Journal of a Novice

[Raw Radish]

Firstly, I am as new to forums as I am to share trading so if this thread is not appropriate, I will understand if it gets “insert appropriate word” (Told you I was new to forums)

Why am I posting at all?
1) It will be a form of discipline for me that, from my brief perusal on the net seems to be essential to share trading.
2) Potentially others contemplating share trading will gain some insight by avoiding the pitfalls that I heedlessly stumble into (and heaven help me) be able to incorporate into their own journey any steps that I make in the right direction
3) Feedback from other forum users (though it may be brutal at times) will possibly give me some direction, highlight my mistakes etc.
4) Note that further updates to this thread will be intermittent as I expect that my time will be devoted to reading and getting an initial understanding of what I’m in for

My expectations are very few at the moment with the exception that I will at least increase my knowledge in this field.
At this stage I certainly can’t envisage myself as a full time trader. At best I can’t see myself making my first real trade until 12-18 months time. In all likelihood, I will find that share trading is not for me and put my money in a managed fund (or under the mattress). Whatever the outcome I eagerly await what lies ahead. I envisage toil, stubbed toes and hope that the pits I fall into don’t have sharpened bamboo stakes at the bottom.

Why share trading?
What makes me think I can be one of the 10% that lasts beyond a year? There are big fish in the market and I’m sure they eagerly await me as a tiny morsel to gulp in or spit out as they choose. Even the smaller fish will have teeth and survival traits.
I suspect everyone has different motives but for me it probably boils down to the following:-
1) Over the years I have put money into the market without too much strategy apart from some token diversification and following some sector trends. Judging by some of the unrealised capital gains I have, I consider myself to be reasonably lucky. But luck cannot be all that I rely on and either I get more knowledge or I get out of the market.
2) The market has a certain mystique about it. My curiosity, propensity for numbers and problem solving makes finding out how the market works very alluring.
3) I like a bit of a gamble. Yep I can hear everyone saying “Warning! Warning! Do not enter”. I know this is potentially a weakness and something that I will need to be aware of.

My first Step.
At this stage I’m treating this venture as a hobby. I can hear most of you scoffing (and for many, scoff may be to light a term). However, as I’m not sure that I will get to physically trade, why not start off small and see where I progress. (Don’t forget that hobbies can become a passion).
While there seem to be many broad methodologies, technical analysis intrigues me and it is solely for this reason that I will investigate this first.
As I want to limit my initial capital outlays I will forego seminars and even charting platforms until such a time as I feel ready to progress. (Probably my first pitfall)
So my-self education will begin with books. I guess that there are a plethora of books than novices should read. Due to the fact that I will initially focus on AUS stocks, and that I have seen their names bandied around I will start my library of with some Wilson, Radge and perhaps a bible (say Murphy).
Well time to start ordering and get stuck into some reading.

 

[tech/a]

Un realized capital gains
Yet your unsure if you'll physically trade.
I'd say you already have the holy grail.

Enjoy the journey.
All 10000 hrs.

 

[notting]

I eagerly await what lies ahead. I envisage toil, stubbed toes and hope that the pits I fall into don’t have sharpened bamboo stakes at the bottom.

big fish in the market and I’m sure they eagerly await me as a tiny morsel to gulp in or spit out as they choose. Even the smaller fish will have teeth and survival traits.

Sounds like fun.

Why share trading?

I suspect everyone has different motives but for me it probably boils down to the following:-

Making an easy kill.

1) Over the years I have put money into the market Judging by some of the unrealised capital gains I have, I consider myself to be reasonably lucky. But luck cannot be all that I rely on and either I get more knowledge or I get out of the market.
2) The market has a certain mystique about it. My curiosity, propensity for numbers and problem solving makes finding out how the market works very alluring. At this stage I’m treating this venture as a hobby.

Gambling tends to have that effect on people, first I tried weed.......

Your first step was - Over the years I have put money into the market and done OK.

I will forego seminars and even charting platforms

Good. First stop loss executed!

So my-self education will begin with books. Wilson, Radge

Great second step - So far, your the man.

 

[CanOz]

Great stuff Radish, a journal is a fantastic start.

If you open a copy of MS Excel and can become quite handy at that then get your hands on some data after you learn a bit about statistics and system trading and that could keep you busy for quite a while.

