[olePigeon]

I don't make a lot of money. Actually, I'm below the poverty line for my area (but I live in an expensive area.) However, I've saved up $1500 and I wanted to start doing a little day trading on the side.

Is $1500 enough to start?

[zombie punk]

Do you have a cushion of several months expenses? Do you have a retirement savings plan and account? Have you eliminated all your non-secured debt? If so, let's talk, otherwise, deal with those things first.

[olePigeon]

I have no debt (I own my car, I rent an apartment, no large credit card balances, no student loans), and my job provides retirement and pension.

I can't spend more than the $1500, if that's what you're asking. If I lose $1500 I'm not extending credit or anything, I'm extremely firm about that. So if some company tanks and I lose the money, well, that's it.

I guess you could say I'm looking at this as more of a hobby, to get my feet wet.

[nash1017]

The market is way too volatile right now for new daytraders to jump in, IMO. Unless you are shorting AAPL...

[zombie punk]

http://www.dummies.com/WileyCDA/Dumm...470171499.html

[zombie punk]

Originally Posted by olePigeon 

I have no debt (I own my car, I rent an apartment, no large credit card balances, no student loans), and my job provides retirement and pension.

I can't spend more than the $1500, if that's what you're asking. If I lose $1500 I'm not extending credit or anything, I'm extremely firm about that. So if some company tanks and I lose the money, well, that's it.

I guess you could say I'm looking at this as more of a hobby, to get my feet wet.

Cool - it's just easy to get into trouble, and you shouldn't be 'investing' money you can't afford to loose in something as risky as day-trading.

[Big Mac]

Too little to start day trading with for a number of reasons. A traditional brokerage won't let you day trade unless you meet the $25,000 minimum equity requirement from the NASD. A pooled capital company will let you day trade with around $5,000 and give you full day-trade margin rights ($100,000), but even then I strongly recommend against it. The market is far too volatile right now, and a trader can too easily see an account balance dwindle even in good times - especially working a highly margined account. AIG went down 30% on no news - that can happen and wipe out an account very easily. The markets deservedly have a reputation for being very harsh. If you want to begin learning about the market but only have a grand or so, I'd suggest that you open a Scottrade account (which is good for beginners), find a $20-$30 growth stock you think will do well in the next year and put your money into it.

[Bwa]

This is not financial advice.

It may not even be good advice. I've day traded and made money doing it. But it's very intense; I don't think I could do it every day for weeks on end.

A few high level comments:

Day trading should be executed in the same manner you would execute any other business. Setting up a company, separate financial situation for the business. The reason I mention this is that I don't believe it's something you can do "on the side". As long as the market is open and your money is exposed in the market, you need to be focused on what's going on. You'll want to be able to write off the cost of your equipment, too (below).

Don't confuse day trading with short term trading. Day trading means you close out every night. News events that occur over night or over the weekend (Fannie/Freddie bailout) should not hurt your position because you shouldn't have a position.

You need a system for trading. How will you decide what and when to buy and what and when to sell? The system is your company's "intellectual property". You should test the system and refine it without moving money. Beware, though, that once real money is involved, it can become very difficult to keep your system.

You need metrics for your system. How will you know how you're doing?

You need more capital than $1500. $1500 isn't really going to cover your commissions, and with so little capital (= smaller gains if things go well), the commissions will kill your smaller gains.

You absolutely need redundancy in being able to execute trades. This means having both Cable and DSL. Battery back-ups to keep trading if the power goes out. Maybe even cell phone access for when both cable and DSL go out. Trading by phone as a last resort (higher commissions on phone orders). Maybe for smaller capital amounts, you don't need all this--but you do need to have a plan for when your infrastructure dies. What if your computer crashes in the middle of trading? I wouldn't trade with less gear than 2 redudant computers and 2 redudant Internet connections.

The initial capital that goes in should be (1) money you can afford to throw away and (2) the absolute max you're going to spend on the venture. You should have a separate set of money for recovering from the potential loss of everything you have put in--and that separate set should never get mixed up with the day trading funds.

The above is just my initial reaction to reading your post. It is not thorough or well thought out.

Frankly, you might be better of stashing the money in a CD or a savings account and building up more capital right now. $1500 isn't enough to open a mutual fund account at Fidelity or Vanguard ($2500 or $3000 minimums, I believe). Or if the risk is fine and you want to do short term trading, go ahead and buy stock and hold it. I don't think the traditional discount brokerages will deal with $1500 but there's players for smaller capital amounts out there.

Good luck.

[zombie punk]

Solid advice Bwa. I get the impression the op is more interested in short term trading. A scottrade or somesuch account would be a good place to start.

