To be or not to be an investor? Kairat Mynbaev ISE-KBTU

Stocks 1.Don’t be greedy (KMG, SBER, KKB) 2.Don’t invest in emerging markets 3.Invest-and-forget – bad strategy for a small investor (my account) 4.Allow max drawdown 5% 5.Fundamentals are very different from market valuation (AAPL story, seekingalpha.com) 6.In the short run technical analysis and company events are more important than fundamentals 7.Remember who the market players are (big versus small, short-term versus long-term) 2

8.Turn-around stories (NOK, RAD, ALU) 9.Invest only in the US (ARCAM) 10.Never worry about lost opportunities (AMBA) 11.Fraud is always there (GALE) 12.Invest in ETF’s if you don’t have time for market research growth.html growth.html 13.Make probabilities work for you (diversify, trade frequently) 14.Buy on pullbacks (buy low, sell high – AAPL) 15.Play on company news, especially earnings releases 16.Always put a stop 17.Don’t double a losing position 3

Limit order book Three main order types Order execution (AMBA data) Bid, ask and midprice; L1 and L2 data Equilibrium in financial markets 4

High frequency trading Renaissance Technologies (staff of 275) 2011: 24% of all transactions Profits fall as response time increases (200ms and 50ms) Tricks of HFT’s 5

Futures Definition of futures Equity Index Futures (E-Mini Futures) E-Mini S&P 500 Futures contract (ES) example Benefits: liquidity, accessibility for small investors, trading hours, low transaction fees, wide enough daily trading range, independent of company news Short trades 6

There are tax advantages to trading E- Mini Futures: Futures: The 60/40 rule 60% profits are taxed as long-term capital gains. 40% profits are taxed as ordinary income. Stocks/ETFs: Profits are taxed as ordinary income (up to 35%). 7

Trading E-Mini Futures is a more efficient use of capital: Significantly lower margin requirements… No SEC minimum equity requirement of $25,000 to day trade. No T+3 (stocks/ETFs)… Your futures trading account is credited or debited based on that day’s profits or losses. No payment of margin interest… You will have to pay margin interest on money borrowed to purchase Stocks/ETFs. No inventory required for a SHORT position… it is just as easy to go SHORT as it is to go LONG trading E-Mini Futures. No payment of SHORT position interest… You will have to pay interest to SHORT Stocks/ETFs. 8

Continuing the rules… 18.Don’t trade tops and bottoms. Go with trend. Triangle and megaphone 19.Paper trade for at least two months before live trading (3-6 months) 20.Manage your trade: entry, stop loss and profit targets 21.Playing with futures is a must even if you plan to work in other markets (stock, options) 22.Remove emotions (Tony Peterson) 23.Discipline above all 24.Don’t be a pro 25.Winning ratio: at least 9:1, confidence level: invincible 26.Paper trade before taking a course. Avoid AceTrades.com 27.Don’t trade during the first minutes 9

Choosing a broker Transaction fees Access to markets Access for international investors discount-stock-brokers-comparison-table discount-stock-brokers-comparison-table Convenience and customizability of software Inactivity fee Margin rates 10

How to start Open an account (experience?) Transfer the money Request permissions for trading on margin, for trading stocks and futures Subscribe to market data Request a paper account Cost of training: wire fee plus subscription fees Keep the paper trail 11