EDIT: Futures Trading

[abcqwerty123]

I apologize if this isn't the correct place for this topic.

 

I am currently getting into trading stocks and I wanted to hear thoughts on stock trading as a whole. I am VERY new and don't fully understand it just yet, beginning to read some books that have been recommended, but from an anarchy point of view, is stock trading good, bad or just a part of true capitalism?

 

Also, if anyone has any recommendations/suggestions on information, tips or reads, please do share. Thank you!

 

Edit Below:-------------------------------------------------------------------------------------------------------------------------------------

 

So, I have been studying day in and day out. I began attempting to trade trip zero stocks, and learned why they are so bad. They are very difficult to get in and out of. After making a little money through them, i started learning about futures. I have been using a simulator with fake money as practice, to test strategies and stuff, and so far so good. If you know anything about futures, you know you buy/sell contracts, and with one contract, I make anywhere from 250$-1500$ a day. I am currently awaiting a big play that has my money tied up on a penny stock, but hopefully it will happen within the next few days and then I am moving full time to futures trading. I REALLY enjoy it and even though it is fake money, it feels great to be able to apply strategies that I spend a ton of time learning, and to see them working. When I go into a trade, I have about an 80% success rate, and again, that is with a single contract. When I have enough money, I plan to start trading with more then one contract, so my 250-1500$ a day will double, then triple and so forth.

 

Anyways, I would love to hear what people think about futures. Do you trade them? Have you ever tried or thought about it? And if you have traded them, did you have any success? Also, do you have any strategies that I can learn because even though I have been doing extremely well, I want to know everything there is so I can do even better.

 

P.S. If you are looking into futures and have any questions, ask away. I really enjoy talking about this and who knows... maybe I won't have the answer you are looking for making me do research to learn it myself. =)

[LibertyDefender]

I don't think it is "good" or "bad" in a moral sense (which I think is your question; if we are viewing trading through the philosophical lens of anarchy?). From a personal standpoint, I think investing in securities, be it buying stocks, bonds, options is an excellent way to preserve wealth in the face of inflation. I think many financial experts draw a distinction between "trading" stocks and investing: trading being short term flips which rely on unusual and perhaps widely unpredictable price fluctuations in a security, whereas investing would be the search for long term wealth preservation/generation. It takes an extremely savvy financial guru and likely a lot of insider knowledge to successfully be a trader in the modern world. In fact, with HFT (High Frequency Trading) and the proliferation of technology in the investment world, retail trading or flipping of stocks is a very tough prospect. Twenty years ago, when retail trading was just dipping its toes in the technology of the 90s, my guess it was easier to take advantage of market inefficiencies. All this being said, I am fairly sure you meant "trading" colloquially, and your intent is to invest in stocks, but I could be wrong! If you are looking to "flip" stocks (at least regularly), I would caution you against it, and I don't have too much advice other than that.

 

If your goal is more along the lines of investing - buying stock in a company with the goal of long term appreciation, I am more familiar and comfortable with this topic:

 

FIrst thing is first (and let's keep it to stocks for right now): Buying a stock (also known as a share) in a company is buying partial ownership rights in that organization. Let's say a company has 100 shares outstanding, i.e. floating around to be bought. Let's also say you buy 10 of those shares. You now own 10% of the company. In most respects, this entitles you to 10% of the earnings and value of the underlying company. You likely won't get any of the money in cash (unless the organization pays dividends), but you will see it in the long term appreciation of the price of your shares. I know we are looking at this from a personal finance perspective - so forgive me - but it is also important to note that the 10% ownership also give you a 10% say in many corporate level decisions of the company. You won't decide the day-to-day; that is the officers' jobs, but mergers, organizational changes, bylaw amendments, major contracts and board positions you will vote on. The aforementioned are fairly standard but the full list of things you are entitled to a say in would be public information through the company's published incorporation documents.

