Newbie seeks your perspective on trading

M

mike_balt

I recently took a course on investing in the market (mid-term and long term, stocks and options). In the course they made some rather large generalizations as well as some rather bold claims.

I've read a bunch of threads here (2manywhinners, etc) trying to get answers, but I still have some more direct questions and I would love some perspective from the people that actually DO this stuff successfully each day. Thanks you very much for your time.

The course professes the following:

The secret the mutual funds don’t want you to know is that they take your money, return you a meager 8%/year, then they go off and make enough money with it to pay everyone in the firm $600K bonus each year. (granted a huge generalization)

Then they said that you could convert your funds to ETFs and with very little attention push your returns from 8% to about 30% with very very little risk.

So what’s the likelihood of that? Are the fees so large that simply going to an ETF will make a very appreciable jump in returns?

Can a set of trading rules be used to go in and out of ETF’s such that returns can be pushed to 30% without much risk?


Demystification of the market – They also professed that the market is not really that difficult. They say it appears that way and that you hear many horror stories because too many Average Joe’s go out and trade on emotion with no technical analysis and get killed thereby making the general population afraid of the market.

And in kind of a rich dad poor dad way, they profess that the market is the secret that the rich keep from general society. The rich and the investment houses perpetuate the myth that the market is dangerous so that the average Joe won’t apply themselves to it. But the rich do apply themselves and therefore play in an exclusive area, and make huge money because all the masses just park their money in funds.



Lastly, They were pitching pretty incredible results along with a dream lifestyle. So I pulled
Lead instructor/course author Mike Coval aside and asked him if I chose this path, what would my day look like? He said he spends about 2 hours a night and a half hour each morning when the market opens to do all his research and trading. I assume this is all on long term stock trades and mid-term options trades. From this, he claims to generate enough money for his family to live extremely well while still building his nest egg. He said that for me, a newbie, I would have to add time to get my training, then I could look forward to that lifestyle.

I started this quest for answers on the tail end of another thread, so if you wish to know background about me or other comments that have been made, feel free to look here:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=57581&perpage=6&pagenumber=8

Thanks once again for your perspective or directions to places I can get unbiased answers.
 
Spydertrader

09-25-04 05:49 PM

I have traded The Jack Hershey Equities Method for little over a year – full time for the past 2 months. I have found my results to be quite extraordinary – enabling me to quit my full time job and trade these methods as my only source of income.

Due to several requests, and in an effort to further refine my own trading results, I have decided to use this forum to document my trades using The Jack Hershey Equities Method. In the spirit of “iterative refinement,” I welcome all participants – especially commentary that helps to improve upon my own results. Feel free to use this journal to post your own trades, to submit ideas, to contribute helpful techniques or to learn more about The Jack Hershey Equities Method in general.

To provide a framework for others to follow, test the strategy for themselves, and to allow for meaningful on topic discussion, the methods I will use for stock selection criteria can be found in the next post.

I hope you find the information contained in this journal useful.

- Spydertrader
More...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=38777
 
was asked to give my thoughts.

i know nothing directly about covel. i've read some people love his books, some say he's ripped off his ideas from others without credit. some places he trades, some he doesn't? so i can't comment on HIM. please take these as more general comments.

first, start off reading. the three books i recommend for everyone are reminiscences of a stock operator (lefevre), how i made 2 million (darvas), how to trade in stocks (o'neil). these books form the basis of how individuals can win in a system without being the ones with the huge accounts, inside connections, inside information, etc.

ETFs are broader than individual stocks. if you only go long ETFs, you'll likely NOT be a longterm winner.

there's many aspects to becoming a good trader. i break them down (not completely, but roughly) as:

-> learning the basics of trading. long and short (if possible), taking stops, not relying strictly on fundamentals, ignoring what the experts say, etc.
-> understanding the actions of stocks after they happen - and using that knowledge to recognize various setups before they happen. setup can be (for me) technical, or fundamental, such as "when a company does X, price usually does Y".

that's a simplified version of the first part. the next part is hard as well, and why a person can be a good teacher (knowledge of all above) WITHOUT being able to trade.

> psychological part. ability to pull the trigger when setups happen. ability to take losses, moving on to next trade. not looking back longingly at trades that "could have" been huge if you broke your rules / stops / etc. discipline not to force trades and to twiddle your thumbs when there are no setups. not letting your ego get the best of you and ignoring the stops / putting on too much size relative to your portfolio.

for most people, it is NOT something that comes overnight. it can be learned by anyone - but if 'anyone' could do it, everyone would be trading. and to go in thinking that (generic) you can make a fortune quickly is a recipe for failure. but knowing some of the pitfalls? that can definitely help.


oh, two other things:
> it's easier to make a bunch of money selling books, courses, etc. on how to trade than it is to be a successful trader.
> there are MANY different ways to trade. but they all involve some variant of maintaining stop points where you admit you're wrong. if you've got a high % of winners, you can let your losses (relative to gains) be a little larger. if you've got a low % of winners, your gains (relative to losses) have to be much larger.
 
