A brokerage firm or a broker should work towards wisely investing the funds of the client in different investment options in order to maximize profits. Apart from thorough professional knowledge, data interpretation, market analysis and understanding the trends in the market, a broker should have good communication skills. A broker should use his expertise but conform to the needs of the client.
A brokerage firm must always be transparent, clear, prompt and effective in communicating with the client on various aspects. The firm is in custody of the client's funds. It is imperative that the firm keeps the client informed at all times of the fund status. Keeping the overall goal of the client in mind, the options chosen on the client's behalf must be communicated. A feeling of not knowing where, how or when the client's funds are invested is a clear sign of unhealthy communication.
The broker working on behalf of the client should have trading qualities similar to the client. An aggressive client should be served by an aggressive broker. Alternately, a safe player should have a safe broker. It is then that the goals of the broker and the client will match.
Accessibility to one's trading account to get frequent updates on the fund and profit status should be a priority. This ensures transparency in functioning. With most firms and brokers being online, it is easier to know the account status on a minute to minute basis also.
One should engage a firm or broker depending on one's own requirement using references, information from forums, and online checks.
Wednesday, September 1, 2010
Wealth Manager
Many wealth managers approach investors positioning themselves as "trusted advisors". Can you develop this type of relationship with someone who is compensated for selling product, or should you seek out a wealth manager who operates without conflicts of interest between the firm and the client? As more independent advisors arise, this question will present itself more frequently to investors.
One of the biggest complaints investors have is that they feel they are being "steered" towards specific investments by their advisor. Frequently, these products are manufactured and/or managed by the firm that employs the relationship manager. They can take the form of mutual funds, managed accounts, or partnerships. This is true for brokerage firms, investment banks, and trust banks. In many instances, the compensation of the "trusted advisor" is largely impacted by how much proprietary product he or she can sell. With that type of motivation in place, it is fair for investors to ask if their best interests are being placed first.
Some large financial services firms responded to investor's lack of trust by creating a "platform" that includes a limited number of outside advisors side by side with their own offerings. This is frequently presented in the form of a "wrap" program that entails a large, all-encompassing fee. The wrap fee includes compensation to the investment manager, the advisor, and the advisor's employer. These layers of fees add up. While convenient, it may prove to be an expensive proposition to the investor. As a result, many investors are gravitating to fee-only independent wealth managers who offer open architecture in a conflict-free manner.
The role of a fee-only advisor is quite different from that of the more traditional relationship between the client and his broker or trust officer. A fee-only wealth manager does not and will not manufacture or sell investment products; their only source of income comes directly from their clients. They will refuse compensation from investment managers, insurance companies, banks, and other sources of investment merchandise. His or her role is to work with you to structure a multi-manager portfolio that fits your specific investment needs. The advisor will likely spend time with you to understand your goals, objectives, and risk tolerance long before the investing process begins. Many fee-only advisors have Certified Financial Planners on staff. These professionals will work with you to ensure that you have the right structure around your assets (i.e. wills, trusts, etc.) to help you meet you your long-term financial goals in the most tax efficient way possible.
It is becoming more difficult for investors to pinpoint outstanding investment talent. There are so many choices that one can become overwhelmed. Fee-only wealth managers offer true open architecture. They are not limited by an investment platform. This enables them to seek out the best and brightest managers in all asset classes. You should expect that your wealth manager has conducted a thorough amount of due diligence on each of the managers in the suggested portfolio. The advisor should suggest separate accounts over mutual funds. Separate accounts are less expensive and more tax efficient than commingled funds. Since your advisor is not compensated for transactions in your account, he or she will probably recommend that your assets be held at a large discount brokerage firm. This will help minimize overall costs to you. While you will be receiving monthly statements from your brokerage firm, the wealth manager should provide consolidated performance reporting on a monthly basis.
To review, here is what individual investors should expect from an independent, fee-only wealth manager:
* A thorough independent appraisal of your current investment portfolio,
* A discussion about what you want to accomplish with your investment capital,
* An examination of the structures around your assets such as wills, trusts, and retirement plans,
* A well-designed asset allocation model that fits your investment goals,
* A suggested multi-manager portfolio that foots with your goals and objectives,
* Thorough and ongoing due diligence on each of the managers in your portfolio,
* Face-to-face meetings at least twice a year to update you on performance and review your objectives,
* A strong effort to reduce investment costs (i.e. manager fees, brokerage commissions, etc.),
* Monthly performance statements,
* No pressure to buy or sell any investment product,
* A fee based upon the amount of assets under advisement.
Fee-only wealth managers offer an attractive alternative to traditional sales-based financial relationships. You have the comfort of knowing that the advisor is working in your best interests and that all recommendations come from a desire to do an excellent job for you.
One of the biggest complaints investors have is that they feel they are being "steered" towards specific investments by their advisor. Frequently, these products are manufactured and/or managed by the firm that employs the relationship manager. They can take the form of mutual funds, managed accounts, or partnerships. This is true for brokerage firms, investment banks, and trust banks. In many instances, the compensation of the "trusted advisor" is largely impacted by how much proprietary product he or she can sell. With that type of motivation in place, it is fair for investors to ask if their best interests are being placed first.
Some large financial services firms responded to investor's lack of trust by creating a "platform" that includes a limited number of outside advisors side by side with their own offerings. This is frequently presented in the form of a "wrap" program that entails a large, all-encompassing fee. The wrap fee includes compensation to the investment manager, the advisor, and the advisor's employer. These layers of fees add up. While convenient, it may prove to be an expensive proposition to the investor. As a result, many investors are gravitating to fee-only independent wealth managers who offer open architecture in a conflict-free manner.
The role of a fee-only advisor is quite different from that of the more traditional relationship between the client and his broker or trust officer. A fee-only wealth manager does not and will not manufacture or sell investment products; their only source of income comes directly from their clients. They will refuse compensation from investment managers, insurance companies, banks, and other sources of investment merchandise. His or her role is to work with you to structure a multi-manager portfolio that fits your specific investment needs. The advisor will likely spend time with you to understand your goals, objectives, and risk tolerance long before the investing process begins. Many fee-only advisors have Certified Financial Planners on staff. These professionals will work with you to ensure that you have the right structure around your assets (i.e. wills, trusts, etc.) to help you meet you your long-term financial goals in the most tax efficient way possible.
It is becoming more difficult for investors to pinpoint outstanding investment talent. There are so many choices that one can become overwhelmed. Fee-only wealth managers offer true open architecture. They are not limited by an investment platform. This enables them to seek out the best and brightest managers in all asset classes. You should expect that your wealth manager has conducted a thorough amount of due diligence on each of the managers in the suggested portfolio. The advisor should suggest separate accounts over mutual funds. Separate accounts are less expensive and more tax efficient than commingled funds. Since your advisor is not compensated for transactions in your account, he or she will probably recommend that your assets be held at a large discount brokerage firm. This will help minimize overall costs to you. While you will be receiving monthly statements from your brokerage firm, the wealth manager should provide consolidated performance reporting on a monthly basis.
To review, here is what individual investors should expect from an independent, fee-only wealth manager:
* A thorough independent appraisal of your current investment portfolio,
* A discussion about what you want to accomplish with your investment capital,
* An examination of the structures around your assets such as wills, trusts, and retirement plans,
* A well-designed asset allocation model that fits your investment goals,
* A suggested multi-manager portfolio that foots with your goals and objectives,
* Thorough and ongoing due diligence on each of the managers in your portfolio,
* Face-to-face meetings at least twice a year to update you on performance and review your objectives,
* A strong effort to reduce investment costs (i.e. manager fees, brokerage commissions, etc.),
* Monthly performance statements,
* No pressure to buy or sell any investment product,
* A fee based upon the amount of assets under advisement.
Fee-only wealth managers offer an attractive alternative to traditional sales-based financial relationships. You have the comfort of knowing that the advisor is working in your best interests and that all recommendations come from a desire to do an excellent job for you.
Structured Products
Structured Products are... well... structured! That means they are put together by a product provider for a particular type of investor and use. They can be used, for example, to provide a regular known income, to give you the opportunity for a higher return than you would get from savings, or to control volatility in a portfolio.
So here's some basics...
Retail Structured products include both deposits and investments. They achieve their objective by offering different levels of risk, return and protection, and by basing the performance on an appropriate index such as the FTSE 100 or S&P 500 - although other indices can also be used.
Plans last a specific amount of time - typically 3 to 6 years. Products can provide full capital protection, or partial capital protection with the chance of an enhanced return. In some cases the maximum return is limited in order to limit the loss if the index goes down.
Different types of product are appropriate at different times in the economic cycle, and certain types do not require the stock market to rise in order to give you your return. And if you have particular views about the future progress of the markets in general or one index in particular, then it may be possible to find a product to match your view.
One other interesting class of structured product is the "kick-out" variety. If the index which the product is linked to reaches (or stays above) a certain level, then the product may kick-out, normally on an anniversary, and return your investment with some growth. This growth is generally very good, but you have to be able to cope with the product kicking-out or not kicking-out.
Don't forget to consider the risks...
As well as being dependent in some way on an index, the returns available from a structured product rely on the provider being able to return your money. Generally the plan provider who put it together will use a separate organisation - the "counterparty" (typically an investment bank) - to underwrite it, and you are dependent on that counterparty still being able to pay up when the end of the term comes, or to pay any income in the interim.
You should also consider any compensation scheme available. Since 2008 we have all become a lot more aware of that. For structured products the situation is not simple, though, and generally if the counterparty fails, then no compensation would be due.
So are they for you?...
Structured products do provide a useful alternative to give you some diversity in your portfolio. Generally they should be seen as an extra to an existing portfolio and not a replacement for a more traditional investment.
Since there are so many types, it is worth taking professional advice before diving into this world full of its own terminology! But depending on your circumstances, you may find a Structured Product or two a rewarding addition to your portfolio.
So here's some basics...
Retail Structured products include both deposits and investments. They achieve their objective by offering different levels of risk, return and protection, and by basing the performance on an appropriate index such as the FTSE 100 or S&P 500 - although other indices can also be used.
Plans last a specific amount of time - typically 3 to 6 years. Products can provide full capital protection, or partial capital protection with the chance of an enhanced return. In some cases the maximum return is limited in order to limit the loss if the index goes down.
Different types of product are appropriate at different times in the economic cycle, and certain types do not require the stock market to rise in order to give you your return. And if you have particular views about the future progress of the markets in general or one index in particular, then it may be possible to find a product to match your view.
One other interesting class of structured product is the "kick-out" variety. If the index which the product is linked to reaches (or stays above) a certain level, then the product may kick-out, normally on an anniversary, and return your investment with some growth. This growth is generally very good, but you have to be able to cope with the product kicking-out or not kicking-out.
Don't forget to consider the risks...
As well as being dependent in some way on an index, the returns available from a structured product rely on the provider being able to return your money. Generally the plan provider who put it together will use a separate organisation - the "counterparty" (typically an investment bank) - to underwrite it, and you are dependent on that counterparty still being able to pay up when the end of the term comes, or to pay any income in the interim.
You should also consider any compensation scheme available. Since 2008 we have all become a lot more aware of that. For structured products the situation is not simple, though, and generally if the counterparty fails, then no compensation would be due.
So are they for you?...
Structured products do provide a useful alternative to give you some diversity in your portfolio. Generally they should be seen as an extra to an existing portfolio and not a replacement for a more traditional investment.
Since there are so many types, it is worth taking professional advice before diving into this world full of its own terminology! But depending on your circumstances, you may find a Structured Product or two a rewarding addition to your portfolio.
Sunday, August 1, 2010
Stock Market
The stock market in India has turned highly volatile of late. A tremendous rise in points in one day is bringing a heavy downfall the very next day. This high degree of volatility has made the life of investors miserable as they are incurring massive speculative losses. In this crucial juncture, effective share tips have become the need of the hour.
Before venturing into share trading, novices should have a complete understanding of the specific terminology of this business. It is imperative to understand the intricacies of stock trading, so that you can judge the market and its functioning to perfection. Similar to any form of investment, more and more knowledge about share trading can boost your chances of tasting success. One way to expand your knowledge base is to acquire good trading tips from seasoned investors, traders, trade magazines and numerous online stock research and advisory companies.
Online research and advisory companies having a formidable relationship with countless stock market brokers and traders offer you vast amounts of information in the form of option tips, nifty tips and intraday tips. They generally carry out extensive research on share market by revolving around company news, economy news, fundamental analysis and technical analysis.
Option trading is a derivative instrument that involves the trading of options over an exchange. In place of trading stocks, traders trade the options presented with these stocks. Options are available in two categories like call options (options to buy) and put options (options to sell). Option trading is frequently confused with futures trading. But, both are completely different having their own distinct characteristics. The use of limitless option tips can open the door to richness for you can derive substantial profits from both upward and downward movement of the market or even when the inherent stock remains stagnant. Option trading with effective strategies can provide you exemplary protection against loss, exemplary potential for profits and exemplary flexibility even in an adverse situation.
Intraday trading, on the other hand, refers to a position in a security that is opened and closed in the same trading day. Though it appears to be quite straightforward and remunerative, traders need to be highly alert and agile to the latest developments. Therefore, there are certain intraday tips that must be kept in mind always. For example, it is not obligatory that a stock running weak today at the time of intraday trading might bear the same fate tomorrow as well; similarly, a stock is going strong now might not be the same tomorrow. Another important trading tip is trade in stocks with high liquidity all the time i.e. that feature huge volume since entry and exit can turn out to be very quick in such stock shares.
Share tips can lend a helping hand to all those investors and traders who fail to make money in the stock market due to short of knowledge, experience and strategy. Using these tips, they can become smarter and churn out money in both ascending and descending market.
Before venturing into share trading, novices should have a complete understanding of the specific terminology of this business. It is imperative to understand the intricacies of stock trading, so that you can judge the market and its functioning to perfection. Similar to any form of investment, more and more knowledge about share trading can boost your chances of tasting success. One way to expand your knowledge base is to acquire good trading tips from seasoned investors, traders, trade magazines and numerous online stock research and advisory companies.
