17-3-10 ASX Stock Report

ASX 200 4853.2 (+1.17%)

SPI Futures 4854.0 (+1.04%)

1. Commodity prices remained strong for the Asian trading day, crude futures still up. Our market was up 56 points so a good result all up. Best performing sectors where Energy up 2.34% and Info Tech +3.07%. Carsales CRZ $3.04 (+13.87%) who we had come in last week performed well.

• ASX 200 4853.2 (+1.17%)

• SPI Futures 4854.0 (+1.04%)

2. NSL & KRL $0.185 (+8.82%) tipped by AFR with major potential for investment of the domestic junior mining companies.

3. Industrials; FGE $2.65 (+5.58%); AIO $1.92 (+2.95%); BLY $0.32 (+1.59%); DOW $7.60 (+1.6%); DCG $1.60 (+0.31%); we are still positive the sector which is highly correlated with resource sector demand.

4. Corporate Express CXP $5.71 (+24.13%) has received an offer for the entire business from US company Staples Inc. The cash offer is for $5.60 per share for ordinary equity holders and a 12.5cent dividend which was announced March 2nd. This values equity for CXP at $1bil. The CXP board has unanimously recommended the offer to shareholders.

5. AWB $0.935 (-11.37%) has downgraded earnings for the full year after factoring in a tough grain marketing environment. Profit has been downgraded for FY10 to $85mil-$110mil, down from $115mil-$140mil.

6. Property; we all know the city of Melbourne is the pick of Australian property growth markets. Stock to keep investing in off the back of the residential property market buoyancy FKP $0.76 (+0.66%); CWP $2.52 (+0.8%); DVN $0.285 (+1.79%)

7. Retail; DJS $5.13 (+1.18%) off the back of good reporting for 1h FY10 results, MYR $3.53 (+0.57%) still has inherent leverage to regional expansion with their competitive advantage in attracting common consumers in times of limited disposable income could prove beneficial; PBG $1.32 (+3.13%); HVN $3.74 (-0.8%)

8. Teleco’s; TLS $3.13 (+0.64%); IIN $2.45; BGL $0.15 (+3.45%)

9. TLS there is still opposition between the senate and the Government over the legislation to split our country’s largest telecommunications provider with no real substance in identifying an outcome. Until that happens we would suggest there being a trading opportunity in the stock. The bill that was proposed by the government has had an implementation study written up over it, which is still yet to be released either to the public or to the senate. Until this study is reviewed the bill may be opposed in the senate. The proposition of creating a National Broadband Network will have significant implication on the infrastructure owned by TLS, however if it is overturned in the senate this could prove TLS be more valuable.

Overseas Headlines:

1. Interest rates in the US will remain at very low levels for some time to come according to the Federal Reserve Bank. The reduced participation rate, slowing capacity utilisation will discourage investment in the country and it is most likely that this will impact on their dollar as we saw this morning. A similar situation will transpire in the Euro Zone. For equity markets and the cost of debt this may be encouraging signs, but just how long the US can sustain their economy without changing rates is the question. Inevitably one would think that inflation would become a key concern and that rates would have to tend to more realistic levels in the mid to long-term.

2. Crude Oil prices rose this morning in anticipation of an outcome on supply ambitions post OPEC ministers meeting today in Vienna . With inventories rising it may be expected that OPEC who distribute 40% of the world’s oil will decide to continue cutting their output of barrels as it has since 2008.

3. Thai citizens are displaying some very unique rituals to overturn their existing government, creating political unrest.

Data Tomorrow:

1. HK:

• U/E survey 4.8% vs. prior 4.9%

2. Japan:

• Interest Rates on hold

3. UK

• Major banks mortgage approvals February survey 54K vs. prior 49K

• Public sector borrowing February survey 14bil vs. prior 4.3bil

• Money supply MoM February survey 0.7% vs. prior 0.4%

• Money Supply YoY February survey 4.3% vs. prior 4.9%

4. EU:

• Italy trade balance January survey -€1650 vs. prior -€123.0mil

• Netherlands U/E February survey 5.7% vs. prior 5.6%

5. US:

• CPI MoM February survey 0.1% vs. prior 0.2%

• CPI YoY February survey 2.3% vs. prior 2.6%

• Jobless Claims March 14 survey 455K vs. prior 462K

• Continuing claims March 7 survey 4522K vs. prior 4558K

• Current Account (exports less imports) Balance 4Q survey $US119.3bil vs. prior $US108.0bil

Forex Trading – Technical Analysis for Beginners

Some Forex traders say the best indicator is price. Therefore many traders use chart patterns with the help of technical indicators trying to predict the price movement. This approach is quite different from the fundamental analysis when price is predicted based on economic news and social events.

