Beginners Blog
Last week I decided to get myself a new hobby, collecting stamps seemed a little dull and it’s too cold for gardening so I figured I’d have a crack at becoming a day trader. I set up an online trading account, put $2000 in and instantly knew that within six months I’d be able to retire. Unfortunatly the gods have conspired against me and two trades latter I find myself down $500.
Where did I go wrong? Well, to be honest I’m not sure. But what I do know is I’m not ready to give up, so from here on in I will be logging my trades, my thoughts as to which companies I’m thinking about having a dip at and analysing where I have gone wrong, hopefully there won’t be too much of that though.
At the moment I’m holding 4700 VBA shares, I bought them fror $0.34 and they are currently worth $0.32. I am going to hold them for the next couple of days and if they don’t do much I’ll dump them and have a go at somthing a bit more volatile.
Feel free to comment on my trades and thoughts as I need all the help I can get.
Cheers Craig.
Shane Oliver – Myths and mistakes investors often make
This is a great read, very interesting especially when he discusses the herd mentality.
Happy trading.
AZZ – Antares Energy Limited
Trade log:
Buy @ 17.5 Sell @ 25.5 Profit 43.62%
Buy @ 27 Sell @ 25 Loss 10.00%
Buy @ 27.5 Holding
Happy trading.
My Trading Rules – Part Two
Following on from my previous post here are some more rules I follow:
- Know when to exit a position. Before taking a position on a trade I always have a predetermined exit whether that be a stop loss to minimize any losses or a profit percentage at which I am happy to exit. This sounds incredibly simple but can be incredibly difficult to implement due to natural human instincts such as greed and stubborness. Remember the golden rule of all trading is to make money, cash is king. Trying to pick the high for the day as an exit is extremely difficult and elusive just as trying to convince yourself that a share will turn around and that your stop loss should be altered. I look for 5 to 10 percent on a trade and when it makes those percentages I will close the position, just as if a share moves against my position I may close out for as little as a 3 to 5 percent loss.
- Watch, watch, watch your watchlist. I have a watchlist of maybe 40 shares at any one time. Some I know intimately, some I can only tell you their listing code. What I can tell you about each one of them is their current price and the prices at which they have traded at for the last month or so. Sometimes longer. You can tell a lot about a share by watching it’s price and volume over time. By watching price movements over a period of time I can tell which ones are currently range trading between certain price points, which ones are trending upwards and which ones are stalling or trending downwards. These observations provide trading opportunities.
- Don’t force a trade. My most difficult compulsion to overcome and it continues to be source of most unprofitable trades. Often the market is treading water and nothing stands out as a potential trade yet I find myself looking for a trade. This is dangerous and akin to gambling. Rather than taking a position based on logic and a ruleset this behaviour is based on trading to just to be in the “game” and from personal experience it is usually followed by loses in a monetary sense and self confidence.
Happy trading.
My Trading Rules – Part One
Like many rookie traders out there looking to make profitable trades on the ASX I have had my fair share of mistakes. Some of these mistakes are easily recognizable, some are not.
Some of my intial mistakes include:
- Assuming that the collapse of a share price indicates value buying opportunities. Assume NOTHING, BBI, VBA, ROC, VPG are all at close to 52 weeks lows and some historical lows. Does this mean they are value buying opportunities at these prices or does it mean the market is now accurately reflecting the company worth. I tend to follow the market knows best philosophy and look for future growth or potential that has not yet been factored into the share price to guide buying opportunities. However, the market can have a tendency to drag good companies down with the bad and these are definite potential buys when they have been oversold, case in point PNA and LYC at 9 and 12 cents respectively.
- Impatient buying on falling prices. Paid the price just a couple of weeks ago on this mistake. LYC was off 12% in two hours on a large drop for the ASX and jumped in on the basis that it would bounce of support at 42.5c only to find that support was smashed and 39.5 reached. When I look for potential daytrades and bounce trades I look for support levels to hold or for the bounce to begin for jumping on board. Don’t catch the falling dagger.
- Company announcements are just that, COMPANY announcements. Would you believe every word that anyone said, all the time? Didn’t think so. So do some research of your own into companies and their announcements before you buy or sell based on released information. Research everything you can get your hands on. From Directors and their backgrounds through to project success and failure rates. Information is everything, it’s your advantage and disadvantage. On the weight of information and evidence I always go with my gut instinct.
- Hot tips. Needless to say the only question I have for “hot tippers” is, how much have you got on it?
One of my biggest mistakes early on was becoming “married” to a particular share. What that means is that It became difficult to retain an objective point of view on the pros and cons after I had invested money into the share. I ironed this out quick smart. It leads to averaging down positions that shouldn’t be and holding shares that have become dog shares without realizing it. I never consider myself as an owner of a company but rather a speculator on potential price movements of a share.
Good luck.