Online research and advisory companies having a formidable relationship with countless stock market brokers and traders offer you vast amounts of information in the form of option tips, nifty tips and intraday tips. They generally carry out extensive research on share market by revolving around company news, economy news, fundamental analysis and technical analysis.
Option trading is a derivative instrument that involves the trading of options over an exchange. In place of trading stocks, traders trade the options presented with these stocks. Options are available in two categories like call options (options to buy) and put options (options to sell). Option trading is frequently confused with futures trading. But, both are completely different having their own distinct characteristics. The use of limitless option tips can open the door to richness for you can derive substantial profits from both upward and downward movement of the market or even when the inherent stock remains stagnant. Option trading with effective strategies can provide you exemplary protection against loss, exemplary potential for profits and exemplary flexibility even in an adverse situation.
Intraday trading, on the other hand, refers to a position in a security that is opened and closed in the same trading day. Though it appears to be quite straightforward and remunerative, traders need to be highly alert and agile to the latest developments. Therefore, there are certain intraday tips that must be kept in mind always. For example, it is not obligatory that a stock running weak today at the time of intraday trading might bear the same fate tomorrow as well; similarly, a stock is going strong now might not be the same tomorrow. Another important trading tip is trade in stocks with high liquidity all the time i.e. that feature huge volume since entry and exit can turn out to be very quick in such stock shares.
Share tips can lend a helping hand to all those investors and traders who fail to make money in the stock market due to short of knowledge, experience and strategy. Using these tips, they can become smarter and churn out money in both ascending and descending market.
Nifty Tips for You
The stock market is one of the best places to invest your money in. People have both earned and lost a lot of money online. The stock market is a place where knowledge is power and knowing when and where to spend your money can be the difference between earning money and losing it. Here are some Trading Tips if you're a new investor, or even if you're a seasoned buyer looking for a new trick or two.
To start off with, finding Intraday Tips can be quite hard. In case you're not ready to spend a lot of time researching the share market, then it's better off if you apply for a good online site that can provide you with buy and sell tips that are delivered promptly to you. These sites will probably provide Option Tips as well.
With that said, it's imperative to understand the stock market before you can really begin trading. The NSE [National Stock Exchange] is certainly not a place you can enter without knowing what's happening. Very simply put, you earn money by selling stocks at a price higher than the one which you bought them at. This is tricky because the prices are constantly fluctuating, and predicting them takes extensive research, which is why most people prefer to just go with an online database that provides Share Tips.
Basically, buying takes place at four price points or times in the day. These are the price at opening, the intraday high price, price at closing and the intraday low price. The very first step is to decide the company whose shares you want to purchase. You then need to research and understand the environment in which they function. Placing some consideration on the segment also helps, as the prices in different segments fluctuate differently.
Try and invest in a company that has a diverse portfolio. Liquidity loss is greatly reduced in such a situation and this can really be a deal breaker. Be very cautious if you wish to invest in a company that has had a reputation of being relatively inactive for extended periods of time. These may result in you losing a lot of money, and in general, it's just best to not invest in them altogether. Look for a company that is constantly listed and active.
When you are studying the company's portfolio, pay more attention to the long term plans. Short term plans rarely stay constant, and should not be a deciding factor. Long term plans on the other hand can completely alter how a company's stocks are affected. The management is also something to look at. A bad public image, chances of any setbacks, impending disaster, all these are things to be avoided like the plague. Apple recently faced a large dip in share prices due to the fiasco of one of their smartphones' reception problems.
Overall, the share market can be a great place to trade if you are careful how you do it. Trade smart, and you can easily make a living out of it.
To start off with, finding Intraday Tips can be quite hard. In case you're not ready to spend a lot of time researching the share market, then it's better off if you apply for a good online site that can provide you with buy and sell tips that are delivered promptly to you. These sites will probably provide Option Tips as well.
With that said, it's imperative to understand the stock market before you can really begin trading. The NSE [National Stock Exchange] is certainly not a place you can enter without knowing what's happening. Very simply put, you earn money by selling stocks at a price higher than the one which you bought them at. This is tricky because the prices are constantly fluctuating, and predicting them takes extensive research, which is why most people prefer to just go with an online database that provides Share Tips.
Basically, buying takes place at four price points or times in the day. These are the price at opening, the intraday high price, price at closing and the intraday low price. The very first step is to decide the company whose shares you want to purchase. You then need to research and understand the environment in which they function. Placing some consideration on the segment also helps, as the prices in different segments fluctuate differently.
Try and invest in a company that has a diverse portfolio. Liquidity loss is greatly reduced in such a situation and this can really be a deal breaker. Be very cautious if you wish to invest in a company that has had a reputation of being relatively inactive for extended periods of time. These may result in you losing a lot of money, and in general, it's just best to not invest in them altogether. Look for a company that is constantly listed and active.
When you are studying the company's portfolio, pay more attention to the long term plans. Short term plans rarely stay constant, and should not be a deciding factor. Long term plans on the other hand can completely alter how a company's stocks are affected. The management is also something to look at. A bad public image, chances of any setbacks, impending disaster, all these are things to be avoided like the plague. Apple recently faced a large dip in share prices due to the fiasco of one of their smartphones' reception problems.
Overall, the share market can be a great place to trade if you are careful how you do it. Trade smart, and you can easily make a living out of it.
Annuity Payment
There are many financial institutions that offer cash for annuity payment. They will give you lump sum cash in exchange for your annuity. Annuity is a financial investment that many people make either in single lump sum or through installments, which can be completed in 20 to 25 years.
After the completion of payment, the company from which you paid annuity premiums will pay you for your entire life or for a fixed number of years, either monthly, quarterly, semi-annually and annually a fixed sum.
Annuity is a good investment to secure your future after retirement. But there are times in your life where you face emergency situations that require the use of immediate cash. Maybe you have set aside sufficient funds for emergency uses.
Depending on the nature and gravity of the situation, you may run out of cash. If you have no other savings to use, or if your non-emergency savings are not enough, you may have the option of selling your annuity payments.
Having an emergency situation is not the only reason why you may consider converting annuity payments into cash. Many people sell their annuity investment in order to purchase a real estate property, a dream car, venture into business, or to finance an education.
There are institutions which offer the services of purchasing the payments you have made for your annuity, and this can solve your immediate financial worries. Annuities, though may serve a significant role in meeting your plans, they are not flexible and capable of solving immediate financial problems.
In the United States of America, more than thirty state governments decided that their residents should have access to this important resource and allow for the smooth transfer of the annuitant's rights to receive payments when it is deemed to be in his best interest.
In all fifty United States, you are able to convert your payments into cash. If you are interested in this undertaking, you may get a free annuity analysis provided by the institutions.
Some financial institutions buy other annuities such as non-structured insurance annuities, single premium immediate annuities, and investment annuities.
Cash for annuity is flexible. You have the option of choosing the number of payments you would like to sell, the funding company that will provide for your lump sum payment, and several options for payment.
Normally, after you have submitted your information, it will take 6 to 8 weeks for you to cash in your annuities. Many financial institutions will bid for your payments, and they will offer you more flexible terms and payment options.
You have to bear in mind though that the lump sum you will receive from financial institutions for annuity payment will be lower than what you would have received once your premium payment matures. This is one way that financial institutions earn their profit.
After the completion of payment, the company from which you paid annuity premiums will pay you for your entire life or for a fixed number of years, either monthly, quarterly, semi-annually and annually a fixed sum.
Annuity is a good investment to secure your future after retirement. But there are times in your life where you face emergency situations that require the use of immediate cash. Maybe you have set aside sufficient funds for emergency uses.
Depending on the nature and gravity of the situation, you may run out of cash. If you have no other savings to use, or if your non-emergency savings are not enough, you may have the option of selling your annuity payments.
Having an emergency situation is not the only reason why you may consider converting annuity payments into cash. Many people sell their annuity investment in order to purchase a real estate property, a dream car, venture into business, or to finance an education.
There are institutions which offer the services of purchasing the payments you have made for your annuity, and this can solve your immediate financial worries. Annuities, though may serve a significant role in meeting your plans, they are not flexible and capable of solving immediate financial problems.
In the United States of America, more than thirty state governments decided that their residents should have access to this important resource and allow for the smooth transfer of the annuitant's rights to receive payments when it is deemed to be in his best interest.
In all fifty United States, you are able to convert your payments into cash. If you are interested in this undertaking, you may get a free annuity analysis provided by the institutions.
Some financial institutions buy other annuities such as non-structured insurance annuities, single premium immediate annuities, and investment annuities.
Cash for annuity is flexible. You have the option of choosing the number of payments you would like to sell, the funding company that will provide for your lump sum payment, and several options for payment.
Normally, after you have submitted your information, it will take 6 to 8 weeks for you to cash in your annuities. Many financial institutions will bid for your payments, and they will offer you more flexible terms and payment options.
You have to bear in mind though that the lump sum you will receive from financial institutions for annuity payment will be lower than what you would have received once your premium payment matures. This is one way that financial institutions earn their profit.
Thursday, July 1, 2010
Investing Mistakes
When it comes to investing-it's a risky business. Just like gambling you never really know what you're going to wind up with or how successful you'll be. However, with great risk comes great reward and many investors realize this early on. In order to minimize your risk as much as possible it's a good idea to avoid any potential mistakes that you could fall into. Here are the 3 mistakes you can't afford to make.
Mistake #1 - Getting started without first knowing the basics. If you're brand to investments then you'll want to brush up on some basic knowledge first. Simply handing your money over to a brokerage firm or finding your way in the dark is a great way to go broke fast. That being said, taking the time and effort to actually learn about how to be a good investor is extremely important for being successful. Jumping in as soon as possible without any background knowledge can only leave you discouraged and broke.
Mistake #2 - Ignoring the urgency of diversifying. Many people blindly begin to invest in whatever they think will have a decent return and maybe in the short term this is a good idea, depending on your goals. However, long term speaking it's a better idea to diversify your assets and get your fingers in a lot of different things. This is a great way to protect against losses and increase performance over a longer period of time.
Mistake #3 - Making investments without a clear goal. This is a major mistake that many beginners make. Not having a clear goal or objective for your portfolio is a sure fire way to be perpetually distracted and passive about your investments. Make sure you have a clear and set goal along with a deadline to have your goal completed by. This will help keep you on track and working towards your objective.
Investing is a terrific way to grow your money and get a good return but always try to think outside the box and see where else you can increase your financial growth. It's also important to remember not to make other mistakes that can be easily avoided. Always make sure you do your research on new investments and minimize your risks at all times to make sure you reduce the potential losses from a poor decision. Through being smart with your investments and avoiding these mistakes you can have great long term success.
Mistake #1 - Getting started without first knowing the basics. If you're brand to investments then you'll want to brush up on some basic knowledge first. Simply handing your money over to a brokerage firm or finding your way in the dark is a great way to go broke fast. That being said, taking the time and effort to actually learn about how to be a good investor is extremely important for being successful. Jumping in as soon as possible without any background knowledge can only leave you discouraged and broke.
Mistake #2 - Ignoring the urgency of diversifying. Many people blindly begin to invest in whatever they think will have a decent return and maybe in the short term this is a good idea, depending on your goals. However, long term speaking it's a better idea to diversify your assets and get your fingers in a lot of different things. This is a great way to protect against losses and increase performance over a longer period of time.
Mistake #3 - Making investments without a clear goal. This is a major mistake that many beginners make. Not having a clear goal or objective for your portfolio is a sure fire way to be perpetually distracted and passive about your investments. Make sure you have a clear and set goal along with a deadline to have your goal completed by. This will help keep you on track and working towards your objective.
Investing is a terrific way to grow your money and get a good return but always try to think outside the box and see where else you can increase your financial growth. It's also important to remember not to make other mistakes that can be easily avoided. Always make sure you do your research on new investments and minimize your risks at all times to make sure you reduce the potential losses from a poor decision. Through being smart with your investments and avoiding these mistakes you can have great long term success.
Bullion Investments
Official figures out show gold bullion prices have risen for yet another day as people continue to get jittery over exactly how much their paper money will continue to be worth. Fears over mounting debt in the western world have fuelled a demand for gold and precious metals that mean prices have climbed 13 percent this quarter - the most since 2007. If you are looking at gold bullion investments, will buying gold bullion alone protect your wealth?
The facts are difficult to ignore: amid the fanfare that the worst of the recession is over, American companies did not increase their workforce as much as predicted and some reports show that business expansion actually slowed compared to last month. Seen as a sign that the US workforce is struggling, this provoked a desire to protect wealth in the face of an uncertain economy, and many turned to gold bullion.
Historically, it has been proven that gold bullion has the ability to ignore global recessions and does well when other forms of investments fail. It has soared in value when currencies fall and grows from strength to strength in times of high inflation.
We are living in uncertain and unprecedented times. The riots in Greece over currency devaluation has provoked fear and it is only natural that people turn towards the one thing that has stood the test of time in not only increasing their wealth but also protecting it.
In the light of the above, one could argue a very strong case that gold alone is the best wealth protector and you should go all out to increase gold bullion investments. However, I would like to point you towards wealth creation alongside wealth protection - one that can even produce in these uncertain times.
The internet explosion has opened up multi-million dollar industries. Having had this technology unleashed into the world, there is no going back - there will never be a time in the future where the internet will pass away as 'a phase'. Increasing technological inventions will continue to bring new visions and ideas to a computer near you - whatever that may look like. This in itself will continue to open up many more million dollar opportunities.
Protecting your wealth also means finding new ways of increasing your wealth. If you knew there was a key that would open the door into a prosperous future, would you take it? Would you be prepared to invest your time and money in learning new knowledge that would equip you to survive a volatile work market for many years to come?