Studying price movement with Forex technical analysis involves charts. The theory of it is that if you look at the historical records of how prices have moved in the past, you can identify tendencies and trends which will mean that you can predict how the prices will move in the future. Then as soon as you spot an emerging pattern that fits your system, you have a trading opportunity.

There are three types of Forex charts:

- The line chart is the first one

The name of line chart tells it all. It is a line connecting the closing prices. Ups and downs of that line show the movement of the currency pair. Unfortunately this type of price does not show you any information on price behavior within the time period. You can see only the close price.

- Second chart type is called bar chart

A bar chart will show a series of vertical lines or bars. The top of the line represents the highest price during that time period. The bottom of the line represents the low. A short horizontal bar on the left side indicates the opening price and a short horizontal bar on the right side indicates the closing price.

That’s why the bar charts also called OHLC charts. It stands for open, high, low and close.

- Third type of charts is candlestick chart

Forex candlestick charts show all of the same information as a bar chart, but presented in a different way which most people find easier to read at a glance.

Like bar chart candlestick shows the price movement in vertical direction. The same way as for bar the top of the candlestick is the high for the period and the bottom of the candlestick is the low of the price for the period. However the major difference is the body. Different color of the candlestick body represents the different tendency of the price withing the given period. The common colors are red for falling price and green for rising. However different charts may use different colors.

The reason many traders prefer candlestick charts is that it can be read and interpreted easily. Trend and turning points are clearly seen due to color difference.

Successful traders always take advantage of emerging trend. You probably heard the famous expression ‘Trend is your friend’. Therefore the ability to recognize the forming trend is of the major importance of trader’s success. Candlestick chart is a great tool in helping to develop this skill.

Source: Albert Schmidt

Types of Traders

There are many different types of traders out there, before entering the market for yourself, you may want to consider what type of trading you would be comfortable with. The different types of traders are:

1. Trend Traders

These traders attempt to buy a stock that is going up and hold onto it until it starts going down. The best part about this strategy is that it takes a relatively short amount of time to manage it. Trend traders could be in a stock for days or years, depending on how well the stock is doing, the idea here is, why kill a good thing.

2. Swing and Day Traders

Both swing and day traders attempt to catch the short movements in the stock market. It involves being much more active in your account and having to pay closer attention to patterns and other short term indicators. The great thing about these strategies is that you make a profit or loss fast and it can add up over time.

3. Option Trading

Similar to swing trading option trading attempts to make money from the stock market in a short term time period. The only difference is that with options you have the potential to explode your profits. A relatively small move in the price of the stock could mean a huge move in the option.

4. Option Seller

Option sellers on the other hand attempt to sell options that they believe will become worthless over time. This way they collect the premium up front and when the option hopefully expires in the future they are in no obligation to do anything. Option sellers do not attempt to hit the huge home runs, but try to make a good return over time by compound interest. These are the most popular ways to trade stocks. All traders will have to find out which strategy fits them the best.

Tips For Day Trading Online

Day trading signifies buying and selling stock within the market day. The market day is the time period between the opening and closure of markets. Traders find this activity extremely profitable because of the financial leverage and rapid returns that accompany day trading.

Online day trading requires good dependable equipment. A good computer for trading, with a memory capacity of 1024mb RAM is required. Experts are divided about the number of monitors required for this activity. Some believe that 2 -3 monitors are needed for effective online transactions while others believe a single large size monitor is sufficient. A high speed broadband internet connection is required for speedy inflow of real time quotes and charts. A good UPS or unlimited power supply is also required for effective trading at the computer. Direct access software will help the trader to place orders and get the orders executed faster.Online day trading requires a good broker who gives instant information.

