The Investment thread!!!!

[Voblat]

There have been a few threads about money recently , not entirely sure what the motive behind certain ones were, but never mind.

During a couple of threads the subject of trading , either the stock markets or money markets, came up a few times , along with basic economy , interest rates and that sort of thing.

So , what i wanted to do was start a thread for those interested in such things, most of you know that I took the desicion a couple of years ago to sell my business , after my daughter was born , so I could watch her grow up. Since then, trading various stock markets, commodity markets and the world forex (money exchanges) markets are my sole source of income.

What I hope this thread can do is help people gain more knowledge about the economy they live in, the financial sector as a whole, either for private investment or careers in the industry. and some advice to anyone looking to invest a little , even if its smalll stuff such as likely interest rate changes, every little helps. An information exchange between the people here, if you like.

There are a few reasons to do this , firstly , my lifelong ambition haS been to author a book , I am currently working one based on basic trend trading , although focussing more on the psychology of the process more than a 'how to make money on the stock markets' type thing. For me, its a good way of honing my writing skills further , and get an idea of how understandable the language I tend to use regarding the subject is for people not involved in the business.

I also sit here at a PC for 3 to 5 hours a day when Im working , and its quite dull sometimes, so having something to do is good

Helping people is also a good thing to do, so if there are a few of you who dabble with investing here and there and we manage to help you make some more money because of something in the thread , then that can only be a good thing for all.

To start off , yesterday was the worst day for the US stock market since 9/11 , the dow jones fell 416 points , the nasdaq dropped 96 points.

(I made over 350 points profit yesterday off that, for daytrading a falling market is as good as a rising one)

The reason for this is the apparent slow down in both the US and Chinese economies, coupled with Alan Greenspan (used to be in charge of the US federal bank) declaring he thought the US was heading towards a recession.

Hes probably right , its been coming a while, the fall in house prices was an early indicator, and where the US goes, Europe eventually follows.

The markets are falling again today , and it looks like there is a major correction (fancy term for a price fall, when the markets seem to be overvalued) worldwide hapenning.

I hope this thread becomes of use to some of you and not the insane ramblings of a PC bound old man , but either fits with the lern2play thing I guess really

[scrunts]

Great idea, love it.

I guess the main question is where the bottom of this downturn is. What kind of stuff could we look out for and on what charts to try to work out how far the indicies will fall.

As I said before, I know a hammer is considered a good indicator (on a candlestick chart) to find the bottom. Any other ideas?

[Wolfgang]

I am not suprised regarding the selloffs yesterday because of the chinese, attack on cheney, etc. But also yesterday a report came out stating that the US housing market in January, used home sales, acutally increased 3% although the national median dropped.

[Voblat]

Thats a good question.

There are several predictors you can look at, chart patterns being one as you say.
You can use mathematical ways too , fibonnacci or similar. Ill go over a few figures during the day and type something out tomorrow to show where the support is likely to come, based on simple trend and other methods.

At the minute it seems panic selling has set in, which of course makes the situation worse, so its likely it will continue with fairly steep falls throughout the day today.

The catalyst for most of this has been the sudden collapse of sub prime lending (mortgages for people who are bad credit risks and cant get major bank mortgages). The whole US economy boom of the last few years has been based on borrowed money, mostly secured against hugely overvalued housing.

The house prices did start to fall slightly at the turn of the year, but in thel ast two months 20 sub prime lenders have gone into liquidation , some very large companies indeed, and it seems to be getting worse. This is being seen as an indicator that the whole borrowing bubble is about to burst.

Interestingly, the UK , and to an extent most of Europe, is in a similar debt bubble based on overpriced housing.

[ANEL]

ok mate i'll edit and pm you if you want but

what do these words/phrases be meanin?

commodity markets
fibonnacci
downturn
indicies
do ponits represent a set amount of money or summin? and are all points worth the same?

[pboy]

Read this mans words..you will learn something

[Elwe]

Originally Posted by ANEL

ok mate i'll edit and pm you if you want but

what do these words/phrases be meanin?

commodity markets
fibonnacci
downturn
indicies
do ponits represent a set amount of money or summin? and are all points worth the same?

lol.. fibonnacci? where did that come from? Isnt that the guy who found out about the golden ratio? 1.618? 1 1 2 3 5 8 13 21 34 etc.?

[pboy]

Fibonacci curves are a graphing technique I think.

[scrunts]

Originally Posted by Elwe

lol.. fibonnacci? where did that come from? Isnt that the guy who found out about the golden ratio? 1.618? 1 1 2 3 5 8 13 21 34 etc.?

Yes, and that pattern can bee seen on financial charts when interpreted a certain way. I didn't quite understand it when i brielfy read through it.

Its often referred to as a fibonacci retracement, which roughly dictates where 'support and resistance levels' are on a falling or rising market respectively. If a support or resistance level is broken, it also dictates where the next one should be.

As I say, I didn't quite undertsand it so just used to draw straight lines across a chart to show where support and resistance had previously been over the years.

Edit: A Retracement is only on a falling market or stock, so if someone refers to a fibonacci retracement, their talking about how far it is likely to fall.

[Voblat]

Originally Posted by ANEL

ok mate i'll edit and pm you if you want but

what do these words/phrases be meanin?

commodity markets
fibonnacci
downturn
indicies
do ponits represent a set amount of money or summin? and are all points worth the same?

