Online Stock Trading

[mrt144]

No. I am not.

I contribute my failure in the stock market with being wrong about the direction of the market.

But that's not as ego pumping or dumping as attributing to a leisure activity you indulge in. I mean, if I had success in the stock market and attributed it to my rigorous weight training regimen that requires all these different factors to be successful, you'd think I was putting you on.

 

[Kruelgor]

I contribute my failure in the stock market with being wrong about the direction of the market.

But that's not as ego pumping or dumping as attributing to a leisure activity you indulge in. I mean, if I had success in the stock market and attributed it to my rigorous weight training regimen that requires all these different factors to be successful, you'd think I was putting you on.

Haha. Yeah, I know where you are coming from. I am a strange bird. I admit to that, but I'm not putting anyone on. This entire thread I'm completely honest and serious.

 

[really]

The game I play doesn't allow for stocks to drop to zero in a matter of a couple of hours. My specific picks are too strong financially. It may drop, but wont drop to zero.

Trading on margin doesn't require your stocks to fall to 0 to wipe out your capital.

 

[Kruelgor]

Trading on margin doesn't require your stocks to fall to 0 to wipe out your capital.

Good point. True. When you lose on margin, you're losing 2:1

Example, if I have $5000 of real cash and I borrow $5000 then I invest $10,000. The stock value drops 20% then I lose $2,000 which is actually a 40% drop, but in the mean time the gains work exactly the same way too. A 10% increase in stock value equates to a 20% gain in real money.

 

[Theige]

If you do not have the time or knowledge to devote to your portfolio, they are not. Also, they are a decent buffer to over-confidence. 43% of my portfolio is in mutual funds and that goes up by a percent every year. The rest of my portfolio is more aggressive, but the mutual funds flatten the risk.

Index funds are far superior to mutual funds for this purpose.

This deserves a separate reply Mods.

No. Theige is completely, utterly, wholly in the wrong here. There are some rotten, fee based mutual funds. Most are not bad. Index funds, a special kind of mutual fund, are excellent for the 95% of folks who do not care to try to understand what stock or commodity to buy and don't want to spend their nights research P/E Ratios.

Not only do I cover this @ Coffeecents.org, but this is also covered here by a wealth manager whose clients are 8 figure folks.

Index funds are considered Mutual funds?

I usually call them index funds

An index fund is a good place to park your money for the long term, but if you can make a small time commitment per week you can definitely find better investment options.

 

[Theige]

Not only do I cover this @ Coffeecents.org, but this is also covered here by a wealth manager whose clients are 8 figure folks.

On page 12 of this PDF, which I found at the link you provided, there is a little chart that shows if your time horizon is 20+ years, your investment strategy should be 100% stocks...

I assumed as much for our purposes, as we are almost all in our 20's and have time horizons over 20 years.

 

[JerichoHill]

Yeah, typically thats how it works, the guy's website is pretty awesome.
If you are young and have a long time horizon, you want to take risks, as riskier assets demand higher returns. As you get old, risk is not something you want to be exposed to as much, so you reduce your holdings.

 

[Godwynn]

The game HAS changed.

This may sound funny, but I do contribute my success in the stock market with my years worth of utter obsession to mastering online multiplayer war games. To master a war game you have to know it inside and out. You have to experiment with different strategies and know every unit and know every weapon in your arsenal. I took this same "war gaming" approach and applied it to this other man-made game we call the stock market.

If you know anything about me, you will know that I train and dedicate myself to utterly destroy opponents in multiplayer war games. I get a nice thrill out of it.

It doesn't matter what we say. You will continue to think the same way, you have walled yourself off from reason and wisdom. Therefore, I advise everyone else to save their time and let you go on your merry way.

 

[Whomp]

Finally being a pattern day trader carries a LOT of additional legal and financial ramification, most of which are not worth it unless you're doing it for a living.

I wasn't aware of this. What exactly is the SEC requiring?

Mutual funds are a horrible investment.

