Active traders, what’s it like to be you?

[Markola]

I realize I’m just not one of you traders, as fun and engaging as it sounds. Every time I do it, it’s nerve wracking and it seems to cost me money. Recently, I decided to sell a taxable asset, use the cash for my Roth IRA contribution, then rebuy the asset inside the Roth. Of course, all that takes several days. During the transition period, that asset shot up in price some 50%! I couldn’t believe it.

I waited to rebuy inside the Roth to see if the price would drop back to my sell price.
It didn’t.
So I bought at the higher price.
Then, of course, the price fell some.

Though I lost a couple grand to Mr. Market, I am relieved to have grabbed back onto the side of the life boat rather than continue to splash around in indecision.

Murphy’s Law has happened virtually every time I’ve ever made an active trading decision. It’s madness, I tell you, for a confirmed buy and hold investor like me. It wasn’t enough money to make any difference, fortunately. I just cannot imagine making big bets, as most of you seem to do on this Active Investing thread. How can you stand for trades to go the wrong way? How do you sleep? What is your mindset? Honestly, hats off to you all.

 

[Montecfo]

It is not for everyone. To be successful requires a certain mindset I think.

 

[RetiredAt49]

I built a machine learning, algorithmic trading bot that automatically places trades and monitors itself - there’s no human intervention and thus it takes out all emotions.

One of the key aspects of my algo is using tight stop losses (if the trade starts going against the long/short position it’s in then it gets out). It is also trading dozens of different stocks/ETF’s and thus it’s diversified. I have a separate thread that discusses the progression.

 

[target2019]

I realize I’m just not one of you traders, as fun and engaging as it sounds. Every time I do it, it’s nerve wracking and it seems to cost me money. Recently, I decided to sell a taxable asset, use the cash for my Roth IRA contribution, then rebuy the asset inside the Roth. Of course, all that takes several days. During the transition period, that asset shot up in price some 50%! I couldn’t believe it.

I waited to rebuy inside the Roth to see if the price would drop back to my sell price.
It didn’t.
So I bought at the higher price.
Then, of course, the price fell some.

Though I lost a couple grand to Mr. Market, I am relieved to have grabbed back onto the side of the life boat rather than continue to splash around in indecision.

Murphy’s Law has happened virtually every time I’ve ever made an active trading decision. It’s madness, I tell you, for a confirmed buy and hold investor like me. It wasn’t enough money to make any difference, fortunately. I just cannot imagine making big bets, as most of you seem to do on this Active Investing thread. How can you stand for trades to go the wrong way? How do you sleep? What is your mindset? Honestly, hats off to you all.

If it took several days than I imagine you were using mutual funds. I think that is a crap shoot.

With ETF's maybe you could be quick enough to make some scratch.

There are many different strategies, and of course I suck at it. Only long-term buy-and-hold of individual companies has worked for me.

 

[FindingForward]

Murphy’s Law has happened virtually every time I’ve ever made an active trading decision. It’s madness, I tell you,

amen brother. If anyone wants to strike it rich, they simply have to do the opposite of what I do. Every. Time. I have the worst luck every time I want or need to time something to market. It's been an expensive lesson, but nothing life changing, thankfully.

 

[Montecfo]

amen brother. If anyone wants to strike it rich, they simply have to do the opposite of what I do. Every. Time. I have the worst luck every time I want or need to time something to market. It's been an expensive lesson, but nothing life changing, thankfully.

Well, having a contrarian mindset helps so you might be onto something.

You could adopt it yourself as George Costanza so famously did in Seinfeld.

 

[MarieIG]

I'm not a "day trader" nor a particularly impressive trader.

To protect me from me, I try to keep the majority of money in the boring stuff, (i.e. vtsax) which I haven't sold and don't intend to (other than temporarily a few years back which I needed to do so for a back door Roth) and limit more speculative stuff to small amounts. (I have had speculative positions which have disappeared.)

More recently, because I have been a bit too "handsy" with trading since retirement, I am trying to literally dollar cost average into some positions - by logging on a buying a tiny bit at a time. This includes adding to SCHD & SCHF. If I see a big drop in one of the positions which I hope to increase over time, I would buy a larger position. I totally expect to see drops, and will live with that.

I am also attempting to take dividends from larger positions in individual stocks and reinvest them in, what I consider to be, "core funds."

P.S. I too can single-handedly move the markets. I was getting ready to buy one year treasuries - and we all know how that turned out.

 

[unclemick]

Hmm - Trader? Well I've putzed with stocks since 1966 starting with a Dean Witter broker in Seattle. Done some DRIP's and was a member in New Orleans AAII - great coffee and pastries. Still above ground and a few functioning male hormones left - 'gamble, dabble, play, with mad money. Success has eluded me but it's fun.

