Any Day Traders

[Drisco]

So this semester I decided to schedule my classes on Monday and Wednesday only(10ish hours of class) and I told work I was only going to be able to cover lunches everyday instead of a full work load.

Last year we did a mock Stock Market project and I've decided I'd like to start day trading on my days off. I've got about 5k that I can afford to lose (Hopefully not).

So is there any Tips/Websites/Books that are to be had? Does anyone else here day trade for a hobby or a living?

[Parkbandit]

Talk to Kranar/ClydeR. He's supposedly pretty successful at it.

[Bobmuhthol]

You don't have enough money to day trade. Feel free to invest, but stocks generally move in batches of 100, and you can't use money from a sale to buy more in the same day. You'd be limited to $5k in purchases per day, and you won't be bringing in large returns day to day. You're better off working and paper trading.

Full disclosure: I have a similarly sized IRA, and I park my money in mutual funds and no-fee ETFs. You'll be eaten alive by fees.

[Tgo01]

I'm sure our resident billionaire Tsa'ah could give you some pointers.

[Tgo01]

You don't have enough money to day trade. Feel free to invest, but stocks generally move in batches of 100, and you can't use money from a sale to buy more in the same day. You'd be limited to $5k in purchases per day, and you won't be bringing in large returns day to day. You're better off working and paper trading.

Full disclosure: I have a similarly sized IRA, and I park my money in mutual funds and no-fee ETFs. You'll be eaten alive by fees.

I used to day trade with 10,000 dollars and I seem to recall being able to sell stocks and use that money to buy stocks the same day. It is true though that you won't be raking in the money with only 5,000 dollars but just from doing it more as a hobby really I made 5,000 dollars in a few months.

The fees weren't that bad either, I think it was 10 or 15 dollars per transaction. So yes buying then selling the same batch of stocks cost 20 or 30 dollars.

[crb]

Day trading is a good way to lose money. If you have to ask advice on this forum, you probably shouldn't be doing it. Even people who are supposedly good managers of money, professional fund managers, don't always beat an index fund on average.

AFAIK what Kranar does is high frequency arbitrage, totally different and not something you can just go do at home unless your home is inside the Googleplex or something and Sergey and Larry let you borrow the hardware.

[Bobmuhthol]

I seem to recall being able to sell stocks and use that money to buy stocks the same day.

You weren't doing it legally then. The trade must settle before you can use proceeds to buy more securities, and they won't settle same day.


Even people who are supposedly good managers of money, professional fund managers, don't always beat an index fund on average.

You know funds can't "day trade," right? And that it's a totally different game? They're not even close to being the same?

[Ralimar]

To reiterate what was said, this isnt gonna happen for you. If youre trading online, a lot of companies have a $5K MINIMUM investment.

[kookiegod]

Yah, 5k, put it in a decent mutual fund that goes off of a major index and sit back and let it grow.

Actually, should put the maximal first into a Roth IRA, then the rest into a mutual fund.

Ignore it for 10-15 years.

Keep funding the Roth fully and put 10 percent min of your salary into your mutual fund.

Day trading is a good way to lose it all. I don't even look at my statements mostly, why I pay a broker 1% who has been doing 7-10 percent returns even in the downtrodden market.

Full disclosure: I have a bit over 2m in the market, and its scattered between growth, growth and income, bond funds, munis, stock funds, some high risk, some very low risk. It throws off between 50-75k a year in income, I have a 401k and a Roth IRA that are fully funded. Along with a 2m life insurance policy to pay off the taxes.

[Suppa Hobbit Mage]

BUY GOLD!

[Stretch]

Find a classmate who has citizenship in India and invest in a 10% deposit account.

[Bobmuhthol]

Actually, should put the maximal first into a Roth IRA, then the rest into a mutual fund.

IRAs are accounts; funds are securities. You use the money in an IRA to buy a mutual fund.

