How to build a share trading business.
Learn how to trade in "under Ten cents shares" on the Australian share market.
Executive summary:
The aim of this E Book is to provide you with 'Megamoneybox's' method for finding Australian asx shares under ten cents using FREE google and other free information to identify potential risers.
We also provide information on:
How to set up as a share trader, (as opposed to being an investor - Australian Tax Office - ATO has different tax reporting criteria for investors), research to meet and maximise Australian tax requirements.
Planning and The Psychology of the herd.
Know yourself. Accept that you are no different from other people. You are just as susceptible to self delusion, self praise and unless you are careful you will end up on a see-saw of fear and greed. Remember the share market risers and falls on herd behavior. Its a jungle out there, and there are predators. But it can give rewards. I can show you a watchlist of over 20 companies identified, purchased and sold. These have all risen dramatically and one rose to over $6.00 a share. At time of writing that watchlist shows a profit of $ $120,813.20
A huge 395.94% What a merry-go-round, or even a big dipper !
So how do I feel? I might feel I should've kept these shares. But I know, I might have been worried about the market, The GFC put us all on a rollercoaster. I might have sold in a panic, or may just have responded to my own emotions. Sharetrading is not about feelings. Sharetrading is about making a plan, setting limits, study and achieving small step gains. You will need to remind yourself that your job as a sharetrader is to buy and sell. Gradually building small step success, and achieving occasionally a big success.
Contents:
How to set up as a share trader,
1. We advise you set up a partnership,(with say 1-4 people) with one partner at least as a high income, high tax payer. Write up a partnership agreement. NB remember only go into business with TRUSTED partners. Partners can create more liabilities etc. (Warren Buffet started with a partnership of friends.)
2. Register an ABN and tax number as a asset and risk management business to avoid being classed as a financial advisor.
3. Read the Australian tax office small business advice as well as the NCL (non commercial losses criteria). eg you need to "sell" $20,000 per annum, in 2 out of 3 years in order to reduce your tax liability and to receive tax refunds for any losses.
4. Note: your accounting method is a trading account and calculating a cost of goods sold, with a profit or loss after deducting revenue (yearly ) costs and any depreciation. It is the same REVENUE accounting as buying and selling potatoes / passion fruit / bananas / mangoes / clothes / art etc. (I like passionfruit best!)
5. You should show an internet presence, as proof of promoting and marketing your share trading business, although it may not be necessary. If you do, always use a disclaimer. Remind readers that you are not a financial advisor, and they should do their own research. We suggest you create a FREE blog on www.google.com blogspot because later you can print your blog into a book at low cost.
How to identify a potential riser under 10cents:
Why limit your share price to under ten cents? Purely for the potential for greater rise and you get more for shares your money. When you decide about risk/sector/price/quality of the company/and ethics of the company, you may decide to buy at a higher price. It's all about numbers. Multiplication and percentages. It's not hard to see that if you buy into an established company, at say, $20.00 a share, the chance of it doubling or rising dramatically is very low. In that case, you would probably be searching for other criteria. Example high dividends.
You must constantly remind yourself regularly, that low cost shares are also high risk. They have a high 'chance' to increase and make you money, but they are also high risk of fraud, destabilisation, under-capitalisation, etc.
Manage your risk by educating yourself and doing as much research as possible. Learn about financial ratios, but understand low cost shares are not going to show good financial results because they are in their very early growth. Maybe even in embryonic stage.
Ask yourself this: Would you invest a large sum of money in this company? Would you eat or use their products? Is there real potential to rise? if it is a gold / energy / or basic resource,(zinc, silver,lead, rare earths, phosphate etc)
Is there a demand? what is happening in the world markets?
Does China / India/ USA / Europe want this product or service?
How long will it take for the company to sell and receive income from this product?
Have directors been resigning? any bad press?, any negative government intervention? Is the company based in a high risk country? are they ethical?
ALWAYS Consult your 5 Best friends. "how, when, where, what and why?"
Read the company's statements to the ASX, and follow the links on Google/finance to the recent press releases. Ask yourself how much press coverage have they had, and what websites promote them?
Step 1 . Buy the newspaper and look at the industrial shares list.
Highlight all in your price range. look at whether they rose recently, and the other information in the columns.
Make a list.
Rank the list.
Then go to asx.com.au look up the individual identified share codes.
Example: go to asx:cgt read the company information.
http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=CGT
read all the recent announcements.
goto charting and chart for 5 years, then two years.
CAUTION:
LEARN FROM HISTORY
Megamoneybox started trading in August 2007 when the market was 6800.
Then we had the global financial crisis (GFC) which started in January 2008 through 2009/10
Some companies dropped by as much 80%. Rio Tinto was one.