The online platform of the broker should be dependable and all services should be instantly accessible. Access to the account of the trader should be easy and the response should be quick and efficient. The trader should be able to place orders and get results before the market closes. The website of the broker should be easy to use and constant updates should be available to the trader. The broker should execute orders instantly with small margins and low spreads. All transactions should be secure online transactions that are encrypted and password protected.

Moving Average Trading Secrets

One of the most popular technical analysis indicators is the simple moving average also known as SMA, if you learn how to use these correctly they can be a very useful tool to help you to make good trading decisions.

The 50 simple moving average, or 50 SMA, is simply the sum of the last 50 values for each period, divided by 50, this is a moving window, as time moves on so does the average. Notice that I used the word period because this indicator works on any time period in exactly the same way.

It can be used on monthly, weekly, daily, hourly, 30 minutes, 15 minute and on whatever time period you want to monitor and trade. Although the SMA is the most commonly used there is also the exponential moving average or EMA. This is a weighted version of the formula using the mathematical exponent function to give more weight to the more recent values, this has the effect of making it a slightly faster average that many traders prefer.

The truth is that it probably does not matter if you used the SMA or the EMA, what does matter however is that you use one or the other and then be very consistent with it. Do not switch between them, it is more important that you trust your chosen indicator then a slight difference in its value.

The SMA is often used to determine what the trend of the stock is, depending on the value used it could be a short term, medium term or long term trend. An important point to note is that moving averages are most useful when the stock is trending, if the moving average is flat, i.e. horizontal on your chart it can become very choppy, this is a good time to stay out of the market.

The general rule is that if the current price is above the SMA the trend is up, if below the trend is down. This is very important to understand because it forms the basics of trend trading and trading with the trend.

For the short term trend many traders like using a 5-8 SMA or EMA, here is a trading secret, never trade again the direction of the short term tend, actually this is really just common sense when you think about it.

Moving averages can often act as support or resistance, many traders use the 15, 21 or 30 SMA for this purpose.

There are a number of other very important moving averages that you need to know about, these are the 50, 100 and 200 SMA, and this mainly applies to the daily and weekly charts. A lot of big players in the markets, the mutual funds, investment banks etc use the 50 and 200 SMA as support and resistance, if they decide to buy or sell based on these you need to follow suite, the 100 to a lesser extent.

8 Trading Habits From Warren Buffett

Wisdom From Warren Buffett

1. Investing With Knowledge

Don’t do anything until you know what you are doing. – Jimmy Rogers

Do

The knowledge in this context doesn’t mean you need an educational degree in finance and economics to invest in the markets. It means learning about the potential markets you are interested to invest in. Knowing and understand them before you put money into the markets.

Don’t

Doesn’t realise that a deep understanding of what he is doing is an essential prerequisite to success. Rarely realizes that profitable opportunities exist within his own area of expertise.

2. Predefined Trading Plan

The secret is for a trader to develop a system with which he is compatible. – Ed Seykota

Do

Has developed his own investment philosophy which is suited to his own personalities and objectives. As a result, no two investors in the market trade in the same manner.

Don’t

Has no plan, uses other people’s system without own’s research. Do not have his own investment philosophy. What it happen is that you see the person change from one systems to another, and failing to understand the importance of writing a plan.

3. Researched And Tested Strategy

If I’m interested company, I’ll buy 100 shares of all its competitors to get their annual reports. – Warren Buffett

Do

Developed and tested one’s strategy for the pass 5 to 10 years to determine the viability of the systems. Characteristics of the systems are also understood before one put real money into investment strategy.

Don’t

Has no system. Or has adopted someone’s else’s without testing and adapting it to his own personality. (When such a system doesn’t work, he adopts another one blindly. Which doesn’t work for him either.)

4. Capital Preservation

If you don’t bet, you can’t win. If you lose all your chips, you can’t bet. – Larry Hite

Do

First priority is to ensure your investment equity can survive and invest for another day. The market will always be there as long as your investment equity is available. If you protect your money and make it the number one priority in investment, you can survive long enough in the market to profit from the opportunities.

Don’t

Investment aim is “to make a lot of money.” As a result, failed to keep them.

