Learn me about stock trading

[Mike K]

So I've been meaning to get into the stock market for probably 10 years now. I've always kind of taken the approach of investing in companies that I'm intimately familiar with and I do a lot of reading on specific companies so I generally have my finger on the pulse of any company I'd be interested in investing in.

I've loosely kept track of whether or not I would buy a stock at a given time and based on that completely (un)scientific data I've almost always been right. In fact, Apple has dropped $300+ in value since the date I noted that I would sell their stock. I think there's enough negative hype around it that it's going to continue to drop and I'd like to get in at some point but I digress.

So today I stumbled upon Tesla in an article and as everyone here knows, I love me some Tesla. That was the stock the motivated me to actually buy some shares. You have a new startup, selling a product people want, beating their sales estimates, posting early profits and well... For the short term I think Tesla is going to be a winner. For the long term who knows. Long story short, I bought 60 shares on a whim. About $3000, an amount I won't cry over losing if they were to go belly up tomorrow.

So as far as buying and selling goes, I know what I want to buy and I know how to buy and sell and I know some of the more basic principals such as short selling but I want to know what I don't know. What are some of the things I should know as far as the technicalities go? What would you tell your neighbor if they told you they were going to invest tomorrow?

I'm not so much looking for advice on what to buy or to diversify, etc. More so I'm looking for tips and tricks on the mechanics of it all. Things you wish you would have known when you first got started, etc.

Click to read more...

 

[Lord Tin Foilhat]

In for advice

 

[willsmysticcobra]

I will write a small and brief essay right after dinner as stocks and markets are my new hobby the past yr

 

[cacicgtp7]

Paging [MENTION=341]sickmint79[/MENTION]

 

[Gwinn The Chinn]

read a book called the black swan by nassim nicholas taleb

 

[sickmint79]

some mistakes i have made or continue to make -

when i first bought i bought a little of a lot of things. stock has to go up just for you to make your fees back then and you are mostly just churning and paying your broker fees.

i've made some naive mistakes entering new areas. i bought options on commodity futures when i really should have bought futures before, and in particular for what i was trying to do, full futures rather than e-minis (which i also bought after the otpions.)

it's hard to take profits on a winner and it is hard to cut a loser. people are biased against taking the recognition of their own loss.

even if you are right on something timing can be your enemy. particularly in the case of options which have a time decay component.

you can get options and hedge your bets with things you are long (like sell a covered call) or buy a put rather than outright short something (which has the potential for infinite loss, at least until they give you a margin call or liquidate your positions)

 

[ktraver97ss]

Buy low, sell high.

 

[Mike K]

some mistakes i have made or continue to make -

when i first bought i bought a little of a lot of things. stock has to go up just for you to make your fees back then and you are mostly just churning and paying your broker fees.

i've made some naive mistakes entering new areas. i bought options on commodity futures when i really should have bought futures before, and in particular for what i was trying to do, full futures rather than e-minis (which i also bought after the otpions.)

it's hard to take profits on a winner and it is hard to cut a loser. people are biased against taking the recognition of their own loss.

even if you are right on something timing can be your enemy. particularly in the case of options which have a time decay component.

you can get options and hedge your bets with things you are long (like sell a covered call) or buy a put rather than outright short something (which has the potential for infinite loss, at least until they give you a margin call or liquidate your positions)

A lot of this is greek to me so I'm going to be doing a lot of Googling just to understand your post.

What I do know is not to get emotional about this stuff. My entire business is comprised of 100k worth of inventory that loses it's value every single day and sometimes I buy it for too much and have to sell it for too little. I learned early on when I started doing this not to fool myself into holding onto an asset versus cutting my loses so I'm not worried about that.

As for commissions, I seem to be paying a straight $7.00 per transaction, at least from what I can see so that doesn't seem too bad. I'm up $200 so far. Time to spend my unrealized gains on tacos. 'Merica.

