What are the steps to becoming knowledgeable about the market?

[Stockmarketmap]

Jim Cramer has a colorful history. We can figure that he's made millions from "The Street", "Mad Money", and as an author. Prior to that, as a hedge fund manager, if he "kept his head above water" ( made enough profit above the 2/20 fee structure for a few years ) or made some leveraged bets and got held onto his capital, then he might have made some money there ( we don't "know" what his success was ). And he, as with many pundits and gurus over the years, doesn't even need to be right on his picks; it's the advertising, entertainment value, and viewership that pays the bills.

Stock picking and actively managed funds ( mutual funds ) are phenomenon of the 20th century. The 21st century has ushered in "index Exchange Traded Funds" and an investor doesn't necessarily need to construct, trade, and manage portfolios of individual stocks. Some ETFs, such as the Powershares QQQ, SPDR MId Cap 400, or Vanguard small cap value, constitute portfolios that have produced some of the best alpha over decades, depending on what research / strategy you are applying. The QQQ ( Nasdaq 100 index ), an index representing mid cap growth, has repeatedly contained many of the popular leading growth companies for 30 years, and the "expense ratio" is extremely low.
From the academic side *, an investment in small cap value ( followed by small cap value / mid cap growth ) has shown to produce the highest alpha premium of all stick universes / styles. Therefore, "core" investment of small cap value early in one's investment lifecycle is, statistically, the best way to accumulate / compound assets over the long term. Within a tax deferred account, such as a Roth IRA, the benefit is even greater.

* https://docs.google.com/document/d/1kToqLWLISRk4n4YnSzv1hT5kBN54l5CvhwGgDwJKPJI/edit?usp=sharing
https://docs.google.com/document/d/1-_nQTfZG1aoIduZuvqCgJws3_ja_zHCuz4h6zLadUoo/edit?usp=sharing

 

[Simples]

Thanks for the links. I'll check them out. My strategy involves picking the top stocks held by mutual funds that have done well. So, more of a 'herd following' strategy. Also am a member of seeking alpha and have been reading their opinions on various stocks. I'm curious on how do these guys become knowledgeable? I'm also a fan of Showtime Billions and am impressed by Axelrod's knowledge. I understand it's a movie but something in me believes that top traders/investors have similar knowledge of the markets.

There are people who are very knowledgeable in the markets. In fact, so much, that they can explain every tick up and down in their favourite markets, and are often employed to do so in various publications, after the fact mind you. But, are these people consistently profitable? If knowledge made one consistent in trading, then they wouldn't really need a regular wage, would they? So I believe the right conclusion is that knowledge alone isn't a driver to success in trading. Knowledge, is rather a byproduct of the required processes.

So what is the criteria then? It depends what type of trader you want to be, and what really works out best for you. I know this sounds corny, but at some point in time you'll need to look inward, start standing on your own two legs. As long as you're fascinated by the show lights, the game faces and the fake truths, you are lost in external celebrities and their grand egos. Realize, it's all just entertainment, and these people are not that profitable as you'd like to become, or at least have a decent shot at becoming. Everyone can become lucky with buy & hold long enough, and in the right market conditions (ie. after a major crash), but while that can be a start, it's very rare and might be hard to exploit consistently if one isn't used to trading already.

You can learn something from everybody, but in this game, you need to absolutely walk the talk yourself.
In trading,
there's no boss protecting you, other than your own stop losses, mental or automatic.
There's no supervisor directing your course of action, other than the markets themselves.
There's rarely a free lunch, you'll have to take on some risk and accept losses as inevitable costs of doing business.
There's really no manual or curicculum ensuring success, because success can only come from doing and improving.

However, every bit of information may help, so everything you've learned so far, might further direct you later. If you are hungry for more knowledge, maybe check out the "hall of fame"-threads on this forum? There are many ideas in those threads that might help you decide what is right for you.

When you're ready to trade, do so, with the expectation that more than 50% of your long-term trades will be a short-term loss and plan accordingly. Don't hold on to something not moving in your direction too long, etc. Move through the hopelessness and find out what you need to discard (99% of everything you've learned).

Most of us are still working on this, and it's a long long journey, only for those who are hungry enough or talented enough. Often, raw talent is overrated/overblown and what is required are those 10k+ hours.

As long as you believe others have made it and know more than you, you continue to feel little and barking up the wrong tree. Many probably do, but who can say their knowledge is right for you?

 

[Handle123]

http://www.fool.com/investing/general/2014/10/06/how-jim-cramer-made-his-millions.aspx

I found this article on line which speaks about Jim Cramer, without college education, studying stocks for hours every day until he could amass a fortune for himself.

