Ask HN: How did you learn about stock market/trading investing ?

https://news.ycombinator.com/item?id=1241165

by yr • 16 years ago

61 71 16 years ago

news.ycombinator.com

Any good videos/books ?

ezliu• 16 years ago

http://www.amazon.com/Options-Futures-Other-Derivatives-5th/...

http://www.amazon.com/Investments-Zvi-Bodie/dp/007293414X

are both very good general resources.

Investments is a very broad approach that covers a lot of markets and basics and how things work. Very accessible to complete beginners.

The Hull is an introductory text and a great reference source to keep handy. You'll need to be slightly mathy to get it, but I suspect most HN readers will feel at home.

solutionyogi• 16 years ago

The most important thing to realize is that trading and investing are different ball game.

I don't know much about investing but I did dabble in trading, especially penny stocks. No, I am not talking about those scam emails where they claim that their stock pick is going to go up 100% in a month. I am talking about realizing those penny stock scams and 'shorting' them to your advantage. I learned about shorting penny stocks from Timothy Sykes (http://www.timothysykes.com/) and have made some money. There are quite a few other traders who share their knowledge through blogs. Few blogs which I follow:

http://www.bigmiketrading.com/

http://www.reapertrades.com/

http://www.welcometothegutter.com/

And most important tip: Trading is very risky. The saying '90% of the traders lose money' is spot on. Realize that trading is an extremely difficult profession and be very careful if you do decide to take the red pill.

splat• 16 years ago

http://www.investopedia.com/ is a wonderful website with lots of basic financial information that spans much more than just trading and investing.

sgoraya• 16 years ago

http://www.bogleheads.org/readbooks.htm

Probably the best resource I have found online; the forums are great, the folks are really helpful with a lot of useful information.

vaksel• 16 years ago

by losing a bunch of money.

personally I didn't find the games etc to be all that useful, you act completely different when it's real money on the line.

luckily I started out around the time the market started picking back up, so even when I made stupid bets they paid off.

shughes• 16 years ago

By trying to incorporate programming into trading.

If you get an account with a company like Interactive Brokers, they offer an API. They also only charge $0.005 per share.

You can study a trading method called momentum trading, which is the idea of riding the curve for a very short period of time. For example, right after a financial statement is released, the company's stock is going to go up or down, depending on the statements results. You can write a program that immediately determines the direction the share price is going at the time in which the statement is public, then buy long or short depending on its direction. Then do the opposite when the program determines the up or down curve is leveling off.

Pretty interesting stuff, and it'll get you engaged.

As far as books, google momentum trading.

bluesmoon• 16 years ago

My girlfriend taught me a lot and then it was just by actually putting money out there and by talking to friends who were doing the same.

davidkellis• 16 years ago

One of the best books I've read about investing is Vitaliy Katsenelson's Active Value Investing: Making Money in Range-Bound Markets.

Katsenelson argues that one should have a sell strategy in mind before purchasing a stock, instead of buying a stock and then holding forever, what he calls "buy and forget to sell".

His book is not about day trading, but he does advocate timing, what he calls pricing, a trade so that a stock purchase is made when it's a good value proposition and sold when it becomes more fully valued.

I hadn't heard the term Range-Bound markets before reading his book. He defines the term and uses it to help him make the argument that taking a more active approach to investing (i.e. buying and selling as opposed to buying and forgetting to sell) is a good strategy in bear markets and range-bound markets, and isn't a bad strategy in bull markets.

It's a very readable book. I'd suggest it to anyone.

Also, Katsenelson has his own suggested reading: http://contrarianedge.com/2009/10/28/books-that-will-help-ga...

iamelgringo• 16 years ago

I'm not a trader, I do index funds. But, I'm a news hound, and I love reading economic an financial news, which is why I started http://Newsley.com.

I went out to NY last week and met with the guys from http://stocktwits.com. They're trying to revamp trading through social media. They have a really active twitter channel,and I follow a number of their twitter feeds.

