A little help...

Hi all,

Brand new to the forum and have easily lost 5 hours already reading old posts!

I am in need of a little guidance though:

A close friend and I have been playing around on the internet for a while with stocks in a "game" based on NYSE. We are tired of practice and long for the real thing.

A little about us; we are young professionals soon to be earning a comfortable wage although not currently. We are meticulous and our background is medical which predisposes us to fairly conservative and well-reasearched decision making.

We are looking to begin trading in a partnership, at least initially, while our principle is minimal.

I have a few questions which I would love some input from experience.

1. Is there a minimum amount that usually makes starting a portfolio worthwhile?

2. Commsec or another?

3. As this is a partnership (hopefully a lucrative one) is it best to start a Co. or a trust fund or none of the above?

4. Where is a good beginning exchange that would suit our hours (normal working hours) for day trading and should we trade on multiple exchanges?

Thanks, I look forward to passing on our story and mistakes (I'm sure we'll make plenty).

1. Generally brokers have a minimum purchase of $500 worth of shares. As for a worthwhile portfolio, its all about how much you want to risk losing vs. your reward capacity. Some have $20k portfolio's, some have hundreds of thousands of dollars invested into a diversifed portfolio. Obviously having less capital makes it harder to spread your money proportionally across all the sectors.

2. Commsec is great, I use it and its customer support is fantastic. Brokerage fees for purchases up to $10k start at 20 bucks. Bell Direct is a budget broker that offers you $15 brokerage fees for small transactions. Its all about weighing up what you want in your broker.

3. Most retail investors (i.e. you and me investors) can just trade from their homes. If you want to up the games I'm not too sure on the logistics of partnership share packages.

4. If you're an Aussie, then the ASX is in your backyard. There's nothing stopping you from investing in overseas markets but you have to contact particular brokers to see if they will accomodate for overseas fund transfers.

I have a quick question for you, are your trading or investing? If you are trading then all the answers above will be negligent as I have no idea how to get a day trading account up and running

Good luck!!

Thanks, your information is certainly helpfull.

I'll start by answering your last question first. Yes, day trading was our goal initially however with a realativly small principle (and trying to maintain diversity) it seems that $15-20/trade might eat into our potential profits substantially!

Are there any other options for day trading out there?

Thanks again, love ASF!

im afraid day trading the asx and nyse are worlds apart. its far better to day trade over there as commissions are dirt cheap compared to in Australia, although there is a new exchange being introduced early in 2011 called chi x whom i am eagerly anticipating as they are likely to offer a fair playing field with good commissions to end the crap that the asx dish up currently.

asx is a nightmare market to day trade so might be best to look at other markets like obviously you and your friend have, the asx just doesnt have the large intraday ranges to make profits from without having massive leverage, the spi 200 for an aussie market would be the other alternative for a cheaper commission scheme, but its not a good beginner market to start on.

most people here love interactive brokers, i havnt used them but they offer cheap commissions. $6 per side for asx stocks per $8000 worth .

trading the us markets from australia is a big ask as you will be up all night but if you have time on your hands i guess it is an option.

personally I have been looking into trading the FTSE as it opens at 5pm our time and trades through the night. sounds like a pretty good time for people who work through the day and want to try abit of intraday trading

GriffSchaefHQ said:

Thanks, your information is certainly helpfull.

I'll start by answering your last question first. Yes, day trading was our goal initially however with a realativly small principle (and trying to maintain diversity) it seems that $15-20/trade might eat into our potential profits substantially!

Are there any other options for day trading out there?

Thanks again, love ASF!

Click to expand...

If you want to day-trade, I can't see how you'd do that without a decent reliable live data service. I'm not sure how far you have researched software packages and which way you lean wrt fundamental vs technical trading.
It is definitely my experience that fundamentals count for nought when it comes to "anticipate" intraday swings; you need a good technical charting package.
While I have not seen the one that Commsec offer, I've been trading for years through a subsidiary of theirs, AOT Online, who offer the web.IRESS platform. That's very good on reliability and data delivery, as well as speed of execution, but their charting sucks.
Given your limited capital, I won't suggest you buy into the Rolls Royce of T/A systems (I use the Market Analyser from MDS), but maybe you want to look into that side.

Also be aware that some online brokers are offering multiple trade entries for one brokerage. For example, in the course of a day, PariTrade lets me execute up to 12 separate buy orders for the same share; likewise, up to 12 sales. That means, I could have bought on Friday lots of 500 TLS shares for $2.84, $2.85, $2.86, $2.87, $2.88, then sold some at $2.89, bought back at $2.88, before selling them back between $2.94 and $2.92. Result: two contract notes, $25 brokerage each.
Friday's TLS trades may not be the most compelling example, but the 5-minute chart below can serve to explain the principle.



PariTech's Pulse package supports the same T/A

Indexes FTSE / DAX / SPI
through IB
data feed ESignal

Read a book called the intelligent investor is my only advice.

Hi GriffSchaefHQ,

It sounds like you want to trade rather than invest - that's fine but have no illusions about what it is you are getting yourself in for. You are about to start a journey that a lot of people fail because they don't know what they are getting themselves in for. Trading is boring... if it's exciting and makes your pulse race you aren't doing in right. Here are some pointers.

Technical Analysis is now your best friend. (Don't ignore fundamental, but the short term price movements you are talking about mean that you should be doing a lot more TA than FA). Read a great deal of material on TA to get a feel for what might suit you. What I have found mentoring people on how to trade is that there are some tools that are intuitive to people depending upon the way they interpret data.

Be aware that in Technical Analysis there are "simple" mathamatical tools for interpreting data. By simple I mean that these tools use mathamatical assumptions to simplify the data. The market however is not "simple" - it is a chaotic system in which correlation can distort these "simple" tools dramatically. It is important to understand what the limitations of the tools you intend to use are. There are also some tools that use Chaotic principles for their underlying methodologies - but chaotic math is still developing in this area and it's more of a dark art than a science at this point.

Bottom line....

1) Learn how to read price action. Do you know your HH, LL, LH, HL 's?
2) Position Sizing and Money management are not optional
3) Learn what positive expectancy is and learn how to test for it.

In answer to your questions...


1. Is there a minimum amount that usually makes starting a portfolio worthwhile?

No, you can start with very small amounts if you have a +/ve expectancy system and enough leverage.

2. Commsec or another?

Read reviews on these forums of the different providers and try out a few demo's.

3. As this is a partnership (hopefully a lucrative one) is it best to start a Co. or a trust fund or none of the above?

Is the income from your trading activities likely to push you into a higher tax bracket? Until it does a company or trust structure is likely to be prohibitavely expensive for you. I would however sit down with your partner and work out the terms to your partnership agreement. This may save you heartache later on.

4. Where is a good beginning exchange that would suit our hours (normal working hours) for day trading and should we trade on multiple exchanges?

I would suggest learning in your own backyard until you find your feet. You must walk before you can run.

Cheers

Sir O