[Archigeek]

Just because 5k might be a little light for day trading doesn't mean you can't invest in stocks, individually or otherwise. If you have a bit more patience, try doing some research and buying stock in a company and holding it for a while. Or you could buy into a mutual fund like most folks here are suggesting.

But more importantly, why is it you want to invest in stocks? You're a student right? Consider the posibility that you should be investing in your most important asset: you, instead of in stocks. If your career goal is to buy and sell stocks, or it is something you want to do the rest of your life, invest by taking an extra class on business management, finance, or stock investing if you can find one, or spend the time reading some of the all time great books on investing. That way, when you're done with school and have more income coming in and have built enough of a pile of cash to invest, you'll be ready.

If that's not what you're studying, invest in some other aspect of your future career. Helping yourself be the best at what it is you're going to do is the most important investment you can make.

[kookiegod]

Just because 5k might be a little light for day trading doesn't mean you can't invest in stocks, individually or otherwise. If you have a bit more patience, try doing some research and buying stock in a company and holding it for a while. Or you could buy into a mutual fund like most folks here are suggesting.

But more importantly, why is it you want to invest in stocks? You're a student right? Consider the posibility that you should be investing in your most important asset: you, instead of in stocks. If your career goal is to buy and sell stocks, or it is something you want to do the rest of your life, invest by taking an extra class on business management, finance, or stock investing if you can find one, or spend the time reading some of the all time great books on investing. That way, when you're done with school and have more income coming in and have built enough of a pile of cash to invest, you'll be ready.

If that's not what you're studying, invest in some other aspect of your future career. Helping yourself be the best at what it is you're going to do is the most important investment you can make.

This is great advice.

Heck, I just dropped 1700 to improve my sales skills for Games2U.

My girlfriend spent 3000 to get her PMP a few months ago, and just landed a six figure job as a project manager at Mass Mutual.

Investing in yourself first is always good advice.

[Kranar]

I don't day trade but legally in order to day trade in the U.S. you need a minimum of 25k.

http://en.wikipedia.org/wiki/Pattern_day_trader

[Kranar]

You weren't doing it legally then. The trade must settle before you can use proceeds to buy more securities, and they won't settle same day.


You do not need to wait for settlement.

[Bobmuhthol]

I'm sorry, you're right. The trade must settle before you can sell the new securities that you've purchased with unsettled funds. But, since day traders typically don't roll security holdings to the next day, buying would imply selling shortly thereafter. The settlement period on a stock transaction is 3 days, so it would be rather senseless for a day trader to execute a buy order without being able to sell.

Sorry for the confusion.

Further clarification: We're still talking about $5k Drisco, so margin accounts are irrelevant.

[Kranar]

I might be misunderstanding you then.

If you have the minimum requirement for a 'Pattern Day Trader' then you are free to buy and sell a security an unlimited number of times a day so long as you maintain your margin requirement.

Does this agree with your understanding?

[Bobmuhthol]

If you qualify as a pattern day trader, then you can make as many trades as you want as long as you meet the margin requirement, yes. The margin requirement will change depending on the position (i.e. it can be well above $25k equity), but so long as you maintain it, your number of transactions is not limited. You can't do this in a cash account, however.

[Kranar]

So yes, we do agree then.

[Parkbandit]

This is great advice.

Heck, I just dropped 1700 to improve my sales skills for Games2U.

My girlfriend spent 3000 to get her PMP a few months ago, and just landed a six figure job as a project manager at Mass Mutual.

Investing in yourself first is always good advice.

Your girlfriend has a pimp?

:wtf:

[Delias]

Look, what if I showed you how I could turn your five grand into just under zero dollars in mere minutes? Would that help?

[BriarFox]

The most expert people can be wrong, but it's not likely, and it doesn't pay to argue with them for the sake of arguing. So, lol at arguing stock-market semantics with Kranar.

[Bobmuhthol]

... Kranar disagreed with me, not the other way around...

Kranar is also likely to admit that he has no formal qualifications in securities regulation, particularly Regulation T, so lol at trying to discredit my argument.