Real money - aka retirement 60/40 index funds ala 'Bogle's Folly' and VG Target Retirement.

Heh heh heh - I will not bore you with my landlord/RE misadventures.

 

[NW-Bound]

I realize I’m just not one of you traders, as fun and engaging as it sounds. Every time I do it, it’s nerve wracking and it seems to cost me money. Recently, I decided to sell a taxable asset, use the cash for my Roth IRA contribution, then rebuy the asset inside the Roth. Of course, all that takes several days. During the transition period, that asset shot up in price some 50%! I couldn’t believe it...

If an asset moves 50% in a few days, then it is a highly volatile one. With just a single trade you can be right or wrong. It's crap shoot.

I am a fairly active investor. I tend to make contrarian bets, and frequent and smaller ones. I don't try to make a killing on any single trade. Rather, I try to be right more often than wrong, and accumulate the smaller winnings into something more substantial. This strategy was not feasible until the advent of the free stock trades, and the 35c fee per option contract that I get on my Merrill Edge account.

I also don't keep doubling up on a stock when I am wrong. If my initial bet on a stock movement is wrong, I may make one more bet, then that's it. I keep an eye on my stock AA to make sure I don't go outside the intended range.

And I stay somewhat diversified and try to limit exposure to any sector. This is the hardest thing to me to do. For example, I currently way overweigh oil/gas industries, semiconductors, agriculture and mining and industrial metal. I have nothing in retail right now, or REIT, and many other sectors.

As a result, I often mistrack the S&P, either leading it or trailing it. I also keep track of this to limit errors on my part.

 

[Markola]

I'm not a "day trader" nor a particularly impressive trader.



To protect me from me, I try to keep the majority of money in the boring stuff, (i.e. vtsax) which I haven't sold and don't intend to (other than temporarily a few years back which I needed to do so for a back door Roth) and limit more speculative stuff to small amounts. (I have had speculative positions which have disappeared.)



More recently, because I have been a bit too "handsy" with trading since retirement, I am trying to literally dollar cost average into some positions - by logging on a buying a tiny bit at a time. This includes adding to SCHD & SCHF. If I see a big drop in one of the positions which I hope to increase over time, I would buy a larger position. I totally expect to see drops, and will live with that.



I am also attempting to take dividends from larger positions in individual stocks and reinvest them in, what I consider to be, "core funds."



P.S. I too can single-handedly move the markets. I was getting ready to buy one year treasuries - and we all know how that turned out.

We are much alike! In the depths of the Great Recession, I suddenly discovered why people own bonds, so I made the genius move to go from 100/0 to 80/20. Nearly the next day, the stock market started its greatest bull market ever. Then circa 2018, I read about the trade wars in the newspaper and was so certain it meant financial suicide that I moved from 60/40 to 50/50. As you said, “We all know how that turned out.” *

I’ve since hired Vanguard to manage our stuff AUM at thirty basis points, in part to keep me from being able to be “handsy.” My itchy trigger fingers cost me much more than that over the years.

To each their own, though, and YMMV.

 

[Dash man]

If I’m doing a large trade, I often use limit orders to try to get a lower price. Selling cash covered puts is another way to try to get a lower price and you can make some additional money along the way.

 

[jazz4cash]

. Recently, I decided to sell a taxable asset, use the cash for my Roth IRA contribution, then rebuy the asset inside the Roth. Of course, all that takes several days. During the transition period, that asset shot up in price some 50%! I couldn’t believe it.

I waited to rebuy inside the Roth to see if the price would drop back to my sell price.
It didn’t.
So I bought at the higher price.

Isn’t there some better way to do this? I’m not sure if it’s possible to do an in-kind transfer for a Roth contribution but I would explore. There are many good reasons for sticking with an AA and maintaining dry powder. I am funding a portion of my Roth contribution by tax loss harvesting. I am also spreading the contribution out over several weeks.

 

[NW-Bound]

Isn’t there some better way to do this? I’m not sure if it’s possible to do an in-kind transfer for a Roth contribution but I would explore...

With Schwab, I can do in-kind IRA withdrawal to a taxable account also at Schwab, as well as traditional IRA-to-Roth conversion, again within Schwab. All orders are executed in seconds via the Web user interface.

With Merrill Edge, they only do cash transfer, and I have to sell, transfer cash, then rebuy, even though all accounts are at Merrill Edge. However, this is done in a matter of seconds with a few mouse clicks.

I don't know why Merrill Edge does not have the same capability as Schwab, although in other aspects Merrill Edge is the same or even better.

Of course, if you transfer to another institution, it will take several days.

 

[Dash man]

Isn’t there some better way to do this? I’m not sure if it’s possible to do an in-kind transfer for a Roth contribution but I would explore. There are many good reasons for sticking with an AA and maintaining dry powder. I am funding a portion of my Roth contribution by tax loss harvesting. I am also spreading the contribution out over several weeks.