 

If you are new to investing, I strongly urge you to look into ETFs (Exchange Traded Funds). An exchange traded fund is a collective pool of invested capital (your money and mine for instance) which attempts to mirror some type of market. What the latter part means is that an "Industrial ETF" might buy 20 industrial stocks, or a "Gold ETF" may buy gold mining stocks or the underlying mining companies themselves. ETFs may even be created to mirror a certain geography: it could invest in only industrial stocks from Argentina, or agricultural products in the United States. ETFs have a ticker symbol like the stock of an individual company, and are traded on exchanges all over the world, but for the price of one share, you are gaining a portion of the appreciative power (and taking a portion of the risk) of all the underlying companies. For example, if you were to buy 10% of General Electric's outstanding stock directly, and General Electric invented a more efficient turbine engine tomorrow, you would be gaining 10% of GE's value appreciation as it relates to this product. Conversely, if tomorrow we learned that whatever company you purchased went bankrupt, you would lose all value you had in the stock. I bring this up because one of the advantages of the ETF is that it is a cheap way to spread risk. In owning a myriad of underlying companies, they make it less likely that any single bankruptcy would cause you to lose all the value you had in the investment. On the other hand, skyrocketing earnings will be similarly diluted.

 

I think ETFs are great for two types of people: risk adverse investors (this should include almost everyone new to investing) and people who don't have the time or interest in researching individual companies. Investing isn't a science, but it is scientific. To do it well takes a decent amount of time and energy. Some people would rather learn about a large segment of the economy and pick an ETF that mirrors that environment than pick individual winning stocks.

 

You should also be cautioned that ETFs do charge fees, regardless of whether your investment is making money or not. There is typically a management fee for AUM (Assets Under Management). This fee is generally calculated as a percentage of the value of the investment you hold. Thankfully, these fees are generally low, and the ETF market right now is competitive enough that free market forces may shopping for low-fee ETFs fairly easy. ETFs are preferable in my mind to mutual funds which usually charge higher fees for active management. Active management indicates that the fund manager is researching and attempting to pick winners and losers in the market. ETFs are passively managed, which means (as mentioned before) they are simply trying to mirror a portion of the market rather than find winning stocks. The particular stocks that an ETF buys can be found on the prospectus of an ETF before buying it. That way you know how many, in what apportionment, and to what end the fund invests. If you want to talk specific ETFs I would be very excited to mutually research.

 

Individual stocks are bought on an exchange in the exact manner an ETF is, only you would be buying one company rather than a pool of investments. In my mind, this type of investing is both exciting and challenging. You really want to do your homework on the company. If you get good at it, it obviously beats the heck out of ETF investing as you will see greater appreciation of your investment. However, you will obviously have to swallow any huge hits the company takes. (And I have been hit hard, twice) Most of my investing right now is done buying individual stocks, and if you want to talk about research or methods, I am happy to chat.

 

I recommend you read the following few books when you get a chance. They are all extremely fast reads:

"The Little Book That Beats the Market" by Joel Greenblatt; "The Little Book That Still Beats the Market" by Joel Greenblatt; "Beating the Street" by Peter Lynch; and "Stock Investing for Dummies"

 

You said you are just getting into it. Do you have an electronic brokerage account? If you do great, if not, I definitely have recommendations/opinions for you.

 

I know you said you are very new, so I apologize if some of what I have written made no sense - I would be happy to clarify. Conversely, if I have somehow exaggerated your unfamiliarity with the subject, I apologize for anything that was repetitious.

 

It is 1am here and I have to get up decently early. As such, I did not proof-read this to death. However, I hope some of this helped and I will return tomorrow with (hopefully) more lucid responses for you. Please reach out for any points of clarification or new questions.

 

Finally, if that is you in the photo, your beard is completely bad-ass. I hope you haven't gotten rid of it.

[abcqwerty123]

I don't know much about it myself, but maybe this video will be of some help?

 

 

Thanks man, I am going to check this video out.

 

 

I don't think it is "good" or "bad" in a moral sense (which I think is your question; if we are viewing trading through the philosophical lens of anarchy?). From a personal standpoint, I think investing in securities, be it buying stocks, bonds, options is an excellent way to preserve wealth in the face of inflation. I think many financial experts draw a distinction between "trading" stocks and investing: trading being short term flips which rely on unusual and perhaps widely unpredictable price fluctuations in a security, whereas investing would be the search for long term wealth preservation/generation. It takes an extremely savvy financial guru and likely a lot of insider knowledge to successfully be a trader in the modern world. In fact, with HFT (High Frequency Trading) and the proliferation of technology in the investment world, retail trading or flipping of stocks is a very tough prospect. Twenty years ago, when retail trading was just dipping its toes in the technology of the 90s, my guess it was easier to take advantage of market inefficiencies. All this being said, I am fairly sure you meant "trading" colloquially, and your intent is to invest in stocks, but I could be wrong! If you are looking to "flip" stocks (at least regularly), I would caution you against it, and I don't have too much advice other than that.