[Kranar]

My professional qualifications include completion of the Series 7, and I'm well aware of Regulation T.

I am not technically required to have passed the Series 7, but it makes things a lot easier when FINRA comes to do an audit of my trading system.

[Parkbandit]

Kranar is also likely to admit that he has no formal qualifications in securities regulation, particularly Regulation T, so lol at trying to discredit my argument.


My professional qualifications include completion of the Series 7, and I'm well aware of Regulation T.

I am not technically required to have passed the Series 7, but it makes things a lot easier when FINRA comes to do an audit of my trading system.

http://i11.photobucket.com/albums/a199/gr870sfunk/Lulz.jpg

[Kranar]

I'm coming across way more hostile than I intend to be. Bobmuhthol was right with respect to a cash account, I was strictly focusing on a margin account.

To engage in day trading you do need a margin account, but if all you have is 5k you can't even engage in day trading to begin with.

As for whether it's profitable, sure it can be but honestly you're probably gonna lose all your cash and it's better to do it in a more professional environment like a prop trading office.

[Bobmuhthol]

I'm coming across way more hostile than I intend to be.

I understood you perfectly. I was admittedly quick to assume that you wouldn't have gone through FINRA exams given the scope of your work, and for that I apologize.

[Drisco]

This is all very helpful and appreciated. I've got an extra 5k (after budgeting) sitting in my bank that isn't doing anything and I'm looking to do something with it to make it grow. I'm not against the idea of putting the money into mutual funds but I was more looking to do something hands on that involved me making the money grow and managing it.

A lot of my friends are trading on Questrade.com with Canadian Banks and they have been talking like it's a day trading thing but if you need a min of 25k then they must be doing something else.

School/Classes and other scholarly activities that would further my education are already paid for.

Was looking for an alternative hands on way of making the money grow but what I'm hearing is Mutual Funds and No-Fee ETF's are the way to go?

[Archigeek]

Mutual funds are designed to insulate you from risk by diversification, but there is a point where more diversification is bad instead of good. If for example you put your money in an ETF that was invested in all stocks on the Russel 2000, you're pretty much going to get a return that is average. Likewise, a fund manager whom you are paying, who can't do better than the Russel 2000 is essentially wasting your money, because he or she is not doing better than average.

The best investors set their sights higher than average. If you really want to play with your $5000, go do some research on 10 stocks. Set strike prices for both buying AND selling each of the 10 before you buy, and then follow through on your plan, watching for a good buy in price that fits within what you perceive to be the value of your stable of prospects. With $5000, you'll likely be buying just one stock, which is fine. Make the purchase and proceed to monitor that stock for any changes in the various factors that affect not just the price but the value of the stock. You may be right or you may be wrong, but if you stick to companies you know and understand, you're more likely to come out well using this method. Just make sure you can afford to lose before you get into it.

[Bobmuhthol]

Mutual funds generally will have a penalty for selling them before 90 days. ETFs don't. If you want to be at all actively trading, you'll need to do it with stocks or ETFs. However, as I said before, fees are killer for small trades. I hate fees, and I hate taxes, so if you're like me you'll just toss it all into a Roth IRA (or the Canada equivalent...?), and you can play around with S&P/Russell 500/1000/2000/growth/value as you see fit. I put small dollar amounts in index ETFs and larger amounts in a mutual fund that I am comfortable staying in for at least a few months.

[Archigeek]

If you're buying stocks in the $10-$50 per share range in blocks of 100, the fees aren't going to kill you. What's more likely to kill you will be desire for instant gratification. Stock investing is not often going to pay off in the short term. Sometimes it does, (I've doubled my money in 5 weeks on a single stock), but that is hardly the norm. The longest I've held a stock is about 14 years, the shortest was the 5 weeks mentioned above. If your logic for buying is sound when you make the purchase, what are the chances the fundementals will change in 5 weeks? It happens, but it's not likely.

