balance but at 100k returning 100% you would pay 40+% as a trader but only 20% as an investor without any other source of income, 20k in tax is alot.

[Happy]

I never liked idea to make income targets, it is possible, but might be hindrance.

[kennas]

That is the best avatar you have there sam....soooooo coooool :bigthumb:
I think your avatar takes the cake though. Reminds me of an interesting tea drinking experience in Equador........

I agree that having a more detached approach to trading is required, but investing should also be less emotional.

'Leave emotion at the door, and if you want a friend, get a dog.' GG

[wayneL]

I think your avatar takes the cake though. Reminds me of an interesting tea drinking experience in Equador........


Mate' de coca? :D

Here is one blokes first years day trading results... with a prop firm though.

http://www.uglychart.com/2006/12/19/final-prop-trading-results/

Cheers

[wayneL]

100% per year is not an unreasonable target and is quite achievable with a low to moderate capital base.

Equally complete bust is not at all uncommon as we have all heard 1,487,654,869,689,674 times by now.

The compounding argument is one that is thrown up consistently and it is a valid argument.

1/ daytrading is a full time profession so wages will be extracted from those profits, severely restricting the compounding effect, depending on size of bank and amount extracted etc

2/ Once you get to a certain size, slippage will become a major problem. In the US, depending on the stocks traded, this can be quite large. Here is oz it will be smaller. Typically, daytraders will have a maximum bank and siphon anything in excess of that into "investments"

In other words, you can only compound so far, before before cash will have to be placed elsewhere.

Cheers

[nizar]

(1) A complete shift in thinking from investor thinking.
(2) Must have live data.
(3) Must have discount brokerage.
(4) Must have sound knowledge of technical analysis,in particular but not limited to.

(1) Volume,Support and resistance,consolidation areas and patterns.
Elliot Wave analysis or Steidelmayer--a great tool/s.Gives you the ability to read "Where" the trade is at! becoming proficient in either or both will take years---but well worth it.
(5) Must have search functions on intraday software.
(6) Must have atleast a basic charting package in realtime.
(7) Must have a strong understanding and methodology to assure a positive expectancy.
(8) A black and white mindset---its either right (you stay in) or your wrong (your out)---no MAYBE's
(9) Ability to know when to load to the hilt!2,3 or more trades on run away winners.

Much more but that will do.


Finally Boring is good.
I love the $$$s that can be made but hate the time consumption and the need to be vigilant the whole time your trading.

Great post.

[nizar]

'Leave emotion at the door, and if you want a friend, get a dog.' GG

Gotta love Gekko. Its all about the bucks, kid.

[nizar]

The switch from investor to day trading

I have been contemplating making the switch from investor to trader.
To make the move I will have to cash in about 30% of my current holdings to raise capital keeping the remaining 70% for long term stock.
On the capital I will have for short term trade I figure I will need to make a return of minimum of 2% a week (averaged out over 1 year).
One of the main reasons for making the change will be for tax advantages.
Has anybody else made the change and if so what problems have you come across or tips of the trade do you have?
Thanks

I have made the change (or in the process) and im very happy with the progress and results so far. Trading is not as hard as some make it out to be, most people just tend to make what is essentially simple, into something more complex.

You just need to be prepared emotionally. At the beginning it was hard for me to take even 3 or 4 losses in a row. It would make me hesitate for the 5th trade, and of course, that would be the big winner. Just make sure you learn from each mistake.

When a trade is gone, forget about it. No regrets, its over, move to the next one.

Learn to be selective. Your system may bring up many buy signals a day. If they dont exactly meet your criteria, walk away. Dont be tempted to buy everything that moves.

Avoid overtrading. Its a killer. Stay FOCUSSED. You have to be in the same focussed, state of mind whether youve just won a large sum or if one of your stocks has gapped below your stop.

All the best on your journey.

[It's Snake Pliskin]

The switch from investor to day trading

I have been contemplating making the switch from investor to trader.
To make the move I will have to cash in about 30% of my current holdings to raise capital keeping the remaining 70% for long term stock.
On the capital I will have for short term trade I figure I will need to make a return of minimum of 2% a week (averaged out over 1 year).
One of the main reasons for making the change will be for tax advantages.
Has anybody else made the change and if so what problems have you come across or tips of the trade do you have?
Thanks

Vb,

To change just for tax reasons does not warrant a total change in paradigm. With change in paradigm comes a change in emotions, capital usage, risk, understanding of risk, and expected income.