Note that

(A) Mike Coval who is a principal and instructor for Investools and author of the book 'A Trader on Wall Street: A Short Term Traders Guide'

is a different person than

(B) Michael Covel, author of the book "Trend Following: How Great Traders Make Millions in Up or Down Markets."
 
MIKE BALT,

TRYING TO BEAT THE MARKET ALL COMES DOWN TO THIS:

1) It's a 50/50 crap shoot: the price will either go up or it will go down.

A better game would be to play either the red or the black on the roulette wheel. Over time it really doesn't matter.

2) Somewhere along the way Dr. Greenspan told a Senate committee:

.... "When you are dealing with stock the possibilities of which are either, it's going to be valued at zero, or some huge number - you get a premium in that stock price which is exactly the same sort of price evaluation process that goes on in the lottery: following principles known to lottery managers for centuries."

3) .... "The chimp, known as Raven to his managers at the Internet Stock Review, threw 10 darts at a dart board with the names of 133 internet companies to select the 'MonkeyDex' - a portfolio showing 50 per cent growth on a year-to-date basis, outstripping the Munder Net fund, with 32 per cent growth."

4) The only winner out there is the 'house': your local casino and your broker.

5) Mike, save yourself a lot of time and effort: invest in an INDEX fund.
 
What a Fu&^$ng joke! If it were possible to make 30% with little risk don't you think the BIG money would all be doing it?

Come on man! Wise up. You're being fooled. Just put your money in some fund and concentrate on your regular job.



Quote from mike_balt:

Then they said that you could convert your funds to ETFs and with very little attention push your returns from 8% to about 30% with very very little risk.
More...
 
Don't ever look for honest advice from public seminars, classes, infomercials, CNBC, etc

Making money is a strange thing if you think about it logically. Fear and greed are basic human instincts.

You see on the news every single day what people do to others in the name of profits and/or money. Now why would anyone herd togehter a bunch of strangers and show them how to make easy money?? It's not as if they're SO rich they don't know what else to do with their time. And I highly doubt they're just very thoughtful, unselfish people.

They ALWAYS got something to sell you. Not in your best interest in the long run obviously.
 
Quote from mike_balt:
Then they said that you could convert your funds to ETFs and with very little attention push your returns from 8% to about 30% with very very little risk.

So what’s the likelihood of that?
More...
Think about the question you asked. They tell you it's easy to take 30% from the market (You take the money from other market participants, never forget that) with next to no risk??? Think about the question for a while and then you can answer it yourself!!!!!!
 
OK, want to thank those who have replied here as well as PM'ing me.

I've read many threads that were forwarded to me as well as info on many other sites.

You've kind of echoed the sentiment that went through my mind all through the course. Mike Coval said that he made a Million in his first year trading, then he said he also lost $700K that year. (I'm thinking 10 years ago, if you could not make money during the tech stock run up, you were likely blind). Then he went on to imply that in the following 9 years he was making money hand over fist in the market and that his family was wealth with all the money they needed - so I'm sitting there thinking and why are you on the road for a living teaching courses.


so anyway, you get my drift. none of it seemed to fit, but as rimshaker eluded to, you can't take seminar leaders etc at their words, which is why I tried to widdle down what they were professing and pose it to this community because you do this every day and you are likely the ones with a reality check on it.

So what I was hoping was not that you'd say, "oh yeah, they are right, that sounds on track" That would only make me think, wow, you're all lying.

I figure the way the course gets people to sign up for the $25 classes is that they take the truth and stretch it so that attendees will say, hmm, I know pieces of that are true so maybe they are right.

So what I was really hoping was that someone would look at the things the course professes and tell me the truth about them. So for instance, the course claims go from mutual funds to ETFs and the reduction in fees will save you and compound over the long run. If funds returned an avg of 8% over the last 10 years, what would the same money in EFTs really return? ( I realize these are all generalizations, but am asking in concept)

If you did switch money to ETFs are there trading strategies that could produce better returns without monumental risk. I'm not talking about day trading them, or producing livable income, but if you can push the percentages up some with conservative covered calls or something similar. That is a concept they professed. Is there a way to do that or is the answer always - " you live and breath the market, all day long, loosing all the time for the first three years and then you possibly have a chance if you still have anything left."
 
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