re: the best way to build $5K into $50K in the market...
JavaAddict, I'd encourage you to find another way to spend your time and trading capital (I believe you mentioned $5K; but this really applies even if it's $20 or $25K), besides trading those small-caps while following chat room hypes and recommendations. Really, if you look at the odds of success over time with that kind of so-called "trading" (which is really not what it is), it's pretty low. If you are going to be our "star" trader on Oprah, Springer, etc. then you're going to have to find a better technique!
Seriously, it doesn't work. It would take at least a chapter, if not a book, to explain all the pitfalls, all the reasons why. The odds against success, trading stocks with $5K-$25K by working the chat rooms, are overwhelming. I get the sense you're too smart for that, and there are smarter ways to build your capital, and still have some fun.
If you want to trade with $5k-$25k (and you want some trading "action"), one idea I'd suggest [hold the tomatoes] is to learn how to carefully, systematically daytrade some of the less volatile futures contracts, like corn, wheat, or maybe the long-Bond contract (I hate to suggest it, but maybe the E-Mini should be looked at too; but it's one of the trickier contracts to trade). As an example of the type of trading I'd recommend, they will be trading the E-Mini over in the intelligent speculator chatroom for the next 2-4 weeks using very systematic, well-defined setups with a disciplined stop-loss methodology; you could go watch that trading live, to get the idea of what I'm talking about. But, I would recommend something tamer than the E-Mini in order to further reduce your risk. I would also caution you to day-trade any futures contract for AT LEAST 3 months before using live bullets, and NEVER carry a futures contract overnight. The leverage is incredible - they put stock options to shame. Most people lose their money with futures because they either don't have the basic trading skills (which as we all know, can be hard to come by), or they get to gambling with their positions, but the "real" traders in the futures markets can and do make money consistently with those contracts (guess where it comes from?).
It takes much less capital to trade the futures, that's why there's so many people trading them (and day-trading margins are much lower than overnight margins). BUT, you have to either know a lot, have a mentor, or (preferably) both. AND be really disciplined with your stops. But, if you approach it intelligently in a disciplined fashion, you can make a decent return and build up your capital base. You really need $50k or more as a starting point to build your capital up by day-trading stocks. Below that, either futures, or consider position trading QUALITY stocks below $10. But, the stock route is very difficult without more capital.
Also, there are many BUSINESSES you can start with $5K, which can quickly get you $50K. The odds are vastly, vastly better of getting there. With your website development skills and $5K, you could be rolling in dough in 1-2 years... just a thought. One thing to think about, most of the people on this thread trading, built their trading funds through developing a business. Or (usually more painfully), by drawing a salary and saving for a long, long time. And, by being older ;))
Hope that doesn't sound too preachy, not intended that way. Just some food for thought.
Intelligent Speculator, we will expect to see this guy on Oprah ;)...
which is appropriate, her broadcast studio is less than a mile from the CME pit...
-Steve |