IRA and Roth IRA contributions have to be cash contributions. Conversions can be in kind.

https://www.irs.gov/publications/p590a#en_US_2021_publink1000230354

 

[MarieIG]

We are much alike! In the depths of the Great Recession, I suddenly discovered why people own bonds, so I made the genius move to go from 100/0 to 80/20. Nearly the next day, the stock market started its greatest bull market ever. Then circa 2018, I read about the trade wars in the newspaper and was so certain it meant financial suicide that I moved from 60/40 to 50/50. As you said, “We all know how that turned out.” ��*

I’ve since hired Vanguard to manage our stuff AUM at thirty basis points, in part to keep me from being able to be “handsy.” My itchy trigger fingers cost me much more than that over the years.

To each their own, though, and YMMV.

That is certainly not a large management fee - and avoiding the buy high and sell low impulse can be worth quite a lot.

I was listening to a financial adviser the other night and he mentioned that a great deal of his value came in protecting his clients from themselves. He mentioned that someone said to him that financial advisers were thieves, and he responded, I may agree with you, but why do you say so. The response, was to the effect, that you make money even when the clients' accounts are down. His response was to the effect that, we not be earning our fee when the accounts are up - anyone can make money in an up market; the work comes in a down market.

 

[Dash man]

To see how management fees can eat up your earnings, watch this video.

https://youtu.be/9Vp__8WMxrE

 

[MarieIG]

If I’m doing a large trade, I often use limit orders to try to get a lower price. Selling cash covered puts is another way to try to get a lower price and you can make some additional money along the way.

Yes, I use limit orders for "larger" trades (ok, sometimes even for small ones, I can't help myself.) Some of my limit orders never execute due to me being - ahem frugal. I haven't done option trading. Well, at least not - directly.

 

[MarieIG]

To see how management fees can eat up your earnings, watch this video.

https://youtu.be/9Vp__8WMxrE

Not a financial adviser cost but - Vanguard used to have little comparisons of how much you would make after 10, 20, 30 years depending on the fund expenses. That made me leery.

 

[MarieIG]

With Schwab, I can do in-kind IRA withdrawal to a taxable account also at Schwab, as well as traditional IRA-to-Roth conversion, again within Schwab. All orders are executed in seconds via the Web user interface.

With Merrill Edge, they only do cash transfer, and I have to sell, transfer cash, then rebuy, even though all accounts are at Merrill Edge. However, this is done in a matter of seconds with a few mouse clicks.

I don't know why Merrill Edge does not have the same capability as Schwab, although in other aspects Merrill Edge is the same or even better.

Of course, if you transfer to another institution, it will take several days.

When I do in kind conversions from my traditional to Roth over at Vanguard, they seem to use end of day value, even for stock and etfs. (I should call and ask them about that.)

 

[Dash man]

When I do in kind conversions from my traditional to Roth over at Vanguard, they seem to use end of day value, even for stock and etfs. (I should call and ask them about that.)

I can understand for mutual funds, but that really is odd for stocks and ETFs.

 

[Car-Guy]

How can you stand for trades to go the wrong way? How do you sleep? What is your mindset? Honestly, hats off to you all.

It's either day trading or going to a casino for the day. Both can be exciting, but results are usually about the same. Some days you win, some days you don't. But over the long run the house wins. (Trust me)

For me, both are done with money I can afford to lose. And there is always the chance for a big win.

 

[Markola]

^^^^That’s entertainment!

 

[Markola]

To see how management fees can eat up your earnings, watch this video.

https://youtu.be/9Vp__8WMxrE

I know that fees compound over time, yes. There is a drag from the 30 basis points plus the average 9 basis points ER of our funds. Everything is in tax advantaged accounts. But it has to be compared to the costs of trading fees, taxes if in a taxable account and the incalculable costs of mistakes, which as I noted for myself, have been painfully high.

But I’m really not trying to argue against active trading and I wish everyone who can sleep well while doing it the very best of luck.

 

[ownyourfuture]

I was an active trader from the late 90's until 2010.
The first stock I purchased 'online' was Nissan. Bought it at 4$, and shortly after sold it at 6$

Around 2000, I subscribed to investors business daily for a year.
IBD is all about technical analysis. I take TA with a large grain of salt, but their #1 rule was to cut your losses at 8%.

The reasoning is that even though you might miss out on a rebound in some cases, you'd never generate a huge loss either.

Always made a lot of sense to me.

 

[NW-Bound]

When I do in kind conversions from my traditional to Roth over at Vanguard, they seem to use end of day value, even for stock and etfs. (I should call and ask them about that.)

I can understand for mutual funds, but that really is odd for stocks and ETFs.

Schwab uses "real-time" values for stocks and ETFs at the moment of the share transfer, as I remember.