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My day trading ignorance in 3... 2... 1...


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My day trading ignorance in 3... 2... 1...

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  #1 (permalink)
Dallas, Texas, United States
 
 
Posts: 2 since Feb 2016
Thanks: 3 given, 3 received

Hey everyone! I am 23 years old and I am 1 year into my first salary career with a chemical company and have no debt whatsoever. I budget my income fairly well and should have $7,000.00 saved up in the next couple months. I hate having my money sit in the bank and not investing it somewhere and let my money make more money.

Two months ago, I absolutely knew nothing about the stock market, literally nothing at all. However, beginning in January of 2016 I started paper trading stocks using $5,000.00 of "imaginary" money, an excel spreadsheet, and the Yahoo! interactive stock charts so I can monitor stock prices and opens/closes. I have real money to invest, but I wanted to get some kind of experience before possibly throwing my savings away. Throughout this experience, to my surprise I have really grown to enjoy day trading stocks and really think there is potential in this interest. So far, in the first 45 days of 2016 I have doubled my "imaginary" $5,000.00 and my balance sits at just over $10,000.00 with maybe 2 hours of effort per day.

I guess what brings me here to the forum is my skepticism that I am overlooking something that will sober my ideas to pursue day trading for a living. It seems too simple to buy 5,000 shares at $1.00, wait for the price to go up to $1.05 and sell the share for a profit of $230.00 ($250.00 less the $10 commission on the buy and sell).

Like I mentioned at the beginning of the post, despite the countless articles and YouTube videos and conversations with my friends that invest, I would consider myself in the very infant stages of understanding the stock market and don't plan on pursuing any real action until I feel comfortable. I am just having trouble researching the "catches" to day trading and was hoping someone could point me in the right direction because I know they have to exist somewhere. I have included below an example of my current day trading activity. Feel free to laugh and criticize if there are flaws in my simplicity of buying/selling. I understand I have a lot to learn and thanks to my pops (love him to death), I have think skin and definitely learn the best by criticism (constructive criticism).

Thanks in advance for the input and all of the time for your responses.

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  #3 (permalink)
Market Wizard
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You're good with excel, so perhaps consider making a simple trade log of all your trades. Then calculate a few simple trade performance metrics. That should give you a pretty clear idea of what you are doing.

From your one day sample log, what I see is a possible problem with your average win / loss ratio. As a sanity check, calculate the breakeven win% using your current simulated avg win and avg loss, if it is above 60% , then what you are doing is not realistic. If so you would need to 'fix' your avg. win/loss ratio and try again. As a new trader, at a minimum you will need a method that breaks even or is profitable at a 50% win rate.

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  #4 (permalink)
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RKP3 View Post
Hey everyone! I am 23 years old and I am 1 year into my first salary career with a chemical company and have no debt whatsoever. I budget my income fairly well and should have $7,000.00 saved up in the next couple months. I hate having my money sit in the bank and not investing it somewhere and let my money make more money.

Two months ago, I absolutely knew nothing about the stock market, literally nothing at all. However, beginning in January of 2016 I started paper trading stocks using $5,000.00 of "imaginary" money, an excel spreadsheet, and the Yahoo! interactive stock charts so I can monitor stock prices and opens/closes. I have real money to invest, but I wanted to get some kind of experience before possibly throwing my savings away. Throughout this experience, to my surprise I have really grown to enjoy day trading stocks and really think there is potential in this interest. So far, in the first 45 days of 2016 I have doubled my "imaginary" $5,000.00 and my balance sits at just over $10,000.00 with maybe 2 hours of effort per day.

I guess what brings me here to the forum is my skepticism that I am overlooking something that will sober my ideas to pursue day trading for a living. It seems too simple to buy 5,000 shares at $1.00, wait for the price to go up to $1.05 and sell the share for a profit of $230.00 ($250.00 less the $10 commission on the buy and sell).

Like I mentioned at the beginning of the post, despite the countless articles and YouTube videos and conversations with my friends that invest, I would consider myself in the very infant stages of understanding the stock market and don't plan on pursuing any real action until I feel comfortable. I am just having trouble researching the "catches" to day trading and was hoping someone could point me in the right direction because I know they have to exist somewhere. I have included below an example of my current day trading activity. Feel free to laugh and criticize if there are flaws in my simplicity of buying/selling. I understand I have a lot to learn and thanks to my pops (love him to death), I have think skin and definitely learn the best by criticism (constructive criticism).

