New to the game need some advice

Thanks for the advice.

I have two objectives one is to build an investment portfolio for long term. I will likely invest mostly in equities via ETF’s.

But I also want to start a trading portfolio, that’s why I was wondering if a good trading platform is important and are there any good books and sites that discuses how to use these tools effectively. I don’t plan on day trading but more swing trading. Likely will hold the stock for a very short term but longer then a day. I know risks of this type of trading are huge, but I am willing to take this risk. In school I had to read and reviewed many journals / articles discussing that active trading in the long will not out perform the index. Hence why I will invest only in ETF’s instead of mutual funds in my investment portfolio. I have a commerce degree in finance, have taken the level 1 CFA exam and currently enrolled in the CMA program. I list this not because it means that I will be the next Warren Buffet but only that I have an understanding of finance and it should help me with a base to learn from. I know there is a lot to learn that’s why I’m on this forum. Before I start actively trading I want to acquire more knowledge and understanding. Here are the steps I’m taking:

- Review notes and texts from university on security valuation techniques.
- Short term trading techniques – use forums and Amazon reviews on some good books out there.
- Get a good grasp of technical analysis. I was taught that this type of analysis is mostly hocus pocus but is mainly used for short term trading. Any suggestions on sites / books about this.
- Effectively use market information portals websites/newspaper/periodicals. I really want to develop a systematic approach to information gathering. Any suggestion on what sites you find the most useful.
- Develop a structured approach to the trading day.
- Gain a good understanding on how to effectively use trading platforms available.
- Use investopedia simulator to test out trading strategies.

Any other suggestion.

Dennis Gartman

Hi Dogcom

You mentioned Dennis Gartman "knows how to hold a winning position that easily takes out his trading losses." I sometimes see that Dennis Gartman on tv like a show called Fast Money on CNBC and I think also on BNN perhaps. From what I can tell he is kind of a pairs trader who likes red bull with long and short positions. I saw him one week saying he was selling all his beta positions like alcoa,etc hand over fist as soon as possible when the markets opened and then a week later saying he is buying them up as fast as possible based on the latest jobs report. He seems to be all over the place.

That being said, I notice Gartman's new fund at horizons, the Horizon Alphapro Gartman which started in March has returned -2% while the S&P500 benchmark index he is trying to outperform is +20% during the same time period. I cannot say I am surprised. All that trading eats up all your returns.

Hi Dogcom

When I was looking up the gartman fund I saw another fund that caught my eye on the horizon website; the Horizon Alphapro Managed S&P/TSX 60 fund. The fund is run by Ron Meisels ( I have never heard of him but apparently he was ranked among the top three technical analysts by Canadian Institutions for six consecutive years in the Brendan Wood Survey) according to the horizons website. It also says the fund rebalances bi-weekly. The Horizons Alphapro Managed S&P/TSX 60 fund has returned +6% since it started in January while its benchmark (TSX60) has returned +16% during the same time period. I may be wrong but I have never heard of another fund that uses purely technical analysis to pick stocks and it made me wonder why that is. Now I know. All this trading and chart analysis is not foolproof. I mean if the guy ranked number 1 for 6 years performs like this, what chance do the rest of us have. LOL.

Granted I have never day-traded, but I don't believe any of the program you listed will help at all. Certainly it is not the platform that will make you money. It is the buy/sell decisions. And certainly using ETF's will NOT make the process less risky - it will only lower the volatility that you want to make money off.

When trading, you are dealing with STOCKS, not companies, or indexes, or industries. Trading is not like handicapping the ponies at the track. It is like standing behind the trainer at the window and putting your money where he puts it.

"Developing a structured approach to the trading day" is easier said than done. Since you already know the research from brokerage accounts that shows that traders lose money, you know the obvious structures/strategies don't work. The successful strategies will not be broadcast by their creators because they become invalid as soon as publicly know. The strategies that were successful in the past are all probably used by the outfits that provide the terminals, training, and even partial financing if you become successful. I don't know where to find those outfits but I'm sure they still exist. So how EXACTLY are you going to come up with this strategy???

Try your library for a book I have heard (but not read) referenced:
"Trading for a living : psychology, trading tactics, money management"
by Alexander Elder.

Billyp, welcome to the world of trading.

Here are my 2cents..

First of all, I’m glad you understand the concepts of risk capital, day trading, and swing trading.
“Learning to trade” is an ongoing venture for many (myself included). I use the term loosely. Traders continue to learn as the market conditions change.

BillyP said:

… reviewed many journals / articles discussing that active trading in the long will not out perform the index

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As you already know, the statistics can be made to serve the whatever underlying purpose. Do these studies include so called “non-successful” traders? (Very likely) Do they include prop trading divisions of major institutions? (Unlikely they would diverge this info to the study as they are pretty highly guarded)

BillyP said:

Review notes and texts from university on security valuation techniques

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Fundamentals go so far in short term trading. In active trading world, the “valuation” itself doesn’t move the stock. It’s the perception, greed, and fear. Thus you see scenarios of the market bubble, crashes, and extreme volatility. The market will move to a perceived valuation before you are able to join the bandwagon. Also, the market can stretch out in either direction longer than your account size can absorb. Here is a popular quote: “Markets Can Remain Illogical Far Longer Than You or I Can Remain Solvent.” Thus, risk management is very important in any trading.

