Stock Market Advice
31 July 2003, 05:07 PM
#1
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Just opened a share dealing account with my bank: Smile.
Does anyone have any tips, or resources I could utilise?
I have £1000 to invest, but I am a complte Stock Market "virgin".
Does anyone have any tips, or resources I could utilise?
I have £1000 to invest, but I am a complte Stock Market "virgin".
31 July 2003, 06:33 PM
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there used to be a subscription service called penny shares and each month you'd get a list of who to buy and what level to sell at.
I gave up with it because I could buy shares in the firm I worked for at 15% below market value.
Phil
I gave up with it because I could buy shares in the firm I worked for at 15% below market value.
Phil
31 July 2003, 06:58 PM
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First thing to do is not to touch your grand for a while.
To get you into the 'feel' for trading you need to spend some time paper trading. Pick a sector, do some research on the companies in it. See if you beleive any of them are 'undervalued' and make a paper trade ( ie, just note a buy on paper, don't buy the stock ). Monitor it. If it does well , see if you can repeat it. If it does badly, see if you can figure out what you missed. Get a handle on reading annual reports and news items. Learn just a little bit about charting if you can - looking for support/resistance levels can identify good entry and exit points.
Do this for a few months until you have turned your 'virtual' grand into a few quid more. Then do it for real.
Don't forget to factor in the costs of buying and selling.
Resources:
www.citybull.com Less hysterical, calmer than most of the forums
www.advfn.com Free price quotes and trade info.
www.iii.co.uk not bad forums, less raving than :
http://infoex.hemscott.com completely barking, lots of shouting on penny stocks, occasional nugget of good stuff
Others ( I don't use )
www.fool.co.uk
www.citywire.co.uk
www.ft.com
www.moneyextra.co.uk
With a grand to start you will do best buying only one - or at the most 2 stocks, otherwise the prospective gains will be swallowed by dealing charges. Set a stop loss - if it goes down by x% then I will sell. If it does, then sell and walk away, this will limit losses to manageable levels. If (hopefully) it goes up, then move the stoploss up as it rises so you will always walk away with a profit.
Be emotionally prepared to lose this grand. If you can't, then don't bother trading. It can and does go pete tong sometimes
Other than that, enjoy ! I love it.
Steve
To get you into the 'feel' for trading you need to spend some time paper trading. Pick a sector, do some research on the companies in it. See if you beleive any of them are 'undervalued' and make a paper trade ( ie, just note a buy on paper, don't buy the stock ). Monitor it. If it does well , see if you can repeat it. If it does badly, see if you can figure out what you missed. Get a handle on reading annual reports and news items. Learn just a little bit about charting if you can - looking for support/resistance levels can identify good entry and exit points.
Do this for a few months until you have turned your 'virtual' grand into a few quid more. Then do it for real.
Don't forget to factor in the costs of buying and selling.
Resources:
www.citybull.com Less hysterical, calmer than most of the forums
www.advfn.com Free price quotes and trade info.
www.iii.co.uk not bad forums, less raving than :
http://infoex.hemscott.com completely barking, lots of shouting on penny stocks, occasional nugget of good stuff
Others ( I don't use )
www.fool.co.uk
www.citywire.co.uk
www.ft.com
www.moneyextra.co.uk
With a grand to start you will do best buying only one - or at the most 2 stocks, otherwise the prospective gains will be swallowed by dealing charges. Set a stop loss - if it goes down by x% then I will sell. If it does, then sell and walk away, this will limit losses to manageable levels. If (hopefully) it goes up, then move the stoploss up as it rises so you will always walk away with a profit.
Be emotionally prepared to lose this grand. If you can't, then don't bother trading. It can and does go pete tong sometimes
Other than that, enjoy ! I love it.
Steve
31 July 2003, 07:16 PM
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I don't know how advanced you want to get with this, but here are a few more pointers, which you probably won't want to hear.
NEVER risk more than 3% of your total equity. By that, I don't mean that you can only use £30 to buy shares, but you should set a stop loss so that you can't lose any more than £30 (I don't know how this would work in reality when trading with £1,000, as commissions would eat in too much). This will protect your equity. Money management is the most important thing. Protect your money.