5. Follow His Investment Plan

For me, it’s important to be loyal to my system. When I’m not… I’ve made a mistake. – Gil Bake

Do

Stick to his rules with discipline as long as its within the boundaries stated in his system plan. The fact is most investments do not win all the time. As investors, we need to be aware that there is drawdown period for any investment strategy.

Don’t

Lack of discipline to follow the rules as layout in the trading plan. (When such a system doesn’t work, he adopts another one. Which doesn’t work for him either.)

6. Learnt From Mistakes

One learns the most from mistakes, not successes. – Paul Tudor Jones

Do

Always treats mistakes as opportunities to improve oneself and never commit the same mistake again. An investor will never stop learning.

Don’t

Blame, justify and give excuses about the systems, people or circumstances that are at fault. While overlooking that he can improve his trading results if he identified them as mistakes and learnt from them.

7. Almost Never Talks to Anyone About What He is Doing

My idea of a group decision is to look in the mirror. – Warren Buffett

Do

Not concern about what he’s doing. Not interested or concerned with what others think about his investment decisions.

Don’t

Always asking for people’s opinions and finding the latest ‘Hot Tip’

8. Be a Risk Averse Investors

Do

Believe that risk can be managed, and always be prepared to beat a hasty retreat.

Don’t

Thinks that big profits can only be made by taking big risks.

Candlestick Charting Explained

Unless you understand Candlestick charting, you cant trade and invest effectively in securities or currencies. It is essential that you understand Candlestick charting. Many options exist for the charting of currencies and securities now with the advancement of technology. There are several types of charts easily available on the charting software. The four main charting methods are: 1) Candlestick charts, 2) Line Charts, 3) Point and Figure Charts and 4) Bar Charts.

For a number of reasons, the three charting methods pale in comparison with the candlestick charting. Candlestick charting has unique and inherent advantages over the other charts. You can understand what’s going on with the price of a currency pair with a simple glance on the candlestick charts. One of the best features of candlestick charting is its visual appeal and readability.

You can get a sense of how the price is trending with the candlestick charts. You can easily spot the opening and closing price of a currency pair on a candlestick charts. You can also tell whether the buyers or sellers have dominated a given day. These price levels can be an important area of support and resistance for a given day.

Why should traders choose candlestick charts over other types of charts when analysing price action of currency markets? Candlestick charts feature specific patterns that you can identify and use to decide when its best time to buy, sell or wait on a trade.

Currency traders or for that matter other traders too, need easy to read charts that allow them to make quick decisions and efficiently analyse price patterns in the markets. Candlestick charting offers those benefits and many more. The need for a consistent and dynamic charting method is more important than ever. Trading is becoming more and more complex. The following four pieces of information are combined to make a candlestick:

Price on the Open: The price at which a particular currency pair opens on a given period is the first piece of information used to create a candlestick.

High Price: The top of the candlesticks wick corresponds to the highest price reached during that given period.

Low Price: The bottom of the candlesticks wick corresponds to the lowest price that a currency pair reaches during a period.

Closing Price: The closing price of the currency pair at the end of a given period is the last piece of information used to create a candlestick. Depending on the price action, the closing price can be the top edge of the candles body if the price action is bullish. It can be the bottom edge of the candles body if the price action is bearish.

Candlesticks that represent bearish price action appear black. Candlesticks that represent bullish price action appear white on the chart. By looking at the candlestick charts than you can by looking at another type of charting tool, you can gain far more insight into a periods trading.

You can tell right away that the up day has a white candle. Similarly the down day has a black candle. That simple difference alone clearly reveals the nature of price action that took place during that period and can be very helpful to you.

Candlestick charts quickly clue you on the type of buying and selling that’s been going on during a given period. Candlestick charting also tell you where it may occur again. In many cases, the buyers continue to buy and sellers continue to sell during subsequent periods.

Source: Ahmad Hassam

Trading Psychology and Discipline

There are many characteristics and skills required by traders in order for them to be successful in the financial markets. The ability to understand the inner workings of a company, its fundamentals and the ability to determine the direction of the trend are a few of the key traits needed, but none of these is as important as the ability to contain emotions and maintain discipline.