BillyP said:

Short term trading techniques – use forums and Amazon reviews on some good books out there.

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They are dime a dozen. You will quickly realize that the trading is not about “trading techniques”.

Here are some books of interest.
“Reminiscence of a Stock Operator” by Edwin Lefvre (Classic book for any trader)
“Market Wizards” by Jack Schwager (Classic)
“Trading In the Zone” by Mark Douglas (Psychology)
“Trading For a Living” by Alexander Elder (Psychology)
“Japanese Candle Stick Charting Techniques” by Steve Nison (Technical)
“Encyclopedia of Chart Patterns” by Thomas Bulkowski (Technical)
“Trade Chart Patterns Like The Pros” by Suri Duddella (Technical)

BillyP said:

Get a good grasp of technical analysis. I was taught that this type of analysis is mostly hocus pocus but is mainly used for short term trading. Any suggestions on sites / books about this.

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Agree that TA is somewhat subjective, but “hocus pocus”?? These terms are always brought on by those who haven’t learned to use them effectively. My suggestion is to learn about the “limitations” of each indicator.
Here’s a good place to start: Stock Charts
Here are some basic chart patterns for your perusal: Chart Patterns

BillyP said:

Effectively use market information portals websites/newspaper/periodicals. I really want to develop a systematic approach to information gathering. Any suggestion on what sites you find the most useful.

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Here are some places to start (free sites)
US Economic Calendar
World Economic Calendar
Market Watch
Earnings Calendar

BillyP said:

Gain a good understanding on how to effectively use trading platforms available

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Does Questrade offer a paper trading account? If it does, do play with it till you feel comfortable. For starters, it is important to understand various order types: market, limit, buy/sell stop, trailing stop, OCA/OCO, and bracket.

BillyP said:

simulator to test out trading strategies

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Great idea. Just remember, most strategies are developed to work in a specific market condition. I haven’t seen a strategy that works 100% of time. Good traders adapt and make necessary changes. If they don’t, then they just become another statistic. Work on the expectancy of a system.


On a final note: Nobody said trading is easy. Success in trading comes in 3 folds: your ability to come out with a system (proper risk management) that gives you an edge, ability (discipline) to execute that edge properly, and ability to change with the market condition. First one is easiest one to do, but second and third one will dictate your long longevity in the trading world.

Good luck and happy trading

"Problem is most day traders DON’T have structures/strategies to begin with." Exactly. And there was no indication from the OP that he had one either. In fact it appeared he was relying on the trading 'platform' and broker-supplied stuff in its stead.

I'll bet many long-tIme investors have (like me) devised trading strategies of their own ... only to test them first and find they lose money. It is human nature. Just like we sometimes waste our time looking at proposals that promise "15% return RISK FREE". But there is a big difference between the suckers who put their money down and ask questions later... and the survivors who think first.

I am really worried by the number of posters to these sites who have decided that trading stocks 'is a way to make money' instead of a job. I know the economy is bad and people are having a hard time finding jobs... BUT throwing away (IMO) the savings you have is the exact opposite of what you should be doing. Look at the home-page of the link given above. Pay attention to the LOSER column.

I'm fairly new at trading , but so far it is working out OK for me.

First decide which kind of trading you want to do , day trading or swing trading.

Day trading requires some huge capital and that you put a lot of eggs in one basket as you are sometimes trying to make gains on stocks moving a fraction of a cent.

Swing trading gives you more time and room to play and you can diversify a little more , if things go bad on one play you can hold it until it works in your favour.

Forget about fundamentals , you will be trading on market hype , fear and greed , nothing else.

I have been trading small cap pharmaceutical companies that are awaiting FDA decisions on drug applications , they almost always run up in anticipation of the expected approvals , I always sell just before the approval date in case it is rejected or delayed.
If approval comes through you could miss out on some nice gains , but if it doesn't , (and it usually doesn't) , you still walk away with a nice profit (actually all profits are nice aren't they?)
It's been working for me the last six months or so.

The FDA has a calendar of upcoming approval applications and some investor services do research strictly in this area.

As an example , I bought NRI a few months ago @.15 when investors were climbing on board in anticipation of approval of their new drug which is already selling in Canada and Europe.
I sold a few days before approval date @.475 , approval was delayed and prices fell back to the low 20's.
I've done this ten or twelve times in the last few months and done quite well , there are a couple that didn't work out and I am still holding , unlike going to a casino , if it doesn't work out right away not all is lost , you still have your stock and you can hold it until it move up again.
All said , I am way up so far , and the ones that didn't work oput are only down marginally , as well I don't put too much capital into any one company , usually no more than $2500.
I usually set a goal and try to stick to it , if I can realise a 20% profit I'm out , it is hard to sell though when a stock keeps moving up , on the NRI I took a chance and it paid off , but sometimes you can lose all your gains just by hanging on a little too long.
I aleays put my sell orders in after close , stock prices are usually highest first thing in the morning if your selling.

I don't buy books about it , I don't research the companies , I don't use any fancy platform or software I just trade from my bank investor account and follow the hype , discussion groups on Google finance is one of my best sources of direction for any given stock I want to trade.

When my profits reach a certain dollar ammount in my account , I buy well paying REIT's to make full use of it and reduce the chances of me using it all on speculative plays.

This is just what has been working for me , others may disagree.