I've done next to no research on the stock market, and am making decisions purely from patterns in the graphs. Am I going on a dangerous path?

Yes.

 

To be fair, this is probably better technical analysis than I've seen on BNN.

 

It will turn on you and then nothing will work and that will be that.

 

It's always fun during a bull market, but the bear market will destroy you.

I suggest reading up on what happened with day traders in the late 90s as they entered the 2000 bear, and again with day traders in the years leading up to 2007. The stories are pretty consistent. It seems really easy and fun during strong years of the market, and you make small amounts of money. Once the market turns sour you start rapidly losing large amounts of money.

 

if you enjoy frequent trading and taking risks, then you should develop a plan to put that into action. There are many resources to teach you how to read charts, but trading on a hunch is not a consistently profitable way to make money. If you want to make these types of plays you can earn a lot more through leveraged funds.

 

27? GO FOR IT, MY SON!!!!

 

I've done next to no research on the stock market, and am making decisions purely from patterns in the graphs. Am I going on a dangerous path?

It's all fun and games until someone loses an eye (or their shirt in this case).

A friend of mine got into day trading during the .com bubble. He thought he was a rock star. Then it all went south, and he lost A LOT of money. Since then, his wife is so scared of the market that he's only allowed to put their money in GICs.

First he lost on day trading, then he lost again by being stuck in GICs instead of equities for the past 15+ years.

 

I often hear people say that a young person, like a 27 year old, should take all kinds of crazy risks with their money because it's harmless. I disagree. I've known many people in my age group (when I was in my 20s) who blew away a lot of money gambling in the stock market. But think of the future value of that capital that they blew away.

If you have 50k today at age 27, even if you just invest it conservatively in a balanced fund, will be worth close to 250K by the time you retire.

In my opinion the sooner you start proper investing -- deciding on an asset allocation, figuring out the best vehicles to use, optimizing RRSP & TFSA for taxes, and properly tracking your performance -- the better, and there's a whole bigger payoff than any kind of stock gambling you could do.

I've been dabbling with stocks and options since I was 20, sometimes with big wins and other times big losses. But I only started properly investing in my 30s. I wish I was doing all the right things back in my 20s.

 

Not only is it the loss of capital, it is the loss of time in the markets. I knew many people who lost $10-20k in the tech boom doing daytrading or investing in Nortel. Some of them have never returned to the markets. You can recover from losing $10-20k, but you can never get 10-15 years of compound growth back.

 

puppies - tell us how your'e doing today (friday) Everthing's UP!!! (I just made a quick $225US!!!)

 

Never understood this sell to lock in a gain business. I have a loss as of today in BTE because today's price is under my ACB of $5.60. End of.

Say I had sold BTE a few months back when it was over $7, and replaced it with another stock such that the other stock fell proportionately and the holdings in the other stock are equal in dollars to my BTE today. I would then have a gain booked on BTE, and a loss on the replacement stock for net dollar change of zero (less commissions of course). What does this accomplish other than 2 commissions for the bank?

I guess some will need to lie to themselves and say they made money on one stock, while denying they lost on the replacement because you "only lose when you sell."

Similarly, I have a gain in other holdings because the market today is higher than ACB. Again I could have putzed around here with a bunch of other trades to donate to the bank at $10 a transaction.

Do yourself a favour people and think in mark to market terms. All day trading does on average is drip, drip $10 at a time into the coffers of the banks.

Find some stocks or ETFs you want to own long term and then aim to keep their weighting approximately constant. New money will necessitate a transaction cost, as will selling a winner down, and adding to a loser to bring it up. Long term, you won't need to make more than about a dozen transactions a year or $120.

BTW, I am a successful day trader. Or am I? Made $2400 on 2000 shares of EMA once when the shares were about $30. This was the Monday of some sort of flash crash and things were nuts about the first half hour, maybe 5 or 6 years ago. If I could have typed my buy order in faster, it could have been $5000 or more. Today the same shares are $45, and there have been dividends all these years.

hboy54

 

Good point. And what if it scares you away permanently from investing, after the trauma of being wiped out?

 

This is all very new to me...
I've done next to no research on the stock market, and am making decisions purely from patterns in the graphs. Am I going on a dangerous path?

I recommend you read William O'Neil's books, How to make money in stocks and other books. His handle on stock patterns is good.
He is also good at teaching when to call it quits for a while, and when to get back in. When the music stops, you have to get out even if you take a loss, and stay out until the band plays again. All the horror stories of the last two crashes wiping out day traders is all due to them not realizing the music stopped. That's the number on thing one can learn from O'Neil.

I think people should do what interests them. They will anyway, regardless of advice to the contrary. So if they will do it anyway, might as well point them to a good teacher.
In the meantime, good luck.