 

If your goal is more along the lines of investing - buying stock in a company with the goal of long term appreciation, I am more familiar and comfortable with this topic:

 

FIrst thing is first (and let's keep it to stocks for right now): Buying a stock (also known as a share) in a company is buying partial ownership rights in that organization. Let's say a company has 100 shares outstanding, i.e. floating around to be bought. Let's also say you buy 10 of those shares. You now own 10% of the company. In most respects, this entitles you to 10% of the earnings and value of the underlying company. You likely won't get any of the money in cash (unless the organization pays dividends), but you will see it in the long term appreciation of the price of your shares. I know we are looking at this from a personal finance perspective - so forgive me - but it is also important to note that the 10% ownership also give you a 10% say in many corporate level decisions of the company. You won't decide the day-to-day; that is the officers' jobs, but mergers, organizational changes, bylaw amendments, major contracts and board positions you will vote on. The aforementioned are fairly standard but the full list of things you are entitled to a say in would be public information through the company's published incorporation documents.

 

If you are new to investing, I strongly urge you to look into ETFs (Exchange Traded Funds). An exchange traded fund is a collective pool of invested capital (your money and mine for instance) which attempts to mirror some type of market. What the latter part means is that an "Industrial ETF" might buy 20 industrial stocks, or a "Gold ETF" may buy gold mining stocks or the underlying mining companies themselves. ETFs may even be created to mirror a certain geography: it could invest in only industrial stocks from Argentina, or agricultural products in the United States. ETFs have a ticker symbol like the stock of an individual company, and are traded on exchanges all over the world, but for the price of one share, you are gaining a portion of the appreciative power (and taking a portion of the risk) of all the underlying companies. For example, if you were to buy 10% of General Electric's outstanding stock directly, and General Electric invented a more efficient turbine engine tomorrow, you would be gaining 10% of GE's value appreciation as it relates to this product. Conversely, if tomorrow we learned that whatever company you purchased went bankrupt, you would lose all value you had in the stock. I bring this up because one of the advantages of the ETF is that it is a cheap way to spread risk. In owning a myriad of underlying companies, they make it less likely that any single bankruptcy would cause you to lose all the value you had in the investment. On the other hand, skyrocketing earnings will be similarly diluted.

 

I think ETFs are great for two types of people: risk adverse investors (this should include almost everyone new to investing) and people who don't have the time or interest in researching individual companies. Investing isn't a science, but it is scientific. To do it well takes a decent amount of time and energy. Some people would rather learn about a large segment of the economy and pick an ETF that mirrors that environment than pick individual winning stocks.

 

You should also be cautioned that ETFs do charge fees, regardless of whether your investment is making money or not. There is typically a management fee for AUM (Assets Under Management). This fee is generally calculated as a percentage of the value of the investment you hold. Thankfully, these fees are generally low, and the ETF market right now is competitive enough that free market forces may shopping for low-fee ETFs fairly easy. ETFs are preferable in my mind to mutual funds which usually charge higher fees for active management. Active management indicates that the fund manager is researching and attempting to pick winners and losers in the market. ETFs are passively managed, which means (as mentioned before) they are simply trying to mirror a portion of the market rather than find winning stocks. The particular stocks that an ETF buys can be found on the prospectus of an ETF before buying it. That way you know how many, in what apportionment, and to what end the fund invests. If you want to talk specific ETFs I would be very excited to mutually research.

 

Individual stocks are bought on an exchange in the exact manner an ETF is, only you would be buying one company rather than a pool of investments. In my mind, this type of investing is both exciting and challenging. You really want to do your homework on the company. If you get good at it, it obviously beats the heck out of ETF investing as you will see greater appreciation of your investment. However, you will obviously have to swallow any huge hits the company takes. (And I have been hit hard, twice) Most of my investing right now is done buying individual stocks, and if you want to talk about research or methods, I am happy to chat.

 

I recommend you read the following few books when you get a chance. They are all extremely fast reads:

"The Little Book That Beats the Market" by Joel Greenblatt; "The Little Book That Still Beats the Market" by Joel Greenblatt; "Beating the Street" by Peter Lynch; and "Stock Investing for Dummies"

 

You said you are just getting into it. Do you have an electronic brokerage account? If you do great, if not, I definitely have recommendations/opinions for you.

 

I know you said you are very new, so I apologize if some of what I have written made no sense - I would be happy to clarify. Conversely, if I have somehow exaggerated your unfamiliarity with the subject, I apologize for anything that was repetitious.