They've also started streaming live video while the US market is open. They have a number of traders broadcast live while they are trading. It's a pretty cool concept. I wish them well.

If you looking for reviews of trading news, and companies, etc... there's http://www.investimonials.com/.

scw• 16 years ago

I'd recommend starting by reading this article about how Google approached educating its employees on investing: http://www.sanfranmag.com/story/best-investment-advice-youll...

And this talk by Charlie Munger on stockpicking and the art of worldly wisdom: http://ycombinator.com/munger.html

The two major mental models which I've found helpful in understanding the market are the Efficient Market Hypothesis (EMH; http://en.wikipedia.org/wiki/Efficient_market_hypothesis) which explains how the market acts under idealized conditions of rationality. Temper this with learning about Behavioral Economics (http://en.wikipedia.org/wiki/Behavioral_economics) which covers issues of human perception and how us semi-rational beings actually act, such as perceiving a loss of $100 as twice as painful as a gain of $100.

The Intelligent Investor by Benjamin Graham is a wonderful book, but reads densely. In more recent editions contains thoughtful side commentary by Jason Zweig which help break up the text and give a more modern perspective. A key idea is the separation between investing and speculation: set aside some percentage of your portfolio for speculating, and experiment with it, but investing for the long-term is the way to go in the absence of something which allows you to escape the financial gravity of the efficient market.

A Random Walk on Wall Street by Burton Malkiel covers efficient market theory thoroughly. The Intelligent Asset Allocator by William Bernstein for approaches to constructing long-term portfolios.

Lots more to say on this issue, but hopefully some of these starting points will get you thinking.

arthurdent11• 16 years ago

Incidentally, heard a rumor (absolute speculation and it was probably made up by the person who told me) that Google was interested in financing an internal hedge fun and someone sent me this link.

http://www.google.com/intl/en/jobs/uslocations/mountain-view...

ig1• 16 years ago

Most large multinationals will have traders in their treasury teams. If you've got large reserves of currency in lots of currencies you need to manage currency and deflationary risk.

sahaj• 16 years ago

start reading the financial news. the best way to learn about the stock market is to start paying attention to the financial news. there's a lot of data to be absorbed when you first start, but with time it'll become easy to read and understand the news articles and how they relate. also start paying attention to the major indexes, prices of commodities and currency. pay close attention to monetary policy set by the legislative body and find out how that may affect the general market or a specific market. pay close attention to the habits of the consumer - how she uses credit, her spending capacity, wages, etc.

just like most things in life, practice makes perfect. start practicing your trade/investment hunches. start with small wagers and increase them as you learn more and start to understand what works and what doesn't.

dirtae• 16 years ago

The Intelligent Investor by Ben Graham is a classic, and a good place to start. A Random Walk Down Wall Street is also a must read, even if you reject the efficient market hypothesis. Of course, there is a huge difference between trading and investing. These books are firmly about investing, not trading.

derwiki• 16 years ago

I learned enough to know it's a game not worth actively playing. Buy an index fund, do dollar cost averaging, and stay hands off. Why?

. Big shot fund managers can't consistently beat the market, and they do this 40+ hours a week -- why should you do better?

. Stocks should be a long term investment; the market has always had a positive return over any 20 year period. Index fund and don't worry about it.

. You'll do a lot better applying energy to your start-up or whatever you're working on than dwelling on ticker prices.

. You're probably not playing with enough money to make it worth worrying about

Ramit Sethi's "I Will Teach You To Be Rich" book is a great overview of personal finance. He convinced me to automate my investments and not worry about following the market day to day.