The mental aspect of trading is more immense than you could believe. Some have the mental fortitude to do well.

Snake

[wayneL]

I have made the change (or in the process) and im very happy with the progress and results so far. Trading is not as hard as some make it out to be, most people just tend to make what is essentially simple, into something more complex.

You just need to be prepared emotionally. At the beginning it was hard for me to take even 3 or 4 losses in a row. It would make me hesitate for the 5th trade, and of course, that would be the big winner. Just make sure you learn from each mistake.

When a trade is gone, forget about it. No regrets, its over, move to the next one.

Learn to be selective. Your system may bring up many buy signals a day. If they dont exactly meet your criteria, walk away. Dont be tempted to buy everything that moves.

Avoid overtrading. Its a killer. Stay FOCUSSED. You have to be in the same focussed, state of mind whether youve just won a large sum or if one of your stocks has gapped below your stop.

All the best on your journey.

also a good post

[It's Snake Pliskin]

also a good post
Yes indeed.

One other thing needs to be considered: is the market the one for you?

[tech/a]

Well I agree with Snake.

Every trade you make will be immediately subject to tax.
Some trades in long term investment portfolios only attract 25% or less tax after holding for 12 mths or more.

If your looking for less stress and more order in life then forget about daytrading.

[wayneL]

Well I agree with Snake.

Every trade you make will be immediately subject to tax.
Some trades in long term investment portfolios only attract 25% or less tax after holding for 12 mths or more.

If your looking for less stress and more order in life then forget about daytrading.

If you have a business/job, forget daytrading.

This is the thing... daytrading IS a business/job, and should not be looked at the same way as longer term trend trading/investing.

It's different!

If sitting in front of a screen appeals more than digging trenches, sueing innocent folk and ripping off your client, selling ladies shoes or whatever, you'll enjoy it.

If you like your business, stay away. If daytrading is stressful , stay away. It's really as simple as that.

Duc mentioned the BIG factor in another thread... psychology. If you can act like a robot when taking a trade you will have a better chance. This is where most either fail or don't enjoy it.

However if you have (or can develop) the right psychology, it is not stressful at all.

My $0.03

[coyotte]

I have made the change (or in the process) and im very happy with the progress and results so far. Trading is not as hard as some make it out to be, most people just tend to make what is essentially simple, into something more complex.

You just need to be prepared emotionally.

So True -- but wonder if it's something to do with the way we think -- Logically or Creatively.

But the Transition from Investor to Day Trader is massive.
An Investor seems to be chasing perceived bargains, whereas a Trader is concerned with defending a position.

As an Investor turning to Trader you would first need to change this mindset and start defending present positions.

This would change you into a Long Term Trader (6-12 plus mths). Then work your way down to a Medium Term (1-3 mths), then Short Term (1-10 days).

It is the Long Term where you are building the foundation (kindy stage) for the Short Term.

1: You're probably better off using CFDs rather than a Broker -- Short/Long around half the top 300 --- lower costs --- instant trade.

2: Create a small Watch List of Shares under $4.00 with reasonable daily volitility and that can also be SHORTED.

3: Keep your position sizes within YOUR COMFORT ZONE --very important.

You do not need to keep a constant vigil --- quite often SPs will make their High/Low for the day by 11am.

For overall performance I have come around to Target Trading of 3 to 10 days. If the SP appears to be continuing its run, take out the initial stake and let the profit ride as a Medium Term Trend trade.

You can have Day/Short/Medium and Long Term Portfolios all running together.



Cheers

[MalteseBull]

(1) A complete shift in thinking from investor thinking.
(2) Must have live data.
(3) Must have discount brokerage.
(4) Must have sound knowledge of technical analysis,in particular but not limited to.

(1) Volume,Support and resistance,consolidation areas and patterns.
Elliot Wave analysis or Steidelmayer--a great tool/s.Gives you the ability to read "Where" the trade is at! becoming proficient in either or both will take years---but well worth it.
(5) Must have search functions on intraday software.
(6) Must have atleast a basic charting package in realtime.
(7) Must have a strong understanding and methodology to assure a positive expectancy.
(8) A black and white mindset---its either right (you stay in) or your wrong (your out)---no MAYBE's
(9) Ability to know when to load to the hilt!2,3 or more trades on run away winners.

