A Virgin Trader

I was talking to ‘the trader’ this morning, about why UK bank share prices in particular just keep going up and up as if there was no recession, no toxic debt, no decimated housing market, no huge write offs – the list goes on.

As far as the virgin trader can see, the picture is very confusing indeed. Each week I think the markets will make some sort of correction and each week they go up, but for how much longer?  This week the FTSE 100 is spitting distance from the 5,000 mark, potentially the biggest summer recovery in a quarter of a century according to the FT, ‘a level that would mark a 50 per cent gain since the market’s March low’.  John Hughman writing for the Financial Times IC says “it’s down to investors attitudes towards risk”. He thinks “the risk in the eyes of many professional investors right now is the risk of missing out”.

‘The trader’ in his usual acerbic manner suggests that as in ‘Last Tango in Paris‘ you could ‘spread some butter‘ – why not take a spread bet on the number of days it will take for the FTSE to breach 5,000 or the DJ to breach 10,000 or how many brokers are certifiably insane.

He is resisting capitulating to the fear but is increasingly worried that once the market begins suffering from an overdue dose of vertigo, that it will bring a pack of cards down with it as we plunge into a double dip recession.

There are unfortunately good grounds to justify a prediction of a further stalling not least of which is that the banks have been building their balance sheets and he suspects it is not just to repair the (self inflicted) damage they have done over the past decade but to buttress themselves for what they think is the coming crash.

The virgin trader is feeling the pressure.

Virgin

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Tags: Share trading for beginners

AmeriChip Inc or AmeriChip International Inc?

On Thursday I read a fascinating article about Harry Potter style video inserts for magazines. The new video ad due to appear in America’s Entertainment Weekly next month, consists of wafer-thin screen and mini-speaker that will allow readers to watch a video when the publication is opened. The technology mirrors that of Harry Potter newspaper “The Daily Prophet” which has pictures which ‘come to life’ to tell the news.

By Friday it was all over the internet; there were mentions in the Financial Times, Bloomberg and CBS, to name but a few.

The full-motion ad is made possible by technology from a small US company called Americhip Inc based in California. On further investigation it seemed the company is privately owned so no share to buy there? But hang on – I then came across another US company called AmeriChip International Inc, which was listed on the NASDAQ but based this time in Clinton Township, MI. Could they be one and the same?

AmeriChip International (AmeriChip) is engaged in technology, which includes the use of lasers to effect a controlled breaking of the metal chip. The company is also engaged in the business of mineral exploration.

The interesting thing about this whole story is that the AmeriChip listed on the NASDAQ, whose share price has been wallowing at around $0.0003 per share for the last year, suddenly went through the roof on the same day the video ad story hit the headlines. As soon as the NASDAQ opened on Thursday the shares started to climb fast and furious; by the end of the day millons of shares had changed hands. By Friday afternoon 138.98m shares had been traded and the price was at 0.0030, quite a jump.

Was it just a coincidence or were investors frantically buying the wrong stock? Were they all thinking they were buying share in AmeriChip Inc the video ad maker when in fact they were buying AmeriChip International Inc the company whose products and services including, automobiles; oil production and refining?

All very confusing for the virgin trader

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Tags: Americhip

Yesterday I got all excited about an article I read. The product really caught my imagination and then, emotion grabbed me by the short and curly’s.

The first thing I did, and bear in mind this all happened in the space of 30minutes, was to check some chart data, check its financials, zoom through its corporate website, do a Google on any internet gossip about it and, finally, check out its debt levels.

Still out of breath and two cups of coffee down, I wiped the sweat from my forehead – “Slow down, you’re going too fast,” I told myself.

“**** it” I told myself, what if this stock is for real, I could be trading in the wife for a blonde in a Ferrari by lunchtime .

Now before I tell you any more I had just broken all my recently acquired ground rules for buying stock. I had:

• been set running by a random chance article a friend had sent me.
• jumped into a sector I know nothing about
• done scant research (all 30 minutes of it)
• got all emotional about the stock
• let my imagination run riot

and finally I was about to buy, at the opening of the day, this crazy, very risky stock on nothing but a few cups of coffee and a rumour.

I had frantically searched the internet for anyone talking about it and yes, there was a faint buzz rippling across cyberspace.

It was still only 10.30am UK time. The NASDAQ would not be open for a while yet. “Just keep calm,” I told myself.

In the meantime I went onto my recently setup broker account and hit the buy button. No results! This couldn’t be!  I was about to miss the opportunity of a lifetime, I was about to lose that millionaire lifestyle before I had even tasted it. I checked the markets my account was supposed to cover which said UK, European and US markets. So why could I not find the company?

I quickly realised that with most online broker accounts, you have to ring up the dealing team if you wanted to buy anything more unusual than a major US stock.