 

[sickmint79]

zecco now tradeking, whose clearing house (apex) just sent me a revised trading statement yesterday (10 days after taxes were due) ----- aside from this groan, i believe still has free trades.

i think zecoo started with lots of free trades (all??) then eventually turned into what it is now, i don't know the policy maybe something like 10 free trades each month for an account valued at 25k or more?? right now the site advert is 4.95 a stock trade or 4.95 an option trade plus .65 each contract.

i use that account for some trades/shorts/options

Option Level Approval
Level 2 - Buying Long Calls & Puts
Margin Account

if i refer you via e-mail and you fund the account with at least 3k and make 3 trades within 90 days then we both get $50, huzzah!

the other broker i use is ameritrade and in particular the 'trade architect' platform which was really just thinkorswim's platform, but then ameritrade bought them. i use this one for buying futures. i basically bought 2 nat gas futures that are 650 days away, dumped money into the account so it wouldn't yell at me on loss swings, and i plan on observing it and doing nothing for a year now at this point. unless it starts bleeding massive amounts of money. for now it just violently swings around 0. which is painful and wild since it is 650 days into the future, who knows what will happen? yet it will be down 1000 and up 1000 the next day. i just take a peek to make sure it's not down 10000 so i know whether i should drink myself to death or not.

 

[sickmint79]

i will also admit to missing out on much of the recent gains, although i have done so believing that the brunt is not really real. ie. stocks didn't go up because the economy, those companies or fundamentals are so great, but in part because there is a ton of money sloshing around and one of the places it's found to go is here. believing the intention of the fed with all its policies (yield shaping, quantitative easing) is to inflate stocks. so the wealth people thought they lost during the crash is now "back" so they feel "whole" and will spend more as wealth effects essentially. which means the current market level may be more fragile than it appears. i still believe this, nonetheless that doesn't mean there wasn't money to be made cautiously playing the trade. plenty of mine has sat sadly on the sidelines. what will happen going forward? i don't know.

 

[sickmint79]

i think we will really see how the cookie crumbles on our next ratchet up in oil prices. i think the 'low' price we're experiencing now is rather temporary and we are not at some new normal of american oil and energy independence. but a lot of people are hoping we are or pricing that we are!

 

[01DADDY01]

Mike K,

Here is my advice......

1) Never buy stocks on a "whim". You have to do your research!
2) Why are you buying TSLA at the highest point? YOU HAVE TO KNOW THE RANGE OF THE STOCK!
3) You are not hedged at all! Are you going to short something or sell some options?
4) Do you have a trading plan?
5) Retail trading is completely worthless. You are all ready giving up $.14 before you start. If you want to get serious the join a prop firm. This is not the 90's any longer. Otherwise I suggest that you save your money and invest it into your business.

 

[ktraver97ss]

Invest in PAF, will have weekly bikini carwashes.

 

[nick122590]

401K Investments

If you had purchased $1,000 of shares in Delta Airlines one year ago, you would have $49.00 today!

If you had purchased $1,000 of shares in AIG one year ago, you would have $33.00 today.

If you had purchased $1,000 of shares in Lehman Brothers one year ago, you would have $0.00 today.

But, if you had purchased $1,000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for the recycling refund, you would have received $214.00.

Based on the above, the best current investment plan is to drink heavily & recycle.

It is called the 401-Keg plan.

And as a bonus...

A recent study found that the average American walks about 900 miles a year. Another study found that on average Americans drink 22 gallons of alcohol a year. That means that the average American gets about 41 miles to the gallon!

Makes you damned proud to be an American!

 

[ktraver97ss]

22 gallons in a year, weaksauce.

 

[sickmint79]

401K Investments

If you had purchased $1,000 of shares in Delta Airlines one year ago, you would have $49.00 today!

If you had purchased $1,000 of shares in AIG one year ago, you would have $33.00 today.

If you had purchased $1,000 of shares in Lehman Brothers one year ago, you would have $0.00 today.

But, if you had purchased $1,000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for the recycling refund, you would have received $214.00.

Based on the above, the best current investment plan is to drink heavily & recycle.

It is called the 401-Keg plan.

And as a bonus...

A recent study found that the average American walks about 900 miles a year. Another study found that on average Americans drink 22 gallons of alcohol a year. That means that the average American gets about 41 miles to the gallon!