I recommend reading Cremers and Petajisto's research on a topic called "active share". Mutual fund managers have changed considerably since the early 80's when they were truly active managers versus today. However, managers with a high "active share" consistently have outperformed the indexes net of fees. Net.

Probably my problem now is defining the finish line or at least the point where I start taking from the portfolio rather than contributing to it. Certainly not before age 59 1/2. I want to lawyer as long as I can (so I say today), but for the making-a-living-at-it to not be so important at some point. I guess at 59 1/2 I start looking at withdrawal rates vs. the income needed to support my desired lifestyle.

Nope, many have played your game before. Very few have won at it.

Just so you're aware there's rule called "systematic equal periodic payments" that allows you to withdraw IRA funds pre-59 1/2.

I know this is "crazy" talk and it defies logic, but IF (and I stress IF) I continue at this rate I will have turned $3000 into a million bux in less than 2 years (magic of exponential growth). Hehe...that sounds insane and I don't expect any of you to believe it, because I know I wouldn't if I heard someone else say it.

Just a matter of time before you should be able to quit your day job. You and Paul Tudor Jones will be rubbing elbows soon enough.

Since you're "trading" can you explain why you don't just avoid a stock for 30 days to capture the tax loss? There's plenty of stocks to trade so why lose the benefit?

 

[JollyRoger]

Just so you're aware there's rule called "systematic equal periodic payments" that allows you to withdraw IRA funds pre-59 1/2.

Thanks. I don't anticipate being in that spot substantially before 59 1/2, but it is good to know.

 

[Theige]

I recommend reading Cremers and Petajisto's research on a topic called "active share". Mutual fund managers have changed considerably since the early 80's when they were truly active managers versus today. However, managers with a high "active share" consistently have outperformed the indexes net of fees. Net.

I read it because you've linked to it before here at CFC

Would you not agree that ETFs, in general, are better than mutual funds?

 

[mrt144]

I wasn't aware of this. What exactly is the SEC requiring?

Sorry, I exaggerated a bit;

Under the rules of NYSE and Financial Industry Regulatory Authority, a trader who is deemed to be exhibiting a pattern of day trading will be subject to the "Pattern Day Trader" laws and restrictions, which is treated differently from a normal trader. In order to day trade:

* Day trading minimum equity: the account must maintain at least US$25,000 worth of equity.
* Margin call to meet minimum equity: A day trading minimum equity request is called when the pattern daytrader account falls below US$25,000. This minimum must be restored by means of cash deposit or other marginable equities.
o Deadline to meet calls: Pattern day traders are allowed to deposit funds within 5 business days to meet the margin call
o Non-withdrawal deposit requirement: This minimum equity or deposits of funds must remain in the account and cannot be withdrawn for at least 2 business days.
o Cross guarantees are prohibited: Pattern day traders are prohibited from utilizing cross guarantees to meet day trading margin calls or to meet minimum equity requirements. Each day trading account is now required to meet all margin requirements independently, using only the funds available in the account.
* Restrictions on accounts with unmet calls: if the call is not met, the account's day trading buying power will be frozen for 90 days or until day trading minimum equity margin call is met again.

From wiki.

 

[Whomp]

I read it because you've linked to it before here at CFC

Would you not agree that ETFs, in general, are better than mutual funds?

"In general" is "too general". What is one's selection process?

The better question is what makes "market capitalization" a better strategy for investing than doing fundamental research? If a company's market cap is going up doesn't that mean you're buying high and selling companies when they are low? Didn't it force you to buy too much technology leading up to March of 2000, financials in 2007 and energy in 2008? Put another way, I read the 4 worst stocks to own in the S&P 500 2009 happened to all be in the top ten to own in 2010.

So, no, I would not choose an index fund over any money manager I own. As I may have said before "passive investing" is an "active investment strategy" to choose based on market capitalization. Market cap is not an investment metric I choose to use in my selection process.

