Trading an Index

[Salv]

Morning guys, very new to this, currently i just invest for the long term. I am trying to expand my knowledge on trading but i have limited time, so my thought was to try trading an index like the top 40, with my limited knowledge. Like this if i make a "bad" trade i just leave it as a medium to longer term investment. Low rewards i would presume but low risk aswell. Obviously i wouldnt epect the returns a normall trader does, but would it be profitable? Your thoughts please?

[SimonPB]

you can trade indices with stx40 SSF's, warrants or directly. My advice would be warrants as the risk is lower, especially if bad trades are to become investments. But then that idea is absolutely horrid and goign to lead to ruin.

[cfm]

Except that warrants have a limited life time before expiring.

[SimonPB]

all derivatives have a limited life span, don't be fooled by the ability to roll futures.

[Salv]

Ok my apologies perhaps i waasnt specific enough. I would just be buying normal shares, no derivatives as i am too novice for that at the moment. The idea would be to buy stx40normall shares at a time when i believe they will go up by X% (based on TA and current market events) if my believe is correct and i make X% i sell out take me profit and repeat. If i was wrong hold on to the shares for +- 3 years until they make a decent profit as an investment. As it is the top 40 the shares have to increase to previous highs at somepoint (unless South Africa as a country goes into a situation like Zim which i dont believe will happen). This alows me to learn the in's and out's of trading whilelimiting my risk. The obvious down side is that a couple bad trades would tie me into the shares as investments limiting my trading funds, but if i have that many bad trades perhaps i should not be trading and stick to investing.

[#6]

So then you'd be holding your losses, but cutting your profits - not a strategy that is normally recommended. If you want to trade short-term, I would second Simon's suggestion that you try warrants. Pick a favourite TOP40 call for when you think the market will go up, and your favourite TOP40 put for when you think it will decline. Limit your risk by paper-trading initially or only buying a small number of warrants. Derivatives are actually cheaper to trade than shares for short-term trades - the commisions are lower for the same market exposure. However, the interest costs become more significant for longer trades.

[SimonPB]

I would not recommend any form of derivative for a newbie, not for at least a few years. That said knowing why you are buying is critical and changing the logic half way thrugh to try and avoid a loss is a very bad idea.

[asylum]

Simon you say dont be fooled by futures as they have a lifespan surely rolling them over which i have done on numerous times and came out on top is better than a warrant that decays over time and becomes worthless.

[Mr_S]

simon, im a newbie and have tracked a warrants that went up big time etc. now, personally i dont really think sittin on the sidelines for a few years watching others take profits that u cud have taken (jus cos yr a newbie) works well for me..id rather say get in but with small amounts as a percentage of yr total portfolio...

[Salv]

Thx for the input guys

[SimonPB]

well no. Opportunity cost, cost of carry both cost you money. An was it a bull market, in which case making money is easy with time.

[SimonPB]

mr s, massive difference between watching a warrant head for the moon - and trading that move (fear and greed being the first two problems you'll run into). If it was that easy - why isn't everybody rich ? And why is everybody in such a hurry to get rich first, some time getting smart first is a way way better idea.