The facts are difficult to ignore: amid the fanfare that the worst of the recession is over, American companies did not increase their workforce as much as predicted and some reports show that business expansion actually slowed compared to last month. Seen as a sign that the US workforce is struggling, this provoked a desire to protect wealth in the face of an uncertain economy, and many turned to gold bullion.
Historically, it has been proven that gold bullion has the ability to ignore global recessions and does well when other forms of investments fail. It has soared in value when currencies fall and grows from strength to strength in times of high inflation.
We are living in uncertain and unprecedented times. The riots in Greece over currency devaluation has provoked fear and it is only natural that people turn towards the one thing that has stood the test of time in not only increasing their wealth but also protecting it.
In the light of the above, one could argue a very strong case that gold alone is the best wealth protector and you should go all out to increase gold bullion investments. However, I would like to point you towards wealth creation alongside wealth protection - one that can even produce in these uncertain times.
The internet explosion has opened up multi-million dollar industries. Having had this technology unleashed into the world, there is no going back - there will never be a time in the future where the internet will pass away as 'a phase'. Increasing technological inventions will continue to bring new visions and ideas to a computer near you - whatever that may look like. This in itself will continue to open up many more million dollar opportunities.
Protecting your wealth also means finding new ways of increasing your wealth. If you knew there was a key that would open the door into a prosperous future, would you take it? Would you be prepared to invest your time and money in learning new knowledge that would equip you to survive a volatile work market for many years to come?
Double Digit Return
In any real estate market imagine earning 10% to 18% and often much more on your investment. Most investments will fluctuate in value, have a low rate of return or are affected by market trends. But there are investments that do keep their value and generate a high interest rate of return for the investors. These investments are known as Tax Lien Certificates and until recently were dominated by institutional investors, savvy investors, wealthy investors and occasionally novices. Many of these investors eventually got the houses or properties associated with the tax lien certificates for "Pennies on the Dollar" through a tax deed (a byproduct of tax certificate ownership).
Tax lien certificates are nothing more than unpaid property taxes that generate a very high interest rate of return to the investors buying them. But they have made many investors extremely wealthy and provided a very comfortable lifestyle. The biggest problem though is very few people know how to capitalize on the existence of a tax certificate. Everyone has heard the saying "Knowledge is Power" and it is very true, especially when you are investing your "nest egg" or money needed in the future. The previously described investors do not want this knowledge brought to everyone's attention because this would cut into their bottom line.
The internet has opened up the ability for anyone interested in learning more about investing in tax liens and tax deeds to do their own searches. Also, there are many tax certificate investors that have opened niche markets to help the novices buy tax certificates for themselves.
Tax lien certificates are nothing more than unpaid property taxes that generate a very high interest rate of return to the investors buying them. But they have made many investors extremely wealthy and provided a very comfortable lifestyle. The biggest problem though is very few people know how to capitalize on the existence of a tax certificate. Everyone has heard the saying "Knowledge is Power" and it is very true, especially when you are investing your "nest egg" or money needed in the future. The previously described investors do not want this knowledge brought to everyone's attention because this would cut into their bottom line.
The internet has opened up the ability for anyone interested in learning more about investing in tax liens and tax deeds to do their own searches. Also, there are many tax certificate investors that have opened niche markets to help the novices buy tax certificates for themselves.
Tuesday, June 1, 2010
Investment Strategy
Fascinating, isn't it, this stock market of ours, with its unpredictability, promise, and unscripted daily drama! But individual investors are even more interesting. We've become the product of a media driven culture that must have reasons, predictability, blame, scapegoats, and even that four-letter word, certainty. We are a culture of investors where hindsight is rapidly replacing the reality-based foresight that once was flowing in our now real-time veins... just like downhill racing, grouse hunting, and Super Bowls.
The Stock Market is a dynamic place where investors can consistently make reasonable returns on their capital if they comply with the basic principles of the endeavor AND if they don't measure their progress too frequently with irrelevant measuring devices. The classic investment strategy is so simple and so trite that most investors dismiss it routinely and move on in their search for the holy investment grail(s): a stock market that only rises and a bond market capable of paying higher interest rates at stable or higher prices! Just not going to happen…
This is mythology, not investing. Investors who grasp the realities of these wonderful marketplaces recognize the opportunities and embrace them with an understanding that goes beyond the media hype and side show performance enhancement barkers. Simply put, when investment grade securities rise in price [As they are now, with the DJIA finally putting together a successful attack on the 11,000 barrier], Take Your Profits, because that's the purpose of investing in the stock market! On the flip side (and there has always been a flip side, more commonly dreaded as a "correction"), replenish your portfolio inventory with investment grade securities. Yes, even some that you may have just sold days or weeks ago during the rally. This is much more than an oversimplification; it is a long-term (a year or two is not long term.) strategy that succeeds... cycle, after cycle, after cycle. Sounds an awful lot like Buy Low/Sell High doesn't it? Obviously, Wall Street can't let you know that it is quite so simple!
[Note that Dow Jones 11,000 was last breached during the infancy of this century, and that the last All Time High in this much too widely followed average occurred late in 1999. When the DJIA banner is repositioned on that historical peak of 11,700 or so, it will represent no less than six years of zero growth in this, the most respected, of all Market Indicators! Would the media strip the gold medal from this Stock Market Icon if it knew that during these same years: (1) There have been significantly more stocks rising in price on a daily basis than moving lower. In fact, more than two-thirds of the last 68 months have been positive. (2) Since April 2000, there have been 120 more positive days in NYSE issue breadth than negative days. (3) 250% more NYSE stocks established new high price levels than new lows. (4) We are working on our sixth consecutive year of positive issue breadth!]
So understand that your portfolio statement values will rise and fall throughout time, and rather than rejoice or cry, you should be taking actions that will enhance your "Working Capital" and the ability of your portfolio to accomplish your long term goals and objectives. Through the simple application of a few easy to memorize rules, you can plot a course to an investment portfolio that regularly achieves higher highs and (much more importantly), higher lows! Left to its own devices, like the DJIA for example, an unmanaged portfolio is likely to have long periods of unproductive sideways motion. You can ill afford to travel six years at a break even pace, and it is foolish, even irresponsible, to expect any unmanaged or passively directed approach to be in sync with your personal financial needs.
Five simple concepts of Asset Allocation, Investment Strategy, and Psychology are summed up quite nicely in what I call "The Investor's Creed":
(1) My intention is to be fully invested in accordance with my planned equity/fixed income asset allocation. (2) On the other hand, every security I own is for sale, and every security I own generates some form of cash flow that cannot be reinvested immediately. (3) I am happy when my cash position is nearly 0% because all of my money is then working as hard as it possibly can to meet my objectives. (4) But, I am ecstatic when my cash position approaches 100% because that means I’ve sold everything at a profit, and that I am in a position to (5) take advantage of any new investment opportunities (that fit my guidelines) as soon as I become aware of them.
If you are managing your portfolio properly, your cash position has been rising lately, as you take profits on the securities you purchased when prices were falling just a few months ago… and (this is a big and) you could well be chock full of cash well before the market blows the whistle on its advance! Yes, if you are going about the investment process properly, you will be swimming in cash at about the same time Wall Street discovers the rally and starts encouraging people to weight their portfolios more heavily into stocks; the number of IPOs coming to market starts to rise exponentially; morning drive radio DJ's start to laugh about their stock market successes; and all of your friends start to talk about their new investment guru or the 30% gains in their growth Mutual Funds. What are you doing in cash!
This is what I call "smart" cash, because it represents realized profits, interest, and dividends that are just catching a breather on the bench after a scoring drive. As the gains compound at money market rates, the disciplined coach looks for sure signs of investor greed in the market place: fixed income prices fall as speculators abandon their long term goals and reach for the new investment stars that are sure to propel equity prices ever higher, boring investment grade equities fall in price as well because it now clear [for the scadieighth (sic) time] that the market will never fall again… particularly NASDAQ, which could double and still not be where it was six years ago. And the beat goes on, cycle after cycle, generation after generation. What do you think; will today's coaches be any smarter than those of the late nineties? Have they learned that it is the very strength of a rising market that proves to be its greatest weakness!
The Stock Market is a dynamic place where investors can consistently make reasonable returns on their capital if they comply with the basic principles of the endeavor AND if they don't measure their progress too frequently with irrelevant measuring devices. The classic investment strategy is so simple and so trite that most investors dismiss it routinely and move on in their search for the holy investment grail(s): a stock market that only rises and a bond market capable of paying higher interest rates at stable or higher prices! Just not going to happen…
This is mythology, not investing. Investors who grasp the realities of these wonderful marketplaces recognize the opportunities and embrace them with an understanding that goes beyond the media hype and side show performance enhancement barkers. Simply put, when investment grade securities rise in price [As they are now, with the DJIA finally putting together a successful attack on the 11,000 barrier], Take Your Profits, because that's the purpose of investing in the stock market! On the flip side (and there has always been a flip side, more commonly dreaded as a "correction"), replenish your portfolio inventory with investment grade securities. Yes, even some that you may have just sold days or weeks ago during the rally. This is much more than an oversimplification; it is a long-term (a year or two is not long term.) strategy that succeeds... cycle, after cycle, after cycle. Sounds an awful lot like Buy Low/Sell High doesn't it? Obviously, Wall Street can't let you know that it is quite so simple!
[Note that Dow Jones 11,000 was last breached during the infancy of this century, and that the last All Time High in this much too widely followed average occurred late in 1999. When the DJIA banner is repositioned on that historical peak of 11,700 or so, it will represent no less than six years of zero growth in this, the most respected, of all Market Indicators! Would the media strip the gold medal from this Stock Market Icon if it knew that during these same years: (1) There have been significantly more stocks rising in price on a daily basis than moving lower. In fact, more than two-thirds of the last 68 months have been positive. (2) Since April 2000, there have been 120 more positive days in NYSE issue breadth than negative days. (3) 250% more NYSE stocks established new high price levels than new lows. (4) We are working on our sixth consecutive year of positive issue breadth!]
So understand that your portfolio statement values will rise and fall throughout time, and rather than rejoice or cry, you should be taking actions that will enhance your "Working Capital" and the ability of your portfolio to accomplish your long term goals and objectives. Through the simple application of a few easy to memorize rules, you can plot a course to an investment portfolio that regularly achieves higher highs and (much more importantly), higher lows! Left to its own devices, like the DJIA for example, an unmanaged portfolio is likely to have long periods of unproductive sideways motion. You can ill afford to travel six years at a break even pace, and it is foolish, even irresponsible, to expect any unmanaged or passively directed approach to be in sync with your personal financial needs.
Five simple concepts of Asset Allocation, Investment Strategy, and Psychology are summed up quite nicely in what I call "The Investor's Creed":
(1) My intention is to be fully invested in accordance with my planned equity/fixed income asset allocation. (2) On the other hand, every security I own is for sale, and every security I own generates some form of cash flow that cannot be reinvested immediately. (3) I am happy when my cash position is nearly 0% because all of my money is then working as hard as it possibly can to meet my objectives. (4) But, I am ecstatic when my cash position approaches 100% because that means I’ve sold everything at a profit, and that I am in a position to (5) take advantage of any new investment opportunities (that fit my guidelines) as soon as I become aware of them.
If you are managing your portfolio properly, your cash position has been rising lately, as you take profits on the securities you purchased when prices were falling just a few months ago… and (this is a big and) you could well be chock full of cash well before the market blows the whistle on its advance! Yes, if you are going about the investment process properly, you will be swimming in cash at about the same time Wall Street discovers the rally and starts encouraging people to weight their portfolios more heavily into stocks; the number of IPOs coming to market starts to rise exponentially; morning drive radio DJ's start to laugh about their stock market successes; and all of your friends start to talk about their new investment guru or the 30% gains in their growth Mutual Funds. What are you doing in cash!
This is what I call "smart" cash, because it represents realized profits, interest, and dividends that are just catching a breather on the bench after a scoring drive. As the gains compound at money market rates, the disciplined coach looks for sure signs of investor greed in the market place: fixed income prices fall as speculators abandon their long term goals and reach for the new investment stars that are sure to propel equity prices ever higher, boring investment grade equities fall in price as well because it now clear [for the scadieighth (sic) time] that the market will never fall again… particularly NASDAQ, which could double and still not be where it was six years ago. And the beat goes on, cycle after cycle, generation after generation. What do you think; will today's coaches be any smarter than those of the late nineties? Have they learned that it is the very strength of a rising market that proves to be its greatest weakness!
Forex Trading
There are many markets: markets for stocks, futures, options and currencies. These are probably the most accessible markets for everyday traders like you and I. People easily understand the basics of trading shares. I began trading shares first and then I moved on to trading currencies.
If you do not know a lot about currency trading, allow me to introduce it to you. It is what I trade and I believe that it is one of the best markets to trade because of its efficiency. The transaction costs to execute a trade are minimal and most brokers provide you with the tools and data you need to make your trading decisions, they usually provide them for free. The market is open 24 hours a day which allows you to design your trading hours around your daily commitments. It is very volatile, which is great for those people who are looking for day-trading opportunities.
The foreign exchange market is the market in which currencies are bought and sold against one another. People may loosely refer to this market under different labels, including foreign exchange market, forex market, fx market or the currency market.
The foreign exchange market is the largest market in the world, with daily trading volumes in excess of $1.5 trillion US dollars. All transactions involving international trade and investment must go through this market because these transactions involve the exchange of currencies.
It is the most perfect market that exists because it has a large number of buyers and sellers all selling the same products. There is a free flow of information and there are little barriers to participate.
The currency exchange market is an over-the-counter (OTC) market which means that there is not one specific location where buyers and sellers can actually meet to exchange currencies. Instead, transactions are conducted by phone, fax, e-mail or through the websites of brokers who specialize in currency trading.
The major dealing centres at the time of writing are: London , with about 30% of the market, New York , with 20%, Tokyo , with 12%, Zurich , Frankfurt, Hong Kong and Singapore , with about 7% each, followed by Paris and Sydney with 3% each. Because of the fact that these centres are all over the world, foreign exchange traders can execute transactions 24 hours a day. The market only closes on the weekends.