Thanks in advance for the input and all of the time for your responses.

Hi RKP3

I think you will find that many people on this forum have observed a quite common phenomenon: paper trading, even though looks very much like the real thing, is not necessarily the real thing simply because of the psychology involved, i.e. when real money is on the line, there is a mental tendency to act in a different way from when it's all simulated.

I experienced this first hand. I often noticed a care-free attitude in putting on a sim-trade. That attitude is not there when I trade real money. That's why I have reduced the amount of time I spent on simulated trades and increased the amount of time I spend trading real money.

Care-free attitude is not the only reason. There is a risk of building bad habits when sim-trading (e.g. letting a loser run) and then risking of bringing these bad habits into real-money trading.

That's my experience anyway. I'm sure others will chip in and add their bit.

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  #5 (permalink)
San Diego California
 
 
Posts: 129 since Oct 2015
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I had one friend in college and we would both be nerds talking about trading.
The difference between him and me is that I dived right into it and he would continue talking as if he knew everything.

There is a stark difference in real vs paper and that's the emotions.
Sadly to say he is still unprofitable and even though I told him to short biotech at the top, he couldn't see what I saw and missed out on a 40% move.

Needless to say, there is a very high learning curve. Read more books, you can test it on paper, but I suggest even dabbling with a small account first. A lot of experienced traders here suggest backtesting and creating a trading plan.
Everyone has their different styles, if your really into it just go with full force. Or you can save time and focus on other hobbies and leave it to a FA you trust.

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  #6 (permalink)
Dallas, Texas, United States
 
 
Posts: 2 since Feb 2016
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Trendwaves... Thanks for the advice! I never thought about measuring the avg win against the avg loss as a benchmark of my performance but I can definitely see the value in that. I'm currently working on my "summary" sheet for my trading log (hopefully have it done by week's end) and will definitely be putting that measure in to use.

Xplorer & Emptymind... I have been wondering if I was guilty of this phenomenon that my carelessness would disappear once my hard earned cash is on the line. Defintely like the suggestion to steer away from "paper trading" and go ahead and open up a small value account that I can trade on to gain experience.

All... Recently (30 min ago) discovered what may be the catch I was looking for.... $25k required to trade without limits The log I had posted to my OP shows 11 trades or so that I made in a single day.... I'd say that extends well beyond the 3 allowed trades in a rolling 5 day period under the PDT.

Now commencing operation save $25k.

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Market Wizard
Tallinn, Estonia
 
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xplorer View Post
Hi RKP3

I think you will find that many people on this forum have observed a quite common phenomenon: paper trading, even though looks very much like the real thing, is not necessarily the real thing simply because of the psychology involved, i.e. when real money is on the line, there is a mental tendency to act in a different way from when it's all simulated.

I experienced this first hand. I often noticed a care-free attitude in putting on a sim-trade. That attitude is not there when I trade real money. That's why I have reduced the amount of time I spent on simulated trades and increased the amount of time I spend trading real money.

Care-free attitude is not the only reason. There is a risk of building bad habits when sim-trading (e.g. letting a loser run) and then risking of bringing these bad habits into real-money trading.

That's my experience anyway. I'm sure others will chip in and add their bit.

I recommend sim trading first. When you know how to make money and actually can
make sim $ in sim trading then its time to switch to money trading. Then your money
will last longer but if you switch right away to money you burn it out quicker that you can imagine.

Sim trading don't build bad habits trader does !.

Is saw boxing match on TV in Las Vegas, I even bought boxing gloves.
I am ready to take Mike Tyson in ring tomorrow

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RKP3 View Post
All... Recently (30 min ago) discovered what may be the catch I was looking for.... $25k required to trade without limits The log I had posted to my OP shows 11 trades or so that I made in a single day.... I'd say that extends well beyond the 3 allowed trades in a rolling 5 day period under the PDT.

Now commencing operation save $25k.

Chances are you are mentioning the 25k as a requirement to trade stocks/equities?

Without going to recommend to trade or not trade a specific security, there are securities other than equities for which the required capital is much lower. Some may say they are riskier too.

If you are aware of what I'm saying great. If not, I'd suggest you research the different types of securities and compare them against equities to work out pros and cons.

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