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New to the stock market: Where do I begin?

Discussion in 'Beginner's Lounge' started by Atomic_Sheep, Nov 24, 2005.

  1. Atomic_Sheep

    Atomic_Sheep

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    Hi guys

    I'm a uni student doing commerce. I am on holidays at the moment and have decided to start trading on the share market. I am starting with 1000 bux so not a lot and hence I'm not looking for long term investments. I have already conducted a hypothetical trade lasting about 1 to 2 months (I cant remember exatly when I "bought" them) and have hypothetically made 29% return. So I'm looking at the higher risk shares. Despite this, I have no idea where to start and how to go about the trading. In other words I dont know where to store the money i.e. which bank... I would imagine that they would have similar rates and probably won't matter much who I bank with. Secondly could you recommend where I trade? I know of etrade... but I'm sure you guys know of something better. Thridly is there some sort of software out there that could help me, I'm doing this from home as you can imagine and ASX doesnt seem like a good way of monitoring the market. And finally, if you can give me a crash course to how to select stocks (would it be better to specialise in a certain area e.g. raw materials? or what?) and how to be consistent (I'm not a gambling person and firmly believe that there has to be information, indicators or whatever, that I will have to know of before I can start trading) (I know thats a lot to ask for especially with my high risk demands) but if you have sites that you could recommend, that would be much appreciated.

    Thnx
     
  2. Julia

    Julia In Memoriam

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    Re: Beginner

    Hello Atomic Sheep

    I'm sure you'll get plenty of advice from forum members.
    All I'd suggest to you at this early stage of your trading career is not to be so dismissive of the ASX. They have a lot of great basic information on their website and respond quickly and helpfully to emails you send them with specific queries. They also have current announcements. Just take a look at www.asx.com.au and work through their various links.

    I've recently switched to e-trade and am happy so far. They have quite good research and other back up services.

    Also using the "Stock Quote" at top of ASF home page and the Search facility will give you access to more info.
    Good luck

    Julia
     
  3. karmatik

    karmatik

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    Re: Beginner

    I agree with Julia about asx.com.au. Being a beginner also I find its very useful and provides online course that summarise what you are after in an easy to digest manner. I suggest you start there.

    Pat
     
  4. tarnor

    tarnor

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    Re: Beginner

    Firstly I wouldnt suggest etrade.. go for something like comsec/morrisons where the trades are alot cheaper., and make sure there's no monthly fees
    http://www.infochoice.com.au/ will give u a run down on online brokers..

    The thing with only having 1k is your horribly undercapitalised.. if your brokerage is 30$ for each trade a 10 percent move on your stock (+100$) minus 60$ brokerage will only get you ahead to 1040$..

    * so straight up get the very cheapest brokerage possible...

    I had a 2k parcel left over from lending money to my mum.. which i've been trading aggressively for the last few months.. althought ive had a few years experience trading more safely i tried to do just what you planned.. although i've been incredibly lucky with phenomenal returns over the last 2 months, the odds are stacked heavily against you and to be honest you're more than likely looking at a 1k education :/

    Things that do go in your favour are that by having such a small parcel you can slip in and out of trades with high volume easily.. but you're constantly fighting that brokerage :( and will need at least 10 percent on your trades for a while.

    Another thing with what you plan to do is that if you want big returns there's going to be a huge temptation to gamble on things like drilling results.. that can make or break you in the one trade..

    SAU is one of these stocks, with drill results coming up in as soon as a few weeks (and also early next year) theirs the potential to make a lot of money quickly on good results.. but it could also sit around for ages at a share price less then what you payed.. I'd be tempted to punt on things like that and probably blow the 1k straight up

    You can get a relatively good 50 - 100 percent return on decent junior oilers if you buy 3 or so month before a high profile drill and then sell before they start going down.. this is a slightly longer high risk play.. TIME is critical

    Big short term gain potential = big short term failure potential

    There's no other way i'm afraid..

    Give me 1k now and i'd go straight to the cheapest CFD provider and wait till i was on a sure thing for my first trade and crank the leverage.. then become more agresssive as i made a little capital... in this way a 10 percent gain on the stock would double your 1k.. a 10 percent loss and it would be game over anymore and it would likely end up having you in a sobbing fetal position.

    I by no means recommend that !!!!

    No matter what happens chalk it up as invaluable education.. that may be all you get out of this exchange..

    and also don't take one smucks opinion only.. like this one i just wrote you will get burned over and over by people on forums spruiking whatever particular share they've fallen in love with.. ie i like SAU, but its acting like a DOG, don't have money in it currently but will gamble on it sometime soon - i've basically already decided that puppy is gunna bring me some money and you couldn't convince me otherwise...