Accept that you will have losers. No one can pick winners every time. That's why the above advice regarding how much to risk on any one trade is so important.
Identify some sort of method that you are going to trade by. This is usually either based on company information, or by using charts.
As someone else said, you should paper trade at first to see if your methods are working for you. You need to stack the probabilities in your favour.
I don't know anything about investing in companies based on their performance - I don't know how to analyse a company, and I don't know anything about economics or such like. There are hundreds of books on investing, but I wouldn't know where to start, I'm not that clever!
[Edited by Butkus - 7/31/2003 7:20:09 PM]
NEVER risk more than 3% of your total equity. By that, I don't mean that you can only use £30 to buy shares, but you should set a stop loss so that you can't lose any more than £30 (I don't know how this would work in reality when trading with £1,000, as commissions would eat in too much). This will protect your equity. Money management is the most important thing. Protect your money.
Accept that you will have losers. No one can pick winners every time. That's why the above advice regarding how much to risk on any one trade is so important.
Identify some sort of method that you are going to trade by. This is usually either based on company information, or by using charts.
As someone else said, you should paper trade at first to see if your methods are working for you. You need to stack the probabilities in your favour.
I don't know anything about investing in companies based on their performance - I don't know how to analyse a company, and I don't know anything about economics or such like. There are hundreds of books on investing, but I wouldn't know where to start, I'm not that clever!
[Edited by Butkus - 7/31/2003 7:20:09 PM]
31 July 2003, 07:40 PM
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Pretty sensible advice above - most of all, if you can't afford to lose the money don't invest.
Consider joining/starting an investment club to learn and share the risk - we have one at work, not very dynamic but good to learn the ropes.
I stick to £500 to £1,000 depending on the company I'm purchasing and the sort of risk I think I'm taking. Might be worth starting with companies you know and have a good recent track record. Personally I look for recovery shares, one's that've been hammered by the market but still have some real value - e.g. of late most of the remaining Telecom related companies. Tech shares seem to be on a recovery at the moment - but don't take my advice....dyor (do your own research).
If you want to frighten yourself look at the Motionmedia (MMD) thread on ADVFN.com (ace site) - bought a lump of these @ 3.75p. In the last two days huge volumes of buys and sells and the price has been as high as 6.0p. Now there's all sorts of rumours of price ramping, director sells and even talk of the shares being suspended in the morning..... Most entertaining share I've owned but wouldn't recommend it at the moment...
Kevin.
Consider joining/starting an investment club to learn and share the risk - we have one at work, not very dynamic but good to learn the ropes.
I stick to £500 to £1,000 depending on the company I'm purchasing and the sort of risk I think I'm taking. Might be worth starting with companies you know and have a good recent track record. Personally I look for recovery shares, one's that've been hammered by the market but still have some real value - e.g. of late most of the remaining Telecom related companies. Tech shares seem to be on a recovery at the moment - but don't take my advice....dyor (do your own research).
If you want to frighten yourself look at the Motionmedia (MMD) thread on ADVFN.com (ace site) - bought a lump of these @ 3.75p. In the last two days huge volumes of buys and sells and the price has been as high as 6.0p. Now there's all sorts of rumours of price ramping, director sells and even talk of the shares being suspended in the morning..... Most entertaining share I've owned but wouldn't recommend it at the moment...
Kevin.
31 July 2003, 07:50 PM
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As a trader myself all the above advice is good.
Don't expect to see big gains though from just 1k.
As well as having a stop loss for downturns(and be strict) set yourself a gain margin and sell at that point(guaranteeing you a profit) unless you intend to keep hold of the same stock for a long time.
The reason for this is that prices will go up and down quite a few times in say a month allowing you to buy back into the same stock time and time again.
This will obviously take time to study and only works if you are willing to trade rather than invest and as it's only 1k you'd need to realise quite large percentage returns bearing in mind you have dealing charges on that.
Don't expect to see big gains though from just 1k.
As well as having a stop loss for downturns(and be strict) set yourself a gain margin and sell at that point(guaranteeing you a profit) unless you intend to keep hold of the same stock for a long time.
The reason for this is that prices will go up and down quite a few times in say a month allowing you to buy back into the same stock time and time again.
