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Southerncomfort

Knowledge is power

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As the title says knowledge is power and before I even contemplate opening an account I have a lot of learning to do!!

 

Im looking at putting some spare cash to work and want to start trading shares but with so much information about whether to trade equities, options, forex etc and whether buying shares or speadbetting is cheaper on tax Im looking for people with a bit of experience to narrow down the learning curve.

I work during the day so will be trading/betting in the evenings on the US markets. I want to cover both short term and long term gains by buying and holding long term stock for the dividends but the short term trades (daily/weekly/monthly) should I buy the shares or bet on the price, which option is the most tax/cost efficient?

Trying to read about and learn all the aspects of trading will keep me busy for years so any advice on which areas/styles I should focus on as a starting point would be appreciated.

 

Thanks

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proper application of knowledge is power.

 

knowledge comes from information,

but information does not necessarily lead to knowledge

 

a lot of information does not equal to a lot of knowledge

 

information overload can lead to confusion

 

knowledge overload can lead to... (fill in the blanks)

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Information overload is what prompted the original post.

 

I live in the UK and work an early shifts so can trade from around 3pm through to the evening which is why I was focusing on American markets.

 

Also are there any cost I should be aware of with trading US stocks, i mean other than the trading cost and stamp duty and capital gains tax. I know these taxes aren't applied if spreadbetting but if spreadbetting is illegal in the US can I still bet on US traded stocks?

 

Many thanks

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Information overload is what prompted the original post.

 

I live in the UK and work an early shifts so can trade from around 3pm through to the evening which is why I was focusing on American markets.

 

Also are there any cost I should be aware of with trading US stocks, i mean other than the trading cost and stamp duty and capital gains tax. I know these taxes aren't applied if spreadbetting but if spreadbetting is illegal in the US can I still bet on US traded stocks?

 

Many thanks

 

It is only illegal for US Residents & Citizens (and a few other minor misguide countries). Everybody else can legally trade US based CFD's etc. The tax free status of spread betting is only one consideration.

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Spreadbetting companies based in the UK offer bets on certain US stocks (major companies), its quite limited though, also the US exchanges are covered as of course is forex. There is no stamp duty when spreadbetting, only when buying UK shares.

 

As you are aware, there is no tax on spreadbetting profits, but also, you can not offset any losses against capital gains etc..

 

Best to open a demo account with a couple of spreadbetting companies, try their platforms / charting and trade in demo mode for quite a while, learn when to buy and sell in demo mode and not with your own money. I guarantee you will be cleaned out if you learn the hard way. Have a look at Meta Trader, you can get a time unlimited demo account through Admiral Markets (not UK based).

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Southerncomfort - we're all learning here all the time, so welcome to the club. I've been studying trading here in UK for years, and I'm just starting for real (it may not take you that long though). The first problem is that it's such a huge area, and the next one is that the professionals who know how to make money for real are mostly busy working for other people, or too busy trading for their own accounts to teach what they do. Relatively few of them post on trader forums, and it can be difficult to work out who is for real (as on any forum) - so I wouldn't recommend taking anything you read (including this!) at face value unless you find confirmation elsewhere.

 

Many trading coaches either don't trade themselves (some tried it and failed), or have worked for institutions but not traded full time for themselves, and not all will tell you the truth about whether their methods can really make money. It's often fairly safe to give them credibility in inverse proportion to how loud they shout and how good they say they are. Promises that sound too good (i.e. get rich quick) almost inevitably are. In one area - FX - background info on all the basics of how the market works, explanations of common indicators, and basic trading concepts, patterns and terms, is readily available free from websites. Some educators charge $'000's for this same info in relation to equities, and you still don't have a good trading plan at the end of it. The reason there are so many FX trading info sites giving away this stuff is that they're covered in ads for retail FX brokers who give them commission or pay advertising - the trading educational and retail FX world is full of cross-commissions taken from your money.