THE MAIN ‘PLAYERS' IN THE FOREX MARKET
The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.
Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. These participants do not have the power to set prices. They just buy and sell according to the prevailing exchange rate. They make up a significant proportion of the volume being traded in the market.
Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.
Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.
Large commercial and investment banks are the ‘price makers'. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.
Commercial banks deal with customers on one hand, and with the Interbank or other banks, on the other hand. They profit by utilizing the bid-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.
Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy's currency.
WHAT CURRENCIES TO TRADE IN THE FOREX MARKET
You can trade any country's currency by exchanging it to another country's currency, however the list below are the ones that are the most popular and are usually made available by most online brokers for you to trade.
AUD (A$): Australian Dollar a.k.a. ‘Aussie' or ‘Oz'
CAD (Can$): Canadian Dollar
CHF (SwF):Switzerland Franc a.k.a ‘Swissi'
DKK (Dkr): Denmark Krone
EUR (€): European Dollar a.k.a ‘Euro'
GBP (£) : Great Britain Pound a.k.a ‘ Sterling ' or ‘Cable'
HKD (HK$ ): Hong Kong Dollar
JPY (¥): Japanese Yen
MXN (Mex$): Mexican Peso
NOK (NKr): Norway Krone
NZD (NZ$): New Zealand Dollar a.k.a ‘Kiwi'
PLN (z dashed l): Poland Zloty
SAR (SRls): Saudi Arabia Riyal
SEK (kr or Sk): Sweden Krona
SGD (S$): Singapore Dollar
THB (Bht or Bt): Thailand Bhat
USD ($): United States Dollar
ZAR (R): South Africa Rand
CURRENCY PAIRS
To trade the currencies above, you need to trade currency pairs. Think of these currency pairs as your trading instruments – instruments that you can buy or sell. Listed below are the most popular currency pairs that people trade:
1. AUD/JPY: Australian Dollar – Japanese Yen
2. AUD/USD: Australian Dollar – US Dollar
3. EUR/CHF: European Dollar – Switzerland Frank
4. EUR/GBP: European Dollar – Great Britain Pound
5. EUR/USD: European Dollar – US Dollar
6. EUR/JPY: European Dollar – Japanese Yen
7. GBP/CHF: Great Britain Pound – Switzerland Frank
8. GBP/USD: Great Britain Pound – US Dollar
9. USD/CAD: US Dollar – Canadian Dollar
10. USD/CHF: US Dollar – Switzerland Frank
The currencies on the left can be exchanged for the currencies on the right.
If you do not know a lot about currency trading, allow me to introduce it to you. It is what I trade and I believe that it is one of the best markets to trade because of its efficiency. The transaction costs to execute a trade are minimal and most brokers provide you with the tools and data you need to make your trading decisions, they usually provide them for free. The market is open 24 hours a day which allows you to design your trading hours around your daily commitments. It is very volatile, which is great for those people who are looking for day-trading opportunities.
The foreign exchange market is the market in which currencies are bought and sold against one another. People may loosely refer to this market under different labels, including foreign exchange market, forex market, fx market or the currency market.
The foreign exchange market is the largest market in the world, with daily trading volumes in excess of $1.5 trillion US dollars. All transactions involving international trade and investment must go through this market because these transactions involve the exchange of currencies.
It is the most perfect market that exists because it has a large number of buyers and sellers all selling the same products. There is a free flow of information and there are little barriers to participate.
The currency exchange market is an over-the-counter (OTC) market which means that there is not one specific location where buyers and sellers can actually meet to exchange currencies. Instead, transactions are conducted by phone, fax, e-mail or through the websites of brokers who specialize in currency trading.
The major dealing centres at the time of writing are: London , with about 30% of the market, New York , with 20%, Tokyo , with 12%, Zurich , Frankfurt, Hong Kong and Singapore , with about 7% each, followed by Paris and Sydney with 3% each. Because of the fact that these centres are all over the world, foreign exchange traders can execute transactions 24 hours a day. The market only closes on the weekends.
THE MAIN ‘PLAYERS' IN THE FOREX MARKET
The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.
Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. These participants do not have the power to set prices. They just buy and sell according to the prevailing exchange rate. They make up a significant proportion of the volume being traded in the market.
Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.
Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.
Large commercial and investment banks are the ‘price makers'. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.
Commercial banks deal with customers on one hand, and with the Interbank or other banks, on the other hand. They profit by utilizing the bid-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.
Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy's currency.
WHAT CURRENCIES TO TRADE IN THE FOREX MARKET
You can trade any country's currency by exchanging it to another country's currency, however the list below are the ones that are the most popular and are usually made available by most online brokers for you to trade.
AUD (A$): Australian Dollar a.k.a. ‘Aussie' or ‘Oz'
CAD (Can$): Canadian Dollar
CHF (SwF):Switzerland Franc a.k.a ‘Swissi'
DKK (Dkr): Denmark Krone
EUR (€): European Dollar a.k.a ‘Euro'
GBP (£) : Great Britain Pound a.k.a ‘ Sterling ' or ‘Cable'
HKD (HK$ ): Hong Kong Dollar
JPY (¥): Japanese Yen
MXN (Mex$): Mexican Peso
NOK (NKr): Norway Krone
NZD (NZ$): New Zealand Dollar a.k.a ‘Kiwi'
PLN (z dashed l): Poland Zloty
SAR (SRls): Saudi Arabia Riyal
SEK (kr or Sk): Sweden Krona
SGD (S$): Singapore Dollar
THB (Bht or Bt): Thailand Bhat
USD ($): United States Dollar
ZAR (R): South Africa Rand
CURRENCY PAIRS
To trade the currencies above, you need to trade currency pairs. Think of these currency pairs as your trading instruments – instruments that you can buy or sell. Listed below are the most popular currency pairs that people trade:
1. AUD/JPY: Australian Dollar – Japanese Yen
2. AUD/USD: Australian Dollar – US Dollar
3. EUR/CHF: European Dollar – Switzerland Frank
4. EUR/GBP: European Dollar – Great Britain Pound
5. EUR/USD: European Dollar – US Dollar
6. EUR/JPY: European Dollar – Japanese Yen
7. GBP/CHF: Great Britain Pound – Switzerland Frank
8. GBP/USD: Great Britain Pound – US Dollar
9. USD/CAD: US Dollar – Canadian Dollar
10. USD/CHF: US Dollar – Switzerland Frank
The currencies on the left can be exchanged for the currencies on the right.
Trading Teacher
Not all traders are fortunate enough to have a friend or relative, who happens to be a successful trader, to learn from. Like most traders, Marquez Comelab, author of book: The Part-Time Currency Trader, did not know anybody who could teach him, in person, how to trade. So he read books and attended seminars. In this article, he shares the lessons he learnt from his very first trading teacher.
When I studied the principles of investing in university, I was taught that the price of a share reflected the value of the company. With fundamental analysis, there are many methods on how one can analyse the financial statements of companies to find out whether a share is a good or a bad investment. You can conduct horizontal and vertical analyses on standardised financial statements, which are just fancy terms for comparing numbers. You can calculate certain financial ratios to get a better understanding of a company’s liquidity, working capital management, its ability to remain in business over the long term, and its profitability.
I applied these concepts when I started trading the stock market. Soon I found that if I wanted to trade shares in a timeframe of less than three months, decisions based on these analyses were not useful. I did not want to buy shares only to receive dividends. I wanted to trade for capital gains.
I was dissatisfied with my knowledge, the tools and the methods that I had to trade the markets. With my desire to trade a timeframe shorter than three months and my strengthening belief that emotions greatly impact on trading, I began to search for different approaches to buying and selling shares.
I went back to one of my textbooks in university. I wanted to know how else I could analyse the markets. From the passage I read, I learned that one can analyse the markets in one of two ways: fundamental analysis and technical analysis.
I bumped into a newspaper ad one day for a trading seminar. While reading through the ad I saw the words: technical analysis. An expert trader was going to speak on the exact topic I was interested in learning. It was a free seminar and everybody was welcome to come along. So I called a friend of mine and I asked if he would be interested in attending this trading seminar. He was.
The seminar was organised by a business selling trading courses: courses to instruct people on how to trade the share market. When we arrived, we were led into a small room. There were about thirty people. The spokesman was apparently a veteran trader who wrote two books on trading. Let’s call him Bauer for the purpose of this article. Bauer had a very strong presence. He was a huge, tall man with a clean-shaven head.
I was on the front row seat trying to listen and understand every word this man said. It was his teachings that planted the seeds of how I eventually grew as a trader over the years. Many times, I heard his voice in my head, reminding me of the lessons I learnt from his books and the lessons I learnt from him that day. I will try to enumerate the lessons I learnt from this man to help you the way they helped me.
This man had my attention from the very beginning. “The share market is a game where people try to steal money from other people. That is the objective of the game and it is legal”, he began. I wondered what the professionals in Wall Street would have thought about that statement if they heard it. I smiled. I liked him already.
He continued: “If you are going to join this game, you are essentially given permission to steal money from other people and in exchange, you are okay with them stealing your money also. Some of the brightest people in the world will be playing with you. Therefore, if you are going to war and fight an army with real weapons, you better make sure you do not go there with a plastic gun.”
He said that people rush to the markets to lose their money. It sounded laughable but I guess it was the only conclusion one can draw from the fact that most people begin trading without sufficiently preparing and educating themselves. Of course, most of us do not put on a trade with the hope of losing our money; however, that is what we are effectively doing when we trade without adequate preparation.
“They just cannot wait to lose their money. They do not bother learning about the market first. They think it is easy. Most people know that they need training before they can fly a plane or perform surgery, but I do not know why they think it is easy to make money trading”, he exclaimed. He was quite emotional about it.
“Trading is hard”, he declared. Only about 5% of people know how to trade profitably. And so the probability of finding someone else who knows what they are doing is very, very small. “Do not rely solely on the advice of your brokers, your fund managers or whoever else. Your best hope for success is to educate yourself. The sooner you do that, the better off you’ll be.”
“When it comes to buying and selling shares, there is no such thing as investing. What people normally refer to as investing means long-term trading to me”. When people hold on to their investments for five or more years with the intention to sell later, then all they are effectively doing is trading…just with a longer time frame.
“Do not buy shares solely for the dividend payments. They offer you measly rewards”, he said. “Do trade only with the purpose of making money from capital gains. Buy low, sell high and that’s how you should make your profit.”
At the time, I was juggling between the concepts of short-term trading or investing for the long-term. I did not know whether I was taking the right approach by attempting to make short-term profits. He made his stance on the matter strongly.
He asked us if we knew what drove prices up or down. Remembering what my lecturer said in university, I responded, “the price moves up and down close to the intrinsic value of the share”.
He turned his attention to me and asked, “What share are you trading?”
“XYZ (I changed the name for the purpose of this article)”, I replied quite happily. Perhaps I could squeeze a tip or two from him about the stock.
“Do you know what the intrinsic value of XYZ Company is”, he asked.
I nodded my head sideways and muttered, “no”.
“I’ll tell you what the value of XYZ is… it is zero!” He barked.
I was taken aback by his response. Zero? Then what are we paying money for when we buy a share? I thought. Then he clarified himself.
“Price is only a perception – it is people’s perception of what they think the value of the share price is”.
“The key to success in trading is psychology”, he continued. Psychology? I thought. How did psychology get involved in this? “The stock market is like an opinion poll. It is a measure of what people think is going to happen. If they think the price will go up, you will see an upward movement on the chart because there are more buyers so the sellers increase their price because some of these buyers are willing to buy at higher prices”, he explained.
He then used an example to explain a typical trader’s behaviour when he trades without a system. As he explained it, I recognised my own behaviour in his demonstration.
This was all a revelation for me. When I was buying and selling shares I wondered what type of people were on the other side of the trade because collectively, they were pretty smart. Now I know. It was people like Bauer who were on the other side of those transactions, doing the exact opposite of what I was doing, using similar methods like the ones he was using. They were looking at the share market with a philosophy and an approach that were completely alien to me. Traders like him were making all the money and traders like me were losing.
I shook my head in disbelief that other people saw things the way they did. I felt excited knowing that there was another alternative, another approach in analysing the markets.
“What you need, is to develop your own trading system.” He exclaimed to everybody in the entire room. “Without a trading system, you will fail. I guarantee you. This trading system must be something that is suited for you and you only. Even if I give you my trading system I am certain that you will fail to make money, because my system is not designed for you. It is designed for me. That is why you need to learn how to use the tools and acquire the skills needed to be a trader”.
I accepted his advice without fully understanding this concept of matching a trading system to suit the trader’s own personality. It lingered in my mind for a long time. The wisdom of his advice became apparent to me as I slowly learnt more about the nature of trading.
Bauer diverted our attention to the charts on the screen projected from his laptop. All I saw were lines, curves, rectangular boxes and more squiggly lines. The tools of a professional trader: I thought. I was being shown the tools that my market ‘adversaries’ have been using to ‘clobber’ me with all this time. My heart was beating faster than usual. I was in awe. I wanted those tools.
I asked Bauer what program he used to analyse the markets. He told me. I also asked him how many indicators he used. I had read enough about technical analysis by that time to know that technical analysts use indicators to analyse share prices. There are many indicators to choose from so I wanted to know how many of those are used by professional traders. He started counting his fingers. ‘Seven’, he said.
I think many people there had not really read up on technical analysis but I had done my homework and by that time, I was pretty much the only person in dialog with him, asking him questions. I wanted to gain as much knowledge and wisdom he was willing to give me.
Then I heard one of the most important lessons I’ve learnt which minimised my losses during my early years of trading: “Trade so small that it is almost a waste of your time. Assume the next trade is going to be the first out of a thousand trades you are going to be making in your life. Even though your profits are smaller, your losses are smaller too. There is no need to rush. Do not worry about getting rich too quickly.”