    Would you trust me.. hell no.. 8)
     
  5. tarnor

    tarnor

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    Re: Beginner

    And also trading speccies..

    be ready for that... over and over and over again..
    cheers
     
  6. doctorj

    doctorj Hatchet Moderator

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    Re: Beginner

    First and foremost, you must realise you're not going to get rich doing these. As often as you see the big gainers each day, in reality you will only be onboard them once in a blue moon and only if you're very lucky.

    That said, as a student its not a bad way to start out. If you lose your stake, then you'll be alright. Chances are you live at home and the $1000 would have just been spent on booze anyway.

    I like the suggestion of jumping onboard junior oilers pre-spud. Timing is the key as you need to be VERY wary of your risk/reward. There are several junior oilers listed on the ASX spudding wells in the next 2 months that are potentially worth multiples of their share price. To see how they play out, look up a chart of GOP from a couple of months ago and cross reference it with the announcements they made. GOP was very typical in the way it played out in the case of a high risk/reward deep offshore well that winded up a duster. Pay particular attention to the language of the announcements, especially the announcement made the day before they announced it was going to be capped and sealed as uneconomic. When trading these things, particularly if you decide you want to stay the course of the drill, the language used can help you stay ahead of the masses.

    At the end of the day being that undercapitalised isn't going to help you retire early but it will let you learn about trading. Nothing compares to the learning curve you experience when you have money in the market. Besides, the very worst thing that can happen is losing your $1000. Take the opportunity, do the leg work and learn something along the way. Depending on what your majors are, you will find many of the subjects you cross in trading will greatly assist you in your studies (eg. Banking, Finance, Corp Law, Accounting).
     
  7. bvbfan

    bvbfan

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    Re: Beginner

    Cheapest broker is Netwealth around $17 and you can use your current bank account.
    I'd suggest looking at one of the high interest accounts online with ING, BankWest or Esanda
    All above 5.5% I think so you can keep money there when funds are idle.

    Pick a few stocks to monitor and don't go chasing them would be my tip.
     
  8. Atomic_Sheep

    Atomic_Sheep

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    Re: Beginner

    Well thanx guys... that was very helpful. I'm currently reading up everything on the asx website (as well as heaps of other sites).

    One more question, does anyone know a bit about options? Would it be feasable to trade options with my starting out capital? I found out about them in my finance book and it basically talked about their pricing some strategies and stuff like that. Just wondering wether anyone has actual hands on experience with them

    I'm personally very tempted to do what a couple of you recommended and bet everything on drill results or something like that anyway. Losing everything isn't going to be the end of the world, I'll just get some more money and start again (will just have to get a job for that that thou :p: ) but basically I want to raise as much capital as possible so I can begin to diversify and increase my choices. And as some of you pointed out, the brokarage fees with such a small starting capital are a major sting in the tail and therefore I'm looking for larger returns (hence high risk). Since I'm on holidays for the next couple of months, I don't mind sitting around waiting for a while for the shares to do antything as long as in the end its a positive result.

    Oh yeh last thing... I know it it would depend from person to person but judging from your responses I gather you guys have found several shares that interest you and you are essentially closely following just those ones, my question is firstly is this a correct perception and if so how many companies do you think would be a good idea to track?
     
  9. kaveman

    kaveman

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    Re: Beginner

    For some reason the ASX has been pushing options trading for a while now. I can only think they earn more money from them.
    The risk is higher and you can lose 100% of your trade very easily. Derivatives are not for the beginner, nor are tey for the expereinced campaigner who has trouble admitting they are wrong and exiting a trade quickly.
    From what you have written you ahve never traded, nor actually invested. Suggest you forget using your own money until you come up with a trading method to suit you. One that you have tested in real time paper trading. Then you may have a chance to actually survive trading with real money.
    Trading is very deceptive. It looks really easy when you are hindsight trading, but the stress of actually placing your money into the market is very very different.
     
  10. bvbfan

    bvbfan

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    Re: Beginner

    I have 5 I'm tracking that I'm quiet keen on, all resources. Some of them like CMR, OXR and PNA have already had their big gains (300%, 1300%, 400%) from when I became interested in them. I still think they will go higher but not as easily.
    There are others I'm looking at now that I see potential to at least double from current levels. ADY, AIM, CMR, EQN but they may take time to get there (OXR has been 5 years, PNA about 3yrs)


    I've mentioned the stocks only for illustrative purposes and do not consider them as tips to buy. Of course you can do your own research and decide whether its appropriate for yourself
     
  11. doctorj

    doctorj Hatchet Moderator

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    Re: Beginner

    If I were you, I'd learn shares before starting in options. Options are complex and the first step to understanding them is understanding the underlying share. The best way to do that is to trade straight shares.

