Trade Up

Unfortunately I do not think Trading / Speculating will ever be recognised as a "proper" job. For those who have no experience, it is seen as a rich mans form of gambling. For those who have done trading, it is a way to pit your wits against other market traders, and try to stay one step ahead. While my family loosely understand what I do, they do not ask an awful lot of questions. Unless someone has a real interest in trading, and the markets, there is no point trying to teach them. It is in the blood.

A similar phrase in the UK is "Buy on rumour, sell on fact" - it does work!! "Sell in May and go away, dont come back until St. Ledger Day" has always been a phrase mentioned EVERY year in the papers in the UK. For those of you not aware, the St.Ledger is a famous horse race in the UK. History has shown that the period between May and St. Ledger Day has often been a flat period, with many traders away from their desks at some stage over the summertime. Are there any periods when the US market has historically been disappointing?

I have seen much mention of the OTC market in the US, which seems to be the more "risky" end of the investment spectrum. Have you ever tried it? Could you consider it? I have seen a number of occassions in the past when companies have made the jump from OTC to the main markets, and the shares have performed very well. Maybe a little bit of research in this market could do wonders for your performance? Is it worth the risk?

Spotting the days when not to trade is as important to a successful trader, as spotting the next 10 bagger. While we can all make small turns here and there, it only takes one bad investment on a "choppy" day to undo all of our good work - I know this from past expriences!! Knowing when to trade is something that comes with experience, although it can take years to get a real feel for the "market".

I have to admit that I am not really a derivatives trader. The idea of investing in such short term investment instruments, which could disappear overnight, scares me. While I have made many mistakes in my stock investments, at least I have been left with some money to re-invest. With derivatives, this can be a different story. I appreciate that it is possible to use derivatives as an insurance policy, but again, this does not really appeal to me.

I have to say that as much as I would like to retire fairly young, I can never see the situation when I will stop trading - its in the blood. How would I replace the buzz of trading? What would I do all day? I like making money, and I like to make lots of it. There may come a day when I reach "burn out" and have no choice but to retire, but hopefully that day is a long long way off.

I have looked at many different elements to trading, but one which I have not seen mentioned on the Forum is Stock Betas. The beta of a stock is the correlation the stock has with the market (or any other method of comparison, e.g. interest rates, etc). A strict definition of correlation is :- A correlation is a single number that describes the degree of relationship between two variables A beta is not a fixed number, and is based on historical data which will change going forward. I am going to leave the rest fairly blank, as I always think it is interesting to hear peoples views, without leading them in a certain direction.

I think that it can be quite dangerous to take forgranted that investment cycles are of similar lengths, and can be predictable. While certain sectors are linked to other actions, e.g. Property and Interest Rates, there are so many other factors to take into account. An example is overseas investment in US property, which for years was dictated by the Japanese. Their investment actions were also effected by the domestic economy (in Japan) e.g. earth quakes, etc. With US debt rising, there is a chance of a slowdown very soon. This would effect the property market, as well as the stockmarket in general. Be careful................

I thought it might be interesting if members of the Forum could post regular, or one-off, summaries of their daily trading activity. It would show what other traders are thinking, how often they are trading and what kind of returns are being made. From the comments elsewhere on the board, there seems to be a major variation in styles, strategies, etc. All posts welcome.................

Soultrader, I think you have hit the nail on the head. These smaller companies do like to drum up interest in their stocks, and sometimes they maybe "hint" at a little more in their conversations with private investors. I find that they are very talkative if they feel their company has been over looked by investors. A bit of good news from a small company can have a major impact on the share price. If you do your research before hand, it can be very lucrative!!

While there are a few names which I have never heard of (to be expected) it is interesting to see the different influences which have effected our trading activities. All of the above traders have their unique style, and their characteristics appeal to different people. I look forward to receiving more comments, and at some point I will total up the "votes" for various traders.

An interesting thread. My answers are :- 1. Why did you decide to become a trader? I took an interest in Stocks and Shares when I was about 14 years old. I was lucky enough to be given a day at a Stockbroking Office when I was 17. This resulted in me being offered employment, after leaving college. 6 Months later I started. Stocks and shares were a big buzz then , and still are now. 2. What steps or hurdles did you overcome to become a trader? When I asked my careers office how I would get into Broking, the lady replied, "No chance, whats your second choice?" I was lucky enough to get a Stockbroking job when I left college, but the Company ceased trading within a year. I then started at the very bottom with a new Broking Company (again!!) and the rest is history. 3. Do you see yourself trading in the next 10 years? Yes. When trading is in your blood, its hard to leave the buzz alone. It would be interesting to see other experiences.