 

[JerichoHill]

Whomp,

I have to point out that you are an outlier in the distribution of those with familiarity with such trading strategies. IIRC, you do investments for a living. I am of the opinion (and nearly all financial folks seem to be in agreement, that for the vast majority of people who are saving money, index funds and passive investing is a far superior strategy vs. active management. This would be due to the barriers faced by most folks (lack of time, asymmetric information, poor risk profile, our own psychology). Clearly if actively managing a portfolio was the ipso facto determinant of success, alot more active funds than we see would be their proper metric.

But success is very tough. Very few active managers have a long viewed track record of success (ie, beating the market return).

Reread the thread here and I think you'd see that at the very least the OP is inexperienced, emotional, and engaging in recency bias, which are deadly when you are an active trader.

No one starts out playing with the big boys.

 

[Whomp]

All I'm saying is if people are willing to spend the time learning can break many of the fallacies they learn. There's a reason why a large percentage of "active" money managers have lagged the index since the 90's and it's because they've been told by investors what the investors want them to do. Pension funds and 401k plans have asked them to stay in their "Morningstar style box" and become more "index like". Why would they care about outperformance if they're going to garner more assets by staying in a "box" and being included in a 401k plan. More assets under management, more money. This makes for a really bad deal for investors and why very few 401k mutual fund options meet my criterion.

By the way, I find the OP's comments amusing and his stubborness will lead to a good learning lesson. I'm done trying to talk people like this out of doing what they're doing. All he has to do is go back and re-read mrt144's comments here and his view even a few years ago. It took a lot for him to discuss how difficult it was on him and his fiancee'.

 

[Mise]

What's really cool is the "margin account" which basically they give you money to trade with.

I knew this thread would be lulzy when I saw this.

Needless to say, I was not disappointed.


EDIT:

As I may have said before "passive investing" is an "active investment strategy" to choose based on market capitalization.

Empirical analyses aside, this is the most intellectually compelling argument against index funds, even for inexperienced investors. Surely there are low-fee ETFs that use more sophisticated measures?

 

[Kruelgor]

Like right now, for example. 100% of my investment is sitting in a cash account until this mess in Egypt clears up. Then I'll start buying stocks again. Maybe in a few weeks.

I have all kinds of "defense" measures I take to prevent catastrophic losses.

I'm loving it.

 

[Kruelgor]

Sorry, I exaggerated a bit;

Under the rules of NYSE and Financial Industry Regulatory Authority, a trader who is deemed to be exhibiting a pattern of day trading will be subject to the "Pattern Day Trader" laws and restrictions, which is treated differently from a normal trader. In order to day trade:

* Day trading minimum equity: the account must maintain at least US$25,000 worth of equity.
* Margin call to meet minimum equity: A day trading minimum equity request is called when the pattern daytrader account falls below US$25,000. This minimum must be restored by means of cash deposit or other marginable equities.
o Deadline to meet calls: Pattern day traders are allowed to deposit funds within 5 business days to meet the margin call
o Non-withdrawal deposit requirement: This minimum equity or deposits of funds must remain in the account and cannot be withdrawn for at least 2 business days.
o Cross guarantees are prohibited: Pattern day traders are prohibited from utilizing cross guarantees to meet day trading margin calls or to meet minimum equity requirements. Each day trading account is now required to meet all margin requirements independently, using only the funds available in the account.
* Restrictions on accounts with unmet calls: if the call is not met, the account's day trading buying power will be frozen for 90 days or until day trading minimum equity margin call is met again.

From wiki.

None of that applies if you're borrowing on margin - meaning it's not anything you need to worry about if you're using someone like ETrade because they will make sure you're in compliance, which is the other beautiful thing about margin accounts, especially the part about $25,000. You don't need $25k to get started.

 

[Abaddon]

Don't you have the "game" to just spot the shares that will make leaps UP in such events?

 

[Kruelgor]

Don't you have the "game" to just spot the shares that will make leaps UP in such events?

You talking about Egypt? The only investment I know of that is doing better because of the recent events in Egypt is crude oil. It jumped over $92 a barrel back on January 31st, but dropped some here in the past couple of days.

I'm so addicted to this stock market game that I watch Bloomberg channel like all the time. I sleep with it on. I can't get enough of it. It's like a sport.