    I maintain a watchlist of between 30-40 small caps (in addition to about 25 midcaps and blue chips). Within the list of small caps I have anywhere between 10-15 energy stocks of which I have varying degrees of understanding of the fundamentals of.

    If you're keen in learning about oilers, google for Junior Oilers Weekly, sometimes creatively referred to as 'JOW' and subscribe. If offers very good research, reading material, visible portfolios and recommendations including a well maintained 'sell on spud' watchlist. Also worth reading this Oil and Gas industry primer for a quick and dirty introduction on the world of oil and gas vernacular.
     
  12. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: Beginner

    Hi Atomic Sheep,
    I guess you've been smitten by the trading bug!! I'm worried by all the emotion being shown here, Mr Market will take your money quick smart and may not even say thank you very much.

    Get as many hours of paid work during the holidays as you can and save some money, aim for $10k to 20k minimum and put it into an online savings account with no fees and at least 5.40% compound interest. Work at it day and night, in between read these forums and all the trading books we recommend here (use the search tool, Chris Tate and Nick Radge's books are great for starters; learn the math and don't shirk the paperwork- treat it like a business and keep records so you can evaluate your performance). That way you will appreciate the value of your hard earned money and wont risk it so easily (I trust), not without some education anyway.

    Also please read the ASF 'code of conduct' (link at foot of each page near the paypal logo) and 'posting guidelines' (link at top of each forum) asap.

    There are lots of questions similar to yours which have been asked here before, maybe a search will give you a new angle on what to be aware of. Hope this helps and do those free courses on the ASX website, next stop, your library- it's free. Be patient.

    Good luck!
    RichKid
    moderator
    PS I'm a beginner in stocks myself so take that into account when reading what I write.
     
  13. karmatik

    karmatik

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    Re: Beginner

    Hi,

    There is some good advice in this thread.

    I have one query which has been bothering me for a while. As I am a beginner also, I have considered paper trading. However, I am concerned that having success at this may give me a false sense of security which could lead me into serious bother once I decided to trade with "real money".

    Do you think this is a fair point?
     
  14. Dan_

    Dan_ Jnr VP of Photocopying

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    Re: Beginner

    I'm also a beginner and am currently paper trading and back testing some ideas to see what expectancy I can return. In my opinion once I have established my "system" and have paper traded it I will slowly make the transition into live trading with my capital. I'll probably start only using 30% of my cash and monitor, if the results are in line with my testing then I will increase the cash. If not and it all goes wrong I’ve only lose a small percentage of the 30% and still have cash ready.

    Although I believe even though back testing can give you a fair idea of your expected results, it is historical data and not live. History may repeat itself but I wasn’t in the market in the past so I have to deal with the physiological side.

    :2twocents
     
  15. doctorj

    doctorj Hatchet Moderator

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    Re: Beginner

    The one thing you cannot teach someone is experience. I think that paper trading is an invaluable tool in gaining some of that experience. Managing open trades is a great educational tool only bettered by trading for real.

    If you don't have the discipline to stick to your trading plan and properly manage risk because of the false sense of security generated by successful paper trading then you're going to fail trading sooner or later anyway.

    A strategy proven profitable by paper trading is no sure sign of being profitable in the market, but at the same time there is no way that a strategy that can't be paper traded to profits is going to be long term profitable in the real world.

    My vote is to paper trade, but you need to be strict about managing your paper account as though it were real money else its a waste of time.
     
  16. karmatik

    karmatik

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    Re: Beginner

    Thanks DoctorJ and Dan, good points!

    Atomic_Sheep - sorry if it seems like I have hijacked your thread!
     
  17. Atomic_Sheep

    Atomic_Sheep

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    Re: Beginner

    karmatik you have hijacked my thread and I am very angry about it lol just kidding lol :p:

    What is paper trading? From what you guys have written, it's just fake trading. Am I right?

    Thanks guys, for your responses, great stuff :D .
     
  18. karmatik

    karmatik

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    Re: Beginner

    Yeah, thats my understanding of it.

    There is so many terms in this trading lark, its hard to keep up. I find http://www.investopedia.com invaluable for discovering what the various definitions mean.
     
  19. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: Beginner

    Hey Atomic,
    Follow this link to see what paper trading looks like, courtesy of WayneL- enjoy ;)
     
  20. tech/a

    tech/a No Ordinary Duck

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    Re: Beginner


    My question back to you would be

    How and why?

    My answer to the very same question would be NO IF you know HOW and WHY you made the profit.

    Frankly to Atomic--I'd forget about trading with a K and invest it in Radges book and Mike Lally's Mastering Risk.

    If your net disposable cash is 1K then you'll die by fear/greed and brokerage.
     
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