Is stock trading with low funds foolish?

[djs13]

I started a thread a few days ago about penny stock investing, but after receiving some advice I'd like to ask a different question.

I'm a college student and during the week I work part-time at a golf store. Basically I ring people up but on slow days I literally spend hours on the computer just reading business articles and going on facebook. I have about $1,200 in savings and I make anywhere from $75-$200 a week depending on my hours.

This is what got me thinking: what if I invested a weeks pay check into the market? I got some great advice in the other thread and I'm purchasing some books on amazon about investor methods and psychology. But would investing $200 or $300 be stupid? That's really all I can afford to risk right now since I use a portion of my savings for college. But one advantage I have is that I can short sell very easily since I'm almost always in front of a computer.

What do you guys think?

 

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[Guest3722A]

Save your money. Learn how to trade first by using a simulation account. Think or Swim is good for this because it lets you trade 24 hours a day when markets are trading. You can trade futures, currencies, metals, stocks...

I know this doesn't sound fun, but neither is losing money.



Learn learn learn! Save save save! And you will know when you're ready.

A rule of thumb in the trading community is to have 2 years of living expenses first, before entering.

Read the books I suggested.


freestockcharts.com is a good place to learn technical analysis which in some circles is important for trading

 

[Jonleehacker]

You'd be better off to just mail me the money directly, why share it with a broker I say

Seriously, topherea is right, spend it on getting educated until you know what the game is all about. To me it sounds like you are suffering from a common illusion that just because they let anyone with a pulse sign up for a trading account, that anyone can make money on the stock market... so not true.

To make money on the market you have to take it seriously, and it is just as much work as any other business.

I guess if you really want to prove to yourself how easy it is to blow a couple hundred in the market, you could open up a micro forex account which you can do with as little as $25.

You won't be able to even open a real stock account with less than $5000, most likely.

 

[stevenmac2]

Personally, I would avoid the junk pile of penny stocks. Get some experience under your belt before you try. Paper simulation is nothing like having real money on the line because the emotion level is not the same. Just be careful - the Market Makers out there that know where you buy and where the stops are in place - they love to manipulate the stock to flush people out for a quick money fix. Also, it is very difficult to apply position sizing to manage the risk because the pace of the action.

For example, some may look at a drop in price of .25 cents to .20 cents isn't a big deal. In Gains/Loss, that small .5 cent movement puts you 20% down. People try to employ some sort of money management rules (like 8% - 10%) loss before they get out. Unless you have a very specific policy to manage this, hope alone isn't going to bring your money back.

If your interest is to get established to do something to test the waters in some way, my advice is to take $500.00 to open a Scott Trade account (there is no minimum limit on the account after that as long as you stay above/equal to $0) covering any positions. At least this would allow you to work some positions in the NASDAQ where you can find some excellent Growth Companies.

The last thing you need is to be worrying about what the market is doing from second to second, when you have a college education that also needs investment. Find balance so you achieve both.

But to your original question, they say that you need roughly $25K to be properly funded. Some start with $5K-$10K. Observe a key rule no matter what you do - Protect your capital so you can live to play another day.

 

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[Guest3722A]

I don't think scottrade would work with $500 because it would have $14 round trips with only $500 to start with. There's decent brokers out there with flat rates of 2.95 so would be less than $6 for round trip. BUT there are also companies out there that will train you to trade and give you leverage but you need a level of understanding first before trying these imo.

On top of this these companies will only charge $1.50 per thousand shares and pass ecn rebates back to you, the trader.

I'd really suggest learning the game first.

 

[CashFlowXpert]

There is an important statement you made: "That's really all I can afford to risk right now since I use a portion of my savings for college."

Don't invest more than you can afford to risk. Investing any amount is good but keep your expectations in check. A $200 investment won't get you rich anytime soon.

Money grows and contracts in percentages in the stock market. A 50% gain investing $200 will yield you a $300 account balance. While a 50% gain investing $200,000 will yield you a $300,000 account. Hence the more invested, the more potential for a greater gain or potential for greater loss.

Unless you are an experienced trader (notice I said trader and not investor) don't expect 50% gains in short periods of time. Most investors shout for joy at 10% gain per year. Though that will get you nowhere with $200 invested. Don't let that discourage you though. The experience and knowledge itself that you gain while trading is valuable.

 

[ramy98]

Save your money; you will be able to merge on the fastlane and take advantage of new investment /business opportunities in the future with large savings. I know saving money is boring and considered lame to some but remember the big picture.

 

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