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Beginners in the stock market: honest talk about trading

The RUVDS blog on Habré saw everything: popularization of JavaScript and cool translation materials, yachting, issues of education and professional development, burgers, cheeses, beer and calendars with cyber girls. The idea to talk about the basics of trading and working in the stock market has arisen for a long time, and that's why. Most companies writing on the subject of exchange have a clear goal: to get customers for their tools and brokerage accounts, which means that investing in their articles is an extremely attractive activity, which should become a hobby of every geek. The only thing that we can offer to novice traders is VPS with trading platforms, and we have no motive to represent the world of trading in the stock market as a means of getting rich. 

We decided to make a series of articles on the basics of trading and the most popular assets for beginners. Honestly, without appeal, carry money to a broker or open your account in a particular bank. Well, it's up to you to decide whether this is your way or not. Sometimes it is much more profitable and even faster to master a new development stack and pump your salary and stable income to the level you need.


How much money should a beginner investor have and where to get it?


There is no fixed amount. Among brokers, you can hear an amount from 100,000 rubles, but it’s clear that this is a story for the passive behavior of the new investor himself (that is, if you entrust the broker with money management and you don’t decide on transactions). If you decide to try to make money on your own, then you can take such lows as a basis:

  • “Standard” minimum - 10,000 rubles
  • IIS (individual investment account) - up to 400,000 rubles. in year 
  • for the purchase of domestic blue chips - 10 000 rubles.
  • for the purchase of foreign products - highly dependent on the selected assets 

But, I repeat, these are conditional amounts: you can choose your own, sometimes the minimum amount of funds on the account is regulated by the broker, from whom you will be serviced. 

The main thing is to determine the important parameters of the funds that you are ready to invest.

  • At the beginning of your investment practice, do not invest the latter, you should have a stock of funds. One of my best practices is to save 10% of any income (left, right, bonuses and bonuses - that's all, even gifts). If there is no purpose of accumulating something important, some of this money can be tried in trading on the stock market.
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Directly - no way. In the Russian Federation, individuals do not have the right to make independent investments in the stock market. To access Mosbirzhe and other sites you need to conclude a broker service agreement and open a brokerage account. After that, you can entrust the management of your money to a professional stock market participant (large amounts) or start making transactions yourself (if the amounts are small).

  • Working directly with a broker - you conclude an agreement, install trading platforms and start experimenting based on your knowledge or (which is not bad, but risky) on discussions on the forums of professional traders and amateur traders. This is the best option for beginners.

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There are many stock market trading strategies (trading), but not all of them are suitable for beginners. Let's take a look at the main ones.

Scalping is a popular type of trading in which a trader makes a profit from any price movement. This work on short time frames (sometimes even 5 minutes or a minute). Suitable for those for whom trading is the main job (profession), requires concentration and attention to detail.

Fundamental trading- a type of trading in which a trader trades in the medium term using fundamental analysis. He analyzes and predicts market movement and the totality of indicators of issuers of securities in the portfolio and, based on the findings, makes transactions. This is a rather conservative method of trading, it is quite suitable for beginners who start with just a fundamental analysis.

Technical trading - a trader trades on any time frames based on technical analysis. Transactions are closed not on the basis of information about the market and the issuer, but on the basis of forecasts of price changes based on how they changed in similar external conditions. In essence, this is a trend analysis trade. Suitable for more experienced traders, however, already at the training stage, it is worth starting to master the basics of technical analysis.

Another strategy suitable for beginners is medium-term trading. The principles of action are the same as for scalping, but profit or loss is fixed on the basis of price movements in the medium term (hour, several hours, days). This time is enough to conduct a deep analysis and make a decision or decide on a strategy. A very stable and comfortable trading method.

High frequency trading(if you have been on Habr for a long time, then you probably read about it) - this is trading, where traders are computers that perform millions of computing operations per second in order to get the maximum profit. It is interesting, promising and all the more relevant for programmers, but you need to know that it is unsafe, requires knowledge and trading experience, and can also be attacked or blocked. It is still not completely clear whether high-frequency trading is the future of the entire world trading system, but it definitely has prospects.

Well, two types of trading are used exclusively by professionals and large institutional market participants.

Instant trading - trading due to price movements inside different timeframes.

Trading on Long Timeframes- trading, which is based on a set of enlarged economic processes, external factors, market conditions and trends. 

There is another trading strategy - repeating other people's actions in your strategy - will not lead you to professionalism and will not allow you to build competent relationships with the stock market. It is interesting and informative to read such stories, but building your trading solely on copying is a very bad idea.

You can always check the chosen strategy “laboratory” on the data of past periods and calculate what result you could get. This is an additional “training” for your analytical skills.

So, you have become familiar with the types of trading and ... 

Further, I recommend that you read the blogs of major brokers (but remember that they are sometimes written not by professional financial copywriters and not experienced traders, but by marketers with a philological background, so maximum criticality!), See educational materials (you can even basic university textbooks), go online -Course from well-known companies (for example, I like the free school for beginners Investments 101 from BCS , it is the most balanced of Russian-language materials). There is another way - to hire a stock market teacher from former traders or from a university, in a short time the basics will be available to you. But feel free to ask for practical experience.

