What do you have invested?

[Tani Coyote]

The passive SP500 Index has beaten your (by admittance) stressful trading by a full point. This is important because what's the point of actively trading if you aren't beating a passive portfolio?

Well, one key difference is money compounds nicely with short-term investments. As well, while you are doing better now, the next slump will probably claim some of the value; I, having money freed up, will be able to purchase at this time and set myself up for more gains.

A realised gain is much better than an unrealised one for the simple fact unrealised ones can slip through your fingers easily.

I'm also close to beating the annual profit rate, which is what's most important.

(Note: My semi-passive stock fund has seen a 20% rise, net, since Sept, mainly because I bought a bit of Chipotle in early September and the people decided they like it so it kinda went up by kind of alot. Got lucky with that)

Well, luck is everywhere regardless of the length of time you hold a stock.

Stocks that did not pay off were C and BAC, both of which I bought cheap to cash in on an eventual rebound of the names, but these were long term investments so I am not sweating the current lack of performance. C has at least made it back to even, BAC is still down but as I progressively bought it as it went down I should make my money back easily when it finally turns.

I know your pain with BAC; I purchased 400 shares and was up to a fifty cent profit per share at one point, but since I got greedy(a first; usually it's my father who succumbs to that), I lost that. When I heard word Wikileaks might release something related to BAC, I dumped it at 11.70 at a minor profit... so you can picture how angry I am seeing as it's a dollar above that now just after I dumped it. Better safe than sorry I suppose...

I guess everyone is just as vulnerable to greed and fear as anyone else...

 

[Patroklos]

You need to look at C and BAC in the grand scheme of things. In the case of C it has great potential for growth, but its stock price has been continuously depressed as the government dropped its shares in the most ridiculous fashion possible. Thats all over, so now it can rebound propery.

BAC has been getting pummeled for a number of reasons to include its exposure to European debt, but any way you look at it it is cheap and can't remain that way for long. The question is how long are you willing to wait for its uptick? You are a far more short term trader than I am. My average hold on short trade stocks is three months, and half of my stocks are long term dividend plays.

 

[Tani Coyote]

You need to look at C and BAC in the grand scheme of things. In the case of C it has great potential for growth, but its stock price has been continuously depressed as the government dropped its shares in the most ridiculous fashion possible. Thats all over, so now it can rebound propery.

This is very true; buying stocks when they were down(plus two weeks of luck with penny stocks) is what allowed my personal portfolio to grow a net of 11-12% since May. It ultimately comes down to developing a keen eye(and of course, a bit of luck) for underpriced stocks and going with them. It may be risky, but generally with risk comes reward.

BAC has been getting pummeled for a number of reasons to include its exposure to European debt, but any way you look at it it is cheap and can't remain that way for long.

I certainly won't be so beholden to rumors next time; they cost me 300 dollars worth of net profit! Several percentage points lost simply because I didn't wait a few days. My father was on me about it, but better safe than sorry...

The question is how long are you willing to wait for its uptick? You are a far more short term trader than I am.

Provided I beat the annual average profit of 8-12%, I am happy to hold on for as little or as long as possible. I can get a bit jumpy though; if a stock goes up 2-3%, I'm quick to cash out and invest the cash in whatever's down at the time. Wash, rinse, repeat.

My average hold on short trade stocks is three months, and half of my stocks are long term dividend plays.

The best part about dividends is you only need to hold a stock for about a week(you buy it before the ex-date, then sell it on the record date, usually three days later) in order to receive it. It's a way extremely short-term traders like myself can take advantage of the market.

Attempting to play the market like that does carry risks, however... the stock's price tends to misbehave on dates pertaining to dividends.

 

[JerichoHill]

Umm, Short term investment opens you up to more risk and more transactions costs than long term investment. I'ev already locked in on quite alot of my gains through a 5 dollar stop-loss order. Wow.

And more money freed up? I'm sorry, but that's just not true. Most investors keep a nice cash fund around to buy up deals that just happen. I have such a fund. I'm speaking solely on what's actually allocated at this point.