[Gator Lager]

check out Jim Cramer books (some people like him others hate him)
Real Money sane investing in an insane world
and
Stay Mad for life

get them at the library. What Bwa said is very true, but you have to start somewhere.

a good place to start for info
http://stocks.about.com/od/findingab...line112806.htm
http://stocks.about.com/od/evaluatingstocks/a/pe.htm

[olePigeon]

So, should I buy AIG stock? They have the government backing them so they aren't going bankrupt. Only $2 a share.

So if/when AIG splits up and sells itself off, how does that work for the stock? Do I get a little bit of everyone who bought parts of AIG? How does a single share get divided amongst multiple buyers? Or do they buy back all the shares first?

[Eug]

A cheap stock may not be a bargain. Conversely, a high dollar stock might be quite the bargain.

Furthermore many near-penny stocks fluctuate wildly. Are you really willing to invest in AIG to see your stock value drop from $1500 to $1000 one day? Sure, it could go up to $2000 in one day too, but you have to be prepared for this.

However, if you're living near the poverty line and have only $1500 to spare, in these times I'd just put the money in a high interest savings account, perhaps in your tax-deferred pension account.

P.S. How much reserve do you have anyway? Do you have 3 months of living expenses available to you? If not, then definitely keep it in a safe place, esp. since $1500 isn't very much money.

BTW, I just invested in AAPL, and guess what? I thought it was quite "cheap" at under $132, but today it got under $122, about $10... errr... cheaper. That's a 7.5% drop in one day. However, the money I invested is money I can afford to lose. I have a reasonable reserve fund on top of this that I can tap should I run into some financial trouble.

[olePigeon]

As I mentioned, this is $1500 I could afford to lose. I'm more curious about what happens to your stock if a company like AIG splits up its assets and sells them to different companies. The poverty thing I brought up is true for 80% of the people in my area. I live in the San Jose Bay Area. You're technically poor if you make under $40k a year.

Fannie Mae is 20 cents a share.

I was just thinking maybe $100 in Fannie Mae, and $100 in AIG. $100 is nothing, and if Fannie Mae ever gets back up to $70/share, my $100 turns into $35,000. Wouldn't be too bad. Conversely, losing $100 isn't bad either.

[olePigeon]

Eug, help me out in the Get Fuzzy thread. I've had three perfect set ups and no one's followed through.

[Eug]

Originally Posted by olePigeon 

As I mentioned, this is $1500 I could afford to lose.

How "affordable" is that?

I'm more curious about what happens to your stock if a company like AIG splits up its assets and sells them to different companies.

Well, I guess it depends, but your stock should be worth what it's proportionately worth after the sale.

I was just thinking maybe $100 in Fannie Mae, and $100 in AIG. $100 is nothing, and if Fannie Mae ever gets back up to $70/share, my $100 turns into $35,000. Wouldn't be too bad. Conversely, losing $100 isn't bad either.

Well, that's basically the lottery ticket method of stock investing. It generally doesn't work so well. Anyways, how much are your commissions? If it's $10 bucks a trade, then you've lost 10% of the value of the $100 stock simply by buying it... and then another 10% if you sell it (at the same price). So basically you're starting 20% in the hole.

BTW, some personal experience: Nortel's high was over $125. Then the bubble burst and it lost most of its value. After the fall, I bought at less than $4, and I still barely managed to break even when I sold many moons later.

And now? That same stock is worth just a fraction of that. It did a reverse split to consolidate stocks, but even the consolidated price is now less than $3.

[Powerbook]

I did some day trading with stocks, with larger positions though (10.000 to 15.000 $), until I realized the stocks I day traded were the stocks I would keep in a long position. And the daily ups and downs are not really interesting enough against the commission and taxes.

I still do some day trading with options and certificates. Simply because I prefer their higher volatility. I do 90% calls/bulls and only 10% puts/bears (I'm a positive thinker ).
All in all I can say, I scored in 85% of my trades. That was before Amaraca dumped all the world in their financial chaos, though!!!

And as a advice to a beginner, don't do this at home. Stick with stocks for the first years. And stay away from those total losers like Fannie or AIG. Invest in companies you can be _sure_ they survive.

PB.

[olePigeon]

Originally Posted by Eug 

How "affordable" is that?

I'd be mad if I lost it, but nothing would really change.

[Eug]

To put it another way...

If you lost it and you lost your job, could that $1500 be important?

[tie]

You might try playing with a simulator before putting real money down. Here's one, but there are probably better ones out there.

[Big Mac]

Originally Posted by tie 

You might try playing with a simulator before putting real money down. Here's one, but there are probably better ones out there.

Simulators are good for general learning, but you don't get the real experience until you're working with actual money. That's where the rubber hits the road. Although, it's probably more helpful for investors than traders to work with simulators because the trading environment is a lot different from investing.

[eccentricref]

$1500 is enough for a couple of hours probably. You're better off putting that money in a CD or money market account.

