A Very Confused Student

[levin123]

Hey Guys,

I'm a student from NZ and I've been teaching myself about the markets etc for about 18 months when I've had the time. I would say that I'm pretty clued up about how the markets operate and about trading strategies etc.

What I want to ask though is where/what trading method/strategy/platform would you recommend? I understand that its got alot to do with your own personal situation, risk tolerance and all that sort of stuff, but I guess I'm just rather overwhelmed by it all.

I mean I could trade solely on fundamentals, solely on TA, combination of the two, invest in riskier high growth stocks, look for short term hiccups in a company and take advantage of those (I have a friend who only invests after disasters and its worked pretty well for him - BP, HPQ, Fletcher Building in NZ after the Christchurch Earthquake.), High div yield stocks, I've even considered CFD trading.

Any advice from the seasoned pros would be much appreciated =)

Benj

 

[So_Cynical]

I mean I could trade solely on fundamentals, solely on TA, combination of the two, invest in riskier high growth stocks, look for short term hiccups in a company and take advantage of those (I have a friend who only invests after disasters and its worked pretty well for him - BP, HPQ, Fletcher Building in NZ after the Christchurch Earthquake.), High div yield stocks, I've even considered CFD trading.

Any advice from the seasoned pros would be much appreciated =)

Benj

You have to find a method that your comfortable with, that's compatible with your personality...have you paper traded for a while?

 

[levin123]

I have been paper trading, switching between TA and Fundamentals and I've been paper trading CFDs for a few months now.

As for my personality/situation I'm currently a poor student so don't have an extremely large capital base. However I'm very risk tolerent when it comes to money, hence why I'm quite interested in CFD trading.

So is a trading strategy/method etc something you develop over time through trial and error or is there a better why to go about this

 

[TabJockey]

I find that different people understand different industries better and worse aswell. Its good to trade shares that reflect businesses that you understand. After that rule of thumb for me is 15% "prospective" and 85% of your money in companies that have real assets to protect your capital.

 

[ENP]

What ever you do...

Trade the ASX as opposed to the NZX. NZX is a total dog.

 

[TabJockey]

What ever you do...

Trade the ASX as opposed to the NZX. NZX is a total dog.

That made me laugh, I had no idea. Did you get burned there or is that just general consensus?

 

[tech/a]

So is a trading strategy/method etc something you develop over time through trial and error or is there a better why to go about this

You have a terribly long way to go.
I'd invest in "The Universal principals of Successful Trading"
By Penfold.

As you'll soon discover there is far more to trading than you currently know of.
Take your time the market will still be there when your money has disappeared.
Better to understand Risk and Expectancy before committing a cent.

Remember it takes around 10000 to become proficient at something and much more to become expert.You have age on your side.

 

[Julia]

What ever you do...

Trade the ASX as opposed to the NZX. NZX is a total dog.

Why do you say that?
How can an entire stock exchange be a "total dog"?

I'm reminded of all the people who say "Super is a con".
Super is simply a tax advantaged vehicle for holding assets.
The difference between success and failure within Super depends entirely on the choice of and management of those assets.

 

[Boggo]

I mean I could trade solely on fundamentals, solely on TA, combination of the two, invest in riskier high growth stocks, look for short term hiccups in a company and take advantage of those (I have a friend who only invests after disasters and its worked pretty well for him - BP, HPQ, Fletcher Building in NZ after the Christchurch Earthquake.), High div yield stocks, I've even considered CFD trading.

Benj

I am just a hacker at this stuff but my opinion would be to get grounded in the basics.

My (basic) opinion of the basics...
Rather than getting confused with over 1900 stocks on the ASX just stick to the ASX 300, that will eliminate most of volatile stocks and will also cut right down on the need for wasting too much time on fundamental analysis.
If you cannot find enough stocks to trade in that lot then you either have too much money or too much analysis.

Do not trade against the larger degree trend, ie if picking stocks on daily charts then check the weekly trend (three quick examples AGO, IAU and PRU) and don't trade against that trend.

High dividend yield stocks, what is yield, TLS yield is going up - because the stock is going down, don't fall for that Mum and Dad sucker trap (look at its chart).

Risk/Reward, as it is usually quoted is a misleading statement to start with.
2:1 Risk/Reward implies you are risking twice as much as you are rewarded, it should read Reward/Risk.

What is risk and what is capital exposure, regularly misunderstood items.
Risk is the possibility of an event occurring and capital exposure is the amount of money you would lose should the risk factor eventuate.

You must have maximum control over capital exposure, ie only expose a calculated amount of your capital to the risk of the trade going wrong.

Software, Amibroker seems to be the popular choice and seems to be value for money. I use Metastock as my primary program, mainly because I was using it before Amibroker existed and I have learned to write basic formula's in its language.

CFD's, if you can make regular profits from normal stock trading then you may succeed with CFD's, they are no place to learn the traps.

That's my to confuse you, and these are just my views and opinions and before you rely on them I would urge you to get a second opinion

 

[brty]

Boggo,

Some very good points in there, but a bit difficult for the beginner. I particularly like....

You must have maximum control over capital exposure, ie only expose a calculated amount of your capital to the risk of the trade going wrong.

...a point that even some who have been trading for a while ignore. There have been a few threads where the proponent of a strategy has come up with the logic that because their stoploss is only 3 cents away from the purchase price they can 'risk' buying 20 gazillion shares (with margin), because they will only suffer a 1% loss of their account size. They fail to realize that in the real market stocks often gap through levels by a large amount that renders the stop useless.

brty

 

[SmellyTerror]

NOT a seasoned pro, but I was drifting through and I'll give you an answer I wish I'd got earlier in the piece:

I recommend Forex.

All that charting / TA stuff works with Forex, as much as it works with anything. : Nice chunky fundamentals there, too, if you dig that sort of thing. Good opportunities at trading lots of different time-frames, and trading hours to suit any insomniac.

Live data is free, demo accounts are everywhere - all good for getting stuck in to practicing without spending any money. You can pick a pair and stick to it, confident of bottomless volume. Longer market times means more grist for your backtesting mill.

Good beginner resource here (which is actually good for any new trader, IMO, as a free resource - again, chart patterns etc carr over to other stuff).

Also a good word for Amibroker, with instruction from The Bandy.

Finally, something like Tharp to get a reasonably broad base, and solid risk management.

...and you're off!

 

[ENP]

So much more companies, trades, opportunities on the ASX.

For long term buy+hold on the NZX there is an extremely limited choice. On the NZX I'd only consider buying an holding SKT and RYM is their price is right, perhaps TWR also but not convinced. Anything else doesn't show clear, continued growth in EPS.

 

[levin123]

Hey guys thanks heaps for the advice. Some of your points are really interesting and I will follow up on those.

benj

 

[levin123]

Just a quick follow up.
It's been 5 years since my initial post and I've learnt an indescribable amount. 80% of which has come from this forum and other similar forums.
Thank you to all the wiseheads here for imparting your knowledge. I know how time consuming this can be

 

[tech/a]

Just a quick follow up.
It's been 5 years since my initial post and I've learnt an indescribable amount. 80% of which has come from this forum and other similar forums.
Thank you to all the wiseheads here for imparting your knowledge. I know how time consuming this can be

So what did you settle on?

 

[levin123]

So what did you settle on?

Sorry just saw this!

I have built an investment portfolio, stayed away from trading in the end.