So ergo, I really don't think you grasped the point of my argument, in that your life now revolves around the market, you are not making returns that are demonstrably higher than passive portfolios, and you're adding alot of stress. Sounds lovely.

Well, one key difference is money compounds nicely with short-term investments. As well, while you are doing better now, the next slump will probably claim some of the value; I, having money freed up, will be able to purchase at this time and set myself up for more gains.

A realised gain is much better than an unrealised one for the simple fact unrealised ones can slip through your fingers easily.

I'm also close to beating the annual profit rate, which is what's most important.
[/qoute]

 

[Zelig]

A realised gain is much better than an unrealised one for the simple fact unrealised ones can slip through your fingers easily.

This doesn't make sense.

If you really can't figure out why, let me know and I'll take the time to explain it.

 

[Hygro]

might it be because he said an unrealized gain is bad because it's an unrealized gain?

 

[JerichoHill]

Yeah,

A stop-loss order really helps make the unrealized realized anyways

 

[El_Machinae]

I still think it's worth the learning experience. JH may be statistically correct, but I think that the life experience in active trading is worth one point of opportunity cost.

 

[JerichoHill]

My "learning experience" in active trading cost me 15K, El Mach. I sure wish I had learned what I knew before losing that.

 

[Whomp]

The best part about dividends is you only need to hold a stock for about a week(you buy it before the ex-date, then sell it on the record date, usually three days later) in order to receive it. It's a way extremely short-term traders like myself can take advantage of the market.

Attempting to play the market like that does carry risks, however... the stock's price tends to misbehave on dates pertaining to dividends.

I'm afraid what you're saying here doesn't make sense. If you buy a stock a day before "ex dividend" date then it's trading "with dividend". However, if you buy it on "ex dividend date it sounds like what it says...without dividend. IE if a company closes at $10/share before ex dividend date but pays a $.25/share then the day it goes "ex dividend" it's opening price is $9.75/share. In other words, without dividend.

Record date means nothing other than who owns the shares based on settlement (T+3) and is always 2 days from the "ex dividend" date.

The only other argument I have in this thread is regarding "passive investing". "Passive Investing" is a misnomer since the reality is it's an active bet that the companies that make the indexes are better at stock selection. That's consistently proven wrong by managers that are truly active and not closet indexers. By considerable margins, I might add.

 

[Tani Coyote]

Umm, Short term investment opens you up to more risk and more transactions costs than long term investment.

Transaction costs aren't as important as the net profit. Transaction costs can eat up quite a bit of money(14 bucks each buy/sell cycle), but if I'm making 1-2% net each transaction, and then lay the foundation for another such transaction, I am satisfied. My father's satisfied as well.

And more money freed up? I'm sorry, but that's just not true.

What I meant was that since the portfolio is very liquid, cash is almost always available. The money isn't locked up like it would be if it was in long-term investments.

Most investors keep a nice cash fund around to buy up deals that just happen.

I'm sure they do; fortunately, if we really needed money to seize an opportunity, my father could just deposit some. The constant influx of cash into the account, as well, replaces that fund quite nicely.

So ergo, I really don't think you grasped the point of my argument, in that your life now revolves around the market, you are not making returns that are demonstrably higher than passive portfolios, and you're adding alot of stress. Sounds lovely.

Given that today the growth has gone to 8.23%, and it's very possible it's higher than what I gave(for the first three weeks, I only had 4-5K, but due to repeated successes, more and more money was approved to be used for short-term trading),

Even so, the average of 75 dollars a week isn't bad at all. My father has problems with grasping relative profit rather than absolute profit(he has a fetish for a 100 dollar profit), but overall I've done quite nicely for myself.

The real test will be a bad year; if I can pull off a profit while everyone else is losing, I will have quite a bit more merit to my positions.

This doesn't make sense.

If you really can't figure out why, let me know and I'll take the time to explain it.