 

you have certainly made profit, and if your interest is in frequent trading then don't let someone come along and convince you that buy and hold will save you $10 a transaction. But do establish some rules to follow and learn to protect yourself. For example if you knew from looking at the chart there was bound to be a rebound, then why not buy on margin or in the case of the S&P 500, use a leveraged ETF? The flip side is having an exit strategy if your analysis did not pay off, and you are staring at a $800 loss at the end of the day.

And another caution I will say is don't value your profits and losses in terms of dollar amounts. It does not reflect the risk and the principal, and leads to emotional trading. What is $800? A lot of money to some people, more than a days wages. But the only thing you should be focused on is that it is 3.2% gain on your investment.

 

figured - purely from the graph - that it is bound to recover to at least $11.15

I like such statements
Can you tell us what is "bound to recover to at least XX.XX" on Monday?!

 

If those gains would be so easy to get (just guts feeling looking at charts),stock market wouldn't exist

 

You could probably be just as successful gambling at a casino. Do your homework follow the patterns of the games and go for it. Sure most everyone loses in a casino but I don't think it is all that different from day trading.

If you talk to someone who is a day trader or a gambler you probably hear the same story about all the money they made on various days. If you ask them about their losses though then you get the real picture and that is they have a problem.

 

Any stock buying that is fun = bad deal. There are better ways of getting your entertainment, like buying dirty magazines or parachute jumping. Both activities have the added benefit of not leading directly to the poorhouse.

 

Gentlepuppies don't listen to these cynical old men. If you have a flair for day trading go for it. Just don't commit more than you can afford to lose without wrecking yourself, you may have a great run of luck but luck has a way of running out.

In other words if a trade is not working be ready to close it out with a small loss before it turns into a big loss. Guys like you have made a lot of money day trading when the market was running right. Unfortunately most of them gave it all back when the market turned against them.

So, play safe and good luck.

 

The naysayers are probably going to be vindicated. But naysaying is like parents discovering their teen is sexually active and insisting the kid stops. It ain't going to happen. You are better off teaching how to avoid getting into serious trouble.

My guess is that the naysayers don't know how to avoid serious trouble in trading other than not trading at all. But what if somone is already doing it, and isn't going to quit? Telling them to quit isn't going to help, especially if, it, like sex, is so much fun.

 

I remember Kae was going something similar and blogged his trades...did pretty good for a number of months till he didn't.

 

If you decide to go ahead with daytrading, do yourself a favour and actually TRACK your performance. Be honest to yourself about how well you're doing.

If you continue to do it successfully, you'll have an excellent performance history to wave in everyone's faces.
If it starts going badly, your tracking will let you know it, instead of denial taking over and causing you to pour money down the toilet.

 

^^Yeah I'm pretty realistic about calculating my return on effort. If I had just left my money in VFV these 2 weeks, I would've made $600 anyway. I'm only counting the extra $900 in additional shares that I ended up affording as a result of my trades, which costed $100, so my actual return is $800. Divided by about 2 hours of slacking at work... still worth it for now =D

I might look into the 3x S&P etfs, but there are no Canadian ones, so i'm not sure how much it'll cost me.

 

I might look into the 3x S&P etfs, but there are no Canadian ones, so i'm not sure how much it'll cost me.

In Canada, there is HXU which gives about 2x the TSX performance, over short time periods.
http://www.horizonsetfs.com/ETF/HXU

 

I might look into the 3x S&P etfs
I dont understand- what does that mean?

 

Friend of mine made $140,000 day trading Nortel on the way up then lost 98% of his account riding it all the way down. I have no idea why he wouldn't buy and hold on the way up, but did on the way down. His explanation is it dropped so fast he had no chance to get out.

I suggest if day trading is working keep doing it, when things change step aside and stay in cash until you see how the wind blows. Just be aware that day trading only works some of the time and the market is not always going up.

 

Friend of mine made $140,000 day trading Nortel on the way up then lost 98% of his account riding it all the way down. I have no idea why he wouldn't buy and hold on the way up, but did on the way down. His explanation is it dropped so fast he had no chance to get out.

I think this is very typical for day traders. Lots of reasons:

- lack of a plan and lack of risk controls
- failure to back test your strategy especially against a bear market
- denial when seeing losses
- over optimism
- falling in love with a stock and not acknowledging it's become a turd
- failure to be critical of one's own approach
- failure to properly track performance

And as mordko says, many people think stock losses are just "paper losses" or temporary. They will wait, thinking if they just wait long enough the market will turn around.

 

Your friend was cristallizing his gains and then didn't want to accept his losses. After all, it's only "paper losses" until you sell. Sticking ones head in the sand is how human psychology works. Every. Single. Time.

 

When I see threads with titles like this, I get worried. What did Benjamin Graham say? “while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”