This will obviously take time to study and only works if you are willing to trade rather than invest and as it's only 1k you'd need to realise quite large percentage returns bearing in mind you have dealing charges on that.
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01 August 2003, 08:06 AM
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It's a good starting point. It is much better than wading in with 10K and losing the lot in a month. As you get more confident, up the money in the account.
The paper trading idea is good. Take a few months to get used to how the stock market works. Read lots - research is the key. When I first started working after leaving school, I was doing a lot of back office work for FX dealers. The most successful dealers were the ones who put their hours in and did their research. You can always get 'lucky' but generally speaking, read lots!
As a starting point, perhaps concentrate on an industry that you know reasonably well (i.e. whatever the company you work for does) - have a look at their competitors - if you know of any trends in your industry (i.e. is it affected by seasonal weather etc), follow the shares and see how these trends affect the share price.
Once you get a feel for this, start investing. The stop loss is a very good idea BTW.
Chris
The paper trading idea is good. Take a few months to get used to how the stock market works. Read lots - research is the key. When I first started working after leaving school, I was doing a lot of back office work for FX dealers. The most successful dealers were the ones who put their hours in and did their research. You can always get 'lucky' but generally speaking, read lots!
As a starting point, perhaps concentrate on an industry that you know reasonably well (i.e. whatever the company you work for does) - have a look at their competitors - if you know of any trends in your industry (i.e. is it affected by seasonal weather etc), follow the shares and see how these trends affect the share price.
Once you get a feel for this, start investing. The stop loss is a very good idea BTW.
Chris
01 August 2003, 08:10 AM
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Dont follow my brothers advise! (I realise no-one knows him)
He thought QXL.com would be a good buy, They were for a week, and then the price has just gone down for the last 3 years. I think my £500 worth of share are now worth £2.50.
Hi did pick some other good ones thou
Bit of a pointless post by me.
He thought QXL.com would be a good buy, They were for a week, and then the price has just gone down for the last 3 years. I think my £500 worth of share are now worth £2.50.
Hi did pick some other good ones thou
Bit of a pointless post by me.
01 August 2003, 08:24 AM
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I think you will be relying completely on luck. I trade for a big bank and make money consistantly only through market making and customer orders. No one can consistantly outperform the risk free rate (the interest rate) in my experience. Traders who take directional views only aim to be successful for 4 or 5 years..eventually they put the bet on the wrong way around and it's BYE! but by then they've been paid enough not to have to worry about it. Thats fine when you are gambling with someone elses money. If it were possible to consistantly outperform the risk free rate of return then the risk free rate would adjust to compensate..why wouldn't everyone just take their money out of their deposit accounts and give it to a fund manager who could absolutely guarantee a higher rate of return? Because that doesn't exist.
Paper trading isn't the answer either IMHO, unless you are very disciplined you will just forget the losing trades and remember the winners. When you really put your money in things change.
Look at the returns on funds..these guys are paid alot of money and have access to much more information than the private guy ever will...still they can't consistantly outperform a simple deposit account.
Treat it like gambling and enjoy the 'buzz' if you want, but relying on it to make a living is very very optomistic.
To be honest I think the time and effort spent researching stocks could be better spent on researching sports bets..that market is less efficient and more easily exploited.
I know mine is an unpopular view, but it's consistant with alot of the bigger market players. Even UBS now trades in a purely non-directional manner in FX derivatives...all the money is made by making markets...something the private investor doesn't have the ability to do.
Regards
Chuck
Paper trading isn't the answer either IMHO, unless you are very disciplined you will just forget the losing trades and remember the winners. When you really put your money in things change.
Look at the returns on funds..these guys are paid alot of money and have access to much more information than the private guy ever will...still they can't consistantly outperform a simple deposit account.
Treat it like gambling and enjoy the 'buzz' if you want, but relying on it to make a living is very very optomistic.
To be honest I think the time and effort spent researching stocks could be better spent on researching sports bets..that market is less efficient and more easily exploited.
I know mine is an unpopular view, but it's consistant with alot of the bigger market players. Even UBS now trades in a purely non-directional manner in FX derivatives...all the money is made by making markets...something the private investor doesn't have the ability to do.