He was suggesting that novices like me should trade using small position sizes. That means to buy small number of shares at the start. I was intrigued. I did not know a person should trade that ‘small’.
Eventually, the seminar ended. I grabbed the booklets and brochures given out by some of the staff. In one of these brochures was the name of the program he uses. They were selling the software with the courses they were offering. I could not afford the entire package but I knew I had to buy the same charting software Bauer used. I decided to learn as much as I could about how to use charts and graphs to analyse the market. I needed to develop my own trading system.
As for my friend, he said he had a car loan to take care of first. He would look into trading shares later when he had a little more money to set aside.
A couple of days later, I got a call from the organiser of the seminar, telling me that based from the questions I had been asking that night, I was the type of person that would most benefit from their education package. Bauer was asked to demonstrate the need for trading education because he traded the markets. In the process, he was selling the courses well. Bauer seemed knowledgeable and experienced. He has enlightened me and probably several other people in that room about how much there was to learn. I was sold. I just could not afford the courses at the time but I wanted them so badly that I asked the sales person on the other end of the line if I could work for them in exchange for the course.
I did not get to do the course but I bought the software from a different distributor at a cheaper price. I also bought the two books Bauer wrote. I figured that I could acquire the skills and wisdom through self-education. I learnt a lot from those two books and from using the software. Having that opportunity to attend that seminar was a ‘gift from the heavens’, as far as I was concerned. Wherever you are, Bauer, I thank you. You – and others like you -- have made me recognize the value of passing on knowledge and experience for others to follow.
When I studied the principles of investing in university, I was taught that the price of a share reflected the value of the company. With fundamental analysis, there are many methods on how one can analyse the financial statements of companies to find out whether a share is a good or a bad investment. You can conduct horizontal and vertical analyses on standardised financial statements, which are just fancy terms for comparing numbers. You can calculate certain financial ratios to get a better understanding of a company’s liquidity, working capital management, its ability to remain in business over the long term, and its profitability.
I applied these concepts when I started trading the stock market. Soon I found that if I wanted to trade shares in a timeframe of less than three months, decisions based on these analyses were not useful. I did not want to buy shares only to receive dividends. I wanted to trade for capital gains.
I was dissatisfied with my knowledge, the tools and the methods that I had to trade the markets. With my desire to trade a timeframe shorter than three months and my strengthening belief that emotions greatly impact on trading, I began to search for different approaches to buying and selling shares.
I went back to one of my textbooks in university. I wanted to know how else I could analyse the markets. From the passage I read, I learned that one can analyse the markets in one of two ways: fundamental analysis and technical analysis.
I bumped into a newspaper ad one day for a trading seminar. While reading through the ad I saw the words: technical analysis. An expert trader was going to speak on the exact topic I was interested in learning. It was a free seminar and everybody was welcome to come along. So I called a friend of mine and I asked if he would be interested in attending this trading seminar. He was.
The seminar was organised by a business selling trading courses: courses to instruct people on how to trade the share market. When we arrived, we were led into a small room. There were about thirty people. The spokesman was apparently a veteran trader who wrote two books on trading. Let’s call him Bauer for the purpose of this article. Bauer had a very strong presence. He was a huge, tall man with a clean-shaven head.
I was on the front row seat trying to listen and understand every word this man said. It was his teachings that planted the seeds of how I eventually grew as a trader over the years. Many times, I heard his voice in my head, reminding me of the lessons I learnt from his books and the lessons I learnt from him that day. I will try to enumerate the lessons I learnt from this man to help you the way they helped me.
This man had my attention from the very beginning. “The share market is a game where people try to steal money from other people. That is the objective of the game and it is legal”, he began. I wondered what the professionals in Wall Street would have thought about that statement if they heard it. I smiled. I liked him already.
He continued: “If you are going to join this game, you are essentially given permission to steal money from other people and in exchange, you are okay with them stealing your money also. Some of the brightest people in the world will be playing with you. Therefore, if you are going to war and fight an army with real weapons, you better make sure you do not go there with a plastic gun.”
He said that people rush to the markets to lose their money. It sounded laughable but I guess it was the only conclusion one can draw from the fact that most people begin trading without sufficiently preparing and educating themselves. Of course, most of us do not put on a trade with the hope of losing our money; however, that is what we are effectively doing when we trade without adequate preparation.
“They just cannot wait to lose their money. They do not bother learning about the market first. They think it is easy. Most people know that they need training before they can fly a plane or perform surgery, but I do not know why they think it is easy to make money trading”, he exclaimed. He was quite emotional about it.
“Trading is hard”, he declared. Only about 5% of people know how to trade profitably. And so the probability of finding someone else who knows what they are doing is very, very small. “Do not rely solely on the advice of your brokers, your fund managers or whoever else. Your best hope for success is to educate yourself. The sooner you do that, the better off you’ll be.”
“When it comes to buying and selling shares, there is no such thing as investing. What people normally refer to as investing means long-term trading to me”. When people hold on to their investments for five or more years with the intention to sell later, then all they are effectively doing is trading…just with a longer time frame.
“Do not buy shares solely for the dividend payments. They offer you measly rewards”, he said. “Do trade only with the purpose of making money from capital gains. Buy low, sell high and that’s how you should make your profit.”
At the time, I was juggling between the concepts of short-term trading or investing for the long-term. I did not know whether I was taking the right approach by attempting to make short-term profits. He made his stance on the matter strongly.
He asked us if we knew what drove prices up or down. Remembering what my lecturer said in university, I responded, “the price moves up and down close to the intrinsic value of the share”.
He turned his attention to me and asked, “What share are you trading?”
“XYZ (I changed the name for the purpose of this article)”, I replied quite happily. Perhaps I could squeeze a tip or two from him about the stock.
“Do you know what the intrinsic value of XYZ Company is”, he asked.
I nodded my head sideways and muttered, “no”.
“I’ll tell you what the value of XYZ is… it is zero!” He barked.
I was taken aback by his response. Zero? Then what are we paying money for when we buy a share? I thought. Then he clarified himself.
“Price is only a perception – it is people’s perception of what they think the value of the share price is”.
“The key to success in trading is psychology”, he continued. Psychology? I thought. How did psychology get involved in this? “The stock market is like an opinion poll. It is a measure of what people think is going to happen. If they think the price will go up, you will see an upward movement on the chart because there are more buyers so the sellers increase their price because some of these buyers are willing to buy at higher prices”, he explained.
He then used an example to explain a typical trader’s behaviour when he trades without a system. As he explained it, I recognised my own behaviour in his demonstration.
This was all a revelation for me. When I was buying and selling shares I wondered what type of people were on the other side of the trade because collectively, they were pretty smart. Now I know. It was people like Bauer who were on the other side of those transactions, doing the exact opposite of what I was doing, using similar methods like the ones he was using. They were looking at the share market with a philosophy and an approach that were completely alien to me. Traders like him were making all the money and traders like me were losing.
I shook my head in disbelief that other people saw things the way they did. I felt excited knowing that there was another alternative, another approach in analysing the markets.
“What you need, is to develop your own trading system.” He exclaimed to everybody in the entire room. “Without a trading system, you will fail. I guarantee you. This trading system must be something that is suited for you and you only. Even if I give you my trading system I am certain that you will fail to make money, because my system is not designed for you. It is designed for me. That is why you need to learn how to use the tools and acquire the skills needed to be a trader”.
I accepted his advice without fully understanding this concept of matching a trading system to suit the trader’s own personality. It lingered in my mind for a long time. The wisdom of his advice became apparent to me as I slowly learnt more about the nature of trading.
Bauer diverted our attention to the charts on the screen projected from his laptop. All I saw were lines, curves, rectangular boxes and more squiggly lines. The tools of a professional trader: I thought. I was being shown the tools that my market ‘adversaries’ have been using to ‘clobber’ me with all this time. My heart was beating faster than usual. I was in awe. I wanted those tools.
I asked Bauer what program he used to analyse the markets. He told me. I also asked him how many indicators he used. I had read enough about technical analysis by that time to know that technical analysts use indicators to analyse share prices. There are many indicators to choose from so I wanted to know how many of those are used by professional traders. He started counting his fingers. ‘Seven’, he said.
I think many people there had not really read up on technical analysis but I had done my homework and by that time, I was pretty much the only person in dialog with him, asking him questions. I wanted to gain as much knowledge and wisdom he was willing to give me.
Then I heard one of the most important lessons I’ve learnt which minimised my losses during my early years of trading: “Trade so small that it is almost a waste of your time. Assume the next trade is going to be the first out of a thousand trades you are going to be making in your life. Even though your profits are smaller, your losses are smaller too. There is no need to rush. Do not worry about getting rich too quickly.”
He was suggesting that novices like me should trade using small position sizes. That means to buy small number of shares at the start. I was intrigued. I did not know a person should trade that ‘small’.
Eventually, the seminar ended. I grabbed the booklets and brochures given out by some of the staff. In one of these brochures was the name of the program he uses. They were selling the software with the courses they were offering. I could not afford the entire package but I knew I had to buy the same charting software Bauer used. I decided to learn as much as I could about how to use charts and graphs to analyse the market. I needed to develop my own trading system.
As for my friend, he said he had a car loan to take care of first. He would look into trading shares later when he had a little more money to set aside.
A couple of days later, I got a call from the organiser of the seminar, telling me that based from the questions I had been asking that night, I was the type of person that would most benefit from their education package. Bauer was asked to demonstrate the need for trading education because he traded the markets. In the process, he was selling the courses well. Bauer seemed knowledgeable and experienced. He has enlightened me and probably several other people in that room about how much there was to learn. I was sold. I just could not afford the courses at the time but I wanted them so badly that I asked the sales person on the other end of the line if I could work for them in exchange for the course.
I did not get to do the course but I bought the software from a different distributor at a cheaper price. I also bought the two books Bauer wrote. I figured that I could acquire the skills and wisdom through self-education. I learnt a lot from those two books and from using the software. Having that opportunity to attend that seminar was a ‘gift from the heavens’, as far as I was concerned. Wherever you are, Bauer, I thank you. You – and others like you -- have made me recognize the value of passing on knowledge and experience for others to follow.
ISA Best-Buys
It's that time of year again when savers make a mad dash to deposit their money into an ISA to earn tax-free interest on savings.
Savers have until the end of the tax year on 5 April to save into an ISA, and as the ISA deadline draws closer, banks and building societies are offering better-paying ISAs to attract savers.
Savers have the choice of putting their money into a cash ISA or stocks & shares ISA, and if you already have an ISA but want to transfer to another provider to take advantage of a higher interest rate and net yourself some extra interest before the end of the tax year, then you still have time to do so, but time really is running short.
If you want to know more about paying into an ISA, then we've put together answers for you in our latest ISA guide. And if you still have questions, visit our ISA blog where more specific ISA questions are addressed.
ISA Transfer Picks
If you already have an ISA and are looking to transfer to a better paying account, then the UBS five year structured FTSE Income Plan is paying a rate of 6.50 per cent, available as a stocks & shares ISA and transfer ISA.
Royal Bank of Scotland is also offering a three year fixed rate cash ISA that returns 4 per cent a year, available as a cash ISA or cash ISA transfer.
Cash ISA Picks
If you want to invest in a Cash ISA, then Investec has a five year capital protected deposit plan with an annual yield of 4.75 per cent or a monthly yield of 0.38 per cent and can also be used as a cash ISA transfer.
Meanwhile, ING Direct is offering a Cash ISA with a guaranteed rate of 2.50 per cent for twelve months. While, Natwest has got an E Cash ISA for existing customers only, paying a rate of up to 2.50 per cent.
Stocks & Shares ISA Picks
If you're interested in a five year structured investment plan, then Investec Structured Products is offering maximum returns of 62.5 per cent at maturity on its FTSE 100 Geared Returns Plan ISA, but returns are not guaranteed and capital may be at risk.
Finally, if you want to take a bit of a risk but don't want to tie yourself in for the long-term, the five year Investec FTSE 100 Enhanced Kick-Out Plan ISA offers a fixed return of 9.25 per cent a year with the potential to kick-out after year one.
Savers have until the end of the tax year on 5 April to save into an ISA, and as the ISA deadline draws closer, banks and building societies are offering better-paying ISAs to attract savers.
Savers have the choice of putting their money into a cash ISA or stocks & shares ISA, and if you already have an ISA but want to transfer to another provider to take advantage of a higher interest rate and net yourself some extra interest before the end of the tax year, then you still have time to do so, but time really is running short.
If you want to know more about paying into an ISA, then we've put together answers for you in our latest ISA guide. And if you still have questions, visit our ISA blog where more specific ISA questions are addressed.
ISA Transfer Picks
If you already have an ISA and are looking to transfer to a better paying account, then the UBS five year structured FTSE Income Plan is paying a rate of 6.50 per cent, available as a stocks & shares ISA and transfer ISA.
Royal Bank of Scotland is also offering a three year fixed rate cash ISA that returns 4 per cent a year, available as a cash ISA or cash ISA transfer.
Cash ISA Picks
If you want to invest in a Cash ISA, then Investec has a five year capital protected deposit plan with an annual yield of 4.75 per cent or a monthly yield of 0.38 per cent and can also be used as a cash ISA transfer.
Meanwhile, ING Direct is offering a Cash ISA with a guaranteed rate of 2.50 per cent for twelve months. While, Natwest has got an E Cash ISA for existing customers only, paying a rate of up to 2.50 per cent.
Stocks & Shares ISA Picks
If you're interested in a five year structured investment plan, then Investec Structured Products is offering maximum returns of 62.5 per cent at maturity on its FTSE 100 Geared Returns Plan ISA, but returns are not guaranteed and capital may be at risk.
Finally, if you want to take a bit of a risk but don't want to tie yourself in for the long-term, the five year Investec FTSE 100 Enhanced Kick-Out Plan ISA offers a fixed return of 9.25 per cent a year with the potential to kick-out after year one.
