Hobby: Day Trading?

[Sytes]

Looking for the pitfalls and good tips for this as a hobby. Not tips as in specific stocks - rather tips on staying as safe as the risk allows.

I have my Sharebuilder account and money not tied to any needs. Looking to learn in hobby fashion not mass $$$. They charge $6.95 per trade.
This a decent start place?

More or less 'speculating' the idea of hobby interest and what I may learn the easy way via heeding learned tips vs losing more $ via the learned hard way.

edit added: I viewed this for some bare basic info. http://www.sec.gov/investor/pubs/daytips.htm

 

[smarandr]

I think this drawing says it all: Credit the image goes to Carl Richards, his book "The Behavior Gap" is a good read.

 

[T Bone]

It takes some dedication to have a gaining portfolio.

I have gained and lost stupid amounts of $ day trading. I currently don't invest the time necessary to day trade so I have pulled out.

Prior to buying any stock, set some ground rules for yourself. Here are a few that have worked for me.

Don't play with the bread money, education money, vacation money, or hunting money.

Only buy stock that I am familiar with. Familiar, as in I understand the fundamentals of the industry.

Prior to transacting a stock, identify what I want my target % gain to be. Set a transaction order at that % gain price level. It takes all the emotion out of it. When the target is reached, profit is captured, I move to the next target.

 

[deer_shooter]

It takes some dedication to have a gaining portfolio.

I have gained and lost stupid amounts of $ day trading. I currently don't invest the time necessary to day trade so I have pulled out.

Prior to buying any stock, set some ground rules for yourself. Here are a few that have worked for me.

Don't play with the bread money, education money, vacation money, or hunting money.

Only buy stock that I am familiar with. Familiar, as in I understand the fundamentals of the industry.

Prior to transacting a stock, identify what I want my target % gain to be. Set a transaction order at that % gain price level. It takes all the emotion out of it. When the target is reached, profit is captured, I move to the next target.

Very solid advice

 

[npaden]

My only advice would be to be willing to sit on the sidelines if there isn't value out there to buy. Don't feel like you have to be invested 100% all the time. Being willing to sit with some money on the sidelines will allow you to take advantage of buying opportunities when they come along.

 

[passinthru]

Buy Benjamin Graham's book the "Intelligent Investor" with commentary by Jason Zweig. And use "Mr. Market" to your advantage.

 

[WV Hunter]

I used to dabble in options. Now I stick with A & B rated stocks or mutual funds for long term investing if that tells you anything. I still own a ton of TIVO stocks thanks to options

 

[WV Hunter]

Where's Jose when you need him?

 

[RobG]

Looking for the pitfalls and good tips for this as a hobby. Not tips as in specific stocks - rather tips on staying as safe as the risk allows.

Day trading as a hobby? Maybe if you like doing taxes as a hobby!

If you are concerned about risk then day trading is really a bad idea. Even investing in individual stocks is really just rolling the dice - there is no such thing as an underpriced stock anymore - a stock is "cheap" because it perceived to have a high risk of dropping dramatically. You aren't going to Google up an underpriced stock - the huge brokerage firms' full time staff and computers are going to beat you to it. Pick up "A Random Walk Down Wall Street" to see what you are betting against.

 

[MtnWest]

I do it full time. I made the IRS election for trader tax status 6 years ago. Only way I survived is my wife is wonderful, has a great job and we didn't need my earnings (lack of in the beginning) for living expenses.

Few tips would be-

Have a plan which means entry/exit levels before you pull the trigger. You must have the discipline to get out at those levels or else the hobby gets very expensive. Remember discipline over conviction.

Objectively follow the money. The market doesn't care what you think or "feel" should happen. You don't have to be "right" or have guessed the market direction. You just want to make money and the market is never "wrong".

Boredom is not an actionable catalyst. This is what npaden was referring to. I had this taped on a monitor for some time. Just because you are sitting there watching the flicks and ticks doesn't mean you need to trade. Opportunity is made up easier than losses.