Regards
Chuck
01 August 2003, 08:53 AM
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I would second what Old Fart says !
Think of investing in single stocks in the same way as betting on horses. Unless you know somwthing that the rest of the market place doesn't then you cannot consistently out perform. Sure you can have a few good investments and you can choose to just remeber those, like most gamblers do !
As for investing in equities (stocks & shares) in general - that's a different proposition - the entire market place moves up and down - at the moment the general feeling is that it's at a bit of a low point and potentially a good time to buy.
Basically you can play a higher risk game of individual stock investments, where you have higher potential returns, but also a higher potential down side, or you can play safer and put your money in a tracker (or some other type of) fund or you can be ultra cautious and buy gilts or put it in a bank.
I work for an investment bank in the City, but I'm in IT and not a trader - I think the middle option, tracker funds is the way to go.
Think of investing in single stocks in the same way as betting on horses. Unless you know somwthing that the rest of the market place doesn't then you cannot consistently out perform. Sure you can have a few good investments and you can choose to just remeber those, like most gamblers do !
As for investing in equities (stocks & shares) in general - that's a different proposition - the entire market place moves up and down - at the moment the general feeling is that it's at a bit of a low point and potentially a good time to buy.
Basically you can play a higher risk game of individual stock investments, where you have higher potential returns, but also a higher potential down side, or you can play safer and put your money in a tracker (or some other type of) fund or you can be ultra cautious and buy gilts or put it in a bank.
I work for an investment bank in the City, but I'm in IT and not a trader - I think the middle option, tracker funds is the way to go.
01 August 2003, 09:31 AM
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Download Casino On Net, play roulette in a private room, follow a well known system and you could make thousands. I tried it once. The stress nearly killed me but I won (and banked) £300 in 3 hours with a £200 stake.
01 August 2003, 09:49 AM
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Is the roulette system betting on red, and doubling bet when you lose? The casino makes a profit on the 2 greens. You will definitely lose money in the long term. The 'best' game at a casino is Blackjack as the odds can be calculated fairly easily and the house edge is minimal.
Seven card stud is also brilliant...if you know how to play 'correctly' it is fairly easy to make a living at it...much harder to make a fortune though
An absolutely FANTASTIC book to read is 'Getting the Best of it' by Robert Sklansky...it is almost the bible at out trading firm.
Rgds
Chuck
Seven card stud is also brilliant...if you know how to play 'correctly' it is fairly easy to make a living at it...much harder to make a fortune though
An absolutely FANTASTIC book to read is 'Getting the Best of it' by Robert Sklansky...it is almost the bible at out trading firm.
Rgds
Chuck
01 August 2003, 12:07 PM
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Chuck,
With real-time software on your pc from the LSE and a charting background you can trade daily (several times daily when the market is bouyant)and make good money. This is dealing with a lot more than just 1k though so it won't help with this post.
With real-time software on your pc from the LSE and a charting background you can trade daily (several times daily when the market is bouyant)and make good money. This is dealing with a lot more than just 1k though so it won't help with this post.
01 August 2003, 12:18 PM
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I laugh at chartists 
The only way to make money from the technical charting guys is to understand what they are going to do, based on the charts, and front-run them LOL even then you'll generally just break even...ie it's equally probably that it will go up or down. I'm a serious believer in random walk if you hadn't gathered it's all about Brownian motion and stochastic volatility
If all you had to do was follow charts based on historic data then once again every fundmanager in the world would do it and the 'value' would dissapear as we all tried to buy the same 'undervalued' asset at the same time.
Directional plays are for gamblers. There isn't anything wrong with that, but it isn't the basis for a lifetimes career.
Cman
The only way to make money from the technical charting guys is to understand what they are going to do, based on the charts, and front-run them LOL even then you'll generally just break even...ie it's equally probably that it will go up or down. I'm a serious believer in random walk if you hadn't gathered it's all about Brownian motion and stochastic volatility If all you had to do was follow charts based on historic data then once again every fundmanager in the world would do it and the 'value' would dissapear as we all tried to buy the same 'undervalued' asset at the same time.
Directional plays are for gamblers. There isn't anything wrong with that, but it isn't the basis for a lifetimes career.