Trading Psychology

The psychological aspect of trading is extremely important, and the reason for that is fairly simple. A trader is often darting in and out of stocks on short notice, and is forced to make quick decisions. To accomplish this, they need a certain presence of mind. They also, by extension, need discipline, so that they stick with previously established trading plans and know when to book profits and losses. Emotions simply can’t get in the way.

Understanding Fear

When a trader’s screen is pulsating red (a sign that stocks are down) and bad news comes about a certain stock or the general market, it’s not uncommon for the trader to get scared. When this happens, they may overreact and feel compelled to liquidate their holdings and go to cash or to refrain from taking any risks. Now, if they do that they may avoid certain losses – but they also will miss out on the gains.

Traders need to understand what fear is – simply a natural reaction to what they perceive as a threat (in this case perhaps to their profit or money-making potential). Quantifying the fear might help. Or that they may be able to better deal with fear by pondering what they are afraid of, and why they are afraid of it.

Also, by pondering this issue ahead of time and knowing how they may instinctively react to or perceive certain things, a trader can hope to isolate and identify those feelings during a trading session, and then try to focus on moving past the emotion. Of course this may not be easy, and may take practice, but it’s necessary to the health of an investor’s portfolio.

Greed Is Your Worst Enemy

There’s an old saying on Wall Street that “pigs get slaughtered”. These little pigs want more and more. This greed in investors causes them to hang on to winning positions too long, trying to get every last tick. This trait can be devastating to returns because the trader is always running the risk of getting whipsawed or blown out of a position.

Greed is not easy to overcome. That’s because within many of us there seems to be an instinct to always try to do better, to try to get just a little more. A trader should recognize this instinct if it is present, and develop trade plans based upon rational business decisions, not on what amounts to an emotional whim or potentially harmful instinct.

The Importance Of Trading Rules

To get their heads in the right place before they feel the emotional or psychological crunch, investors can look at creating trading rules ahead of time. Traders can establish limits where they lay out guidelines based on their risk-reward relationship for when they will exit a trade – regardless of emotions. For example, if a stock is trading at $10/share, the trader might choose to get out at $10.25, or at $9.75 to put a stop loss or stop limit in and bail.

Of course, establishing price targets might not be the only rule. For example, the trader might say if certain news, such as specific positive or negative earnings or macroeconomic news, comes out, then he or she will buy (or sell) a security. Also, if it becomes apparent that a large buyer or seller enters the market, the trader might want to get out.

Traders might also consider setting limits on the amount they win or lose in a day. In other words, if they reap an $X profit, they’re done for the day, or if they lose $Y they fold up their tent and go home. This works for investors because sometimes it is better to just “go on take the money and run,” like the old Steve Miller song suggests even when those two birds in the tree look better than the one in your hand.

Creating A Trading Plan

Traders should try to learn about their area of interest as much as possible. For example, if the trader deals heavily and is interested in telecommunications stocks, it makes sense for him or her to become knowledgeable about that business. Similarly, if he or she trades heavily in energy stocks, it’s fairly logical to want to become well versed in that arena.

To do this, start by formulating a plan to educate yourself. If possible, go to trading seminars and attend sell-side conferences. Also, it makes sense to plan out and devote as much time as possible to the research process. That means studying charts, speaking with management (if applicable), reading trade journals or doing other background work (such as macroeconomic analysis or industry analysis) so that when the trading session starts the trader is up to speed. A wealth of knowledge could help the trader overcome fear issues in itself, so it’s a handy tool.

In addition, it’s important that the trader consider experimenting with new things from time to time. For example, consider using options to mitigate risk, or set stop losses at a different place. One of the best ways a trader can learn is by experimenting – within reason. This experience may also help reduce emotional influences.

Finally, traders should periodically review and assess their performance. This means not only should they review their returns and their individual positions, but also how they prepared for a trading session, how up-to-date they are on the markets and how they’re progressing in terms of ongoing education, among other things. This periodic assessment can help the trader correct mistakes, which may help enhance their overall returns. It may also help them to maintain the right mindset and help them to be psychologically prepared to do business.