(UPDATE: fixed formatting, thanks davidw)

natrius• 16 years ago

Seconded on both index funds and http://www.iwillteachyoutoberich.com/. If you have a job but haven't thought about retirement accounts, you owe it to yourself to read this today to take advantage of what is basically free money before April 15: http://www.iwillteachyoutoberich.com/blog/the-worlds-easiest...

davidw3• 16 years ago

I think for me this is the biggest question. Is it worth trying to get involved with something where there are N people who know more, move faster and have better connections that I do? I think the case for 'no' is pretty convincing.

BTW, your formatting is messed up, don't indent the points.

arthurdent11• 16 years ago

Thats how I feel about web startups sometimes.

People who write better code (and faster), know more VC's, first to market.

Finance, like startups, is a big world with room for many of players of different flavors.

daydream• 16 years ago

Yes to everything the parent said. You can learn most of what you need to know from these two books:

"The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between" - William J. Bernstein

"The Random Walk Guide To Investing" - Burton Malkiel

Do I believe that the market is completely efficient, and that it's impossible to beat it over the long term? Absolutely not. But I do believe that there are very few people in this world that can, and I'm darn sure I'm not one of them.

Take 80% or 90% of your portfolio, whatever suits you, and follow an index-based approach to investing. Have as much fun as you want with the other 10% or 20%. Best of both worlds.

nearestneighbor10• 16 years ago

> why should you do better?

It's a zero sum game, but one might be smarter than others. Some companies doing algorithmic trading consistently skim off their share of the market's inefficiencies.

What I'm wondering is how much of an investment it would be to get into high-frequency trading for yourself. Any idea?

mathgenius• 16 years ago

Probably 10 - 50 million. You will need 5 - 10 hard core programmers, a network engineer, a trader or three, a bunch of the fastest servers around, etc. etc. This is an insane idea, I would not recommend it! (The margins are being pushed to zero as more and more companies get into this.)

arthurdent11• 16 years ago

http://www.algodeal.com

Someone sent me this gem a few days ago.

I love the idea (for the guys who run it AND the guys who it opens up opportunities for).

Might be something you could play with.

Depending on what sort of HF strategy you want to run, I imagine this can be done relatively cheaply. (300K-800k? Pretty wide range I know... that's all I got though).

Obviously your strategies are limited, you're not competing with some of the super low latency firms for the fastest of opportunities because of hardware limitations or price prohibitive vendors/deals with exchanges or whatnot.

I was just reminded of this: http://www.reddit.com/r/IAmA/comments/9s9d7/iama_100_automat...

If I recall correctly, he got started with under 100k and has a pretty inexpensive setup.

"High Frequency" trading means a lot of different things to a lot of different people.

joe_the_user• 16 years ago

The capital-gains tax is a reason not to get into short-term trading: http://www.fool.com/personal-finance/taxes/2008/09/04/anothe...

sorbits6• 16 years ago

It's a zero sum game

It most certainly is not.

When you buy shares they represent a share in a company. This company may rise in value due to good management, successful products, expanding into new markets, etc. If you sell your share at a higher price, no-one is going to lose the money you will earn, the company is just worth more than when you bought it.

Other securities may make you money in other ways, e.g. if you buy T-bills the FED is paying you interest on the money you effectively loan them.

herval• 16 years ago

it's not a zero sum game. The definition of zero sum games is "A situation in which one's gains result only from another's equivalent losses.". There are many aspects of a stock market that make it NOT sum to zero: the fact that things can go up or down in value with no one buying/selling (aka GAPS) itself makes it a positive/negative sum game. Not to mention taxes, broker costs, IPOs and all other 'game moves' that inject and/or take money out of the 'game'.

adamtmca• 16 years ago

An interesting note on the zero sum discussion, while the stock market clearly is not a zero sum game options on the other hand ARE zero sum.

On the exercise date the payoff for the buyer of an option that's in the money will exactly match the loss of the seller. Vice versa if it's out of the money. Kind of neat.

arthurdent11• 16 years ago

It blows my mind that this is taken to be true. There is a LOT of literature that "supports" these ideas, but a lot to the contrary as well. And there's lots of garbage out there if your primary source for this data is Google searches or a few free blogs (I like Sethi's blog, just don't buy into a lot of it).