“**** it,” I told myself again, and quickly signed up for another online, execution only, broker account elsewhere. This time they did offer the stock.

By now I had chewed all my finger nails (for the first time in my life). The stock price was so low I could probably buy the whole company for less than a cup of Starbucks coffee.

I put in my quantity, set a stop limit, hit the buy button then collapsed into my chair.

Man, what an hour.

To be continued.

Answer: Not necessarily.

The old saying that ‘timing is everything in life’, seems to be especially true for share trading. You must time your both your entry and exit points with care.

As a virgin trader the first watchword is patience, watch first before you move. Hey I know is sounds boring, where’s the thrill in that?

If you have a bottomless wallet and the patience of a nat don’t let me stop you, but for the rest of us virgin’s there are a few things to consider before we hit the buy button.

You’ve been doing your research, you have spotted a potential hot one (you hope), you have looked at some charts, 1week, 1 month, 1 year and the last 3 years you have kept abreast of the latest company news and it is all looking good. You may have even applied a couple of EMAs (exponential moving average) to the charts, if you have managed to get your had around the concept, and it is still looking good, what next?

Now as I have said before I am just a virgin trader so what do I know, but it seems to me there is still more to do if we want to protect our all so valuable capital.

What are they?

Firstly I would:

• Make a plan. Not having a plan is a complete no no. Work out an entry point and an exit point. Write it down in a notebook and be honest with the positives and negatives otherwise you are only fooling yourself and the market makers love a fool. Is it a short or long term trade? Decide before you buying when you will sell, decide on a timescale.
• What are the volumes? How much buying is going on in the stock?
• Is there much momentum in the share?
• What are the charts looking like, are they going up and in what way?
• When do the figures come out? Is there a statement out soon, and how soon?
• Have a serious look at applying an indicator or two to your charts. I like EMAs (exponential moving averages) lots of websites offer this kind of data tool free. My favourite is the FT website (Financial Times).
• What are the general markets doing?
• What’s in the news, political  and business?

If after all of that, make sure the share price is rising on the day not falling. Just a small amount, not a huge jump. Finally don’t buy right at the beginning of the day, let it settle first.If there is anything else I have missed let me know.

A virgin
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For the virgin investor who plans to buy and hold stock for the medium to long term, the overheads are minimal. Any broker commission, stamp duty or other costs will probably play little part in their success or failure.

For the virgin trader like myself however, it is not so simple and the more you trade the greater the accumulative costs involved in buying and selling share. I have to admit when I first began trading in my dummy paper trading account I was focused completely on what stocks to add, how much they were, and were they going up or down. The typical virgin mindset I think? Broker commissions may seem nothing compared to the potential mouth watering riches awaiting a budding trader, but they all add up. Trading overheads directly related to the buy and sell include commissions, slippage and expenses. Unless you pay attention to these costs you will soon be dead in the water and this is particularly true for the small trader (we’re not talking height here). However whatever size account you have DON’T OVERTRADE.

Each time you trade you make it harder to come out on top and remember use an execution only broker. Get a cheap, no frills online broker, I have just started using The Share Centre which charges 1% commission, with a minimum of £2.50 for buying and £7.50 for selling. It also charges a quarterly management fee of £2.94 (approx £12 a year), regardless of how many shares you have with it, that seems quite good to me so far.

Don’t waste your money on full service (advice) brokers. Even the virgin can see they have not done all that well is recent times. I prefer to make my own mistakes.

A virgin trader
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On Friday 7 August 2009, the Dow Jones Transportation index registered its highest close of the year. Apparently from a (Dow Theory) technical standpoint this means, we are in a bull market as all three requirements have been met. According to the FT (Financial Times) this doesn’t mean it’s time to buy. Wait for a correction, and buy on the dips.

As a virgin trader still deep in bedtime stock market reading, this is all academic, as I am still not ready to risk the real money. My mantra is to watch, wait and learn at least for the time.

v

Tags: Bull market

As a virgin share trader I ask myself, is there any point reading the online share trading bulletin boards (BBs)? Most broker sites have them and there chat and gossip on virtually every sector and stock under the sun. The question is are all those opinions worth the time is took to write them? They can certainly be amusing and even informative at times but I would never make a decision based on anything I read there.
As a virgin it is all too easy to see everyone else as experts, and yes, they certainly know more than me – which is not difficult, but is there advice worth listening to? I have always found that in any business that those who talk the most are usually the ones you should listen to the least.
I would suggest they are certainly a good place to get some background detail on a particular stock, although I certainly would not take it as gospel. I would suggest they are a place to look at now and again for amusement, but when it comes to deciding when to buy and what to buy your better off with some good chart data an annual report and the newspaper.
The virgin recommendation of the day:

• Don’t follow a bulletin board gurus tips.
• Ignore internet tipsters or tipsheets
• Don’t go to a bulletin board for ideas
• Make your own mistakes

Bulletin boards should be seen as light entertainment, pure and simple.
If you happen to be one of those people who have never ventured near an online bulletin board it is a small online community related around a particular topic. Contributors usual have a nickname if they want to actively participate in a conversation or (thread). Threads usually appear in order of last updated, this can be confusing if your new to it.
However all is not bad with bulletin boards, don’t get me wrong, some contributors are committed to their chosen subject and really want to help pass on information, some will even cut and paste relevant data from company reports and statements and many are only to willing to give advice.
But then what do I know I’m just a virgin.