Much more but that will do.


Finally Boring is good.
I love the $$$s that can be made but hate the time consumption and the need to be vigilant the whole time your trading.

(10) ability to manipulate the market with fake bids/sells and large parcels often seen in day trading stocks

[nizar]

An Investor seems to be chasing perceived bargains, whereas a Trader is concerned with defending a position.

Interesting point.

Last week somebody at work asked me about how i trade. I told her i like to buy stocks when they are at their MOST EXPENSIVE. And she was like shocked and like "oh, wow, thats an interesting theory" and probably thought in the back of her head (i wonder how much this fool has lost so far). And i said well it is contrary to what most people think - but most people dont make money from trading stocks.

And then i explained about blue skies and volumes and when to sell. It took a few minutes and then i said to her it really is that simple. And then she said the classical line: Oh, but i could never put my money somewhere without knowing everything about the company. :rolleyes:

And then i thought - time to get back to work.



3: Keep your position sizes within YOUR COMFORT ZONE --very important.


Position sizing (money management) and proficient use of stops (risk management) are both very important.

For me personally, sometimes my position sizes are a 1/3 or 1/2 of my initial capital (because i use fixed fractional position sizing and really like tight stops)

I think in general position sizing is an overlooked part of the trading plan.

[theasxgorilla]

I think in general position sizing is an overlooked part of the trading plan.

Agreed, usually in favour of technical (over) analysis.

[Bobby]

I have made the change (or in the process) and im very happy with the progress and results so far.

Learn to be selective. Your system may bring up many buy signals a day. If they dont exactly meet your criteria, walk away. Dont be tempted to buy everything that moves.


.
Hello Nizar,

I guess your now set up with live data & scanner.

Like to hear your recommendations & reasons regarding this.

Cheers Bob.

[nizar]

Hello Nizar,

I guess your now set up with live data & scanner.


Actually no.
Though i really really should.

Im going on holidays 2nite overseas for a few weeks, when i get back i will get some equipment.

Im not going to spend several Gs though, my account is not big enough to make such a spend practical.

[It's Snake Pliskin]

Im not going to spend several Gs though, my account is not big enough to make such a spend practical.

You can trade CFD's and take advantage of THEIR money.

THOUGH UNDERSTAND YOUR RISK.

[Bobby]

Actually no.
Though i really really should.

Im going on holidays 2nite overseas for a few weeks, when i get back i will get some equipment.

Im not going to spend several Gs though, my account is not big enough to make such a spend practical.

Looked into this some time back, costs little if your good with putors !
I'm not, but can show the way when you get back.

Cheers Bob.

[tech/a]

Dont think position sizing within your comfort zone can be over stated.

On price of trading tools.
Watching some of the "trades" and profits made in the "Fundamental shares" thread 3k on equipment for pretty well all those there should be a drop in the ocean.

I'm not understanding the contradiction.

There are trades of 100-200% made with regular monotony or so it appears.
Even a $2000 position will have the software and data paid for in a few trades.
A $5000 position and one trade will have it all paid for with change!

Hell if good software places you in the position to trade even a few a month why wouldnt you race out and get it!

If you cant afford good software you cant afford to trade! (Ive said that before).

Using it to the best advantage is another matter I suppose.

[ezyTrader]

nizar,

Commsec platinum platform is available for professional traders. 47 trades or 1 option, in a quarter (3 months), and the subscription is free.

Better than nothing, I reckon.

I'm at the stage of reading more books than you can chew (swamped is the other word) before I decide if daytrading is the game for me. So far, the market's been kind to me...I must say...

[Bobby]

I'm not understanding the contradiction.


Using it to the best advantage is another matter I suppose.

Tech those two points are worth considering, the cost of setting up with live feed & scanning ability is pertinent for those who find using this software difficult.

Sure you get a trial period with most, but that may not be enough time to get your head around how it all works before you need to pay up.

I know you use Marketcast , they charge some $bucks for their trial.
Yes its cheap it you know how to use it.

How easy is it to use comprehensively ?

Also good to see you posting again.

Bob.