Bottom Line

It’s often important for a trader to be able to read a chart and have the right technology so that their trades get executed, but there is often a psychological component to trading that shouldn’t be overlooked. Setting trading rules, building a trading plan, doing research and getting experience are all simple steps that can help a trader overcome these little mind matters.

Three Bad Reasons for Pursuing Trading as a Career

When I talk with traders who are having problems, I often find that the root problem is that they have pursued work in the financial markets for the wrong reasons. Here are three of the most common problematic reasons that draw people to trading:

1) The Thrill of Gain – While this often masquerades as a passion for markets, a little observation reveals that these traders have little interest either in markets that they don’t trade or in markets while they are not trading. The interest in market action often reveals addictive patterns, in which the roller coaster rides of gains and losses become more valued than the achievement of a smooth, upward sloping equity curve. This leads to overtrading and painful emotional ups and downs.

2) The Need for Independence – These traders are drawn to markets because they don’t want to have to answer to someone else in a structured job. The problem with this pattern is that the very need for independence that leads people away from structured careers also leads them away from the kind of structured practice and preparation that are necessary for trading success. Just as these traders don’t want to be tethered to a 9-to-5 career, they rebel against being tethered to markets. This shows up as poor discipline, poor preparation, and difficulty sustaining even modest efforts at performance development (such as keeping daily journals).

3) The Need to Make It Big – Many traders try to use performance in the markets, not as an expression of their competence, but as a desperate attempt to prove it. They don’t feel successful in other endeavours and are using markets to try to be a success in life. As a result, most of their self-esteem eggs are in the trading basket. That becomes threatening and stressful when inevitable trading slumps occur. Worse still, such traders often feel a need to make more and more to fill the hole of lacking self worth, eventually leading them to take too much risk and blow up.

What is the common theme among the three groups of traders? They are using trading to act out (and try to resolve) personal issues that are separate from risk/reward and opportunity in markets. Their needs lead them to place trades more for psychological reasons than logical ones.

Source: Brett Steenbarger

Investing vs.Trading What’s The Difference?

There is a question which is sometimes asked by those new to the financial markets, and even occasionally debated by experienced participants. That question is how one differentiates between trading and investing. Because both trading and investing – when one considers them from the perspective of the financial markets – are performed in very similar fashions, they are often thought of as interchangeable actions.

Both trading and investing, after all, are at the most simple of levels application of capital in the pursuit of profits. If I buy XYZ stock I expect to either see the price appreciate or earn dividends perhaps both.

What separates trading from investing, however, is that generally in trading one has an exit expectation. This might be in the form of a price target or in terms of how long the position will be held. Either way, the trade is seen to have a finite life. Investing, on the other hand, is more open-ended. An investor will buy a company’s stock with no predefined notion of when he or she will sell, if ever.

We can use examples to help demonstrate the difference. Warren Buffet is an investor. He buys companies which he sees as somehow undervalued and holds on to his positions for as long as he continues to like their prospects. He does not think in terms of a price at which he will exit the stock. George Soros is (or at least was while he was still actively running his hedge fund) a trader. His most famous trade was shorting the British Pound when he thought the currency was overvalued and ready to be withdrawn from the European Exchange Rate Mechanism. The position he took was based on a specific circumstance. Once the Pound was allowed to float freely, and quickly devalued in the market, Soros exited with a handsome profit. That meets the criteria of having a predefined exit, making it a trade, not an investment.

There is another way one can define trading as set against investing, though. It has to do with the manner in which the applied capital is expected to produce a return. In trading the appreciation of capital is the objective. You buy XZY stock at 10 expecting it to go to 15 and thereby produce a capital gain. If dividends or interest are paid out along the way, that is fine, but likely only a minor contribution to the expected profits.

In contrast, investing looks more toward income over time. That makes income production, such as dividends and bond interest payments, the major focal point. Do investors experience capital appreciation? Sure, but unlike in trading, that is not the prime motivation.

With these definitions in mind, consider what many people refer to as their single biggest investment their home. Based our second definition of investing, however, a home is generally not an investment because in most cases is does not produce any income. In fact, it produces considerable expenses in the form of mortgage interest payments, utility bills, and upkeep. If anything, a home is a trade. We buy it and hope for its value to rise over time, increasing our equity. And the fact that many people expect to move in only a few years and sell at that point makes it even more of a trade rather than an investment. (Of course own rental property can certainly be viewed as investing, unless one is flipping it, which would definitely be more trading.)

