
Ask HN: How did you learn about stock market/trading investing ? - yr
Any good videos/books ?
======
derwiki
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)

~~~
nearestneighbor
> 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?

~~~
sorbits
_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.

~~~
pathik
It is a zero sum game. For everyone who gains, there is someone who loses
money. The prices aren't going to rise higher and higher forever.

~~~
sorbits
Why aren’t the prices going to rise higher and higher? There is absolutely
nothing that says they shouldn’t (or they should for that matter).

And how does someone lose money if the prices stagnate? The prices have to
actually drop for someone to lose money.

Fundamentally this stuff is pretty simple:

I have an idea for a business, I need $1,000,000 in startup capital. I sell
1,000 shares costing $1,000 each.

After a year my business is profitable and valued at $2,000,000. The stock is
now worth $2,000. That means everyone who bought my stock now earned $1,000.

Who lost on this? you can say that the consumers who paid my company (to make
it worth more) lost, but a) these are not part of the stock market, and b) my
product may actually have saved them more than they spent.

~~~
pathik
Well in the long run, it IS a zero sum game. A stock is valued higher only if
someone wants your stock. If no one is interested in buying your stock and you
try to sell it, its value will be zero. Also, if everyone holding a certain
stock starts selling it, in the end the value will drop down back to zero. So
everything earned by someone is lost by someone else. The only real earnings
which you get by owning the stock is the dividend which the company pays out.

~~~
sorbits
It is true that if no-one wants the stock then the value of it will drop. This
however should (under normal circumstances) only happen if the company is not
profitable and is in debt (to the point where its physical assets amount to
the same or less than its debt).

It is not a psychological game, i.e. if someone somehow managed to make the
Microsoft stock drop to zero then I would effectively be able to get all of
Microsoft for nothing, that’s a pretty sweet deal, and why that stock won’t
drop to zero as long as they are profitable.

The “psychology” that affects the stock prices are in speculation about the
future worth of a company, and that is why you see a disconnect between a
company’s net worth and market cap — generally the market cap should be above
its net worth, otherwise someone should buy all the shares and liquefy the
company :)

------
solutionyogi
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.

------
shughes
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.

------
scw
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...](http://www.sanfranmag.com/story/best-investment-
advice-youll-never-get)

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.

~~~
arthurdent
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...](http://www.google.com/intl/en/jobs/uslocations/mountain-
view/finance/taxtreasury/trader-foreign-government-bonds-mountain-
view/index.html)

~~~
ig1
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.

------
dirtae
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.

------
vaksel
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.

------
iamelgringo
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/>.

------
ezliu
[http://www.amazon.com/Options-Futures-Other-
Derivatives-5th/...](http://www.amazon.com/Options-Futures-Other-
Derivatives-5th/dp/0130090565)

<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.

------
davidkellis
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...](http://contrarianedge.com/2009/10/28/books-that-will-help-gain-sanity-
in-insane-market-part-2/)

------
maigret
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>

------
reidman
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.

------
sgoraya
<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.

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

------
brc
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.

------
rmanocha
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.

------
sahaj
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.

------
pathik
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.

------
known
_Any good videos/books ?_

[http://www.elitetrader.com/vb/forumdisplay.php?s=&forumi...](http://www.elitetrader.com/vb/forumdisplay.php?s=&forumid=25)

------
bluesmoon
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.

------
steve19
The same way I learn most things: by making mistakes.

~~~
steve19
I am not trying to be facetious, but a better question would be "how can I
learn trading without making expensive mistakes?".

~~~
maigret
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.