>.Big shot fund managers can't consistently beat the market...

1. My understanding is that literature regarding this generally refers to the mutual funds. I've also heard it voiced that the mutual fund community on average doesn't beat the market. That's not the same thing.

2. Renaissance. Quantum Fund. DE Shaw.

http://en.wikipedia.org/wiki/Renaissance_Technologies#Invest...

I generally thing that HN types are the types who are smarter and likely competitive with the best and the brightest in finance.

>. Stocks should be a long term investment;

Why?

> the market has always had a positive return over any 20 year period.

1. Some people want returns in timespans of shorter than 20 years.

2. Not all markets have had positive returns over all 20 year periods. Even US equity markets have had losing 10 year periods, and inflation adjusted returns make the picture bleaker as well. I'd say the SPX has a good shot at not beating inflation adjusted returns for the 20 year period beginning in 2000. http://www.simplestockinvesting.com/SP500-historical-real-to...

3. "Positive" isn't good enough for everyone.

>.You're probably not paying with enough money to make it worth worrying about

Gotta start somewhere. My first program was "hello world."

Investing time in learning about financial markets isn't for everyone, just like software startups isn't for everyone.

Facebook:Renaissance :: <insert YC startup here>:Jane Street Capital :: "hello world":making your first trade

Learning to trade or invest or code or build startups is just another skill.

kneath• 16 years ago

I've found that I fall into the "not playing with enough money" camp. The difference between the "gotta start somewhere" attitude of software development is trading costs money. I found I was consistently making 20-30% returns, but after trading fees it was a lot more like 0-5%.

You can write as many Hello World programs as you want for no incremental fee — but every trade costs money, so you need to trade enough to offset the feeds.

davidw3• 16 years ago

> I generally thing that HN types are the types who are smarter and likely competitive with the best and the brightest in finance.

Thinking you're smart enough to compete with people who are not only very smart, but also experienced and dedicated sounds like a good way to get royally screwed if you're not careful.

Ennis• 16 years ago

> Learning to trade or invest or code or build startups is just another skill.

Absolutely. I started with $2000 and doubled it many times over to pay for tuition. But I read everything I could and watched my stocks religiously.

I would buy and sell every few days or weeks to make use out of every 5% gain or loss in the stock's value.

Yes, the fees (etrade at $20 a trade) were ridiculous. They might have cost me 25% of my gains but at the end of the day my gains were still up there. It's much cheaper to trade now.

If you have the time to invest then I would learn foreign exchange instead. You can have much more leverage there without much initial capital. I would love to spend more time on trading my money but as you move on from school life just gets busier. So go read and make some money.

PS: I should say I lost my fair share initially as well.

Tichy• 16 years ago

Fund managers: it is even worse. Because customers will choose the fund with the best tack record, managers have an incentive to take high risks when the time to report comes near. If they win, they win big, if they lose, they lose just their bonus.

What i haven't understood yet is why index funds are supposed to be so great. At least if everybody would just buy undex funds, it wouldn't work. Also, who picks the stocks in the index? Why would index funds be better than just buying some random stocks?

known2• 16 years ago

If I find an inefficiency or loophole in the markets, I prefer to fix it. However, hedge funds tend to exploit it & make money through automation & http://en.wikipedia.org/wiki/Algorithmic_trading

bitdiddle• 16 years ago

I'll call total bullshit on the idea that stocks provide positive returns over long time periods. (EDIT: note that you don't always get to pick the time period, life has that nasty habit of forcing the situation)

Over the last 25 years, including the recent meltdown, the best investment was long US treasuries.

My advice is to do your own research buy a small group of stocks you know very well, preferably that pay a dividend, and hold them. When they go down, if you are still a believer buy more.