If you want less risk, (but less chance for reward), consider etf's or mutual funds as others have suggested. Personally, my risk tolerance is adjusted based on my financial situation. When the economy turned south recently and I found myself out of work, I liquidated all stocks that weren't in retirement funds, because I didn't feel that I could weather short term fluctuations when I knew I might need the cash within a year. I don't really see you in the position to make long term investments in stocks either because as a student, your situation is going to change dramatically when you graduate, but to each their own. Hats off to you for having cash in hand while a college student, and the discipline to make it pay off if you go for it.

[DoctorUnne]

Archigeek's advice in general is great.

If you want to be hands on, by all means research individual stocks and buy the ones you like. As long as you buy ten or so in equal sizes and they aren't all in the same industry, you'll get 99% of the diversification benefits you would from buying a mutual fund or ETF. Plus it's a lot more enjoyable and is a great learning experience.

Don't trade a lot though because the fees caused by the churn in your portfolio will be huge relative to your capital base. Pick the stocks you like and stick with them until you find better ones.

To find ideas, buy a few issues of Barron's and read the articles. If any of them resonate with you then do some research on them by reading the annual report or 10-K (available on the company's website in the investor relations section) and checking out investor blogs such as www.zerohedge.com and www.seekingalpha.com. In general you want businesses that you are confident can grow earnings over the next few years and have sustainable business models. One of the better simple measures you can easily find out there is PEG ratio, which is a company's P/E multiple divided by its earnings growth rate. The lower the better, but make sure it's a company that you believe is at least maintaining market share and is in an industry that will be around for a long time.

[Hulkein]

You are young and can risk losing it so buy some penny stocks and treat it like the lottery IMHO.

[Tsa`ah]

I'm sure our resident billionaire Tsa'ah could give you some pointers.

You're also a fucking moron who fails at trolling.

I would be of no help since I haven't earned much in the way of capital gains. My investments have been in actual businesses ... not trading of any sort aside from a relatively small amount done by an investment firm.

I just don't play the market.

[Keller]

You're also a fucking moron who fails at trolling.


Troll throws out a line hoping to troll, bait is taken, trollee states the troller fails at trolling.

As an accomplished troll myself, Tgo01's execution was fucking brilliant.

Well done, sir.

[Tsa`ah]

Troll throws out a line hoping to troll, bait is taken, trollee states the troller fails at trolling.

As an accomplished troll myself, Tgo01's execution was fucking brilliant.

Well done, sir.

So you're pretty much saying he's a fucking moron that is well accomplished as a troll.

[Parkbandit]

No, I think Keller is saying that Tgo01 got the exact response from the exact person he wanted when he made his post..

It's like he's the puppet master..

[Atlanteax]

Tsa'ah is gullible like that.

[Hulkein]

So you're pretty much saying he's a fucking moron that is well accomplished as a troll.

The person being trolled always believes the troll is a fucking moron.

[kookiegod]

Mutual funds are designed to insulate you from risk by diversification, but there is a point where more diversification is bad instead of good. If for example you put your money in an ETF that was invested in all stocks on the Russel 2000, you're pretty much going to get a return that is average. Likewise, a fund manager whom you are paying, who can't do better than the Russel 2000 is essentially wasting your money, because he or she is not doing better than average.

The best investors set their sights higher than average. If you really want to play with your $5000, go do some research on 10 stocks. Set strike prices for both buying AND selling each of the 10 before you buy, and then follow through on your plan, watching for a good buy in price that fits within what you perceive to be the value of your stable of prospects. With $5000, you'll likely be buying just one stock, which is fine. Make the purchase and proceed to monitor that stock for any changes in the various factors that affect not just the price but the value of the stock. You may be right or you may be wrong, but if you stick to companies you know and understand, you're more likely to come out well using this method. Just make sure you can afford to lose before you get into it.

Yes.

And since you only got so much to start with, do not get into speculative stocks.

The tried and true, dividend producing stocks will make you money long term. McDonald's, Apple, Google, etc.

As Kerl said, do research, and I do believe in diversify, I own a lot of things, and made out pretty good last year in which was a crazy year.

~Paul