[constable]

The switch from investor to day trading

I have been contemplating making the switch from investor to trader.
To make the move I will have to cash in about 30% of my current holdings to raise capital keeping the remaining 70% for long term stock.
On the capital I will have for short term trade I figure I will need to make a return of minimum of 2% a week (averaged out over 1 year).
One of the main reasons for making the change will be for tax advantages.
Has anybody else made the change and if so what problems have you come across or tips of the trade do you have?
Thanks
Vic , whatever you do , join a gym or better yet get a home gym.
One thing i found is that sitting in front of the computer for 6 hrs tends to pack on the weight!
Wouldn't hurt also to set up your desk and computer as far away from the fridge as possible! lol (mine is about 5m , no where near enuff)
Anyrate get those endorphins flowing, healthy body healthy mind. :)

[tech/a]

Tech those two points are worth considering, the cost of setting up with live feed & scanning ability is pertinent for those who find using this software difficult.

Sure you get a trial period with most, but that may not be enough time to get your head around how it all works before you need to pay up.

I know you use Marketcast , they charge some $bucks for their trial.
Yes its cheap it you know how to use it.

How easy is it to use comprehensively ?

Also good to see you posting again.

Bob.

Bob.

If it interests me I'll post. But gone are the days of "Teaching" so to speak.

I had Marketcast for a couple of years before I used it for shorter term trading.
I get a 50% tax deduction.
Im no Software genius Im a builder not an I/T based person---everything is self taught.
If I can use it anyone can.
Marketcast is $165/mth and around $400 setup.

Really in the scheme of things not big $$s. For a student---yes--- but students without a capital base shouldnt be trading---learning yes--trading---there is a time and place for everything---not the time.

You hear all the time dont confuse brilliance with a Bullmarket---well Ive seen some very very lucky and very very silly trades/decisions by people in the Fundamental section of this forum.

A lot of hope and could be,would have,should do on the next announcement analysis.

Its in plain veiw anyone can drop in and watch. Simply an observation.
So how costly is the right gear????

[Bobby]

Bob.

If it interests me I'll post. But gone are the days of "Teaching" so to speak.

I had Marketcast for a couple of years before I used it for shorter term trading.
I get a 50% tax deduction.
Im no Software genius Im a builder not an I/T based person---everything is self taught.
If I can use it anyone can.
Marketcast is $165/mth and around $400 setup.

Really in the scheme of things not big $$s. For a student---yes--- but students without a capital base shouldnt be trading---learning yes--trading---there is a time and place for everything---not the time.

You hear all the time dont confuse brilliance with a Bullmarket---well Ive seen some very very lucky and very very silly trades/decisions by people in the Fundamental section of this forum.

A lot of hope and could be,would have,should do on the next announcement analysis.

Its in plain veiw anyone can drop in and watch. Simply an observation.
So how costly is the right gear????
Tech I've quoted your entire post, before I comment you777
are a mix of idioyn'crasy thats you ! ;)

[It's Snake Pliskin]

Last week somebody at work asked me about how i trade. I told her i like to buy stocks when they are at their MOST EXPENSIVE. And she was like shocked and like "oh, wow, thats an interesting theory" and probably thought in the back of her head (i wonder how much this fool has lost so far). And i said well it is contrary to what most people think - but most people dont make money from trading stocks.

And then i explained about blue skies and volumes and when to sell. It took a few minutes and then i said to her it really is that simple. And then she said the classical line: Oh, but i could never put my money somewhere without knowing everything about the company. :rolleyes:


Nizar,

I don't talk to non investors/traders anymore. They always know more and display sheep mentality with a touch of "might be able to think but can't" attitude. They all know more than me and that is the way I like it.

[wayneL]

Nizar,

I don't talk to non investors/traders anymore. They always know more and display sheep mentality with a touch of "might be able to think but can't" attitude. They all know more than me and that is the way I like it.

I think thats the best way.

"They" don't like what I have to say anyway... and they blame people like us for their losses :rolleyes:

[It's Snake Pliskin]

I think thats the best way.

"They" don't like what I have to say anyway... and they blame people like us for their losses :rolleyes:

Exactly.
Everytime there is a downturn they say "how much did you lose?"
Answer: "nothing."
Result: Sheep stare.

[Bearman52]

Exactly.
Everytime there is a downturn they say "how much did you lose?"
Answer: "nothing."
Result: Sheep stare.
hI sNAKE
IT CONFUSES THEM EVEN MORE WHEN YOU'VE SHORTED STOCKS OR FUTURES AND MADE A BUNDLE IN A FALLING MARKET
LOVE IT :)
BM