The best advice for non-professionals is to simply not trade. Taking commissions into account, your expected excess return is negative, i.e. you'll better off just going long on some index fund. All the advice being thrown around at laymen on stock trading are nothing more than empty platitudes that have not been empirically shown to consistently work.
Keep in mind that when you're playing the markets, you're competing against institutional investors and hedge funds that have far superior resources (data, algorithms, etc) to better analyze the market and to even move the market in a direction favorable to their holdings (e.g. Warren Buffet). The most likely outcome of trading is that you'll get out-gamed by these sophisticated investors.
>Buy stocks that is being bought. Sell stocks that are being sold. (In other words, keep track of the stock order flow. Bid/asks).
This is one of the most overlooked things in trading when it comes to non-professionals. Not all price shifts are created equal. Watching the order flow, especially the volume of trades at each price, is far more informative than simply looking at price shifts. A few small trades at a lower price does not necessarily make a trend.
> Cut your losses quickly and with determination, while you should let your winners run as long as possible.
Yes. You can also learn this from playing Poker. Science even has a name for the inverse behavior: Disposition effect.
> Buy stocks that is being bought. Sell stocks that are being sold. (In other words, keep track of the stock order flow. Bid/asks).
And this is way I stopped doing this. It takes a lot of time and you feel guilty whenever you are not looking. Many people may know this effect from Facebook or Twitter. Consider it much worse, when you have a lot of money at stake.
This was pure gambling. Unless he statistically did the sums (nothing mentioned in the article), this was pure and simple gambling (probably going off candlestick trading which is big in Japan). In the finance world, this is also called dumb money.
It's incredibly difficult in the long run to make money by day trading. You need to be in the top 20% of trading ability to just break even (meaning, 80% of people who day trade outright lose money) and among the top 2-3% of traders if you want to make any substantial profits.
I personally take Charlie Munger's approach of going long a US equity index with most of my money and then using leftover funds to exploit what I perceive as structural mispricings in different asset classes/financial markets that I think will correct themselves in the short/medium term. Bitcoins, for example, have been a fun ride since I bought some at the start of 2013.
Reminds me of a Ghost in the Shell plot, where one man wrote software that dominates the Japanese market. I'd make a joke, but that would fall into spoiler territory.
BBC recently ran a two part documentary about traders and day-traders. It was called Millions By The Minute. It was quite entertaining (not very informative though).
I don't know if day trading and currency trading are more common in Japan than other countries, but low interest rates certainly encourage gambling. Here are two more articles on Japanese amateur currency traders and day traders:
[+] [-] ersii|11 years ago|reply
* Cut your losses quickly and with determination, while you should let your winners run as long as possible.
* Buy stocks that is being bought. Sell stocks that are being sold. (In other words, keep track of the stock order flow. Bid/asks).
Feel free to complement this, if I missed anything. In general an interesting read/story.
[+] [-] asdfologist|11 years ago|reply
Keep in mind that when you're playing the markets, you're competing against institutional investors and hedge funds that have far superior resources (data, algorithms, etc) to better analyze the market and to even move the market in a direction favorable to their holdings (e.g. Warren Buffet). The most likely outcome of trading is that you'll get out-gamed by these sophisticated investors.
[+] [-] nandemo|11 years ago|reply
Except that he first made his fortune by buying stocks that were being sold (due to an error of the other side, but still being sold).
[+] [-] downandout|11 years ago|reply
This is one of the most overlooked things in trading when it comes to non-professionals. Not all price shifts are created equal. Watching the order flow, especially the volume of trades at each price, is far more informative than simply looking at price shifts. A few small trades at a lower price does not necessarily make a trend.
[+] [-] qznc|11 years ago|reply
Yes. You can also learn this from playing Poker. Science even has a name for the inverse behavior: Disposition effect.
> Buy stocks that is being bought. Sell stocks that are being sold. (In other words, keep track of the stock order flow. Bid/asks).
And this is way I stopped doing this. It takes a lot of time and you feel guilty whenever you are not looking. Many people may know this effect from Facebook or Twitter. Consider it much worse, when you have a lot of money at stake.
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] leoh|11 years ago|reply
[+] [-] pumpkinattwelve|11 years ago|reply
Remember kids, there are two types of traders:
Know which one you are.[+] [-] Humjob|11 years ago|reply
I personally take Charlie Munger's approach of going long a US equity index with most of my money and then using leftover funds to exploit what I perceive as structural mispricings in different asset classes/financial markets that I think will correct themselves in the short/medium term. Bitcoins, for example, have been a fun ride since I bought some at the start of 2013.
See this study on day traders for more info:
http://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/...
[+] [-] rurounijones|11 years ago|reply
Hmm, that information seems a little too identifying.
[+] [-] seanmcdirmid|11 years ago|reply
[+] [-] fdsary|11 years ago|reply
[+] [-] JacobAldridge|11 years ago|reply
[+] [-] _random_|11 years ago|reply
[+] [-] thirdtruck|11 years ago|reply
[+] [-] Tycho|11 years ago|reply
[+] [-] greeneggs|11 years ago|reply
[1] http://www.nytimes.com/2007/09/16/business/worldbusiness/16h... [2] http://www.nytimes.com/2006/02/19/business/yourmoney/19day.h...
[+] [-] JacobAldridge|11 years ago|reply
[+] [-] leoh|11 years ago|reply
[+] [-] VexXtreme|11 years ago|reply
[+] [-] _random_|11 years ago|reply