Commodity Markets.

These are the places across the world where trading happenns, be it stocks and shares or commodities, like gold silver , pork bellies etc .

The most famous are the London Stock Exchange (The LSE) , the New York Stock exchange (NYSE, home to the dow jones index).

The indices are related to this. Each market (new york, london, honk kong , Paris etc, they are all over the world) publishes an index value of the health of that market. In new york its the dow jones for stocks/shares. In the UK its the FTSE.

How they are worked out isnt too important, what they do is give an idea of how well the markets are doing. If , for instance, the FTSE is going up, overall, stocks in London are rising. If they are going down, then overall the stock prices are falling. Depending on how large the rise/fall is, you can get a good idea of how well/badly that particular market is doing.

For instance, as I said , yesterdy, the Dow Jones fell 416 points, the biggest fall since 9/11. It normally moves a maximum of around 70 points one way or the other in a day, so you can see this is a large downward move, and therfore something serious is happenning to stock prices.

Fibonnacci is the name of a mathematician who discivered a sequence of numbers that can predict where a falling, or rising, market will start to level out . Its not 100% accurate, but its a tool used by traders to help them make trading desicions. He actually discovered the sequence in natural shell spirals in the 17th century.

A downturn is simply that. The markets accross the world have been going up steadily for a while, now they are falling, so they have turned downwards, shortened to downturn.

If one daytrades the indices (remember those!) rather than individual shares or commodities, then you will trade on a certain value per point. How much depends on how much money you have to trade, anything from £1 or $1 upwards. If you trade for the market to go up, and it does, you get however much per point for the amount of points you got in the trade.

If it goes down instead, you would lose the amount of money per point for however many points you lost on the trade.

That is, if the UK FTSE was at 6200 , and you made a trade for it to go up at £10 per point. (That would be a buy trade)

It went up to 6240 , and you exit the trade. You get £10 * 40 points, or £400.

If it went down to 6160 though, you would lose £10 * 40 , or £400.

There are ways to restrict losses to a minimum , you can also do sell trades if you think the market is going down, so you enter again at 6200 , and it goes down to 6160 you get the 40 points profit.

[Voblat]

Originally Posted by Elwe

lol.. fibonnacci? where did that come from? Isnt that the guy who found out about the golden ratio? 1.618? 1 1 2 3 5 8 13 21 34 etc.?

Its exactly that.

Its amazing really, but completely true that one of the most popular forcasting methods in the world is based on the golden ratio from nature. Every piece of analytical software out there has the ability to overlay fibonnacci values onto a trading chart.

It can be accurate when used with other forms of whats called 'technical analysis' , which is basical mathematically analysing the daily/weekly/monthly charts of whatever it is you are trading.

[ANEL]

cheers bud

[scrunts]

Wikipedia has a good article on Fibonacci numbers:

http://en.wikipedia.org/wiki/Fibonacci_number

If you're to be any kind of a success at trading, you need to understand everything said on this document entirely, or you'll lose everything you own!!!!




















Just kidding

[Danto]

Am looking forward to this mate, am certain this thread will be a good read

[Ratel]

http://www.kstp.com/article/stories/S33513.shtml?cat=1

[Voblat]

Originally Posted by Ratel

http://www.kstp.com/article/stories/S33513.shtml?cat=1

Thats a somewhat misleading article.

They try to attribute the 400 point loss to that glitch, which isnt true. It did indeed drop 200 points from it, but retraced those 200 points in the following 2 hours or so . That issue caused the Dow to be down over 600 points on the day , but the reality of the 400 point drop was already there , both before and after the computer thing.

Today the FTSE ended 100 points down , the dow ended up 52 points on the day.

[Asir]

The Chinese bubble had to have a minor correction at some time, I have been watching my Chinese assets go mad of late, but China has amazing underlying value, the only way long term is up (but it will be a bumpy ride)

Two things, I would not worry about the stock shake up of the last few days, the underlying value in the stocks is still very good, especially in the UK. I think the inherent value in the FTSE justifies 7k.

And second, unlike the US housing market, the UK one is not going to seriously crash any time soon. We have too much of a shortage, when you think about it we have a 1/4 of the population of the US on a land mass almost identical to the state of Wisconsin.

UK Rates, well I can see the 5.25 lasting out the whole of 2007, but I think the next move (eventually) will be up again. The US will likely trim off a ¼ point at some time, and we will thus probably see the $2 / £1.

[Deno]

Im confused you say you got 350 points in the stock market yesterday but like how much is that?

[Asir]

Originally Posted by Deno

Im confused you say you got 350 points in the stock market yesterday but like how much is that?

If he's talking about NYSE, about 4%

[Voblat]

Originally Posted by Asir

If he's talking about NYSE, about 4%

He means how much money is 350 points profit I think, not the percentage of the market that 350 points represents.

In answer to that question, it depends entirely on how much money you have to trade with in the first place.

You can trade as little as £1 / $1 /1 euro per point , and go upwards from there as much as you want, as long as you have the funds to cover the trade.

If you had £10 per trade , for instance, 350 points would make you £3,500 yesterday, in about 4 hours total accross 3 indeces, FTSE, Dow Jones and S&P 500.

If the question was how much did I personally make, I trade at a level of between £100 and £1000 a point.