Thursday, April 1, 2010
Decision Making
To reduce risk when you are doing online forex trading, it is always best to do forex review system trading. When you do trading online, you never do it haphazardly. Instead a lot of planning goes into the decisions that you make one what and when to trade forex online. Being a foreign exchange trader means a lot of profits, but it also means a lot of losses for those who do not read the signals correctly. This is why forex review system trading is one of the safest ways by which you can approach your forex trading business wisely and profitably.
With forex review system trading, you minimize your risk of losing money by doing the proper research to support the different online trading decisions that you make with your forex accounts. One way of doing this is to read the trends in the economy and market as it is depicted in the news. By finding out what the situation is in a country, you will be able to learn whether your money is worth investing in their currency to make a hefty profit. With this method you would need a good knowledge about how things like the peace and order situation can affect a country's economy and, in turn, the value of their currency.
Second, you can follow a set forex review system that will allow you to get information that is fit to guide you in your next forex trading move. This forex review system will get you information about the market trends at very specific times and currency values during the day. With this kind of information, you can make prudent and appropriate management decisions that will help you boost your profits and learn more about the nuances of how a currency increases and decrease in value.
Third, another way of doing forex review system trading manually is to do research on other websites of other traders. These other forex traders have the savvy and experience that is needed to make huge profits. It is great to sign up to a forum of online brokers and traders who will always have great advice for you when taking about the foreign exchange market. You can also check the different reviews and blogs maintained by these traders that will give great advice as they document their thoughts daily.
By doing forex review system trading, you can be sure that your approach is prudent, safe, and will get you expected profits because of your steady pace and well-founded decision-making process. Forex review system trading methods are established so that forex traders like you can follow specific guidelines that will guide you in making the right online forex investment decisions to properly come up with actions to garner the best profit possible.
With forex review system trading, you minimize your risk of losing money by doing the proper research to support the different online trading decisions that you make with your forex accounts. One way of doing this is to read the trends in the economy and market as it is depicted in the news. By finding out what the situation is in a country, you will be able to learn whether your money is worth investing in their currency to make a hefty profit. With this method you would need a good knowledge about how things like the peace and order situation can affect a country's economy and, in turn, the value of their currency.
Second, you can follow a set forex review system that will allow you to get information that is fit to guide you in your next forex trading move. This forex review system will get you information about the market trends at very specific times and currency values during the day. With this kind of information, you can make prudent and appropriate management decisions that will help you boost your profits and learn more about the nuances of how a currency increases and decrease in value.
Third, another way of doing forex review system trading manually is to do research on other websites of other traders. These other forex traders have the savvy and experience that is needed to make huge profits. It is great to sign up to a forum of online brokers and traders who will always have great advice for you when taking about the foreign exchange market. You can also check the different reviews and blogs maintained by these traders that will give great advice as they document their thoughts daily.
By doing forex review system trading, you can be sure that your approach is prudent, safe, and will get you expected profits because of your steady pace and well-founded decision-making process. Forex review system trading methods are established so that forex traders like you can follow specific guidelines that will guide you in making the right online forex investment decisions to properly come up with actions to garner the best profit possible.
Investing Easier
Getting into forex trading is usually quite a challenge in the beginning, but with the right forex secret trading advice, you will be able to get the profits that you want in no time. The foreign exchange market is a relatively volatile one so you always have to be ready with what it has to offer before making a trade. This means getting the right information and signals so that you can analyze this information and make better decision. Here are some great pieces of forex secret trading advice from seasoned forex traders that may just help you once you decide to get into foreign exchange market trading:
Learn, Learn, Learn!
To be able to be the best that you can be in forex trading, you really have to get down to it and learn the ropes! It takes a lot of hard work to be able to read up on forex trading and learning the nuances of the business. Learning the ropes simply take discipline to do online research on the topic, reading books about it, joining forex trading forums so that you can ask other forex traders about their businesses, and basically finally doing it and learning the nuances of the trade through hard experience.
Forex Robots
Forex robots may just be the easiest way to get into the forex trade quickly and easily. The problem with this method is that you have a piece of software doing all the trading for you and you hardly even has to think. Remember to learn the market first before even trying out a forex robot. Even if it does everything for you, you will have to learn the mechanisms behind why it makes certain trading decisions with certain trading signals. Availing of forex trading software may require you to always keep yourself educated by making use of the customer service available so that you can have your questions answered when needed.
Be Prudent
Don't go into the forex trading business with too much confidence. In fact, plan your strategy so that you can learn the ropes and invest a relatively conservative amount of money first before diving in deep and making big investments. Remember that you are still a beginner, so it is best to follow this piece of forex secret trading advice so that you don't lose all your money at once and regret your forex trading experience for the rest of your life.
Simplicity Is Best
As you learn more about foreign exchange trading, you may want to keep your strategy simple first as you begin to learn the nuances in forex trade. Keep it simple while you learn the terms and the different information that you receive to boost your trading actions. It is best to take it slow, make conservative investment, and learn the trade as fully as you can with this forex secret trading advice before jumping into it fully.
Learn, Learn, Learn!
To be able to be the best that you can be in forex trading, you really have to get down to it and learn the ropes! It takes a lot of hard work to be able to read up on forex trading and learning the nuances of the business. Learning the ropes simply take discipline to do online research on the topic, reading books about it, joining forex trading forums so that you can ask other forex traders about their businesses, and basically finally doing it and learning the nuances of the trade through hard experience.
Forex Robots
Forex robots may just be the easiest way to get into the forex trade quickly and easily. The problem with this method is that you have a piece of software doing all the trading for you and you hardly even has to think. Remember to learn the market first before even trying out a forex robot. Even if it does everything for you, you will have to learn the mechanisms behind why it makes certain trading decisions with certain trading signals. Availing of forex trading software may require you to always keep yourself educated by making use of the customer service available so that you can have your questions answered when needed.
Be Prudent
Don't go into the forex trading business with too much confidence. In fact, plan your strategy so that you can learn the ropes and invest a relatively conservative amount of money first before diving in deep and making big investments. Remember that you are still a beginner, so it is best to follow this piece of forex secret trading advice so that you don't lose all your money at once and regret your forex trading experience for the rest of your life.
Simplicity Is Best
As you learn more about foreign exchange trading, you may want to keep your strategy simple first as you begin to learn the nuances in forex trade. Keep it simple while you learn the terms and the different information that you receive to boost your trading actions. It is best to take it slow, make conservative investment, and learn the trade as fully as you can with this forex secret trading advice before jumping into it fully.
Money In The Trade
The biggest market open 24 hours a day that is open to the public is the foreign exchange market. Open to so-called day traders, the forex market has a daily turnover of almost 4 trillion dollars. While it is true that it is possible to make a decent living by trading in the foreign exchange market, the sheer amount of technical knowhow that one should possess is the determining factor whether one succeeds or fails in this kind of living.
The entry of forex software system trading makes it possible for the average Joe to trade in forex markets. The software's algorithms incorporate expert knowledge which means that the technical aspects of trading are built into it. The only requirement is to be always on internet connection, preferably a fast one e.g. DSL or broadband. Forex software systems need to initialized once and after this has been done, the computer makes the buy and sell decisions for you.
Forex software systems trading make use of the internet to monitor, in near real time, how the world's foreign exchange market behaves. When there are changes in values between two currency pairs (the dominant one being the dollar and the euro) the software takes note of this and depending on how it was initialized, buys or sells currency on your behalf. Since there are market fluctuations all day, the novice trader, especially those relying on their wits alone, become greatly influenced by emotions. Fear and greed are very powerful and they cloud decision making especially in those times where real cold technical analysis is needed. Forex software systems trading is of course free from debilitating emotions and make their buy and sell decisions solely on what incoming data is telling them.
With forex software systems trading, it becomes possible to make forex trading a second job, a supplemental source of income. There is no need to quit an office job just because forex trading demands close monitoring of trends. The software tirelessly monitor data feeds for trends and make use of the information to trade.
Perhaps you must have heard of talk saying that in these uncertain economic times, the best strategy is a conservative approach in finances. That talk is wrong. With uncertainty comes volatility in the exchange market. The value of one-currency changes and the difference in value can be significant. Changes like this should be taken advantage of. With forex software systems, the task of buying and selling, when the opportune time comes, becomes very simple.
While the profit margins for any trade is small, as long as money is being made during each buy and sell, forex trading becomes a real money making opportunity for everyone. If you want to try it out, you can always download trial editions of the software and see for yourself how easy forex software systems trading really are.
The entry of forex software system trading makes it possible for the average Joe to trade in forex markets. The software's algorithms incorporate expert knowledge which means that the technical aspects of trading are built into it. The only requirement is to be always on internet connection, preferably a fast one e.g. DSL or broadband. Forex software systems need to initialized once and after this has been done, the computer makes the buy and sell decisions for you.
Forex software systems trading make use of the internet to monitor, in near real time, how the world's foreign exchange market behaves. When there are changes in values between two currency pairs (the dominant one being the dollar and the euro) the software takes note of this and depending on how it was initialized, buys or sells currency on your behalf. Since there are market fluctuations all day, the novice trader, especially those relying on their wits alone, become greatly influenced by emotions. Fear and greed are very powerful and they cloud decision making especially in those times where real cold technical analysis is needed. Forex software systems trading is of course free from debilitating emotions and make their buy and sell decisions solely on what incoming data is telling them.
With forex software systems trading, it becomes possible to make forex trading a second job, a supplemental source of income. There is no need to quit an office job just because forex trading demands close monitoring of trends. The software tirelessly monitor data feeds for trends and make use of the information to trade.
Perhaps you must have heard of talk saying that in these uncertain economic times, the best strategy is a conservative approach in finances. That talk is wrong. With uncertainty comes volatility in the exchange market. The value of one-currency changes and the difference in value can be significant. Changes like this should be taken advantage of. With forex software systems, the task of buying and selling, when the opportune time comes, becomes very simple.
While the profit margins for any trade is small, as long as money is being made during each buy and sell, forex trading becomes a real money making opportunity for everyone. If you want to try it out, you can always download trial editions of the software and see for yourself how easy forex software systems trading really are.
Software Fraud
With so many Forex automated trading expert advisors on the market today showing outrageous and profitable trading results, you may be tempted to purchase one of these automated Forex trading systems to see for yourself. It is extremely hard to resist the temptation when you come across Forex automated trading results showing a 500% gain within two weeks. How can you say no to automated Forex trading software that claims 99% wining trades? There are also Forex managed account services claiming 25 consecutive profitable months without a single losing month. Then there are marketing statements claiming financial independence without having to know a thing about the Forex market. Lastly, there is the coup de grace of offering a full money back guarantee.
Let's examine each of these marketing promises to understand them for what they are. In order for an automated Forex system to obtain a 500% gain within two weeks, it must take extreme risks to compound its trading account. Compounding the trading lot size will compound the potential winnings, but it will also compound losses. It is unlikely that this automated Forex trading software will continue to replicate its winning results week after week without any losses. If this Forex automated trading system really works, then the inventor should be richer than Warren Buffett and Bill Gates. The last time I checked, Bill Gates is still the richest man in the world.
It is human nature to want to be right all the time. Unfortunately, this is a bad trait in Forex trading. In order to have 99% wining trades, this automated Forex system is trading with a very large stop loss or no stop loss altogether. By trading without a stop loss, the unrealized losses in the account are open floating losses. This Forex automated trading software will not close the trade until it is profitable; hence, it will continue to hold the losing trade until the account gets margined out. You can have 99 wining trades, but with this technique, one losing trade could wipe out your entire trading account. Trading without stop loss is like playing Russian roulette with your money.
Often, I come across Forex managed account services using automated Forex trading systems without a single losing month. This is too good to be true, as even Warren Buffett cannot make this claim about himself, so you should stay away. Alternatively, you can make the cheques out to Bernard Madoff and get in early on the Ponzi scheme.
There are no shortcuts in life. Any automated Forex trading software or products claiming to provide financial independence without you needing to know a thing is likely to be a Forex software scam. Trading involves both risk and reward. You must read and understand as much as possible before using any automated Forex trading systems.
The best marketing hook ever invented is the full money back guarantee. A guarantee to give you the option of testing the program completely risk free so that you can experience the effectiveness of the automated Forex system first hand. You should be aware that it is extremely difficult to get your money back regardless of what the vendors' guarantee says. Most of these guarantees are not protected or honored by companies like Visa, PayPal or MasterCard. Understand that there is always risk involved and use these five easy steps to detect Forex software scams.
Let's examine each of these marketing promises to understand them for what they are. In order for an automated Forex system to obtain a 500% gain within two weeks, it must take extreme risks to compound its trading account. Compounding the trading lot size will compound the potential winnings, but it will also compound losses. It is unlikely that this automated Forex trading software will continue to replicate its winning results week after week without any losses. If this Forex automated trading system really works, then the inventor should be richer than Warren Buffett and Bill Gates. The last time I checked, Bill Gates is still the richest man in the world.
It is human nature to want to be right all the time. Unfortunately, this is a bad trait in Forex trading. In order to have 99% wining trades, this automated Forex system is trading with a very large stop loss or no stop loss altogether. By trading without a stop loss, the unrealized losses in the account are open floating losses. This Forex automated trading software will not close the trade until it is profitable; hence, it will continue to hold the losing trade until the account gets margined out. You can have 99 wining trades, but with this technique, one losing trade could wipe out your entire trading account. Trading without stop loss is like playing Russian roulette with your money.
Often, I come across Forex managed account services using automated Forex trading systems without a single losing month. This is too good to be true, as even Warren Buffett cannot make this claim about himself, so you should stay away. Alternatively, you can make the cheques out to Bernard Madoff and get in early on the Ponzi scheme.
There are no shortcuts in life. Any automated Forex trading software or products claiming to provide financial independence without you needing to know a thing is likely to be a Forex software scam. Trading involves both risk and reward. You must read and understand as much as possible before using any automated Forex trading systems.
