My experience trading stocks so far..

During the summer of 2015, I saw an ad for a new app called Acorns on Facebook. The Acorns investing app works by encouraging you to invest your spare change. Using a system they call “round-ups,” Acorns monitors your bank account and automatically invests the change from your daily purchases. I started to research and even deposited a little money to see what could happen. I quickly found out, that Acorns is more for the long term.

Next, I discovered penny stocks and Robinhood. I bought a few hundred shares of a few stocks that were around 10 cents. I started to use stock profit calculators dreaming of what could happen if my investment went up to a few dollars.

A few weeks of playing with these stocks, I quickly lost some money and got my first lesson about bagholding.

I started to learn about technical analysis and different trading strategies on various websites. I eventually made the switch to a TD Ameritrade account thinking their trading platform and tools were better than Robinhood.

Within a few months, I discovered Stocktwits and found quite a few scammers selling courses and subscriptions to their trading chat rooms. I foolishly subscribed to a few of these thinking it would help me do better with stocks.

About 5 months of trading I started with $5500 of savings and lost more than half of it. I lost over $1000 in commissions alone from TD Ameritrade because I was trading quite a bit.

I ended up giving up on stocks for a bit convincing myself that the people on the other side of these trades are either very smart people who study the markets 24/7 or computers that have much faster executions than me.

In 2016, I started up my Robinhood account again and tried a few trend following strategies after reading a few books and had mixed results. I think I didn’t do as well as I hoped because I was looking for gains in a short timeframe and trend following is a longer term strategy.

Now in mid 2017, I am back to trading again with Robinhood. This time I am trading with $500 since I am still playing around with different strategies.

Here are rules I am following so far and I’m sure these will change as I fine tune in my latest strategy.

  1. Avoid Stocktwits and any other social media regarding stocks.
  2. Avoid Stock Picking Services and Gurus.
  3. Do not trade and stocks that are not on NYSE or NASDAQ.
  4. Do not trade stocks that have less than 500,000 average daily volume.
  5. Do not risk more than 1% of my portfolio on any trade given my account size.
  6. Position size using 2x-4x ATR (Average True Range).
  7. Buy stocks only during the last hour of the trading day.
  8. Add a stop loss on every order.
  9. Trail stops every time a new high of day is made.
  10. Do not exit any trade until stopped out.

 

I have discovered so far that the stock market is random and you have to take what it gives you. I am convinced if I can keep my losses small and let my gains run, I will be profitable in the long run. I will post more on the subject in the future.

A few books I have read along the way.

  1. How I Made $2,000,000 in the Stock Market by Nicholas Darvas
  2. The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder
  3. The Honest Guide to Stock Trading: Make Market-Beating Returns. Achieve Long-Term Wealth by Llewelyn James
  4. Technical Analysis For Dummies by Barbara Rockefeller

 

Also, if you are thinking about signing up with a guru, I highly recommend you check this site out first to help you avoid scammers: http://www.tradingschools.org .

One Reply to “My experience trading stocks so far..”

  1. Drew
    After more than 20 years of trading experience, I would add some things to your stock screening.
    I would add a few fundamentals to the screen..
    As I’m sure you know, fundamentals tell you WHAT stock to buy…. Technical analysis tells you WHEN to buy.
    The fundamentals that I add to my screen ( btw, I use VectorVest for everything now and have been for many years ) are.
    1. Positive earnings growth
    2. Positive earnings.. You can have positive earnings growth but the company can still be losing money. I like companies that actually make money.
    3. For POSITION SIZING i utilize the 2% rule described below……

    The 2% Rule of Portfolio Money Management
    This rule states that you will never take a position in a stock where taking a loss (determined by what stop you set) will be more than 2% of the portfolio value. The idea is to only take small losses when you are wrong. Never let it get away from you….Know prior to getting in where you will get out. !!!!!!!!!
    By using this simple formula below it will help us determine how many shares of a stock we will buy in order to maintain the 2% rule of Portfolio Money Management.
    Prior to entering the position we will need to know at what point we will take a loss. This can be a mental price or a hard stop set in our brokerage trading platform..
    1. Determine your stop loss. Look at a chart. See if you can recognize support and resistance. It is a lower risk trade if you are buying close to support. The stop can be smaller which will allow you to buy more shares and still maintain the 2% rule.
    2. Determine Position Size by applying this formula.
    Formula # of Shares = (Portfolio Size x 2%) / Stop Size
    Example Lets say I have a $55K portfolio and I am looking at a $27.00 stock to buy and I determine that if the stock drops by 8% I am going to sell it. Using the 2% rule of money management, how many shares of this stock should I buy?
    FIRST….Determine the size of your stop… $27.00 X .08 = Stop Loss of $2.16 .
    This means on your trading platform you put a stop to sell if it falls below $24.84
    NEXT… Apply the above formula..
    #of shares to buy = (55,000 x .02 ) / 2.16 ….answer is 509.26 shares.

    Remember. It’s all about living to trade another day if we make a mistake in buying a particular stock. If you have no equity left, you’re out of the game. Don’t take big losses. Use prudent money management.!!!!!!!!!!

    Check out Vector Vest… You can screen based on technicals and also fundamentals. Also you can set up a trading strategy based on your screens and defined stops and then set the clock back and see how well the strategy performed. Plus it will give you buy sell and hold recommendations on 8000 stocks that are in the data base… I have had many trading programs and VectorVest by far has out performed all of them…
    http://www.vectorvest.com

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