 

Spread betting - many spread betting companies are just bookmakers really (that's what they're supposed to be) - and your chance of success with a few is about the same as putting your money on a horse, because they're often trading against you one way or another (increasing the spread, phantom transactions, have a look on the forums). There is at least one spread better in UK who operates a different model and has no incentive to behave like that, but you have to trade large size with them, which probably isn't what you have in mind to start with.

 

Some retail FX brokers are little better, because most make their money from the spread (difference in buying and selling price). They're effectively making the market you're trading in (or using the market of a larger broker), and in some circumstances they may also have to trade against you. There are FX brokers who make their money by charging you commission on your trade value, and you'll find some of those discussed on this forum - they mostly have either what is called an ECN system or operate a Currenex platform. Their interest is mostly for you to trade heavily, so they have no interest in you blowing your account out (unlike other retail FX brokers - that's why those offer such large leverage). However, most have a minimum account size of $10,000. FX brokers are better than equity and futures brokers at providing free 'training' or 'simulator' accounts, which can be more or less realistic (some fill all your orders immediately with no slippage, which is unrealistic), but at least you're learning without losing real money. If you can't make money consistently with a simulator, what's the point of trading with real money? You can also trade FX with Futures, which is a real zero-sum market (ie if your broker is trading against you, it's by accident, not design).

 

Equities - 'direct access' trading accounts can put you right in the real electronic market (e.g. NASDAQ or NYSE) with the professional traders. They're mostly fast platforms, and the liquidity you're trading (ie whether you get filled at the price you want) is coming from THE real market. not 'a' market made by the broker as so often in FX. Incidentally, almost all FX broker sites will cite the fact the FX is the biggest market as a reason for trading it. That's only true in aggregate, but irrelevant if you're only trading the part of it your broker controls. Professionals usually advise against trading stocks from 'tips' - often the tipster is a journalist who has never traded, or if he is a professional (eg your stockbroker report, or a mercheant bank upgrade), he may be selling you the shares (or whatever) he has been accumulating at lower prices for a while.

 

If I was starting again, I'd try to find someone who is actually making real money consistently for sure (don't take their word at face value, some people lie about this), and ask them where they learned what they do. There is a great deal of counter-intuitive but vital psychology involved in trading (I'd suggest starting with Trading in The Zone by Mark Douglas). All professional traders I've spoken to say that good psychology and money management plus simple logical reasonably effective trading methods works better than the 'Holy Grail' of complicated trading schemes and indicators on its own. I've been there and bought the latter - they're very pretty and make you think you must be trading right, and most are an expensive waste of money. Trading plans that involve buying the author'sd expensive indicators are usually a waste of money, because there's little that's new in the world of indicators - some are just dressed up overpriced versions of open source indicators you could get for free on this site (and some indicator writers are kind enough to post their indicators here for free).

 

One other thing - if anyone calls themself a 'Master', or a 'Guru', be very careful, some are very persuasive people, but only masters at emptying your wallet. If you're a natural gambler, or at the other extreme, find losing money very painful, you may find trading isn't for you. Be aware that everyone in the market, and a high percentage of those around it, wants YOUR money, and many are well equipped to take it. Everyone I've met who trades for real says it's one of the most difficult things they've done, but it's fascinating.

 

Hope that helps, and good luck, Max

Edited by maxr

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Knowledge is Power they say but Power is the ability to bring Knowledge into physical reality.

 

Maxr made a very good comment.

 

Well as a newbie in forex, if you're really going to last your lifetime years, the most important thing is to start building your trading principles.

 

The learning curve is a must but realistically speaking, it is not a difficult one, it can be quite easy if you meet an honest trader; he will guide you through all you need to know.

 

Whether you use your own learnt principles or you stick to someone's else's..., be sure to master it and use it well to your advantage.

 

My interest in this forum is to see how I can honestly help people trade online forex better - at least as many that will believe there can be a difference in the way things have been done all these 'centuries'.

 

Again, knowledge is Power but Power is the ability to bring Knowledge into physical reality.

 

You can turn all your knowledge into trade profit returns.

 

 

To your trading success.

Aden

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