The best marketing hook ever invented is the full money back guarantee. A guarantee to give you the option of testing the program completely risk free so that you can experience the effectiveness of the automated Forex system first hand. You should be aware that it is extremely difficult to get your money back regardless of what the vendors' guarantee says. Most of these guarantees are not protected or honored by companies like Visa, PayPal or MasterCard. Understand that there is always risk involved and use these five easy steps to detect Forex software scams.
Money Management
Students and acquaintances often ask me to teach them Forex trading techniques to profit in the Forex market. Is there such a Holy Grail that can provide guaranteed winning trades? I listen as an acquaintance continues to complain that he is losing too much money, that he is never on the right side of the market, that he keeps making the same mistake repeatedly, and why does he keep getting stopped out? After about 30 minutes of his ranting, I interject and tell him that maybe he should start learning about trading psychology. With a disappointed face, he looks at me dumbfounded.
Many Forex traders give up after one year while some traders continue to jump from system to system, looking for the ever-elusive Holy Grail. It seems that after learning a number of different trading techniques, traders tend to plateau, and are unable to improve, regardless of what they do. Somehow, there is always a new trading course offered by a most successful trading guru or an ultimate indicator claiming unparalleled results that is a must-have.
The Forex industry is so polluted with scammers and marketers that it is impossible to sort out who is telling the truth. It is extremely sad to see so many people losing money in this market; however, it is the greed that continues to recruit more neophytes. It is like a gambler looking for an easy way in life to make a lot of money in the shortest amount of time. There are traders claiming that they are not gamblers and have never stepped into a casino in their life. Welcome to the twenty first century, where gambling comes in many forms, and the casino comes to your house via Forex internet trading.
In order to gain an advantage in Forex trading, you have to realize that what you need are not the indicators or ground-breaking Forex trading techniques. The skills that you need to acquire are discipline, emotional control, patience, and the right mental attitude toward losing. It is about how you respond to pain and pleasure, greed and fear. The keys to being successful in Forex trading are all internal. It is not so much about finding the highest probability and lowest risk point of entering in the market. Regardless what you do, there is always a risk and a chance of losing. You must accept the consequences of losing or being stopped out in the market. Lacking emotional control will cause you to experience pain whenever your account goes negative and experience pleasure whenever the account goes positive. You have to realize that psychology contributes to 70 percent of your trading success. If you don't learn the proper trading psychology then you have diminished your chances of success.
Money management technique is twice as important as Forex trading techniques. If you rush to earn a lot of money in a short period of time, you will take larger risks and are more prone to wipe out your trading account. There are no shortcuts in building wealth, regardless of what industry you are in. Whether it be with manual Forex trading or Forex managed accounts, if someone claims to make consistent profit month after month, then it is likely to be a scam because there is no risk involved.
Many Forex traders give up after one year while some traders continue to jump from system to system, looking for the ever-elusive Holy Grail. It seems that after learning a number of different trading techniques, traders tend to plateau, and are unable to improve, regardless of what they do. Somehow, there is always a new trading course offered by a most successful trading guru or an ultimate indicator claiming unparalleled results that is a must-have.
The Forex industry is so polluted with scammers and marketers that it is impossible to sort out who is telling the truth. It is extremely sad to see so many people losing money in this market; however, it is the greed that continues to recruit more neophytes. It is like a gambler looking for an easy way in life to make a lot of money in the shortest amount of time. There are traders claiming that they are not gamblers and have never stepped into a casino in their life. Welcome to the twenty first century, where gambling comes in many forms, and the casino comes to your house via Forex internet trading.
In order to gain an advantage in Forex trading, you have to realize that what you need are not the indicators or ground-breaking Forex trading techniques. The skills that you need to acquire are discipline, emotional control, patience, and the right mental attitude toward losing. It is about how you respond to pain and pleasure, greed and fear. The keys to being successful in Forex trading are all internal. It is not so much about finding the highest probability and lowest risk point of entering in the market. Regardless what you do, there is always a risk and a chance of losing. You must accept the consequences of losing or being stopped out in the market. Lacking emotional control will cause you to experience pain whenever your account goes negative and experience pleasure whenever the account goes positive. You have to realize that psychology contributes to 70 percent of your trading success. If you don't learn the proper trading psychology then you have diminished your chances of success.
Money management technique is twice as important as Forex trading techniques. If you rush to earn a lot of money in a short period of time, you will take larger risks and are more prone to wipe out your trading account. There are no shortcuts in building wealth, regardless of what industry you are in. Whether it be with manual Forex trading or Forex managed accounts, if someone claims to make consistent profit month after month, then it is likely to be a scam because there is no risk involved.
Six Deadly Sins
It does not matter if you are a new trader or a veteran trader, most of us will commit one of the six deadly sins in Forex Trading. As a veteran trader, you will likely to commit only one or two, but for less informed traders, they are likely to commit more, if not all, of the sins listed below.
1. Reliance on the Experts. In 2007 to 2008, the housing market crumbled, the stock market tumbled, and many investors lost money. Many of Wall Street's top analysts had vouched for the toxic mortgage-related securities, and many investment banks went bankrupt because of this reliance on the Experts. The same principle can be applied to Forex trading. Forex reviews and forum postings can easily be manipulated; hence, you should be skeptical when coming across the latest "can't miss" software or trading courses that promise to double your trading profits in two weeks.
2. Setting the wrong goal and trading target. Everyone seems to focus on setting goals and achieving ten pips a day. This is a marketing ploy to sell more Forex trading courses, software, or the latest Forex techniques on DVDs. No one can consistently achieve ten pips a day. You can't take when the market is not providing you with trading opportunities. If you set an unattainable goal, you are setting yourself up for failure. Be realistic with yourself and set up monthly goals instead of daily or weekly trading goals.
3. Not paying proper attention to drawdown. It does not matter if you are trading manually or with automated trading software, all traders and trading software will go through a period of drawdown or a losing streak. You must always take this possibility into account and not compound your trading lot. You may compounding your winnings, but this technique will also amplify your losses when a losing streak hits. Always have an exit strategy or enough cash to cushion any drawdown that may occur.
4. Forgetting to practice, practice, and practice. In order to master a new trading skill, you will need several months, or even years to refine your skills. Don't fool yourself and think that you have mastered the market after three months of demo trading. Many have gone down the same road and failed. You will not be the exception, so don't bet your entire savings on it.
5. Falling in love with a trade. Don't hold on to a losing trade that is going to wipe out your account, even the great Warren Buffett is wrong at times; hence, be willing to cut your losses and move on.
6. Not checking your emotion. There is no such thing as a guaranteed winning trade. You must learn to treat each trade, whether it be a losing trade, break-even, or winning trade, equivalent emotionally. It is possible to have 10 or more consecutive losing trades; hence, don't give up, just learn to move on. It is business as usual, and you should not let your previous losing trades affect your decision making process. One of the primary reasons why automated trading software works so well is because it is not emotionally affected by either winning or losing trades.
1. Reliance on the Experts. In 2007 to 2008, the housing market crumbled, the stock market tumbled, and many investors lost money. Many of Wall Street's top analysts had vouched for the toxic mortgage-related securities, and many investment banks went bankrupt because of this reliance on the Experts. The same principle can be applied to Forex trading. Forex reviews and forum postings can easily be manipulated; hence, you should be skeptical when coming across the latest "can't miss" software or trading courses that promise to double your trading profits in two weeks.
2. Setting the wrong goal and trading target. Everyone seems to focus on setting goals and achieving ten pips a day. This is a marketing ploy to sell more Forex trading courses, software, or the latest Forex techniques on DVDs. No one can consistently achieve ten pips a day. You can't take when the market is not providing you with trading opportunities. If you set an unattainable goal, you are setting yourself up for failure. Be realistic with yourself and set up monthly goals instead of daily or weekly trading goals.
3. Not paying proper attention to drawdown. It does not matter if you are trading manually or with automated trading software, all traders and trading software will go through a period of drawdown or a losing streak. You must always take this possibility into account and not compound your trading lot. You may compounding your winnings, but this technique will also amplify your losses when a losing streak hits. Always have an exit strategy or enough cash to cushion any drawdown that may occur.
4. Forgetting to practice, practice, and practice. In order to master a new trading skill, you will need several months, or even years to refine your skills. Don't fool yourself and think that you have mastered the market after three months of demo trading. Many have gone down the same road and failed. You will not be the exception, so don't bet your entire savings on it.
5. Falling in love with a trade. Don't hold on to a losing trade that is going to wipe out your account, even the great Warren Buffett is wrong at times; hence, be willing to cut your losses and move on.
6. Not checking your emotion. There is no such thing as a guaranteed winning trade. You must learn to treat each trade, whether it be a losing trade, break-even, or winning trade, equivalent emotionally. It is possible to have 10 or more consecutive losing trades; hence, don't give up, just learn to move on. It is business as usual, and you should not let your previous losing trades affect your decision making process. One of the primary reasons why automated trading software works so well is because it is not emotionally affected by either winning or losing trades.
Forex Market
There are many reasons why investors are unaware of or uncomfortable with short selling. One major reason is because it is counter intuitive. It makes more sense and is more intuitive for people to buy something, hold on to it, and then sell it at a higher price. You buy a stock at $2, hold onto it for 6 months, and then sell it for $3. Let's take an example, you buy a house, you live in it, and then you sell it to buy another house. You can buy a house for investment, and you can rent it out to help pay for the mortgage. You don't live there, but you still own the house. In all of these examples, you buy something, you own it, and then you sell it.
In short selling, you are selling something that you don't own. It is counter intuitive because you can't go around your neighborhood and sell a house that you don't own. Hence, short selling does not make a lot of sense to people. Don't worry, the next example will ease you slowly into the concept.
It is midnight, you are out of milk, and your kid is crying. You run over to your neighbor's and ask to borrow a jug of milk. It happens that your neighbor just bought a jug of milk for $5, but he refuses to take your money. Instead, he tells you to buy him another jug of milk later, and you will be even. The next day, you go to the supermarket and the jug of milk is on sale for $3. You buy the jug of milk and return it to your neighbor and save yourself $2 in the process. Basically, you consumed the milk (an asset that isn't own by you), and then you delivered an identical milk back to your neighbor at a later time. This is the concept of short selling. A short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered.
Say you don't think that Nortel Networks' share price should be at $120 per share because the company is not profitable. You can borrow 10 shares from your stockbroker, and sell them for a gain of $1,200. When the stock price drops to $70, you buy back the 10 Nortel shares at $700, and return them to your broker. You borrowed 10 shares from your broker, and then you returned 10 shares, pocketing $500 in the process. If the price of the stock rises, though, you have to buy it back at a higher price, and you lose money.
In Forex trading, you can make money in both up and down markets if you are able to anticipate the up and down trends in the market. If you believe that the currency pair is going up, you buy at the low price and then sell at the high price. Alternatively, if you believe that the currency pair is going down, you sell at the high price and then buy at the low price to recover. In real time Forex trading, the rates of the currencies can change at any time. For instance, the quotes accessible for a specific currency pair can move upwards or fall down within a blink of an eye. This forces the investors to be extremely flexible and to go with the trend. Whereas, in the stock market a bull run can last as long as several years; hence, it is difficult to switch your thinking from a bull to a bear market.
Even though you have tools of short selling and long buying to in the foreign currency market, Forex trading is extremely difficult to master and more than 95% of traders lose their money. Understand that any method or software that boasts a 300% return on investment will also contain a minus 300% drawdown. Ask the right questions before purchasing or renting any currency trading software.
In short selling, you are selling something that you don't own. It is counter intuitive because you can't go around your neighborhood and sell a house that you don't own. Hence, short selling does not make a lot of sense to people. Don't worry, the next example will ease you slowly into the concept.
It is midnight, you are out of milk, and your kid is crying. You run over to your neighbor's and ask to borrow a jug of milk. It happens that your neighbor just bought a jug of milk for $5, but he refuses to take your money. Instead, he tells you to buy him another jug of milk later, and you will be even. The next day, you go to the supermarket and the jug of milk is on sale for $3. You buy the jug of milk and return it to your neighbor and save yourself $2 in the process. Basically, you consumed the milk (an asset that isn't own by you), and then you delivered an identical milk back to your neighbor at a later time. This is the concept of short selling. A short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered.
Say you don't think that Nortel Networks' share price should be at $120 per share because the company is not profitable. You can borrow 10 shares from your stockbroker, and sell them for a gain of $1,200. When the stock price drops to $70, you buy back the 10 Nortel shares at $700, and return them to your broker. You borrowed 10 shares from your broker, and then you returned 10 shares, pocketing $500 in the process. If the price of the stock rises, though, you have to buy it back at a higher price, and you lose money.
In Forex trading, you can make money in both up and down markets if you are able to anticipate the up and down trends in the market. If you believe that the currency pair is going up, you buy at the low price and then sell at the high price. Alternatively, if you believe that the currency pair is going down, you sell at the high price and then buy at the low price to recover. In real time Forex trading, the rates of the currencies can change at any time. For instance, the quotes accessible for a specific currency pair can move upwards or fall down within a blink of an eye. This forces the investors to be extremely flexible and to go with the trend. Whereas, in the stock market a bull run can last as long as several years; hence, it is difficult to switch your thinking from a bull to a bear market.
Even though you have tools of short selling and long buying to in the foreign currency market, Forex trading is extremely difficult to master and more than 95% of traders lose their money. Understand that any method or software that boasts a 300% return on investment will also contain a minus 300% drawdown. Ask the right questions before purchasing or renting any currency trading software.
Trading Systems
Michael Jordan was one of the best basketball players in the world. So what do Michael Jordan and automated Forex trading have in common? It is known in sports terminology as a cold streak or slump. Michael Jordan has missed more than 9000 shots in his career. He and his team have lost almost 300 games, and he failed to make the final game winning shot more than 25 times in his career. Does this make him a poor basketball player because he has failed over and over again during his career?
