T Nation

Playing the Stock Market


#1


Anyone here play the stock market ??

Are there day traders or anyone like that here?

Whats a good amount of money to start off with?

Who are the gurus of the stock game?

Is day trading a bad idea?

Anyways thanks for stopping by ..


#2

I recommend "The Intelligent Investor" by Benjamin Graham.

Check out the website "SeekingAlpha". Stay far away from "The Motley Fool".

Do an absolute crapload of reading before sinking a single dollar into stocks.


#3

How versed are you at financial reports? You should read a little bit before you invest if you're not really savvy on the industry terms. It can be overwhelming for beginners (not sure of your level of exposure to the industry).


#4

I dabble. Read books, take a relevant "continued learning" class if a college nearby offers and practice day trading on simulation sites first.

I like simustock. WWW.simustock.com


#5

I dick around with it a little. I also recommend Seeking Alpha.

I'd start with a few thousand, but don't drop it all into any one stock. It's tempting to start low, but your transaction costs are usually a fixed cost, so if you use a site like Scottrade with $7 trades, it's $14 round-trip. If you bought $200 of XYZ, the first 7% of your gains are gone off the top. Definitely don't invest more than you can afford to lose if you're going to day trade or speculate.

If you jump in during a bull market, pretty much anything you go long on will rise, so don't mistake luck for genius.


#6

Individual investing is stupid. The money votes - plain and simple. You are outgunned by a thousand firms with a million times the resources and brain power.

If you are successful it will most likely be only because of sheer luck.

Individual investors are getting run out of the market left and right. All the profits from the HFT firms and hedge funds come from individuals. It's a 0 sum game. You will be on the losing end of firms headed by james simons, boaz weinstein and the like.

It's a miracle etrade and companies like that survive.


#7

I disagree regarding individual investors.

Have a portfolio of around 5 stocks that you know in and out, dont get sentimental, and ride the wave.


#8

x2, just understand the market and ride it.


#9

Yes

Yes

Are you investing or trading? If you're investing, then whatever risk capital you have is fine. If you're trading, I'd want $50k - $100k in an account plus 6 months living expenses in savings.

The gurus tend not to trade. They're long term investors. That's why Buffet gets the press. Nowadays, the trading gurus are essentially technology companies with co-location facilities that you've never heard of.

Day trading your investment account is a horrible idea. Day trading to try and make a living is merely a bad idea. Whichever poster above mentioned HFT firms hit the nail on the head.


#10

Thanks for the replies so far... I am a newb and just wanted some info on the subject.


#11

x3.

I have about 4 shares and over the past year have made about a 30% return on them, treating it as a long term investment.


#12

Most people have no business engaging in short-term trading of any sort.


#13

Have some long term holds, but also dabble in the derivative market quite a bit with puts and calls.

Had a hunch netflix would tank last year even more once it hit around $180. Shorted it at a $70 dollar strike price and never looked back once it took another massive haircut.

Playing derivatives, especially naked is extremely risky but it is also how the success stories of college grades making a million in a summer trading happen.

For example, I gave some advice to my parents on a short term investment, Apple (aapl) was trading at around 370, february expired calls for $400 were selling for $6 a share, you must buy in blocks of 100 shares so around $600 a block. If you had invested 10k in a short term investment, today that investment is worth $56. You run the risk of the stock going the other way but there are times when you just know a company is going to knock it out of the park.

The 10k investment is now worth over 90k.

There was definate potential you can get stung and so far this year I have got stung on nflx success to date but I feel by the end of the year it will be trading at the yearly lows or much lower, business model does not make sense going forward. There are paying massive amounts for these shows and movies that the networks and film studios can no longer profit on. You may get stung on some derivative trades as a couple cents can be very volatile to your investment, have to keep emotions out of it and understand the fundamentals of the company. Other times just ride the market wave, either way derivates play allows you to take advantage of both a bull market and bear market because you are essentially speculating on the rise or fall of a company.

Its how soros and paulson made so much cash in the last recession, betting against the mbs that were out in play.


#14

www.fool.com

no joke check it out


#15

Care to elaborate on this?

What exactly are expired calls?


#16

Don't ruin his made-up story with your petty technicalities.


#17

My petty technicalities?


#18

Just an aside but I was at a networking function last night and the speaker was a dude from Austin who graduated UT as a mechanical engineer in the early 80s, dabbled in day trading and quit engineering to earn $1 million his first year as a 23 year old in the 80s.

Over the years he earned a pretty penny, although risk is of course involved. In his worst day he lost over $4 million.

Ultimately, Reuters bought his firm for $150 mil a decade ago. Just a dude who studied trading as an aside and became proficient. He did get to ride the emergence of etrading in general though.


#19

Ah, sorry. I was being sarcastic. I thought you were pointing out that one doesn't trade expired options.


#20

They were expiring in February calls, sorry for the typo. February 18th to be exact. Strike price of $400

The january calls that were available expired before the earnings report in January, so they would not of been as valuable.

Story is not made up and here is the math.

February 18th $400 strike price calls
http://thestockmarketwatch.com/stock-data.aspx?stock=AAPL&a=showOptions Around December they were trading at the low of $11.75 Since you must buy in blocks of 100 shares. $11.75*100=$1175. $10,000/1175=8.5, So let's assume they went ahead and went to the upper end and bought 9 blocks of 100 shares. 9 * 1175=$10575.
We fast forward to today. Last sale as I am typing this up is 56.55 per share. ($56.55*100)*9=$50895
($50895/$10575)*100=481%return in a little over 30 days.

You also run the risk of losing it all if it goes the other way and the AAPL example is really hitting a homerun as it's performance is helping drive the entire S&P 500.

Seekingalpha is awesome, I would much rather look through the technical analysis of many and then come to my own conclusions then do a lot of mind numbing work it is. You sense there is a bit of motivation of big banks to give favorable ratings to large company's in order to have the banks act as book runners when they are doing M & A acquisitions. Big time fees for the big banks, but that is what happened to Enron, everybank was afraid to give them a negative rating in fear of losing revenues for their profit. I tend to think more of the people on seekingalpha have less of an agenda when writing but you have to be careful when treading through information.

For reference, I am writing my level one CFA exam this summer and have been trying to immerse myself in the markets as much as possible the last six months.