Is it possible?

Is it possible to make a few hundred dollars a month from stocks with a small capital? In poker, you can play .5/1 with a few hundred dollars and make a few hundred/month. Is there an equivalent in the stock market?

I've tried reading some books, but mostly they're way above my head right now. I'm just a newbie and want to know if I can make that kindda money in stocks. The general idea I got from the books though is that money is made long term by putting in like $10,000 and getting like 7% return on it annually.

I started an investment simulator game online and was basically thinking about doing the following: Do my hw and research a stock then put about $2k in it and buy some shares. If the stock goes down, then I just wait for it to go up and consider it a long term investment (assuming my research and hw are right). If the stock goes up enough to get me like a $60 after the two comissions I paid to buy and sell, I sell the stock and net $60 profit. Is this doable? Am I just talking complete nonsense here? Any advice (even harsh ones) will be appreciated.

[AceHigh]

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Is it possible to make a few hundred dollars a month from stocks with a small capital?

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No. There is a ton of variance in stocks, it's impossible to make money every month with stocks. You could average a few hundered a month, but you couldn't make that money month after month after month.

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I started an investment simulator game online and was basically thinking about doing the following: Do my hw and research a stock then put about $2k in it and buy some shares. If the stock goes down, then I just wait for it to go up and consider it a long term investment

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This strategy is very risky. You could get you a few really big losers that ultimately wipe out your whole bankroll, even though most of your picks are winners.

Say you put half your money in Google/GOOG and Delta/DAL at the beginning of the year, you would have quickly sold out GOOG for a decent profit, but your DAL would have lost 78% or so. Avoiding the really costly losers is very important in stocks, a lot like in poker. Picking up a WorldCom or Enron every now and then will really kill this strategy.

http://finance.yahoo.com/q/bc?t=1y&s=DAL&l=on&z=m&q=l&c=goog

Well, I don't think I would have bought delta after 9/11 but wasn't there a lot of news and stuff about it going broke or something? If that happened when I have a stock, I'd just sell it right away before all my money's gone. Maybe even shortsell it? I dunno.

[Sniper]

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Is it possible to make a few hundred dollars a month from stocks with a small capital? In poker, you can play .5/1 with a few hundred dollars and make a few hundred/month. Is there an equivalent in the stock market?


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Yes, its certainly "possible" to make a few hundred dollars per month from stocks starting with a few thousand dollars.
You would primarily focus on short term swing trades.

Try reading The Master Swing Trader by Alan Farley, to get an idea of what that would be like.

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The general idea I got from the books though is that money is made long term by putting in like $10,000 and getting like 7% return on it annually.

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That would be long term investor mentality. To make consistant short term $, you would be fairly actively trading.

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If the stock goes down, then I just wait for it to go up and consider it a long term investment

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If you are trading, you are looking to be right immediately, or you get out. Sitting in a stock waiting for it to do what you expect (which it may never do) is just a waste of time. Move on. cut your loss quick, and find the next opportunity.

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If you are trading, you are looking to be right immediately, or you get out. Sitting in a stock waiting for it to do what you expect (which it may never do) is just a waste of time. Move on. cut your loss quick, and find the next opportunity.

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Isn't this daytrading?

[Sniper]

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Isn't this daytrading?

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You'll need 25K+ to pass the equity requirement for "Pattern Daytrader".

I was suggesting that you could accomplish your goal by swing trading... you would be looking to hold your position 2-3 days on average.

I deffinately don't want to be a daytrader as I heard bad things about their jobs (heard it was really hard and most go broke). How much do you think I'll need to start with to accomplish what I need (ie. a few $100/month)?

[Sniper]

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I deffinately don't want to be a daytrader as I heard bad things about their jobs (heard it was really hard and most go broke).

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I heard the same thing about poker players!

As a daytrader, you have to be prepared to go thru the same research, practice, analyse routine that you should as a poker player.

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How much do you think I'll need to start with to accomplish what I need (ie. a few $100/month)?

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The answer to this question, depends on how much time you are willing to put in to find the right opportunities.

Your starting goal should be to average about 2-3% on equity compounded each week as a swing trader.

you don't need 25k to daytrade, only thing is that you can only trade total cash amt

[Sniper]

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you don't need 25k to daytrade, only thing is that you can only trade total cash amt

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Once you are labeled a pattern day trader, you can not trade with equity lower than 25K.

my friend has 15k in his account and trades around 20x a wk.

[Sniper]

Some brokers will allow you to day trade on a "cash available" basis under 25K, but not all of them.

The actual rule...
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a. Minimum Equity Requirement for Pattern Day Traders - The minimum equity required for the accounts of customers deemed to be pattern day traders shall be $25,000. This minimum equity must be deposited in the account before such customer may continue day trading and must be maintained in the customer's account at all times.

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[coolhandsun]

You might want to think about the logic behind this strategy for trading stocks. I've never been a fan of aggressive short term trading in general. You're counting on finding inefficiencies and "beating Wall St"...which is pretty tough. I'm in the industry and still don't think I could turn much profit taking short term stock positins....you have to have an edge.

Also, the idea of keeping your losers and cutting your winners is a bad way to go about stock trading in general. There was a recent nobel prize winner in economics who won for his work in behavioral finance. I think it was Kahneman. One of his observations was people tend to make assymetric decisions based on the bias in how they frame the decision. Whether the positions been profitable is not necessary to frame the decision and can cause inefficient decisions.

If you think GOOG is a good stock to be long at 300, then you should be long it. If you're already long it you shouldn't sell. You're essentially trying to find price inefficiencies in the stock, so your position should be a function of the opinion over its value (or where you think you can get out of it), your capital, and your risk thresholds. However, if you bought it for 290, your model would have you lock in the profit and sell it at 300 and sell out your position. And if you had shorted it at 310, and it goes to 300, your model has you holding your short position. In both cases you should be long GOOG at 300, despite your profits or losses in that stock. But both ways that Google can go to 300 has you either remaining short, or selling out your long.

Your proposed trading style mirrors one of the psychological paradoxes/weaknesses of how people make inefficient decisions. Whether it has been a profitable decision in the last 5 days shouldn't have an effect on your trading activity. The exception being that your opinion of the edge in holding the position may have changed since you put the position on, for perhaps the same reason the positions performed poorly.

Some background stuff on the psychology of trading and framing decisions if you're interested:

http://en.wikipedia.org/wiki/Behavioral_finance
http://en.wikipedia.org/wiki/Framing_%28economics%29
http://en.wikipedia.org/wiki/Bird_in_the_bush

Gavin

p.s. Not suggesting you don't try a little trading with "mad money"...not my game. Just a suggestion to re-frame your trading decisions. "The ultimate risk is not taking a risk"

yes also another way around it is if you have an overseas broker, only thing is commissions are a bit higher like 20 a trade.