posted
First off, Ill start by saying im only 22 and completely new to this.
I recently setup my account with Banc of america investment services. Its a cash account.
I did some daytrading of small ammounts, a little over $1k per trade. I think i ended up 200 short. I thought no big deal theyll just take 200 out of my account. wrong.
I guess i shouldve researched this more, because they want to take out all of the purchases, only to put the sale back in immediately after. I was thinking they would just take the difference.
So, I need to setup a Margin account. Luckily they only require $5,000 in securities, which i do have and can keep in there.
Now, my question to you, is it worth it to go through the ropes to set up a margin account and play with the banks money, or should i just make sure whatever I do during the day can be covered by my linked account and not do multiple day trades?
I plan on dumping some of my current stock thats underperforming to put some $ towards day trading, so unsure if I could keep that $5,000 minimum up...
advice for a beginner?
(hopefully its not to read a book... i may be young but i caught on quickly as to who makes money and who makes money by telling the world they make money )
posted
Ok, Ill stick with cash accounts until I learn more.. Thanks.
I just didnt quite understand at first how the bank handled the trades and i guess I can just stick with one, lets call it, purchase and sale on same day as not to offend those that believe i shouldnt be day trading or am using the term improperly .
Posts: 869 | From: Az | Registered: Sep 2006
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What is the fee structure at Banc of America? Just guessing you can find a better provider if you are planning to be actively trading.
Tex is right. There are a lot of dangers in the pennystocks lake. Definately do not want to jump in without knowing the waters.
About books...in some instances you are correct but certain books can save you a lot of headaches. Machiavelli has a good list posted in the newbie thread.
Two warnings about cash accounts (that's what I use):
Only trade with settled funds. That way you won't get stuck waiting for settlement if the bottom falls out.
You can only flip a stock three times per week in a cash account without being flagged as a daytrader. By flip I mean in and out on the same day. You don't want to get flagged.
This board is an invaluable resource. Don't be shy to ask questions. But remember, the legwork and the decision of what to buy always rests on you. Rely on others for those things and you will get burned.
Good Luck,
The Bigfoot
-------------------- No longer eligible for government service due to lack of tax issues. Posts: 5178 | From: Up North | Registered: Dec 2005
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posted
Its just a flat 10$ trade, no commissions, no minimum $ requirements.. except margin, minimum $5k securities for collateral.
Thanks for the warning on the flips, Ill avoid that until my acct is changed.
I just spoke with the bank and will probably move to a margin account afterall. The settled funds issue worries me, as I dont want to be waiting 4 days between trades and overdraw my checking account because the money hasnt cleared yet.. and even if i move $ over to brokerage acct first, the sale will always take 3-4 days and goes into checking.. so no chance of being able to do much active trading.
In the last couple months ive learned ALOT from this board. Your posts have always been very helpful.
Yes I do agree and understand the pennys are risky.. i have taken everyones advice here on setting emotions aside and learning when to cut bait, both on red and green. Very good advice.
posted
Advice to beginners: Do not daytrade you are not ready and will get kicked around by the Market... instead swing or position trade to get your feet wet... do not be in a rush as Tex has said... remember patience is a virtue and cash is a position also ...
Advice to Beginners: Reading books is a must... if only at least one book... those authors/professional traders traded successfully and professionally before they wrote those books so obviously they know a thing or two more then the rest of us who are wannabe professional traders... lol
Advice to Beginners: do not trade on Margin if you do not know what you are doing... your playing a dangerous game with your $$ if you do
Advice to Beginners: Explore other brokerages before trading through a bank... there are better alternatives
Advice to Beginners: If you think I do not know what I am talking about and do not want to listen to my advice then listen to Bigfoot, Tex and others who already say some of the same things that I already do but who are listened to more then I am...
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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posted
I suppose ive miscommunicated my intentions.
It also appears, from your other posts, that Im using daytrading incorrectly, or am calling it by different terms than you.
My preferred method, is buying one, maybe two securities a day and selling at some point throughout the day.
Many dont call this daytrading, as they refer daytrading to much higher volume and rentry several times within hours, etc. Is this what you mean by daytrading?
Brokers, personal preference.. I like BOA's customer service, always quick to help.
I did not mean to say I will be trading on margin.. the Broker just wanted me to have a margin account, so that my money stays in the account and doesnt sweep back every night at midnight.. thus letting me buy and sell throughout the day without funds flying back and fourth.
And about all the advice for beginners, can you identify the root of the reason they get "kicked around"? Its going to be a personality problem.. whether the beginner in question has an emotional attachment to their money/stocks, if they are indecisive, believe in spiritual stocks, who knows. But beginners dont fail, people fail.
Can you identify the traits of those that you have seen fail vs those you know to succeed?
Posts: 869 | From: Az | Registered: Sep 2006
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posted
And Im more than willing to listen, but I can not stand vague responses or comments. Theres always a reason behind everything, and I have always thought if someone says sometihng without expressing that reason, they dont know it themselves. Or, perhaps theyve said it so many times it just bothers them to say it.. so then, why say it?
Im guessing that may be why many dont listen.
I enjoy soaking up information, as long as its comprehendable and has some backing!!
technically, daytrading is a roundtrip, in n out in same day. True: "real" daytraders may hit the same stock several times in one day...
I don't want a "full-service" broker. For one, they don't know chit about pennies. Several of us prefer multiple cash accounts to one account--even one account with margin. Mach turned me on to Choicetrade, which charges $5 per...*and* allows stop-limits on pennies...pretty cool.
However, as mentioned, several here also like margin accounts for avoiding settlement issues. Frankly? never been a problem for me.
posted
I don't understand the idea of funds sweeping back and forth. Do you mean to your checking account? I guess that would kinda make sense for a bank.
