Help With My Stragety
Q: Here is what I was thinking about Today: I have 5K in cash. I was looking to do some short term trading, but right now I am confused. I am awaiting a check to my brokage, so I cannot trade with real money. So instead, i am using the contest trading system with my brokage. I have to say that I am doing pretty poorly. I have reset it about 10 times, and thats not good. While I was in school, I thought that I would do some short term trading over the summer. After the market clsoed, I would go to my watch list, and look at what they did today. I would usally say, wow, this one came down a lot, If I could, I would buy it here. It was a list of about 30-40 stocks that I monitored.
A:
Let me be blunt, Matt. You are losing your ass now. You are going to
lose your ass with the real money. That's a fact. Take it anyway you
want. If you continue this way, by the end of the year you will have
zero money.
Put your money in a couple of good mutual funds. Get a good job,
continue to put part of your earnings into mutua
years you'll have much, much more money than the way you are going now.
I don't know about that, but it's pretty much guaranteed that UNLESS
you are making serious consistent gains in contest trading you are
CERTAIN to lose your ass with real money.
If you can make serious, consistent gains in contest trading at least
there is some chance you won't lose it all immediately; just don't
talk yourself into believing that contest trading is anything like
real money trading. Contest trading is good practice, but the
emotional element is absent and that is the most important element of
all.
I'm late catching this thread, but I'll put my two cents in
anyway. For what it's worth, you are not yet ready for trading stocks
with real money. Your idea of trading with the "contest" system is
not bad, but you will need to spend a lot more time learning and
"practicing" before you're ready to start risking real money. If
you're not willing or able to spend a lot of time learning the ways of
the market, you would be better off following Peter's advice and
investing in a good mutual fund.
As far as "paper" trading, the trading contests that you
mentioned are one way of gaining experience. Some will protest that
it's not the same as using real money, but it's still not a bad way to
start out. Another way is to set up one or more "pretend" portfolios
on one of the websites that provide this service. I use Clearstation
and MSN MoneyCentral.
Clearstation is good for tracking lists of stocks, with links
to charts, news, etc. MSN has portfolios that you can set to keep a
cash balance, which then changes as you buy and sell stocks. You
could start with $5000 (or any number) in cash and enter buys and
sells using that principal.
In any case, you'll need to decide upon one or more systems
for picking (and selling) stocks. If you spend the time required to
learn more about stock trading, you will come up with different ideas
that you can test using these "paper" portfolios.
Doing well with paper trading does not mean that you will
succeed with real money. On the other hand, if you don't learn enough
to succeed at paper trading, you're not likely to make a profit using
real funds.