CanOz

 

[YMI]

Hi Radish, what I like in your post, it doesn’t sound too overly confident. Some of the beginners think they could easily earn 5% per week and I think that’s more a dream – perhaps an experienced professional trader could make that on average but very unlikely for a beginner imo.

I participate in the ASX game currently and I have to admit that I am doing really bad. It started off well but then... My excuse is that I don’t have the time to watch the market all day and it hasn’t even a simple stop loss function. Bottom line, winning is not that easy and it’s probably better to start cautiously.
Good luck to you!

 

[Raw Radish]

Thanks for the positive comments.
Tech/A, seems to me that you are a glass half full sort of bloke. The journey of 10,000 hours looks to be very optimistic.


After some intense reading over the last month (interrupted by a holiday) my intrigue has only increased, I can’t fathom why I haven’t delved into this before. Still not sure if I will ever trade but what do they say about the destination is not as important as the journey (or something like that). I feel like I’ve just received an expansion for WoW and am fretting about the install time. (Gotta remember the market will always be there). Anyway I think it’s time to turn off the True Shot Aura and turn on the Bollinger Bands.
Worried that my current feeling of being a kid in a candy store can easily change to a bull in a china shop. “Oh the humanity”

My self- education started by reading Murphy’s Technical Analysis. Liked the style and format and I’m sure I had a few brain implosions from so much new stuff to learn (retention level currently about 1%). However, after finishing the book I found I was not getting the practicalities of how one would even begin to start trading. I’m sure that I’ll re-read this book many times and probably do the workshop book associated with it. But at this stage I decided to move onto Wilson and Radge

Interestingly when I started reading Wilson and Radge, I got the impression that I was getting an insight into their personalities. I haven’t had this in a while (primarily due to reading Sci-Fi pulp). Neither author promised untold riches and if truth be told indicated the opposite along with a fair bit of toil. They both stated the realities as they saw them and offered their viewpoints of the same. I got the feeling that while they are willing to incorporate new ideas into their thinking that they wouldn’t suffer fools gladly (Note to Self: Do not speak if you happen to be in the same room as them)

Wilsons BeST book was not only a great introduction for me on the basics of trend analysis but also gave practical steps on how one can actually develop a plan to become a trader. Well structured and easy to comprehend (except for some convoluted explanation – which I put down to my own shortcomings rather than his style). I expect I will be influenced greatly by this book. I should probably read other books of this nature to get a more balance view but believe that I’d just get totally confused by contradicting ideas. So for now, Wilson you’re my main man.

Radge’s Unholy Grail : Gotta love this Radge’s style – Here is what I’ve found it’s up to you how you use it. The ease with which he analyses systems and then tweaks them for momentum trading, belies the fact that his “tweaks” are based on his vast knowledge and long experience. Pros make things look so simple. A book I’ll reread later after gaining more knowledge.
Think I grasped the concept of Monte Carlo analysis whereby selecting stocks that fall within the trading parameters will achieve a return somewhere between the max and the min returns. I suspect that one must fully invest, if the system so dictates, and avoid any subjective decision making else the analysis maybe invalidated.
Radge also noted the more experience the trader becomes, the more they adopt a systematic approach. Not sure if this change is part of a natural learning curve or that beginners have incorrect beliefs, be interesting to ask (Note to Self: Refer to previous Note to Self)

My brief reading has seen little in respect to taxation issues, I suspect because of the number of permutations. Dividends (including stripping (45 days)), wash sale (30 days pre/post), CGT vs Trading Income etc appear relevant to me (but potentially not to the extent that it impact on the trading plan). (NTS: Next chance you get, buy an accountant a few drinks to see if one can differentiate between trading and capital accounts. Brilliant Radish – now you’re looking at getting advice from inebriated bean counters)
Nor have I found any information regarding monitoring ones actual portfolio. If a stock is in your portfolio, it’s there until exit conditions are met, even if it is flat lining.