This week I setup a couple of dummy/paper trading accounts. Can’t afford to risk the real spondoolies just yet. Paper trading or “virtual stock trading” as I have also seen it called is perfect for the virgin trader, it gives you the chance to test out the markets, pick some stock, do some research, play with stop losses, all without risking any real money.
Just like monopoly really, except instead of buying property you’re investing in stock. Paper accounts are easy to setup and behave just like a real live trading account. A practice/paper account is an easy, risk-free way to improve your investment skills. Usually online paper accounts give you:

• A start up fund, say £10,000 of fantasy money so you can practice playing the market
• Functionality that’s designed to work as closely as possible to a real share dealing account, not just a watch list.
• Access to tips and advice to help you get started and improve your investment skills
• Free research tools so you can learn more about the market

A paper account lets you:

• Pick stocks, buy and sell within your paper account based on current market prices
• Check out different strategies and considerations
• Set up and try stop-loss and tracking stop-loss limits to see how they work
• Set up watch lists

There are plenty of online brokers offering paper accounts and usually for free. If it is not for free find one that is.

I have setup paper account with www.share.co.uk. This was real easy no complicated forms to fill in and the user interface is very intuitive. I also set up a paper account via the FT (Financial Times) this is great and I would definitely recommend it to any virgin trader.

Here is how to set one up. Go to:

http://www.ft.com/sitemap

Then scroll down the page and select ‘portfolio’ from the ’services and tools’ section. From there you will be asked to register (it is free) and the rest in pretty simple really.

v

Tags: share trading tips

I have taken this explanation directly from Wikipedia, no point pretending otherwise.  Why bother trying to rewrite it. - credit wikipedia

Individuals or firms trading equity (stock) on the stock markets as their principal capacity are called stock traders. Stock traders usually try to profit from short-term price volatility with trades lasting anywhere from several seconds to several weeks. The stock trader is usually a professional. Persons can call themselves full or part-time stock traders/investors while maintaining other professions. When a stock trader/investor has clients, and acts as a money manager or adviser with the intention of adding value to their clients finances, he is also called a financial advisor or manager. In this case, the financial manager could be an independent professional or a large bank corporation employee. This may include managers dealing with investment funds, hedge funds, mutual funds, and pension funds, or other professionals in equity investment, fund management, and wealth management. Several different types of stock trading exist including day trading, swing trading, market making, scalping (trading), momentum trading, trading the news, and arbitrage.

On the other hand, stock investors are firms or individuals who purchase stocks with the intention of holding them for an extended period of time, usually several months to years. They rely primarily on fundamental analysis for their investment decisions and fully recognize stock shares as part-ownership in the company. Many investors believe in the buy and hold strategy, which as the name suggests, implies that investors will hold stocks for the very long term, generally measured in years. This strategy was made popular in the equity bull market of the 1980s and 90s where buy-and-hold investors rode out short-term market declines and continued to hold as the market returned to its previous highs and beyond. However, during the 2001-2003 equity bear market, the buy-and-hold strategy lost some followers as broader market indexes like the NASDAQ saw their values decline by over 60%.

Now it makes a bit more sense. As a virgin trader I suppose I am the later hoping to be the former?

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Be honest now, who at some time of other has not fancied dabbling on the stock market? playing masters of the universe? Yes of course you have.  Now I have read in a number of places that there are several distinct types of investor and which one you are dictates how you will react to share trading.

There are day traders, analytical investors, long term investors, short term investors, bulletin board gurus, penny share investors, bottom picking investors, traders selling short, traders selling long and safe and steady investors, to name but a few. All motivated by something different, both rational and irrational. It also seems that your personality, as well as what motivates you, is the key to your success as a share trader. However, whatever type of investor/trader you are one thing is paramount – don’t guess, don’t trade on emotion and don’t trade on bulletin board advice – research, research, research.

Beware sharks feeding!

If your a virgin trader, as I have already learned from the ever increasing pile of books by my bed, that if you don’t spend lots of time on research, teaching yourself the basics and defining a clear set of guidelines to stick to then you will lose your money. It is worth repeating, YOU WILL LOSE YOUR MONEY. The markets are full of skilled market makers and professional traders, people who do know what they are doing and they like nothing better than to make money at your expense.

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