It does to me; I'm saying that a realised gain is deposited in your bank account, but a little bit of greed with an unrealised one means you lose a lot of it during the next dip. my father is usually a victim of unrealised gains slipping because he gets sucked into the "it'll keep goin' up!" mentality... then again, he is a bit of a sheep.

There are four stock market animals - bulls, bears, hogs and sheep. My Dad is a hog AND a sheep. Not a good combo.

I still think it's worth the learning experience. JH may be statistically correct, but I think that the life experience in active trading is worth one point of opportunity cost.

Indeed; I've learned quite a bit! Such as how to read patterns in charts based on the shape of the candlesticks, how the bid/ask spread can ruin what seems like easy profits with penny stocks...

My "learning experience" in active trading cost me 15K, El Mach. I sure wish I had learned what I knew before losing that.

I bought stocks in 08 right before the crash and cost my father almost half the 3K he gave me. My consistent victories with stock picks I have now, however, have encouraged him to give me more and more.

If you buy a stock a day before "ex dividend" date then it's trading "with dividend". However, if you buy it on "ex dividend date it sounds like what it says...without dividend. IE if a company closes at $10/share before ex dividend date but pays a $.25/share then the day it goes "ex dividend" it's opening price is $9.75/share. In other words, without dividend.

I'm well-aware; the stock tends to dip and grow in relation to the dividend by the dividend amount. It's why all sources I've read have said it's not so easy to game the dividend. It should be a bonus, not the backbone of one's short-term investments. If it is the backbone, well, it sounds like one's better off with long-term investments.

Record date means nothing other than who owns the shares based on settlement (T+3) and is always 2 days from the "ex dividend" date.

The record date determines who gets the dividend(since all current shareholders are recorded on that day), however. That's why if you buy it on the ex-dividend date, your money won't settle by the record date, meaning no dividend.

I've heard that generally the record date is 2 days after, indicating there are exceptions, as few and far between as they may be.

 

[innonimatu]

Transaction costs are irrelevant aren't as important as the net profit. Transaction costs can eat up quite a bit of money(14 bucks each buy/sell cycle), but if I'm making 1-2% net each transaction, and then lay the foundation for another such transaction, I am satisfied. My father's satisfied as well.

Unless you can do much better that the average speculator, transaction costs do matter. If your profits are in live with the average you'll lose compared to those who did few transactions.

And you're probably neither luckier not more knowledgeable than the average. As a small speculator you start at a disadvantage: less aceess to privileged information and less power to game the rules. Then if you're constantly changing your speculation targets you won't ever become knowledgeable, never specialize in anything.

 

[Tani Coyote]

Unless you can do much better that the average speculator, transaction costs do matter. If your profits are in live with the average you'll lose compared to those who did few transactions.

Of course. But if the net gain is 8% annually, I've already surpassed that in 2.5 months.

We're looking at a net of 3900 dollars or so by year's end at the current rate. Nice enough considering I've only worked in 5K increments for much of the period.

And you're probably neither luckier not more knowledgeable than the average.

Luck has been on my side consistently since October. And before that, with my own money, since June.

 

[JerichoHill]

Anyone who says "Transactions Costs don't matter" makes Tobin roll over in his grave

Transactions Costs. Matter.

My point still hasn't sunk in.

Either my "Passive" 401K in the SP500 or a more active but longer term portfolio of stocks has beaten your returns, easily. Is it worth the stress of marrying your life to the hours of the market to get returns you could get with much less stress?

Returns only matter in the relative (what is my opportunity cost?)

It is also very dangerous to extrapolate returns to yearly returns. Do we need to explain why extrapolation carries risk?

 

[Whomp]

Of course. But if the net gain is 8% annually, I've already surpassed that in 2.5 months.

We're looking at a net of 3900 dollars or so by year's end at the current rate. Nice enough considering I've only worked in 5K increments for much of the period.



Luck has been on my side consistently since October. And before that, with my own money, since June.

Everyone's made money in this kind of market and honestly 8% isn't really cutting it since October and luck is not a strategy. Just sayin'...