Can I even become a share trader?
Constraints
Drawdown – Looks like 20-30% the norm. I should be able to cope with this. My current holdings must have experienced greater. This will be in the face though
Win % - Expert traders seem OK with approx 50%. Going to take some getting used to (Paper trading probably the best way to go used to this)
Selling at Stop Loss – Foresee me having some difficulties here as well. I should be able to overcome by placing contingent orders with broker. Could also buy a minimum bundle of AAC (so it appears at the top) and never sell (be like a big warning sign, though likely to be the only trade I win)
Time Factor – I will have to be able to put more time into trading than I currently am. Suspect at least a minimum of 1-2 hours per day. If not I may as well look for alternatives.
Going Solo – It would be nice to be travelling this path with someone else (or even better a mentor) just to bounce ideas against. At last going solo I will have no one else to blame.

Risk Management, Risk Management – this mantra seems like the Location, Location, Location in real estate. It looks like this is the number one imperative for me.

Brokerage, unfortunately there is no way of not paying the ferry man. Currently I’m with Comsec. I moved my holdings there after getting fed up with stock brokers who charged 10 times as much and I’m sure only rang me when their monthly figures where low. Comsec is easy to use and allowed me a few days to transfer money in after doing a purchase. The fees seemed OK especially considering how few transactions I was doing.
However, I’m going to investigate CMC and IB as potentially a bit of paper work may save me a few hundred to a few thousand depending on trade frequency and parcel size. That’s a lot of beers in my mind. Additionally, Comsec appears to double dip on fees for conditional orders.
Given how easy it is to transfer cash these days I’m not overly concerned by the very average cash rates CMC offers. May even be of some benefit by forcing me to wait a day to place an order.

Record Keeping and Analysis
I can’t see this as being an issue as I don’t mind playing around with the odd spreadsheet (even if it has been ages since I have done so). Going to need a massive overhaul of my current spreadsheet as it is currently a GCT record vehicle. At a minimum I need some performance indicators.


Homework.
1) Reading - continue with current books
- be nice to find something equivalent to Wilson’s book (can’t seem to find any atm)
- grab a Point and Figure (possibly J Du Plessis)/ Candlestick book (possibly S Nison)
2) Broker accounts
3) Trading Summary Spreadsheet – Wilson’s examples look like a good starting point, try and get some data input for prices, indicators etc (Don’t go to far as determinants sure to be diff from Wilson)
4) Trading Portfolio Spreadsheet – Update current include win/loss ratio, losing streak, drawdown etc etc.
5) Risk Management – develop formulas to calculate. Possibly incorporate into above spreadsheet(s)
6)Learn the motion of the Ocean.(Be the surfer behind the waves and get a feel of the sets coming in without even thinking of catching a wave)Grab some charts and try to read the RHS. Check on-line for potential examples etc
7) Start a Trading Plan. Will be very fluid at this stage but will try and think of what I’m going to trade and how I’m going to trade for starters. Will also investigate how to manage my current portfolio in the interim (or potentially long term)

 

[Boggo]

...
Nor have I found any information regarding monitoring ones actual portfolio. If a stock is in your portfolio, it’s there until exit conditions are met, even if it is flat lining.

There are times when new opportunities present themselves where you are better off to sell off if it is not doing anything, think of it it as an employee who is just standing around doing nothing.

...
Risk Management, Risk Management – this mantra seems like the Location, Location, Location in real estate. It looks like this is the number one imperative for me.

Apply the rules but be aware of items such as the effects of stocks going ex dividend etc and how they may affect your stops. Don't ride a small calculated loss into a massive loss.

Have a read of the PEN, RED and more recently the SAR threads while comparing the date of posting with the chart at the same time.
Everyone starts off in the >90% losing group, some choose to stay there.

Regarding tech/a's 10000 hours, that is what it takes to get wisdom.
Knowledge comes and goes but wisdom sticks around

Wishing you well Radish

 

[Raw Radish]

Thanks for that Boggo. Tough getting rid of those employees who stand around the water cooler but will have to find a way of introducing some system about how to performance manage them off the payroll.

Your thoughts on Risk Management are consolidating my viewpoint that the exit point is at least, if not more important than the entry point.

I have at least done some of my homework with regard to spreadsheet development. They are at a stage where they give me a functional basis to work from. Of course they will need further modifications depending on what strategy I believe will work for me. I have attached a screenshot of how I intend to determine my initial parcel size given some basic risk management strategies.


I hope to post some screenshots of my Trade Summary spreadsheet very soon. It seems to have grown into a monster, to the point that it is evolving into a very rudimentary charting system.

 

[CanOz]

Nice work Radish!