[el chupacabra]

the stock market is just a big scam... a giant legal casino for rich people with inside information. Use your common sense. look at what kind of people tend to make money and who tends to lose.... only invest knowing the probability is against you. especially right now. the rate of return isn't going to be that high right now, you might be better investing in gold or something for the next few years. personally im keeping my money in savings and waiting for interest rates to go to 18%. If I see some good options (puts) I might buy those but the put prices are astronomical right now because people are finally starting to see that the economy is going to crash...this fed bail out was basically the end of the current high middle class life style...it fed all kinds of money to the riches companies & billionaires of the world and we all get to pay for it with inflation.

every now and then they need to bring in recessions like this to separate the classes further as resources become scarcer.

[Peter]

you could make good returns with $1500, go for it.
I started with £2k a few years ago and its now worth well over 10x that.

[Big Mac]

That's a pretty impressive result, Peter. Invested or actively traded?

[Dual Porpoise]

el chupacabra is correct that poor people generally loose in the stock market.

[Eug]

Originally Posted by Eug 

Well, that's basically the lottery ticket method of stock investing. It generally doesn't work so well.

Pigeon,

Heh. If you you had invested financials mid-day yesterday, this lottery ticket method could have been quite successful.

You need a fair amount of intestinal fortitude to invest that way though.

However, even then you would have been screwed with your intended invested amounts, because of the costs of the commissions on such small ($100) investments.

Originally Posted by Big Mac 

That's a pretty impressive result, Peter. Invested or actively traded?

Not speaking for Peter, but AAPL alone could have done that.

[dawho9]

Originally Posted by olePigeon 

So, should I buy AIG stock? They have the government backing them so they aren't going bankrupt. Only $2 a share.

So if/when AIG splits up and sells itself off, how does that work for the stock? Do I get a little bit of everyone who bought parts of AIG? How does a single share get divided amongst multiple buyers? Or do they buy back all the shares first?

Depends on what happens when they come out at the end. They may still declare bankruptcy for debt protection. Back in the airline bankruptcy days people would be sitting on stock pre-bankruptcy and discover coming out of it there stock was gone. So in the bankruptcy situation you can play the game and try to make a short term buy but you need to get out of dodge before they come out of bankruptcy because in many times - there isn't anything left on the other side.

http://www.usatoday.com/travel/fligh...terstitialskip

dw9

[Peter]

Originally Posted by Big Mac 

That's a pretty impressive result, Peter. Invested or actively traded?

traded, I do have some AAPL but like to have a wide range of stuff, more fun! Between that message yesterday and Monday NYSE opening I reckon it'll be a 10% gain on my portfolio.
Could have done nicely if I'd bought some Oracle / RBS ... the worst thing about day tradeing? the constant kicking yourself of "D'oh shoulda bought!" The best? When you don't buy and the stocks fall. Relief is immense

[soothu]

Originally Posted by olePigeon 

I'd be mad if I lost it, but nothing would really change.

I am no day trader either...but I took to doing some trading recently...I invested 15,000 and I am at 21,000 right now...just bought stocks like WB, MER at low and sold them when high...even a 4-5 dollar increase for 100 shares could earn you $500 in one transaction which costs just $7 at scottrade. In your case, it would be $600 profit.

You could open a scottrade account online, use their money transfer feature to transfer money ($500 minimum the first time) from your bank account and you are ready to go.

Day Trading as a profession is something else...but this you can do even while at work during the day. All it needs is some quickness and alertness from your part.

The FRA and FNM stocks were at 0.25 10 days ago now they are close to $2! Your $1500 would have become > $10,000 by now just in 10 days but nobody knew - the winners are the risk takers! Yes, it's ofcourse gambling but with some common sense...you keep asking the forums, discussing and wait to take action and the stock price never waits but jumps!!! I haven't invested in FRA, FNM either! Even if you make $300 to $400 per day via upto 4 transactions, it would only cost you $28. You would have still made $250-$350. And after taxes you would still have $175-$245...tell me who's going to pay you $250 every day?

These are the best times to buy Financial stocks in the short run and try to make some quick bucks. If I were you I would invest in 2-3 stocks, watch them closely, the time when they hit close to a high or a low, would place an order either to sell or buy and Scottrade when you place the order at Market price it goes through in a jiffy...or you could "limit" the price and set your target for buying or selling.

Give yourself a chance to make some money on the run, good luck!!!

[imitchellg5]

A lot of people make their money at night.

[Big Mac]

Originally Posted by soothu 

If I were you I would invest in 2-3 stocks, watch them closely, the time when they hit close to a high or a low, would place an order either to sell or buy

Yeah, it's a good strategy much of the time. If you know what to look for you can spot solid up or down trends and place automated "stop" orders to protect your gains. I experienced some of my best sustained trading performance that way. However, I still caution those who are interested in trading or short term investing that there are ups and there are downs, and the key is to hold moderate positions and take steps to control risk; don't get cocky when you have a really great day. Also, trading isn't for everyone.