The markets are still in recovery. The Asx S&P 200 AND THE S&P 500 - ALL ORDS are still below 5000. Think of the scale as stairs. Step 3 is low. Step 5 getting better. Steps 6 and 7 good.
AT Step 8, the bubble may burst. The mid point is about 4700
Then go to www.google.com/finance/ sign in, create a watchlist, and add technicals to your graph. These technicals will give you guidance and the pre set graph will show a snapshot when you revisit. Below is a screen print of CGT on www.google.com/finance with technicals added.
simply change the code from CGT to whatever you are researching.
Scroll down the page for more information.
There you can see other companies in the same sector and mini graphs. You also see various columns with financial data. Move the scroll bar across and you will find more.
Below is a copy of the lower section of the page on
http://markets.smh.com.au/apps/mkt/movers.ac
This lower section shows some of the low cost shares.
These results are dated 16.07.2011 which was a 'down day' on the ASX
AEM is only .011 and it rose by 57.14 % . Hmm I wonder why?
RFT, MTI, OMI, HCT, MNM at 0.12 (We've made money on them before, originally bought at 0.07)
KME, NWE, JKA, SMA All worth putting on a watch list.
If you search google finance you get more info than asx.com.au
http://www.google.com/finance?q=ASX:CGT
When you search from google finance, you will see a graph. You can add technicals to this graph to give yourself more information. Under the graph, click technicals and add, Bollinger bands, Macd, KDJ curves, Williams % R.
Study the numbers showing for the bollinger bands, and usually you will see a squeeze, then a rise when they are all equal. In this case .04.
In the KDJ graph, check that the j curve is not above 60. at 80 it will be about to fall.
You want to see the blue lines above the red lines on the graphs.
Study these indicators and you will learn more. This is only a simplified overview. As a beginner, you do not need to learn candlesticks. Do so if you must, but there are sufficient technicals here to give an indication.
Scroll down to read more. Check the market capitalisation. Low cost shares are usually low, but there are big variances, depending on how long they have been on the ASX.
Decide how much money you can start with.
Megamoneybox limited it's buying to $500.00 (minimum buy online)
Decide on price range, and sectors.
Buy into 2-6 companies - each at $500.00 + fees. If you sell half as soon as it rises to 50% (and / or any other criteria you might set), you will soon reach your sales target of $20,000 for the year. Certainly you should achieve that in the first two years. Your first year costs will probably create a loss, which is tax deductible from your other form of net income, in the proportion of your partnership ownership.
By selling half on a 50% rise, you actually end up with some shares for free. Remember, you are not a long term holder, your job is to buy and sell.
You also may be eligible for new shares offered, at a discount without fees, so we nearly always buy the offers.
There are hazards. Some companies will consolidate, and you can end up with fewer shares than you started with. Companies can de-register. They can go Bankrupt. etc etc.
This method can make you too cautious, but that's ok. That's how you learn.
We believe in the potential of Australian resources, energy, and technologies. so buy over a broad range of sectors.
go to http://www.google.com/finance sign in, make a watchlist with your top ten. enter a share amount of say 1000 with price etc.
in google finance you can search with prefix asx: but in yahoo finance you search just with ax:
What you really want is a day's summary of what shares rose on a daily basis, and by how much. Then do your research.
When you are in google finance, you can scroll down and see financial information.
AS WELL, you can see results of other similar companies in the SAME SECTOR. This gives you an immediate insight into which shares might be useful to put on your watchlist.
You can also go to:
http://markets.smh.com.au/apps/mkt/movers.ac
scroll down, to the top market movers and see top results.
Then do your research.
You can go to Yahoo finance http://au.finance.yahoo.com/gainers?e=ax
see the next pages for the Sold and rose screenshots.
Below is the shares sold and rose screenshots. (2 parts)
scroll down for screenshot 2
lower section shares sold and rose.
The graphs above show a plus of $120,813.20 A huge 395.94% !
What a merry-go-round, or even a big dipper !
This article is an overview, and a guide only. More detail is available in Issue 2. I hope I have given you enough information to start your journey.
Be careful. be cautious. Take one step at a time.
Regards,
Mega
Megamoneybox.blogspot.com
Go to http://Megamoneybox.blogspot.com and sign up as a follower. Follow occasional free tps on twitter.
Megamoneybox address is http://Megamoneybox.blogspot.com.au We try to help you earn money on the internet.We give free share trading tips. We aim to educate and enthuse. We are in Australia in the land of the Sun. We are asset management and risk consultants, are not financial advisors. You Trade at your own risk. We could be wrong. So do your homework. Go to our other blogs to de stress. We are not big risk takers. We asses, investigate, analyse and then decide.