Cman
01 August 2003, 12:22 PM
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I'll give you a clue. Futures will be lower by the time i've finished typing this sentence! Bloodbath doesn't really begin to describe it today... 
01 August 2003, 01:05 PM
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'Done right' = got lucky first time!
A good frind of mine took his $1mio bonus accrued from 5 years in Osaka trading warrants and bought yahoo. Turned it into $7mio very easily and retired at 33.
He then diversified...into a whole bunch of tech stocks, all looking pretty damn good eh? Had soo much money it was the natural thing to get into venture capital business too.
Sometime during his last million he realised the internet bubble really had burst. He's back on the exchange floor now, grinding out a living.
I just want to point out there are *alot* of risks involved, and many many more people fail than thrive.
Statistics dictate that there *will* be some humoungous success stories..but thats just because soo many people try. You rarely see a bestselling autobiography by a loser...despite the fact they outnumber winners a thousandfold...expressed very well in another fun book : Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life by Taleb...however it can be a hard read as the guy is a bit of an egomaniac.
Cman
A good frind of mine took his $1mio bonus accrued from 5 years in Osaka trading warrants and bought yahoo. Turned it into $7mio very easily and retired at 33.
He then diversified...into a whole bunch of tech stocks, all looking pretty damn good eh? Had soo much money it was the natural thing to get into venture capital business too.
Sometime during his last million he realised the internet bubble really had burst. He's back on the exchange floor now, grinding out a living.
I just want to point out there are *alot* of risks involved, and many many more people fail than thrive.
Statistics dictate that there *will* be some humoungous success stories..but thats just because soo many people try. You rarely see a bestselling autobiography by a loser...despite the fact they outnumber winners a thousandfold...expressed very well in another fun book : Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life by Taleb...however it can be a hard read as the guy is a bit of an egomaniac.
Cman
01 August 2003, 01:22 PM
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Tiggs gave the best bit of advice here,use the time you were gonna to do overtime.
Either that or invest it in your own earning ability.
(from one very sceptical person when it comes to shares).
Either that or invest it in your own earning ability.
(from one very sceptical person when it comes to shares).
01 August 2003, 02:01 PM
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ahhh, common sense! someone agrees with me
i invest millions of pounds for private cients on a regular basis and it dont matter if the markets a bear a bull or a red and green spotty frog. £1000 will not make enough to validate your time unless you are either hoping to get very lucky (in which case buy a scratch card) or you are happy to make a low profit per time invested (in which case you may as well flip big macs)
T
i invest millions of pounds for private cients on a regular basis and it dont matter if the markets a bear a bull or a red and green spotty frog. £1000 will not make enough to validate your time unless you are either hoping to get very lucky (in which case buy a scratch card) or you are happy to make a low profit per time invested (in which case you may as well flip big macs)
T
01 August 2003, 02:35 PM
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ive been paying into a unit trust for 2 years i pay a sum each month and it is now worth more than i put in but if i had payed in a lump sum it probably would not be but im not a millionare yet!
01 August 2003, 02:49 PM
#30
Some good advice here, the stock market isnt for novices, but we all need to start somewhere.
Do lots of reading, buy the book from www.fool.co.uk lots of good advice their.
For £1k I wouldnt really buy any more than 2 stocks, the trading costs will get in the way otherwise.
Decide what you are in it for, long term or quick gain? personally on £1k I wouldnt be looking to make money overnight.
Be prepared to lose money, you cant expect every share you buy to rise and rise.
Dont panic! if it goes down on the first day you buy, dont **** yourself.
When you look at a company, think about them logically, what do they do? how are they likely to make money? what is their public image etc?
Do lots of reading, buy the book from www.fool.co.uk lots of good advice their.
For £1k I wouldnt really buy any more than 2 stocks, the trading costs will get in the way otherwise.
Decide what you are in it for, long term or quick gain? personally on £1k I wouldnt be looking to make money overnight.
Be prepared to lose money, you cant expect every share you buy to rise and rise.
Dont panic! if it goes down on the first day you buy, dont **** yourself.
When you look at a company, think about them logically, what do they do? how are they likely to make money? what is their public image etc?