Throughout the training you will need a demo account, where you can operate with virtual money and not incur real loss (however, and not make real profit). (By the way, note that the demo account should not inspire you, because, firstly, it is greatly simplified relative to the real situation, and secondly, it can motivate you and “play along”).

And when you are armed with the basic theory to the teeth and you know that Japanese candles are not sold on Aliexpress and do not fit Toyota and Honda, you can try to start working with real money on a brokerage account.

No, stop. I do not want to seem like a homegrown psychologist, but I know for myself: tune in, that you are not a wolf from Wall Street. No confidence, no relaxation, no excitement. You are an inexperienced sapper in a minefield without a mine map. And that means a maximum of rationalism, reasoning and caution.

Well, everything started.

You need a broker, or rather, an organization where you can open a brokerage account. The broker will give you access to trading instruments, will take on all technical and legal risks. All actions the broker performs on your behalf and at your expense (unless otherwise agreed), and you, as a trader, decide on what assets to acquire, how to form a portfolio, etc. If you wish (often with a certain set volume of investments), you can be provided with a personal broker with whom you can consult via chat or phone about any risky transactions, structural products, access to certain instruments, etc.

How to choose a broker?


A professional participant in the securities market engaged in brokerage is called a broker. This is a company that has access to stock market trading floors and which will make transactions on your behalf and at your expense. In addition, the broker is a tax agent and it is he who will properly draw up and file tax returns or file a tax deduction. Money to your account will come already "cleared" of taxes. The broker takes a commission for his activities - as a rule, this is a very small amount, but guarantees and convenience are at a high level. 

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Despite the fact that the market for financial institutions is tightly regulated, new scam companies constantly appear that mimic brokers. They collect money from potential investors, and then disappear without fulfilling any obligations. At the same time, they offer convincing and “geeky” arguments: “we have neural networks”, “we work with bitcoin, therefore we do not get a license”, “we are for high-frequency trading”, etc. in fact, there is no talk of any technological fraudsters. Be careful.

Do not confuse the broker with analysts, and even more so with robo-advisers. If the broker under the contract has a lot of obligations, then these entities do not bear any responsibility for their advice and recommendations. Nevertheless, in any broker company there are whole analytical services that provide brokers with the basis for decision-making and data for analysis.

How to form a portfolio?


There are three main parameters of investment: profitability, investment period and risk. Accordingly, each portfolio is determined by the ratio of these factors. Here, as in an old joke: choose any two. On the graph you can see the ratio for different types of investors. 


I think the best ratio for investing is: diversify - invest at least 40% in reliable instruments, 10% in high-risk ones, and distribute the remaining 50% based on liquidity and your main strategy. The optimal investment period is up to three years (including due to tax laws). The easiest option to start is to open an IMS (individual investment account, we will talk about it in the future).

How to lose money with a guarantee?


Most private investment beginners make the same typical mistakes that differ only in the scale of the losses. Do not do so.

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The following two errors are directly related to the choice of investment instruments and they are two extremes of investment behavior.

  • It is a mistake to use only one investment tool (for example, invest only in the shares of one company, only in dollars, only in gold, etc.). More precisely, in this case you get not an active investment, but a rather conservative tool for “saving” money, which can bring income in the long term. This type of investment in efficiency can be compared with a bank deposit. 
  • It is no less erroneous to invest in everything in a row, especially in risky instruments, obscure startups, new companies, in stocks against the backdrop of hype around some events. Such an attitude to your portfolio leads to a loss of profitability, a lack of understanding of the fundamentals of structural investments. In the end, you may find yourself in a situation where you simply cannot predict the behavior of market participants and market reactions to them. 

This tweet 


caused such a movement:


So predict your portfolio on the basis of Twitter (by the way, a great way - there is already an understanding that the tweets of CEOs of corporations and especially politicians, and in particular D. Trump, are actively influencing stock market trends)

Do you know what it means that you have come to working in the stock market right? You should be bored. Excitement in investments (any!) Is the worst adviser. 

We choose the stock market for various reasons: out of interest, for investing and maintaining free cash, out of a desire to earn money or just learn something new. Some developers, after exploring the stock market, change their specialization and go into the development of trading robots. 

The stock market is a difficult story. In reality, no one can constantly successfully predict the future of the stock market: today you will reach the point, and tomorrow other investors (this is speculative trading in the good sense of the word). This, of course, is not roulette or a gaming machine, but the whole difficulty lies in determining the trend, learning how to do technical and fundamental analysis. Everything else is based on that. And programmers, mathematicians, techies are often good at analyzing trends, but to say “I am an expert in economics” from day one is too presumptuous and can turn against you. Remember: there is always risk.

What to read on the topic?



And of course, read the financial, political and insider channels on Telegram - there the information appears first (after Twitter ;-)).

The list of references and sites varies greatly depending on the selected tools, so there will be additional references in articles about different tools.


If you have experience investing (positive or negative), tell us in the comments how you started, what you stumbled upon and dropped out of?

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