Question I have is where does one even begin to study such stocks? Does one start by focusing on an industry or picking a stock they like and learning all about it?

Where does one go for the info? Are the search engines sufficient or should one be able to search SEC filings, etc...? Thanks in advance to those who chose to provide some input.

One thing of becoming knowledgeable about the market and another of making money, you don't need both to either do the other. Knowledge of the market is to me knowing the basics of any instrument and about economies, currencies and interest rates. Day trading one minute bars of ES and staying in for 3.5 minutes has little of know of the markets other than reading a few charts and a mountain of back testing to see if your patterns will work.

Each however takes years to get good but each goes into different directions. Market knowledge often is better learned by working for others and Learning how to trade is often done by oneself. Investing has little to do with trading, as investing has more to do with internals and fundamentals whereas trading has more to do with chart reading and TA.

Many often discuss what stocks to buy, which will make a pop to upside, whereas if I can find non dividend stocks that are in downtrends, I much prefer to sell them short than buy. Stocks drops faster than they rise, so you can make money faster than buying.

Alcoa had Head and Shoulders pattern heading down February 2015 for 60% drop. AA does have dividend of .12 cents, so that be a factor or not to consider when selling short.

 

[Robert Modd]

I think of traders in different catagories. Directional and non directional. Most traders are directional meaning they pick a direction. Fundamental traders pick a direction based on some type of information. Traders that use charts tend to be directional. Non directional traders use derivatives in order to profit when an underlying stays within a pre set range.

Sometimes traders can properly pick a direction but the real key is money managment. How much risk do you take with each trade? When your right how much profit do you take? When your wrong how much of a loss will you take? This needs to be planned ahead.

In order to figure out what type of trader you are directional or non directional and how to manage your money in trading situations you just need to get in the game.

 

[murray t turtle]

http://www.fool.com/investing/general/2014/10/06/how-jim-cramer-made-his-millions.aspx

I found this article on line which speaks about Jim Cramer, without college education, studying stocks for hours every day until he could amass a fortune for himself.

Question I have is where does one even begin to study such stocks? Does one start by focusing on an industry or picking a stock they like and learning all about it?

Where does one go for the info? Are the search engines sufficient or should one be able to search SEC filings, etc...? Thanks in advance to those who chose to provide some input.

%%
[a]NO WONDER , college drop outs average more[source Forbes 400]
By the way actually he did better in his hedge fund than his TV talk, like'' BAC going to $60''; its a good 10 year downtrend from $50,LOL[source Jack schwager =Sense + Nonsense book ''
Buy or borrow his[jack Scwager top trader books]; dont be late they fine you @ library-cost of time + money.
[c] SEC?? sure every little bit helps;study stuff like SPY, 10 year charts, all data. One of my CPA's he doesn't like charts -he is used to numbers lined up on federal tax foms-so each to his own.Study 10 years of daily[and all data] SPY prices if you want, do that for 7+ years.Wisdom is profitable to direct. I like most everthing on this section up until NOW. Some maybe make money on BAC buy,if you buy 499 or 500 stocks with it.LOL

 

[Vindago]

Find a stock with ADR above 0.5$ and possibly above 2% of its value, spend a year or more observing PA for the stock (you may paper trade it if you want but the important thing is observation).
Once you are able to anticipate PA with a good (would say more than 70%) rate.

Start trading (BLASH and SHABL) it with few contracts until you are consistently making money day in day out.

Scale up.

it is as simple as that.

P.S. forget all about Fundamentals, TA, Books, Courses, that's what the majority do and as we know 99% of the trader lose, so just focus on what is happening now in PA with an eye on higher TF

 

[cvds16]

so just focus on what is happening now in PA with an eye on higher TF

That's sound advice, but I would prefer to have at least three tf's to play with, if you want to do your analysis real well you need four, in extreme cases where things are not so clear you need 5 timeframes, for monstermoves you need 6. You can only see silver will go up in six timeframes. Gold however makes it clear in four. I was only able to see the analysis in silver thanks to the easier analysis in gold since both are linked.

 

[cvds16]

Also fundamental analysits had pointed out the historical extreme end of the gold to silver ratio several times. It was even in the newspaper that I read. So that got me thinking too ...

 

[bigspeculate]

If you want to learn abut TA, Stockcharts.com has a good primer.
http://stockcharts.com/school/doku.php?id=chart_school

 

[radex78]

I think only with learning and practice then any trader will get better knowledge start from experience, reading article forex also helpful and learn from expert trader might also useful, but most useful lesson if practice with ourselves and learning