Makes you damned proud to be an American!

my biggest trade win percentage wise was lehman brothers. i think they were trading at $20 or so? i bought 10 $2.50 puts i think < 6 months out. they each cost a nickel. i basically bought to cover when they were at a nickel. basicaly 4,355% return.

boy do i wish i purchased $1000 worth of that...

 

[Mike K]

Mike K,

Here is my advice......

1) Never buy stocks on a "whim". You have to do your research!

A whim was a poor choice of words. I've been studying Tesla for the last 6 months.

2) Why are you buying TSLA at the highest point? YOU HAVE TO KNOW THE RANGE OF THE STOCK!

Because at almost any point since it's IPO I would have been purchasing it at it's highest point. It's been in almost a constant state of ascension since it's IPO so if I worked off that way of thinking I'd never have bought it.

3) You are not hedged at all! Are you going to short something or sell some options?

No, that warrants more investigation and I'll pick it up as I learn (or you can feel free to give some pointers). At this point I'm only in it for $3000. If tomorrow Tesla says we're going out of business and their stock crashes it won't bother me. I'm just dipping my foot in the pool right now. If stock trading is like everything else I've done I'm sure there will be some hard lessons learned along the way.

4) Do you have a trading plan?

No, none at all at this point. I'm trading one stock. I'm treating it as I treat any other asset I have. When I get to the point where I put serious money in the pot and I start to diversify then I'm sure I'll give a plan more thought.

5) Retail trading is completely worthless. You are all ready giving up $.14 before you start. If you want to get serious the join a prop firm. This is not the 90's any longer. Otherwise I suggest that you save your money and invest it into your business.

Why? Why is it completely worthless? At the end of the day I look at this like I look at anything I'd buy for my business. I'm betting that if I buy x for y then it will eventually be worth z. That's all I do right now anyhow. At the end of the day though if I buy it for $1,000 and 6 months from now it's worth $5,000 then I've made $4000 regardless of how I purchased it.

Again though, I don't know what I don't know so if there's a better way to approach it by all means, do share.

 

[01DADDY01]

What means do you use to study this stock? As long as you know how the stock trades then I am sure you will be fine. I would just be really cautious about a stock which has all ready blown through its 1 yr target by more than 20%. I think the analysts are going to be pushing this down. You know it has gained $27 since August right? That is about half the stocks total price as of right now....I would strongly have you research how to hedge your positions. You are completely naked. Never ever buy a stock without being hedged!
You have an exit strategy right? Do you know how much you want to lose or gain? You HAVE to prepare yourself for these situations just like running your own business.
BUY LOW SELL HIGH my friend then when everyone else is buying you sell. That is the only way to stay ahead of the game.
FIND UNDERPERFORMING STOCKS and buy them. Did you think the same thing about Ford when it went down under $2?
You will get eaten up with fees with Retail Trading!
Ask more specific questions.

 

[Mike K]

What means do you use to study this stock? As long as you know how the stock trades then I am sure you will be fine. I would just be really cautious about a stock which has all ready blown through its 1 yr target by more than 20%.

But what's a target other than other's opinions of it's value? It's been going up consistently, I tend to think that if Tesla stays on the track they're on right now they're going to see explosive short to mid-term growth. I'm not really interested in what analysts have to say about it because I watch the company, I watch the company, I read about it daily, the announcements they make, their future plans, their financial stability (as much as I can know that). Maybe I'm being naive but as I noted in my first post, my own research and knowledge of the companies has gotten me pretty far in my virtual portfolio.

I think the analysts are going to be pushing this down. You know it has gained $27 since August right? That is about half the stocks total price as of right now....I would strongly have you research how to hedge your positions. You are completely naked. Never ever buy a stock without being hedged!

Why? I'm fine with losing the money. I mean when I'm dealing with big money sure, I can understand that that's sound advice but for this specific purchase why is that necessary so long as I've already kissed the money goodbye? I'm playing; I'm learning.

You have an exit strategy right? Do you know how much you want to lose or gain? You HAVE to prepare yourself for these situations just like running your own business.