Even though you're talking hobby I still wouldn't recommend trading individual stocks. You can't have a solid plan if you wake up one morning to find an after hours news release has your stock gaping down 40% at the open. That's a hard lesson I've learned. Stick with ETF's that trade at least 500k shares a day.

I geeked out a bit on my response. Good luck! You are on the right track not using mortgage $. If you have any questions shoot me a pm. Remember to leave emotions for weddings and funerals, not the market.

 

[Sytes]

Great advice/info guys, thanks - keep it rolling!

Anyone read/listen to this? Thoughts?
http://www.dummies.com/store/product/Day-Trading-For-Dummies-2nd-Edition.productCd-047094272X.html

 

[smarandr]

Obviously I'm in the minority here, but I still wanted to post one more picture:

 

[noharleyyet]

Where's Jose when you need him?

Deriding someone else.

 

[mixedbag]

I've been thinking of doing day trading myself.I have ALOT to learn first though.I have the slow steady stuff already that's finally doing OK,and doubled my IRA money since buying after the crash.I have a lot banked away though doing basically nothing.I would like to see a better return on it and keep turning it over.Was thinking of buying houses to flip too since I do that sort of thing for a living.Unfortunately, the banks don't like to give mortgages in my area anymore;if you can afford them or not.

 

[RobG]

There are so many more reliable ways to make money. For example:

 

[tarheel]

Right now look to the Thai exchange for the best gains.

 

[Elkmagnet]

I think I have to many expensive hobbies already.

My advice is to save your money in liquid form and wait for the next big crash then buy all you can afford.
If you want to do it as a hobby until then play it as a game. Get a notepad or use spreadsheet pick your stocks and buy "pretend" shares in the actual amount you are willing to spend. Follow the market as if you had invested real money, take it seriously and see where you come out. This way you'll be well versed before ever loosing a dollar.

Awww high school economics class was fun.

 

[Sytes]

Interesting you bring that up Elkmagnet. A few friends and I have been doing this mock trading for a few years. We have run a couple small 3 month real trade competitions though day trade is it's own beast.

There is only so long someone thrills off playing fake money games before seeing if the real world is worth a go.

Take for instance... $6.95 per transaction... Say I work 1000$ on a 20$ share. Off the bat, I am behind the curve. I need to produce .14 cents per share to simply break even...
That is a healthy chunk considering it may just as easily run red!

Take for instance I choose POM Pepco Holdings Inc lowest point was $20.84 highest was 20.96 for the day of trading. So if I made a slam dunk move at its lowest and I sold at its highest, I would LOSE .02 per share even though I produced .12 per share!

Part of the strategy is to find that % that pulls profit - a good challenge. Thus interested in a hobby to start and get a feel for the daily loss/gain. The goal is learning how... and identify how much it will take...

 

[RobG]

Take for instance... $6.95 per transaction... Say I work 1000$ on a 20$ share. Off the bat, I am behind the curve. I need to produce .14 cents per share to simply break even...
That is a healthy chunk considering it may just as easily run red!

Don't forget to lop off 30% or so from you short term gains to cover taxes...

 

[Calvin]

Best advice is to not get greedy. Every gain is a gain. First rule of course is to have money to invest. Nothing makes you money like money, but you have to be realistic about your gains. If you are expecting to take $1,000 and turn it into a guided sheep hunt in 6 months, you are in for some big loses.

I like to watch 10 or so solid stocks. Ones that have a decent dividend. Watch them every day. Know them backwards and forwards. I hate mutual funds and etfs. I pick stocks. If I get stuck not finding the bottom of a falling good stock, I just hold and collect the dividend until things improve. In this market, it doesn't take long. Things could change though.

I usually keep 15k in my wellstrade account. I'm keeping another 30 on the sidelines waiting for another major pullback. I wait, and jump when things look stupid good. Like when Ruger is dropping like a rock after a mass shooting, and they are selling everything they make at a record pace. That's the type of no-brainers you want to invest in. Never force anything, by thinking you have to trade every day, or week. It might take months to find that trade you just can't lose on. Sometimes I make $500, other times I make 3k. Any money is good, and it's just a few clicks on the computer.

Good luck. Don't get greedy.