This is I think my first post and it is gonna be a bit long but I thought it important to give enough information so that others can give advice. Sorry about that in advance.
Basically I need some advice on where to go from here with my trading strategy.
A bit of history…
I started what I thought was investing (but now realize was gambling) in stocks in about 2006 with a first trade of about $2000. As I gained more confidence and a fair bit of success, I increased my activity. I had no such thing as stop losses in place, I didn’t even know what they were. I had no strategy. I had disproportionate amounts of funds invested in certain stocks. Because I was making money, it was all too easy so I just kept buying things I thought sounded good. I had 95% of all my funds in mining stocks on the ASX. No money management rules in place. I just pumped money into the market as I got paid each month. No charting, or real technical analysis. I would just read or hear about a stock and then look at the chart. If it looked like price had retreated then I would buy on the hope that it was a short term dip. I bought penny stocks and didn’t even really care/understand about the importance of volume. Writing this now makes me cringe, but at the same time it is a learning experience.
Well the funny thing is I made quite a bit of money from 2006 until mid 2008, and I had at least doubled if not tripled my money. So a bull market and blind luck probably did their best to confirm all the bad habits I had. I remember getting a scare in August 2007 when my stocks dropped a fair bit, but then they shot straight back up in a matter of a couple of weeks, so on with the show I thought.
Well things of course turned to the schidt in September/ October 2008. At the time I was on holiday in the US and was getting internet connection every 3-4 days as I was travelling around a lot. I remember logging on and realising my portfolio value was down $50k. Holy F$%# I thought, then “Oh well, it’ll come back”….another 3 or 4 days later I log on and it’s down $100k. At that point I thought that I was down so much already I may as well just hold and wait… So I managed to turn abount $400k into I think $85k at the low point…nice work, I’m sure you’ll agree.
Well since then, I have done a fair bit of reading on all my bad habits, working out where I went wrong and how things could have been different. I drew a line in the sand and have basically started afresh. But really that has only meant a few (but significant) changes:
1. I have stop losses now on any new trades and on existing positions
2. I have sold out of stocks I was too heavy in and tried to diversify into different sectors.
3. I changed brokerage firms to IB so I can do automatic stop losses. I am now also trading US stocks.
4. I have half my portfolio in cash right now.
My stocks have come back a bit and I have had some more success to the point that I am now down about 50% from my portfolio all time high, and I am down 35% on the total money I have invested.
So my problem is where do I go from here???
I have been trawling the internet looking for information on how to trade, but any newcomer will understand how mind boggling all this information is. There are so many punters out there who are willing to take my money and offer all these great systems etc, that it is too hard to sort out the BS from anything that may be of value.
So I end up just thinking everyone is full of BS. It’s like watching the financial channels and the so called economic experts. One minute the market is falling and all the economists are going on about how we will be in for new lows. The next minute the markets are moving on up, and now they are telling us we are in a bull market again..blah blah blah. If those guys who are so called experts have such differing opinions, then how the hell is an ignoramus like me meant to make any sense of it?
I see a few posts on forums and the like about how all the subscription services are a waste of time and that you can get all the information for free. Well that may be true, but the problem for a novice like me is that just as with the paid services, all the free information is so varied. There are so many different ideas around that it’s hard to make sense of it.
I ended up subscribing to a particular newsletter for stock market tips and I have had very good success. But while I am making money out of their tips, I don’t like the fact that I am reliant on someone else to tell me what/how to trade.
So reading through more forum posts etc, a lot of people say you need to know what type of investor you are and what timeframe you are trading etc.
What I DO know is this:
• I want to trade for 1 reason only – to accumulate wealth. I am not trading for income, just capital growth.
• I don’t pay CGT as I am not a tax resident of Australia.
• I am not interested in looking at a computer screen all day and being a day trader. Far too much stress and work, plus I have a day job.
• I do have a pretty high tolerance of risk (as I’m sure you will get from my previous experience).
• I am interested in some type of momentum or trend trading methodology, going with the flow and with stop losses always in place.
• I want to be able to make money in down markets as well (eg shorting stocks), but I have never done this before.
• I don’t really want to trade on margin, but if I could have a sound trading system in place and I understood the mechanics of it better, I would consider it
• I want consistent achievable returns. What do I consider achievable? Is 20 – 30% per year realistic? I think so.
• I am interested in trading forex, but again know nothing about it. I am getting the feeling that it is all very complicated and too hard, but another part of me thinks it is really just like a stock, with support and resistance levels etc, so is it really THAT complicated?
• Every person you speak to or read about has such differing opinions about what matters and how to time markets (eg what indicators to use), that it just gets totally confusing.
What I DON’T know:
• How to do any technical analysis other than very rudimentary stuff.
• What software should I be using for scanning stocks, what indicators to assist in identifying trends, and what rules to use for entry/exit
Is there a one stop shop so to speak where I can get all this information and try and design a trading strategy that suits my needs? What would others recommend?
While I hate the idea of being ripped off by some internet company that teaches you how to do this or that and then delivering nothing, the one appeal that such companies do have is that they are one source of information for a newbie, so it takes a lot of the problems of conflicting/alternative advice away. As well as saving time by trying to work out what information to read etc. The problem is there are so many charlatans around that how do you choose?
I have even flirted with the idea of paying someone for stock mentoring advice, but again how do you find someone reputable? Someone who is actually making money and not just regurgitating theoretical BS?
I understand that there are many ways to skin a cat and that there are different strategies that suit different people, different markets etc. But all I want to know is ONE way of skinning the cat!!! A reliable, consistent way…. I’m not looking for a magic box system that tells me what to do as I don’t believe they exist, but to try and understand how I can get the returns I am after by using some sort of rules based trading strategy.
Some posts suggest that to get a good understanding takes years and years or research and practice. Is that really true, or is it only true for people who want to day trade? Remember I am not after unrealistic returns or being a day trader.
So how much time would it take to put me in a position where I could independently search for opportunities and place trades and have an expectancy of making the 20 – 30% returns I am after? Weeks, months or years? I know it depends on everyone’s intelligent levels and the effort you put in, so let’s assume I am of average intelligence (although my trading history would suggest otherwise ha ha), and am prepared to put in 10 – 15 hours per week in research/study.
So to recap, what I would really like advice on is:
1. How to go about finding a trading system to achieve my targeted returns (20-30%). Either a fee paying or free service that will educate me and give me the understanding to design and trade a system with positive expectancy of making profits. A system with defined entry and exit rules that is simple and works. Does such a thing exist? Preferably one source of information rather than someone just telling me "search the internet, it's all there". That advice is not exactly helpful
2. Expected time frame to learn and implemet #1
And before anyone gets too critical, please remember we all have to start somewhere. I tried to find similar posts like this on this forum but didn't really see anything, so apologies if all my queries have been answered elsewhere (and if they have, can you please show me where the answers are?).
Anyway, sorry for the length of the post, just thought I would try and provide as much information as possible. Thanks a lot for reading.
I would really appreciate constructive advice/suggestions as to where I should go from here….