No I don't. I'll just do it how I would otherwise do it. I'll keep following the company and when it gets to a point where I suspect the stock is going to fall I'll sell. So far my "gut" has been pretty good and again, for now at least I only plan on touching companies I'm intimately familiar with. On a larger scale I understand that I'm going to have to hedge my bets and have strategies, a plan etc but for right now, this $3000 and this one stock I'm confident in just feeling it out for awhile and seeing what kind of returns (if any) I get. And again, maybe I'm being naive but without sounding like an arrogant ass, I have a tendency to make money where others can't (or won't) and much of that success I think can be attributed to shaking my fist at the conventional norms and learning by trial and error.

BUY LOW SELL HIGH my friend then when everyone else is buying you sell. That is the only way to stay ahead of the game.
FIND UNDERPERFORMING STOCKS and buy them. Did you think the same thing about Ford when it went down under $2?

Actually I did. Ford had good cars in the pipeline, they mortgaged their name, they had a competent CEO and had realized where they went wrong in the immediate past. I just wasn't trading then. A buddy of mine got in on that though.

You will get eaten up with fees with Retail Trading!
Ask more specific questions.

Curiously why? If each trade is $7.00 and I'm dealing with larger dollar amounts how is that going to eat me up? And what's the alternative?

 

[sickmint79]

i don't invest in tesla for the reasons i have made known here: i don't see a big future in electric cars, outside of toys for rich people or good solutions for small market niches. until then gas technology has plenty of room to grow mpg or even gas-hybrid, without having to give up much for the all electric world and its problems. doesn't mean you can't make money on it in the mean time though.

i don't think you have to hedge everything you buy, particularly when you are tossing in lower chunks of change or if you are happily being a somewhat risky speculative bastard.

finding underperforming stocks and knowing they are busy certainly is easier said than done! i have all of the info from agora financial if you're interested in looking at what they have to offer, can PM me on that one.

the penny stock fortunes one had a buy call on tesla - beats me why, it's not a penny stock... in any case some of those guys venture out of the letter's general theme (ie. the short report will say to go long on things occasionally) anyway they said to buy tesla 10/20/2010 and have an entry price of $20.35. they have it marked as a hold today.

i think you're fine trading in a regular account.

 

[b00sted]

Real estate is so much easier.

I know a guy that does very well with day trading...But it seems like a black art to me.

 

[nick122590]

Real estate is so much easier.

I know a guy that does very well with day trading...But it seems like a black art to me.

wish you were in iowa... me and my buddy are getting a house within the next few months... pretty sure we are down to 2

 

[Mike K]

Every time I look the stock is up. I bought in at $50.12 and it was up yesterday to a $52.00 close, $52.20 in after hours trading, opened at $53.00, dropped briefly and is at a new high of $53.75 and pretty volatile around that price.

Elon Musk (CEO) announced on his Twitter feed yesterday afternoon that today would bring an announcement current and future model S owners would like so I was expecting the fluctuation and the volatility this morning. Some are speculating free batteries for the life of the vehicle which I think is completely unrealistic and seems unsustainable. I think it's something more reasonable like they teamed up with a national retailer to install their supercharger stations. Supercharger stations give you 150 miles in 30 minutes of charging.

I'm going to hold either way and if the announcement is a disappointment I've got a stop order for another 60 shares at $50.

 

[sickmint79]

it's no fault warranty battery replacement or something like that. like unless they can tell you purposefully tried to screw it up they will replace it. for life? i forgot.

 

[Mike K]

it's no fault warranty battery replacement or something like that. like unless they can tell you purposefully tried to screw it up they will replace it. for life? i forgot.

Kind of a non-announcement announcement. The stock built on the heals of the announcement and then fell after it was made because really, it didn't live up to his tweet. I mean it's cool, yes but it didn't live up to his tweet. More or less unless you're intentionally trying to brick the battery (not sure how they'd tell) they'll replace it for free. Also they're introducing valet service where they show up to your place with a loaner Model S or Roadster and take your car away for service. That's pretty cool. Nothing ground breaking or worthy of a significant bump/ drop in stock price though.