An athlete will go through a losing streak, and every trader will go through a similar losing streak, a period of consecutive losses with no profitable trades. In trading, this term is defined as drawdown, and it can be defined as a percentage or a number. Regardless of whether you are trading manually or using any automated Forex trading systems, you will experience a period of consecutive losses. It does not matter if you are Michael Jordan of the basketball world or the Warren Buffett of the investment world, everyone will face losses during their career or investment period. Losses are inevitable, and as investors/traders, we cannot avoid them. Trading involves both risk and reward; hence, it is impossible to obtain any type of reward without involving some risk.
An automated Forex trading system cannot avoid a losing streak; however, it is with proper money management that it can minimize the losses during the cold streak. For example, if an automated Forex trading system has a maximum drawdown of $3,000 using a 0.1 standard trading lot, it is not advisable to start trading with this system using $5,000 as starting capital. If you are unlucky and a drawdown immediately starts right after you have turned on your automated Forex trading system, you will see your trading account going from $5,000, to $4,000, to $3,000, to $2,500 and then to $2,000. In this example, you just experienced a losing streak of $3,000, or a 60% drawdown.
Before using any particular trading systems, you want to know what is the largest loss you can face when an automated Forex trading system starts incurring losses due to changes in the volatile Forex market. You must understand that this is a temporary worsening condition of a trading system. This period is the trading risk, and it will pass. With this risky period, a good trading system will recover and provide you with ample rewards (a.k.a. profits). Depending on your level of risk tolerance, a 60% drawdown is quite extreme in one's trading account. If you know that the drawdown is $3,000, you may want to start trading with $10,000 instead of $5,000. During a losing streak of $3,000, you will only experience a drawdown of 30%, which is a lot more tolerable.
Be a good investor scout and always prepare for the largest losing streak during your investment period. A drawdown period can be as long as three months; hence, don't jump from one system to another system looking for the Holy Grail. If you have found a profitable trading system, stick with it during its three months drawdown period and you will be handsomely rewarded for your patience. Alternatively, follow a profitable automated Forex trading system and wait until it starts losing and then jump in. Just like Michael Jordan of basketball, after missing three baskets, he will likely score on the fourth basket, so don't give up on him too early.
An athlete will go through a losing streak, and every trader will go through a similar losing streak, a period of consecutive losses with no profitable trades. In trading, this term is defined as drawdown, and it can be defined as a percentage or a number. Regardless of whether you are trading manually or using any automated Forex trading systems, you will experience a period of consecutive losses. It does not matter if you are Michael Jordan of the basketball world or the Warren Buffett of the investment world, everyone will face losses during their career or investment period. Losses are inevitable, and as investors/traders, we cannot avoid them. Trading involves both risk and reward; hence, it is impossible to obtain any type of reward without involving some risk.
An automated Forex trading system cannot avoid a losing streak; however, it is with proper money management that it can minimize the losses during the cold streak. For example, if an automated Forex trading system has a maximum drawdown of $3,000 using a 0.1 standard trading lot, it is not advisable to start trading with this system using $5,000 as starting capital. If you are unlucky and a drawdown immediately starts right after you have turned on your automated Forex trading system, you will see your trading account going from $5,000, to $4,000, to $3,000, to $2,500 and then to $2,000. In this example, you just experienced a losing streak of $3,000, or a 60% drawdown.
Before using any particular trading systems, you want to know what is the largest loss you can face when an automated Forex trading system starts incurring losses due to changes in the volatile Forex market. You must understand that this is a temporary worsening condition of a trading system. This period is the trading risk, and it will pass. With this risky period, a good trading system will recover and provide you with ample rewards (a.k.a. profits). Depending on your level of risk tolerance, a 60% drawdown is quite extreme in one's trading account. If you know that the drawdown is $3,000, you may want to start trading with $10,000 instead of $5,000. During a losing streak of $3,000, you will only experience a drawdown of 30%, which is a lot more tolerable.
Be a good investor scout and always prepare for the largest losing streak during your investment period. A drawdown period can be as long as three months; hence, don't jump from one system to another system looking for the Holy Grail. If you have found a profitable trading system, stick with it during its three months drawdown period and you will be handsomely rewarded for your patience. Alternatively, follow a profitable automated Forex trading system and wait until it starts losing and then jump in. Just like Michael Jordan of basketball, after missing three baskets, he will likely score on the fourth basket, so don't give up on him too early.
Trade Software
If you are trading forex, you will definitely be interested in a solution to help you do all the manual work of trading so that the trading activities can be carried out when you sleep, work or any other activities you are doing. Of course there are different forex auto trade software available that can assist you greatly in the forex trading.
In this modern world, forex traders are finding that these forex trading software which uses trading platforms of industry standard are becoming very useful in the forex trade. With these software, all traders, whether beginners or experienced, are able to maximize their revenues and profit. However, due to the abundance of such software available in the market, consumers are getting confused and wonder which one can provide the best results. To help you out, here are the criteria that you need to look at before choosing one.
Firstly, the forex auto trade software must have a demo account for consumers so that they can get hands on with the software in order to get familiar on how the market works. This will allow them to practice forex trading without actual money involved. With the experience gained and when anyone is ready for the real trade, they can gradually enter the market with the real money. This will ensure gaining maximum profit and losing minimum if things turn bad.
Secondly, features must be available with the software for one to make any necessary parameters adjustments. This will ensure that the forex software will work according to one's trading style for optimal performance and profits.
Thirdly, the forex auto trade software must have a mathematical modeling tool to ensure having a better market analysis. Whether the decision made to invest will be successful will depend on how good the software can analyze and make the decision based on mathematical figures, trends and market history. Therefore, it should not rely on emotions and hunches to make profit.
Fourthly, ensure that the software posses an integrated money management system for better sound decision making in the investment. This will help to ensure maximum profitability or minimum loss in the event of unfavorable market.
Last of all, ensure the forex auto trade software is compatible with Meta Trader 4. This is widely known and used as the trading platform for trading like futures, forex and CFD markets.
In this modern world, forex traders are finding that these forex trading software which uses trading platforms of industry standard are becoming very useful in the forex trade. With these software, all traders, whether beginners or experienced, are able to maximize their revenues and profit. However, due to the abundance of such software available in the market, consumers are getting confused and wonder which one can provide the best results. To help you out, here are the criteria that you need to look at before choosing one.
Firstly, the forex auto trade software must have a demo account for consumers so that they can get hands on with the software in order to get familiar on how the market works. This will allow them to practice forex trading without actual money involved. With the experience gained and when anyone is ready for the real trade, they can gradually enter the market with the real money. This will ensure gaining maximum profit and losing minimum if things turn bad.
Secondly, features must be available with the software for one to make any necessary parameters adjustments. This will ensure that the forex software will work according to one's trading style for optimal performance and profits.
Thirdly, the forex auto trade software must have a mathematical modeling tool to ensure having a better market analysis. Whether the decision made to invest will be successful will depend on how good the software can analyze and make the decision based on mathematical figures, trends and market history. Therefore, it should not rely on emotions and hunches to make profit.
Fourthly, ensure that the software posses an integrated money management system for better sound decision making in the investment. This will help to ensure maximum profitability or minimum loss in the event of unfavorable market.
Last of all, ensure the forex auto trade software is compatible with Meta Trader 4. This is widely known and used as the trading platform for trading like futures, forex and CFD markets.
Earn inflation
Savers have been getting a raw deal in recent months, and rising inflation has dealt yet another blow - making it harder than ever to get a good return on your hard-earned cash.
Inflation, as measured by the Consumer Price Index (CPI), leapt up from 1.9 per cent in November to 2.9 per cent in December - the biggest monthly increase since records began.
And as inflation reduces the future buying power of your cash, high inflation rates create serious problems for savers.
In fact, a basic rate taxpayer will now need to earn 3.6 per cent or more before tax to maintain the "real" value of theirsavings pot; the figure is even greater for higher-rate taxpayers, who now have to earn a rate of at least 4.8 per cent.
Rising inflation
Spiralling inflation, coupled with low savings rates, means many accounts are now effectively worthless when tax on the interest they pay is deducted.
And, with interest rates held at 0.5 per cent yet again this month, the outlook shows little sign of improving.
If you stash your money away in an account paying a low rate of interest, your actual rate of return after inflation will be negative, so it's important to fight back to maximise the returns on your money - though be prepared - this is no easy feat in a rising inflationary environment.
Review your rate on your easy access account
First off, you need to check the rate you're earning on any easy access accounts you hold.
Currently, one of the top rates you can get on an easy access account is 3.15 per cent from the Coventry building society; a higher rate of 3.31 per cent is on offer from the Cheshire building society, but this is a 30-day notice account and also includes a 1 per cent bonus for 12 months. *
Nonetheless, given that so few instant-access accounts are paying anywhere near the rate required to get a real return, you may need to move the bulk of your money elsewhere.
Get into a fix
At present, some of the highest rates are on offer to those who are prepared to lock their money away for at least a year in a fixed-rate savings bond.
FirstSave, for example, is paying 3.65 per cent on its one-year bond, while ICICI Bank is paying 4.25 per cent on its two-year bond; elsewhere, the State Bank of India is paying a huge 5.25 per cent on its five-year bond.*
However, you need to think carefully before committing to a fixed-rate account longer than one or two years, as if interest rates go up quickly, these offers could soon become uncompetitive.
Consider an Isa
When it comes to saving, an individual saving account (ISA) should be your first port of call, as you can earn interest on your nest-egg tax-free.
However, only a handful of cash ISAs currently pay enough to beat inflation.
If you're looking for an easy-access ISA paying above 2.9 per cent - the rate needed for a return - you could squirrel your money away with Manchester building society paying 3.01 per cent or Newcastle building society paying 3 per cent. *
It's also worth bearing in mind that fixed-cash ISAs offer a hedge against inflation; Leeds building society, for example, is paying 4.6 per cent on its five-year fix. *
Check out a regular saver
While regular savings accounts - where you agree to pay in a set amount each month - offer some of the higher rates in the savings market, there are still only a few accounts on offer which beat inflation.
Stroud & Swindon building society, for example, is paying 4.5 per cent on its variable rate regular saver, while Buckinghamshire building society is paying 4.12 per cent.*
However, you must check the terms and conditions, as these accounts often come with restrictions; rates tend to be fixed only for one year during which you cannot access your funds without penalty, and you may be penalised if you fail to invest on a regular basis.
Keep a close eye
Savers may be able to take heart from forecasts that inflation will start to fall back later this year, but in the meantime, you cannot afford to sit back and relax.
Keep a close eye on what you're being offered and be proactive about shopping around to find a good deal to ensure you're getting good returns going forward; and never drop your guard, as high inflation is sure to return at some point.
Inflation, as measured by the Consumer Price Index (CPI), leapt up from 1.9 per cent in November to 2.9 per cent in December - the biggest monthly increase since records began.
And as inflation reduces the future buying power of your cash, high inflation rates create serious problems for savers.
In fact, a basic rate taxpayer will now need to earn 3.6 per cent or more before tax to maintain the "real" value of theirsavings pot; the figure is even greater for higher-rate taxpayers, who now have to earn a rate of at least 4.8 per cent.
Rising inflation
Spiralling inflation, coupled with low savings rates, means many accounts are now effectively worthless when tax on the interest they pay is deducted.
And, with interest rates held at 0.5 per cent yet again this month, the outlook shows little sign of improving.
If you stash your money away in an account paying a low rate of interest, your actual rate of return after inflation will be negative, so it's important to fight back to maximise the returns on your money - though be prepared - this is no easy feat in a rising inflationary environment.
Review your rate on your easy access account
First off, you need to check the rate you're earning on any easy access accounts you hold.
Currently, one of the top rates you can get on an easy access account is 3.15 per cent from the Coventry building society; a higher rate of 3.31 per cent is on offer from the Cheshire building society, but this is a 30-day notice account and also includes a 1 per cent bonus for 12 months. *
Nonetheless, given that so few instant-access accounts are paying anywhere near the rate required to get a real return, you may need to move the bulk of your money elsewhere.
Get into a fix
At present, some of the highest rates are on offer to those who are prepared to lock their money away for at least a year in a fixed-rate savings bond.
FirstSave, for example, is paying 3.65 per cent on its one-year bond, while ICICI Bank is paying 4.25 per cent on its two-year bond; elsewhere, the State Bank of India is paying a huge 5.25 per cent on its five-year bond.*
However, you need to think carefully before committing to a fixed-rate account longer than one or two years, as if interest rates go up quickly, these offers could soon become uncompetitive.
Consider an Isa
When it comes to saving, an individual saving account (ISA) should be your first port of call, as you can earn interest on your nest-egg tax-free.
However, only a handful of cash ISAs currently pay enough to beat inflation.
If you're looking for an easy-access ISA paying above 2.9 per cent - the rate needed for a return - you could squirrel your money away with Manchester building society paying 3.01 per cent or Newcastle building society paying 3 per cent. *
It's also worth bearing in mind that fixed-cash ISAs offer a hedge against inflation; Leeds building society, for example, is paying 4.6 per cent on its five-year fix. *
Check out a regular saver
While regular savings accounts - where you agree to pay in a set amount each month - offer some of the higher rates in the savings market, there are still only a few accounts on offer which beat inflation.
Stroud & Swindon building society, for example, is paying 4.5 per cent on its variable rate regular saver, while Buckinghamshire building society is paying 4.12 per cent.*
However, you must check the terms and conditions, as these accounts often come with restrictions; rates tend to be fixed only for one year during which you cannot access your funds without penalty, and you may be penalised if you fail to invest on a regular basis.
Keep a close eye
Savers may be able to take heart from forecasts that inflation will start to fall back later this year, but in the meantime, you cannot afford to sit back and relax.
Keep a close eye on what you're being offered and be proactive about shopping around to find a good deal to ensure you're getting good returns going forward; and never drop your guard, as high inflation is sure to return at some point.
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