Stay away from mutual funds, they are loaded with hidden fees, their managers are like cattle, and they typically do well only in bull markets when everyone does well.

rmanocha• 16 years ago

I've recently started doing some investing (in both stocks and MF's) - in the Indian market. Over a 3 month period, I've had higher returns on my Growth MF's than on all the stocks I've bought.

I'm slowly starting to pull out of stocks and reinvesting that money into MF's - stocks take up too much time for it to be worth the effort.

steve192• 16 years ago

The same way I learn most things: by making mistakes.

steve192• 16 years ago

I am not trying to be facetious, but a better question would be "how can I learn trading without making expensive mistakes?".

maigret2• 16 years ago

That would lead to much simpler answers, mine would be "you can't". Of all the picks you'll make, most won't be the most efficient, and many will go down. So if you can't accept losses - at least for a given amount of time -, just buy fix interests - no stocks.

reidman• 16 years ago

I read Investing for Dummies back in 2004. It taught me all the basics I needed to know -- mostly lingo, since I had no clue what all the TLAs meant.

I had just gotten my hands on a few thousand dollars that I knew would otherwise be wasted on an unnecessary purchase, so I signed up with Ameritrade (back in 2004 when it was much less user-friendly) and had to read the book before I felt confident enough to actually place an order.

The book advised me to buy what I knew, and to only buy something I planned on holding for a long time. Luckily I had just tried out a Powerbook for the first time and was blown away, so I bought a bunch of Apple stock.

maigret2• 16 years ago

Through a recent HN discussion, I discovered the finance course from Robert Shiller at Yale, and this is really only joy to look at this lecture. You get the whole semester in video: http://academicearth.org/lectures/finance-and-insurance

pathik4• 16 years ago

I stopped day trading when I discovered that the time I spent tracking my investments and researching stocks was not worth the profits I earned.

I would rather buy an index fund or go long on certain stocks with excellent fundamentals.

brc• 16 years ago

The first thing to do is decide whether you really want to invest the time and effort into learning. Realise that the people you are playing against are professionals who do it all day every day. That's not to say you can't develop an edge and beat them, but don't assume you can walk in with no experience and set the world alight. Nobody here would expect a novice programmer to sit down and write the most awesome web app in a weekend - the same principle applies.

In this thread I've seen 'day trade', 'don't day trade', 'index funds' , 'don't do index funds'. Realise that all this advice is contrary, and only applicable to the specific people providing it. What matters is finding something compatible with your belief system, not twisting your mind to try and accept somebody else's belief system. Because when the pain and stress arrive, if you're not fully aligned with your strategy, then you're going to make the wrong choice.

Once you've decided you're going to put some effort in, then you need to work out a strategy that aligns with your personality. This needs to evaluate things like:

- your risk tolerance

- your expectations of returns

- your starting capital

- your analytical skills

Everyone is different, and the only people who succeed are ones who find an approach that works for their personality, and then take the time to get rid of their mistakes.

As for books, here's what I recommend:

- Intelligent Investor by Ben Graham - the take away in this book is the 'margin of safety' concept

- Trade your way to Financial Freedom by Dr Van Tharp - the take away in this book is that active management by position sizing and risk setting dictates more of your return than your actual strategy.

- Market Wizards, The New Market Wizards and the Stock Market Wizards, all by Jack Schwager. These books are all a series of interviews with top traders in commodities, currencies, funds, stocks and probably something I've forgotten. By understanding how an incredibly diverse set of traders have made astounding returns in the same markets should make you realise that there is no one approach that works, there are only approaches that work for specific people.

Good luck, and pray your first trade is a failure, not a success. Because you need to learn the pain of loss and how to minimise it before you taste the sweetness of profit.

known2• 16 years ago

Any good videos/books ?

http://www.elitetrader.com/vb/forumdisplay.php?s=&forumi...

Ask HN: How did you learn about stock market/trading investing ?

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