I'd also be very careful trying to project current results into the future and assuming they can be replicated the same way. It's a recipe for disaster especially since you haven't have your face kicked in by a bear raid yet. For "bull only" traders there's no greater pain than getting crushed by a bear run.

If you're "bull only" trader you should start broadening your markets beyond equities since the rally in coffee has been a beast since June when it broke through 150 and today the March 2011's stand at 217.20. This can also be traded on NYSE under JO.

If you're truly trading then you should care less "what" trades or "what" direction it trades. Learn the "what's" and you'll become a much better "trader".

Trend = Friend
Bend = End

 

[Tani Coyote]

Anyone who says "Transactions Costs don't matter" makes Tobin roll over in his grave

Transactions Costs. Matter.

Sure, but the compounding investment makes those extra costs worth it, I feel.

Either my "Passive" 401K in the SP500 or a more active but longer term portfolio of stocks has beaten your returns, easily.

Actually, since I started with only 4-5 K and worked my way up to 16K as of now(would be more but my Dad occasionally tells me to buy stock x for whatever reason, usually with disastrous results where we hold onto it for longer periods of time), it's possible I beat the 8.75% net gain... I am only half a percent from it, after all.

Is it worth the stress of marrying your life to the hours of the market to get returns you could get with much less stress?

Well, I may have exaggerated the stress. I derive excitement from watching stocks go up and down, just like the flashy lights of a casino.

What's stressful is when a stock doesn't sell as quick as it should, though I'm learning not to panic since delays inevitably resolve themselves... longest short-term stock I had was about 35 days, and that's solely because I got greedy and didn't sell it at about the 2 week mark(where it would have had a dollar/8.6 gross profit per share).

Returns only matter in the relative (what is my opportunity cost?)

My father couldn't grasp relative returns if he tried.

Everyone's made money in this kind of market and honestly 8% isn't really cutting it since October and luck is not a strategy. Just sayin'...

I'd also be very careful trying to project current results into the future and assuming they can be replicated the same way. It's a recipe for disaster especially since you haven't have your face kicked in by a bear raid yet. For "bull only" traders there's no greater pain than getting crushed by a bear run.

I dunno if it counts as a bear raid, but there have been one or two times I bought a stock only for it to lose a few percentage points over the following days. Usually my Dad's picks.

That said I tried using my own money to short-term trade and bought when a stock was low on Nov 5... it stayed low for a while and only now is showing signs of picking up. Fortunately, despite the setbacks I had with my own money, it's grown over 10% this year since May.

If you're truly trading then you should care less "what" trades or "what" direction it trades. Learn the "what's" and you'll become a much better "trader".

Trend = Friend
Bend = End

I'll certainly have to keep that in mind. I've never really looked at specific resources. All I hear is oil, oil, oil in stock news in terms of resources.

 

[Mise]

So you've made 7.5% in a market that's gone up by 8.75%, net of fees, and that's a success for you?

Also, please stop blaming things on your Dad... It's not good form at all.

 

[Patroklos]

Thats just him. As I said I am up 35% and 40% in the same time frame (half of that is realized). Granted I don't turn stocks as fast as him, but there is nothing keeping you from making money that way. I haven't sold any stock since April for less than a 10% gain.

 

[JerichoHill]

Thats just him. As I said I am up 35% and 40% in the same time frame (half of that is realized). Granted I don't turn stocks as fast as him, but there is nothing keeping you from making money that way. I haven't sold any stock since April for less than a 10% gain.

I think there's been several of us to point out the flaw in T-Fox's thinking.

It's much easier, I think, to make money when a market is generally upturning, which it's been doing in this short timeframe. Of course, when the downturn hits, its very easy to see who knows their stuff.

 

[El_Machinae]

I bought stocks in 08 right before the crash and cost my father almost half the 3K he gave me. My consistent victories with stock picks I have now, however, have encouraged him to give me more and more.

I'm on your side, since this is a learning experience. However, this statement triggers warning bells. It should be at least a few years before your father actually trusts you with decent money. Don't fall into a gambler's fallacy (any of them): you're still at the stage where you're effectively gambling.