As noted earlier, for many people trading and investing seem like the same thing. The mechanics of buying and selling are basically the same. Sometimes the analysis one does to make those decisions is identical as well. Its the intention and definition of objectives which separate trading and investing, though.

Byron Wien’s ten Stock Market surprises for 2010

Dead on target at the beginning of the new year, 76-year-old Byron Wien again published his annual list of surprises to expect in 2010. Wien, Vice Chairman of Blackstone Advisory Services and one of Wall Street’s best known veterans, has been publishing his list of economic, market and political surprises since 1986.

Reviewing Wien’s 2009 list, he was very accurate with the direction of most of his predictions.

He foresaw a second-half recovery in the US economy, and the S&P 500 Index rising to 1,200 (up from 903 at the end of 2008 to 1,115 by December 31, 2009). He also predicted: “The ten-year US Treasury yield climbs to 4% [up from 2.24% to 3.84%]. Later in the year, as the economy shows signs of recovery, economists and investors shift their mood from concern about deflation to worries about inflation. A weak dollar, rapid growth in money supply and record-setting deficits (over $1 trillion) are behind the change.” Spot on.

Wien also expected the gold and oil prices to climb to $1,200 and $80 respectively – a feat accomplised in December.

He believes his ten surprises have at least a 50% chance of occurring at some point during the year. Although this is not a very high probability, his predictions nevertheless make for stimulating reading. His list for 2010 follows below.

1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor’s 500 operating earnings come in above $80.

2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end.

3. Heavy borrowing by the US Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, “The suits are finally listening”.

4. In a roller coaster year the Standard and Poor’s 500 rallies to 1,300 in the first half and then runs out of steam and declines to 1,000, ending where it started at 1115.10. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors.

5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain.

6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000.

7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020.

8. The improvement in the US economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected.

9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the US market.

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the US and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country’s nuclear arsenal.

Source: PR-inside.com

10 Rules for Better Trading

Rule 1: Believe you can win. If other traders can do well in the market, so can you. However, if you don’t have enough courage and confidence in yourself, you will never achieve success. The events over the past year have tested many people in this regard and some now think the game is rigged against them. Nothing could be farther from the truth as opportunities remain. Those who will win in the markets first start by believing they can do it. Then they back up that strong belief with serious hard-work and determination to find their trading edge. However, it starts with you first having faith in yourself.

Rule 2: Don’t be seduced by results. You must stay in the present and focused on executing each trade to the best of your ability. Don’t let yourself think about how much you’re going to win (or lose) in the market or how great of a trader you are or not, but instead focus on what matters most – each and every trade you make. Do that and the results will take care of themselves.

Rule 3: Sulking won’t get you anything. The worst thing you can do for your prospects of winning is to get down when things don’t go well. If you start feeling sorry for yourself or thinking the trading gods are conspiring against you, you’re not focused on the next trade. Good traders readily accept their mistakes and move on to the next trade. They don’t let one bad trade carry onto the next one.

Rule 4: Beat them with patience. Every time you have the urge to make an aggressive trade, go with the more conservative one. You’ll always be OK. The moment you get impatient, bad things happen. In tough markets, stay patient and let others beat themselves.

Rule 5: Ignore unsolicited advice. You’ll have lots of well-meaning friends and experts who want to give you advice. Don’t accept it. In fact, stop them before they can say a word. Their comments will creep into your mind when you are trading and conflict with your own strategy. If you’ve worked on your game, commit to the plan and stay confident with it.

Rule 6: Embrace your personality. The key is to find what works best for you. There are many approaches out there, but there is only one trading approach that will utilize your best skills and talent to create and sustain an edge. The worst mistake you can make is to simply embrace a strategy of someone else that doesn’t match your own personality and strengths.

Rule 7: Have a routine to lean on. Every trader should follow a mental routine on every trade. It keeps you focused on what you have to do, and when the pressure is on, it helps you manage your nerves. You may not have control over the market, but you have control on how you trade the market. Having a routine will inject consistency that will keep you calm under pressure.