 

It is 1am here and I have to get up decently early. As such, I did not proof-read this to death. However, I hope some of this helped and I will return tomorrow with (hopefully) more lucid responses for you. Please reach out for any points of clarification or new questions.

 

Finally, if that is you in the photo, your beard is completely bad-ass. I hope you haven't gotten rid of it.

 

I am actually talking about trading over investing. I have a few friends who have been doing it awhile and they are all WAY up financially because of it, and so that made me want to look into it. I am starting a book called 'Trend Trading for a Living' that came highly recommended to me.

 

Thanks for all the information. I am new, but I have also learned tid bits here and there. I have been recently studying (last week or two) a ton and I do have an account with etrade. I have currently doubled my money since April 1st when my money was transferred to the account.

 

Basically, I am going to be trading sub zero, aka trip 0, stocks. From what I currently know, I want to find patterns in stocks that have maybe 2-3 ticks between the support and resistance, daily. Then basically, buy in on the support and sell on the resist. However, I don't know any strategies and don't even really know what I am looking for aside from a basic chart. That is what I am trying to learn about though and trend trading is what I am told I want to look into.

 

Anyways, I really appreciate the information because learning about investing will obviously help me as well, it is just something I am looking to do currently because, well, mainly because I have plenty of free time and everyone has told me that a good trader will always make more money and faster then a good investor.

[Wuzzums]

https://www.youtube.com/watch?v=BweADB78tBY

 

There's no predictability in the stock market so it's just a game of chance.

 

Look at it like poker. A seasoned player has a clear advantage over a newbie, and if all players at a table are of the same caliber then it's a coin toss who wins. This is why as a seasoned player, you would want to play with as many newbies as possible to make a profit. And how do you get newbies to join? Promise them riches, publish as many self-"help" books as possible, get as many people interested as possible, make the game as well known as possible, how easy the game is to play once you get it, offer "full-proof" strategies, assure them you have to invest lots of money to make lots of money, divulge "secrets of the trade", constantly tell them how it's "easy money", and so on. Personally I'm very weary of books written by people that make a living out of people not knowing what they teach.

 

Don't go in with both feet. There are several programs out there that let you test out the real market with fictitious funds.

[LibertyDefender]

Alright TruthLogicFreedom, I am glad I drew the distinction then! Good luck with the trading, and please keep me posted on how you do. Trading trip zeros is especially risky, but I am glad it is working out for you. I had a phase where I played around in them. I had huge success in 2013 with BMSN, but as a counterpoint, KMAG destroyed me. I am glad you have had success so far.

 

If you do change your mind, I have to disagree with Wuzzums' assertion that there is no predictability in the stock market. If he is positing that there is no predictability in certain stocks, especially the pump-and-dump trip zero schemes you are now playing, I agree. But just because there is risk in the stock market doesn't mean it is akin to gambling in the form of a poker game. If you buy a piece of a real company with genuine profits, you are then entitled to a piece of the risk and rewards of said ownership. Since companies employ people who are incentivized to make a better life for themselves, wealth generation is typically increasing, and therefore so is the company which employs them.

 

His caution is extremely prudent though, which is why I was trying to steer you towards low-load ETFs. I strongly recommend against financial advisors who charge anything but a flat fee for a particular service. (I would actually recommend against an advisor entirely unless you are very well personally acquainted with them) You should always do your own research, and you should collaborate with others to maximize your knowledge where possible. In the long run (10 to 20 year horizon or longer) a diversified portfolio has an unbelievable track record in the stock market.

Also, you probably don't want to read any of the books I recommended in my original response. They are definitely books about investing, not trading. Likely, there are more informative books for your course of action out there. Again, sorry for my confusion! You had the verbiage down better than I gave you credit for!

[abcqwerty123]

https://www.youtube.com/watch?v=BweADB78tBY

 

There's no predictability in the stock market so it's just a game of chance.

 

Look at it like poker. A seasoned player has a clear advantage over a newbie, and if all players at a table are of the same caliber then it's a coin toss who wins. This is why as a seasoned player, you would want to play with as many newbies as possible to make a profit. And how do you get newbies to join? Promise them riches, publish as many self-"help" books as possible, get as many people interested as possible, make the game as well known as possible, how easy the game is to play once you get it, offer "full-proof" strategies, assure them you have to invest lots of money to make lots of money, divulge "secrets of the trade", constantly tell them how it's "easy money", and so on. Personally I'm very weary of books written by people that make a living out of people not knowing what they teach.