Issue is totally a matter of preference and if you are comfortable there then stay. $10 a trade ain't the best but it is better than many "full service" brokers depending on what type of tools come with the service. Down the line you may want to look at online brokers but that'll be up to you.
Why beginers get beat up? Many reasons.
Don't have expireance with the math involved and end up with too big or too small a position to take advantage of the stock.
They research a stock and believe they have a winner and haven't gotten to the point where they are willing to admit to themselves they are wrong.
Don't understand MM's and how they operate. I.E. get frustrated at what they see as sideways trading when they think volume deserves an increase and don't look further into the reasons why the stock isn't growing...Are frustrated that they can't get in or out at bid or ask and again blame MM's rather than figuring out what is going on...Fall for the dips and panic sell...And the opposite, convince themselves a reversal or downtrend is only the MM's taking her down for a dip and hold long after they should've...etc.
Ooo...and here is a big one. Lots of newbies believe that the only way to make money quick is to put a majority of their capital in one stock. Won't say I haven't done it before myself but CAN'T say it has worked out the way I wanted much either. Much more likely to make money if you do not risk a lot in one play. Limits your upside a little but hey...you got time.
.....Think of it this way.
A person has an account with 5000 in it. He puts it all in one stock and the next day terrible news comes out and he gets out with a 25% loss. He just lost 1250 and shouldn't trade until the funds settle which means he is out for the week.
Same person, same account, same stock, but he only puts 1000 in. He loses 250 and has 4000 still settled in his account to continue trading with if he finds something good.
.....
There are many different trading styles and there are even more individual hangups that cause traders problems.
Knowledge is good you will never know everything. Keep learning.
Rules are good but don't beat yourself up when you break them (you will).
I am a believer in listening to your gut...but it must be controled.
Candlesticks are great but they won't tell the future. Same with TA (technical analysis).
I could go on but Leno is on.
And Mach...you don't give yourself enough credit. Some of the advice I give I learned from you!
Later,
Da Foot
-------------------- No longer eligible for government service due to lack of tax issues. Posts: 5178 | From: Up North | Registered: Dec 2005
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posted
One thing that seems elementary now, but was hard for me to grasp as a new trader, was the difference between a 'margin account' and 'trading on margin'. I have a margin account with choicetrade. I use only the cash I have in my account, and I avoid settlement issues. I don't use the margin portion (double my cash margin position, provided by the broker) to trade on margin. That way I am only gambling with my money and not setting up for a double loss by using margin money that is not mine.
The account is essentially tagged as a margin account, but is really no different than a straight cash account; that is, if you only use the amount of your actual cash position to trade with. If you use the additional margin part provided by the broker (which I don't think is possible with pennys anyway) you are using more than your cash position, and that can get nasty with margin calls if the pps drops...
So Tim, to answer your question, I would recommend a margin account with choicetrade using the capital that you feel comfortable with, and only trade with the cash position you have. choicetrade requires $2000 in cash/securities in order to have and use a margin account. I would peruse their site and decide what you want to do. Hope that helps with the margin account question.
PS- Listen to these guys, they know what they are talking about...
Posts: 2741 | From: Seattle | Registered: Feb 2005
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I got myself in sort of a pickle with the brokerage.. Guess I wasnt clear enough of my intentions and they are setting me up w/ a money market now also.. which is what I really need to be able to buy and sell without settlement delays... and not buy ON margin. The margin account wouldve taken care of my needs, IF i bought on margin.
posted
Makes no sense to me but I've never traded with a bank before.
Enjoy, and may your sails always find good wind amid the loads of hot air.
-------------------- No longer eligible for government service due to lack of tax issues. Posts: 5178 | From: Up North | Registered: Dec 2005
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posted
Money market account makes no sense, that's no more than an interest bearing checking account that your brokerage pulls money from to purchase the securities you want. You need the margin acct. to be able to "day trade" and not worry about settelment days. As previously stated you need to have discipline. For example -$5000 in a margin account = $10,000 buying power -so you buy $5000 of stock XYZ and sell later in the day for $6000. In a normal cash account you would have to wait 4 business day to use that money again. With a margin account you can let your $6000 settle, and still buy another $5000 of another stock the same day. The discipline comes into play because you may be tempted to buy $11,000 worth of some stock on the 4th day, when in reality you only have $6,000 cash.
-------------------- If ignorance is bliss, why aren't more people happy? Posts: 2647 | From: MN | Registered: Feb 2006
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posted
But in that scenario theres still settlement delays.. you just avoid them by buying on margin, which the first time you essentially bought cash and are waiting for the settlement, then next time you buy margin only to pay that margin by transferring funds back from your checking account once they have settled. So you have the settlement time to your checking account, then the settlement time back to the broker to pay the margin, so you can sell the securities.
Otherwise if you sell the stock you buy on margin, without paying the margin from cash account first, apparently its an illegal free ride.. i just found that out when they told me yesterday. :-X I thought that was how you avoid the settlement delays was by buying on margin then selling and the sale paid the margin and the rest was sent to the cash account.. but that is technically illegal.
So then they suggested money market.
The way they explained it to me was with a money market i have no settlement waiting. I transfer whatever i want to the money market account. I buy, it takes it off that total. I sell and it adds to the total. The money is there in their account online, never a transfer outside of their institution, so its always up for play. So if I were to buy that 5k, sell it at 6k, that 6k is instantly ready to go right after its filled.
I havent tested this theory, but thats how the last guy explained it to me..
Sounded good to me, and as long as it doesnt cost me, hey im all for it..
posted
To me Money Market accounts are nothing but glorified savings account that give you maybe 2 or 3% extra interest... so think of it as a savings account where they withdraw and deposit money as you trade... when deposited your earning interest...
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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