Beginner seeking guidance

[Bennny]

G’day folks,

I do medium density residential property developments - return on invested capital (with leverage) is generally in the order of 25-50% per annum, depending on speed of sales.

As the cash flow is extremely lumpy (it’s 12-24 months from acquisition to seeing funds returned, and sometimes there’s a blank period between completion of one site and waiting for the next), I’m thinking of learning to day trade stocks to supplement that. From what I can gather, with enough time, effort, learning and patience I could expect similar returns as my developments - but with the added benefit of liquidity.

The plan is to commit a relatively small sum (~$50k, with no more than 1-2% at risk per trade) to begin with, develop my strategy for >12 months before committing further. Positions would be long or short depending on signals, and closed before EOD. No leverage would be used.

A few questions for the experienced folk here:

1. What’s the best way to learn the best strategy for me? I’ve got basic money management covered, but I’m lost as to how to develop entry and exit points, identify trades etc.
2. Any must read books?
3. How long should I paper trade before committing funds to market?
4. I’m a little confused as to strategy - people say black boxes don’t work, but I need to have a trading strategy in place that identifies when to enter/exit trades based on signals. They seem similar?
5. People say back testing doesn’t work. Other than paper trading, is there a way to identify the best strategy moving forward?
6. Anything else I haven’t considered, but should?
7. Any common mistakes to avoid?

Beginners don’t know what they don’t know, and that’s what hurts them. I’ve no doubt this is true for me learning this business, and would appreciate all advice.

Cheers in advance!

 

[JackRab]

No offence, but that's a stupid idea Ben...

If you're making 25-50% already, why would you want to risk capital in daytrading? Most retail traders lose... I don't think you will be an exception. If you lose, you will also lose capital to fund your prop development....

If I were you, I would work on streamlining projects to get a more steady cashflow.

How much capital do you usually have tied up? And with how much did you plan to trade?

 

[fyretrading]

you sound smart benny check out tastytrade or my youtube 25% to 50% is a bit on the high side. S&P returns- 7%-12%, warren buffett 21%

Trading does open the door to market neutral returns .

In your real estate business I imagine your theoretically long the real estate.

 

[Robby Luca]

1) Should start with 0.5% risk per trade (not joking).
2) I do not know. I know a lot of good books but do not know what's best for beginners.
3) Should paper trade until your consistently making profits. Might take 3 years.
4) I don't know why people say it doesn't work.
5) For day trading, just paper trade and learn chart patterns. For long-term, backtesting can work and give you a general idea if done properly. Those who say backtesting doesn't work is because they use fundamentals to trade or their backtesting didn't work because they didn't know what they were doing.
6) Learn chart patterns, get a good broker (low commission, good platform, and have quick executions), know when to exit before entering a trade, know how many shares to buy (position size). There are so many different types of traders. They use different strategies, you need to read up on all of them and figure out which best suits your personality, then paper trade, and see if it works for you. If it doesn't work, then adapt or try some other strategy.
7) Paper trade until you're consistent, day after day.

 

[Bennny]

No offence, but that's a stupid idea Ben.

Appreciate the honesty

If you're making 25-50% already, why would you want to risk capital in daytrading?

As the cash flow is extremely lumpy (it’s 12-24 months from acquisition to seeing funds returned, and sometimes there’s a blank period between completion of one site and waiting for the next), I’m thinking of learning to day trade stocks to supplement that

If I were you, I would work on streamlining projects to get a more steady cashflow.

The time between acquisition, plan development, planning approval, pre sales, finance, site start, completion of construction, settlements etc does not happen overnight. Saying "streamline the process" is like saying "make more money from your trading".

How much did you plan to trade?

The plan is to commit a relatively small sum (~$50k, with no more than 1-2% at risk per trade) to begin with, develop my strategy for >12 months before committing further.

 

[Bennny]

you sound smart benny check out tastytrade or my youtube 25% to 50% is a bit on the high side. S&P returns- 7%-12%, warren buffett 21%

Thanks mate.

 

[Bennny]

1) Should start with 0.5% risk per trade (not joking).
2) I do not know. I know a lot of good books but do not know what's best for beginners.
3) Should paper trade until your consistently making profits. Might take 3 years.
4) I don't know why people say it doesn't work.
5) For day trading, just paper trade and learn chart patterns. For long-term, backtesting can work and give you a general idea if done properly. Those who say backtesting doesn't work is because they use fundamentals to trade or their backtesting didn't work because they didn't know what they were doing.
6) Learn chart patterns, get a good broker (low commission, good platform, and have quick executions), know when to exit before entering a trade, know how many shares to buy (position size). There are so many different types of traders. They use different strategies, you need to read up on all of them and figure out which best suits your personality, then paper trade, and see if it works for you. If it doesn't work, then adapt or try some other strategy.
7) Paper trade until you're consistent, day after day.

Thanks Robby. 0.5% at risk per trade would be a wise move, smoothing out losses/gains whilst starting out.

 

[JackRab]

The time between acquisition, plan development, planning approval, pre sales, finance, site start, completion of construction, settlements etc does not happen overnight. Saying "streamline the process" is like saying "make more money from your trading".

No, with streamlining I meant spreading out on multiple projects so you would have a more dispersed cashflow. Not sure if that's possible, that's why I also asked what capital you use.

Why do you think you would make enough money daytrading? Or would it be more of a hobby... killing time?

 

[FreakofNature]

newbies

 

[Bennny]

No, with streamlining I meant spreading out on multiple projects so you would have a more dispersed cashflow. Not sure if that's possible, that's why I also asked what capital you use.

Doing that at the moment, I have three projects underway (thirty townhouses all up). It's still lumpy cashflow.

Why do you think you would make enough money daytrading?

I don't

Hence why I'm here.