When I was in the Broking industry in the UK I had access to many company directors, adviser, etc. Once they knew that you were working for a decent sized Stockbroker they were always willing to speak about trading, etc. As much as it may surprise a few of you, some companies are willing to talk to private investors as well, although this tends to be the smaller companies, where maybe there is not as much interest. You can gain a good insight into a company this way, and you also get to learn the "signals", i.e. the questions they wont answer, and why. Have you ever called a Company?

As we are looking for changing trends we will often come across false breakouts. While I would never normally rush in on an initial breakout, I take a lot of notice of trading volumes. This is perhaps more useful when shares are falling, and we are looking for that last big sell-off before the shares bottom out. Next time you see a share turning after a downwad spiral, check the volume just before the turn, and chances are you will see the last leg of the sell off, on high volume.

Risk AND reward are the main factors you should consider when investing. When you breakdown a traders "gut" feeling for a trade, it is amazing how many factors really come into play. You could find the best stock in the world, trading well, profits on the up, but if the market is collapsing - whats the point of investing? Its like swimming against the ocean - tiring, and ultimately you will lose.

Discretional Trading is what seperates a good trader from the rest. A feel for the markets, an eye for a trade, all of these come into play. System Trading can be useful and very profitable although in the past I always found myself adapting my "system" as I went on. Thats the problem with systems, you always feel you can improve them.

Im not sure how anyone can really call themselves a trader without at least access to Level II. While I appreciate saving money may be a factor when starting to trade, you really cannot afford not to have level II. Level II gives you a better feel for what is actually happening underneath the surface, with more detailed quote, size info.

While I still take a look at Company Report and Accounts, etc, I always like to look at the wider picture. I also check out Broker Reports, chit chat on the boards and the share price trend. It is only after checking these that I would arrive any a decision, whether this be to deal / research further / ignore / monitor. After all said and done, the actual share price trend is fairly high on my list of major pointers.

Insider Trading has been around since time began - people dealing on confidential information. There have been many attempts around the world to stamp this out, but nobody has come any where near solving the problem. The nature of the problem is shrouded in secrecy and tends to be enclosed within small groups of "informed" people. Some radicals suggest that Insider Trading should be legalised so that everything is in the open. Insider Trading happens every day in the markets - which is why prices move on "no news". I have not got a clue how to solve the problem - but would welcome any opinions on the subject.

Sorry if I have been a little misunderstood. I am not trying to say that all traders have no ethics or values, just pointing out (like Soultrader said) that traders tend to be more thick skinned than most. Its like the traders who sell airlines short after a crash - now I would not do that, but I know some traders who would. That opens another issue, if nobody acts on bad news then we risk a false market - after all the market is only a reflection of supply and demand. Some people see gambling and tobacco stocks as unethical, but personally that would not stop me trading in these stocks. I hope thats clears up any misunderstanding?

Boredom is a massive problem for traders as, if you are like me, you mind is buzzing all of the time with ideas. I think this is why a lot of traders play poker, for the thrill, if trading is a little quiet? What other things do you do to avoid trading out of boredom?

Have you ever jumped into a trade out of boredom? When markets are quiet, or there is nothing on my radar, I have found myself trading stocks I would not normally have touched. Has anybody else ever found themselves in this situation? Spotting a trend which is not quite there? Is it just me, or do traders have a very low boredom threshold?

I think that many traders (myself included) can easily fall into the over-trading trap out of boredom. If the markets are not moving, or nothing catches my eye, I have found myself jumping into trades I would not normally touch. Traders tend to have a very very low boredom threshhold, which is sometimes difficult to control!! Be careful, boredom can be very expensive.

While a Mentor is not essential, I found it very useful when I was in the Stockbroking Industry in the UK. In my 14 years in the industry I had two great Mentors who I learnt so much from. The best Mentors tend to be very reclusive, until you get to know them. Once you earn their trust and respect, you can learn some amazing things. Each Mentor has different ideas and strategies, and I found both of my Mentors very very interesting to listen to, and great to bounce ideas off.

I think you need to have a degree of intelligence to be able to trade the markets. Im not saying that you need to have bags of qualifications, but you need to have a good grasp of maths to work out valuations, and be able to think on your feet. Sometimes it the people you least expect who make the best traders.