 

Don't go in with both feet. There are several programs out there that let you test out the real market with fictitious funds.

 

I will check out that video in a little bit, but I have to disagree with you about there being no predictability. My idea of "the future" is that everything is predictable, but no predictions can be a 100% guarantee. What I mean by that is, when you play blackjack, you can make a prediction based on what cards have already been played, the likelihood of you getting the card you need or slightly below and the likelihood if of you getting a card that is too high. That prediction won't be 100%, but you can have a better % chance then if you just guessed with 0 knowledge of how the game works. The same goes for the stock market. The stock market is run by people and participated in by people, therefore I need to understand people and how the majority of stock traders who are trading with the price ranged stocks I want to. I also can look at the patterns of all of the numbers to find when to know when a stock with top off or take off, along with many other things. I am not saying I am some master at this and that it isn't difficult, just that I will never accept anyone that says that something is completely based on luck and that there is no possible way you can't even be %1 better off then going in completely blind.

 

Oh, I used to play texas holdem, a type of poker game. That game requires you to play against the table instead of the house. First, I learned how to play the game and the numbers behind my chances. Then I began playing a little with just local friends to learn to read people. Then I went to casinos once in awhile and played online (back when it was legal). The only time I ever didn't double my money was when I played with friends when I first started out because they would play tourny style where you play until 1 person is left. Every other time I have played, I have double my money at the very least because I would pay VERY close attention to people and understand what they had through body language. At the same time, I would play extremely random, always being as weird as possible and then randomly being serious and such. There most likely was a pattern to how I played, but I never stayed around long enough to give someone the chance to understand me. The only reason I stopped played was because, it was very boring to me. I don't know what it was, but gambling became boring after I learned how to play and so I moved on. Now stock trading is what looks intriguing, and it may become boring after I learn it all, but it is currently exciting and a challenge, and I want to learn/understand it.

 

 

Alright TruthLogicFreedom, I am glad I drew the distinction then! Good luck with the trading, and please keep me posted on how you do. Trading trip zeros is especially risky, but I am glad it is working out for you. I had a phase where I played around in them. I had huge success in 2013 with BMSN, but as a counterpoint, KMAG destroyed me. I am glad you have had success so far.

 

If you do change your mind, I have to disagree with Wuzzums' assertion that there is no predictability in the stock market. If he is positing that there is no predictability in certain stocks, especially the pump-and-dump trip zero schemes you are now playing, I agree. But just because there is risk in the stock market doesn't mean it is akin to gambling in the form of a poker game. If you buy a piece of a real company with genuine profits, you are then entitled to a piece of the risk and rewards of said ownership. Since companies employ people who are incentivized to make a better life for themselves, wealth generation is typically increasing, and therefore so is the company which employs them.

 

His caution is extremely prudent though, which is why I was trying to steer you towards low-load ETFs. I strongly recommend against financial advisors who charge anything but a flat fee for a particular service. (I would actually recommend against an advisor entirely unless you are very well personally acquainted with them) You should always do your own research, and you should collaborate with others to maximize your knowledge where possible. In the long run (10 to 20 year horizon or longer) a diversified portfolio has an unbelievable track record in the stock market.

Also, you probably don't want to read any of the books I recommended in my original response. They are definitely books about investing, not trading. Likely, there are more informative books for your course of action out there. Again, sorry for my confusion! You had the verbiage down better than I gave you credit for!

 

I agree with you, that there is predictability in the stock market, but I know that there is predictability in everything, even the pump-and-dump trip zero securities. Anyways though, I really appreciate your information, and I might look into those books later, but I want to understanding trading as much as possible before I move onto investing. Thanks a bunch for your help because I may know a little bit, but I still learned stuff from what you said, even if only understanding that some of my ideas were correct.

[LibertyDefender]

It seems to me like you knew a lot more than you were giving yourself credit for! Again, good luck. Please keep me posted with a personal message now and again, I would like to know how you do.

[abcqwerty123]

It seems to me like you knew a lot more than you were giving yourself credit for! Again, good luck. Please keep me posted with a personal message now and again, I would like to know how you do.

 

Oh, really? I didn't know how much I knew, just felt like I was barely scratching the surface, but thank you! I will for sure.

[abcqwerty123]

I have edited the original post, so take a look at the edit and reply if you feel like it.