Rule 8: Find peace in the market. The market has to be your sanctuary, the thing you love, and you can’t be afraid of making mistakes. Yes, you’ll experience both good and bad times, but you must enjoy and revel in the challenge.

Rule 9: Test yourself. Don’t look for easy trades and setups at all times. Test yourself by working hard trades and difficult markets in order to test and improve your skills. For example, if you’re uncomfortable with trading options, spend a month just trading options. If you’re uncomfortable with shorting stocks, spend a month shorting stocks. We only get better if we constantly test what we think is most difficult.

Rule 10: Find someone who believes in you. Having confidence in yourself is important, but it helps to have someone who believes in you, too, whether it’s a spouse, a friend, a teacher, or a mentor. No man’s success can be entirely attributed to his own actions. You must surround yourself with people who believe in you at all times.

This is a powerful set of trading rules that will serve you well.

Source: Damien Hoffman

The Importance of Listening to Yourself when Trading

A fundamental reality underlying trading psychology is that we know, more than we think we know. Much of what we know is a felt, gut hunch–not a set of explicitly formed ideas. Those internal cues are lost when we are swamped by emotions from negative learning experiences. It takes an unattached mind–a mind free from worries, fears, internal demands–to keep tuned to our gut. In quieting body and mind, we gain access to the felt knowledge we possess, but may not realize we possess. That is why so many of the brief therapy techniques that I teach to traders –what I call therapy for the mentally well– are designed to regain control of body and mind. It is not by accident that half of the chapters in my book on self-coaching are devoted to these techniques.

Loss of discipline is the most common concern of traders who seek psychological assistance. But equally important, if not as recognized, is the related tendency to not listen to oneself. So many times, we *know* what we should be doing and do not act. Sometimes out of second-guessing ourselves, sometimes out of fear, sometimes out of listening to others rather than ourselves. We know–and at some level we even know we know–but we don’t listen to that knowledge. This creates a double consequence: a missed opportunity, but also a loss of confidence. It is difficult to sustain confidence in our judgment if we routinely engage in cognitive self-betrayal.

After the hard work of analysis is done–we’ve performed the research, read the news reports, observed the charts, talked to colleagues–it remains for the mind’s implicit mode to perform the synthesis. Without the data that come from long hours of observation, the mind has nothing to synthesize: we need to first see many patterns before we can recognize those patterns in real time. But if we do not listen to ourselves–if we remain stuck in analysis, or if we entertain so much mental noise that we cannot hear our syntheses–the many hours of learning are lost.

Many gurus would have you listen to them for guidance. The only real wisdom, however, comes from listening to yourself.

Source: Brett Steenbarger

The Psychology of Trading

Perhaps the most critical characteristic shared by successful investors and traders is their psychological approach to the market. All forms of financial investments have foundational knowledge that is essential to success in that market. I am not suggesting that you can simply think the right way and trade stocks, commodities or any other market successfully. But you could be the world’s foremost expert on the commodities market and still not be able to translate that knowledge into monetary success.

Two emotions fear and greed can be lethal to your financial success. Developing an unemotional, systematic approach to your trading and investments is crucial for success. The following ideas will help you control your emotions and improve your trading results.

Develop a Trading System

Many people approach the market in a very unsystematic fashion. One day they are buying blue chip stocks that pay dividends; the next day they are playing tips from their nephews on biotechnology start-ups. Develop a system that suits your personal style, risk tolerance, knowledge level, and time available to devote to this activity. Decide what market you will trade and exactly how you will trade. Simply saying I will buy and sell stocks is not a trading system. Write down your rules. For example, for a stock investor, what criteria will stocks meet for your consideration? At what price will you buy? Will you short stocks? Where will you set your stop loss price? How much will you invest in any single position? How much will you diversify among industry sectors? Will you rotate in and out of sectors as they fall out of favor with the markets? Wherever possible, back test your rules and ensure your system has a reasonable expectation of profitability.

Have a Written Plan for Every Trade

Before you buy that stock or option spread or other investment, you must make some critical decisions. Write down your answers to the following questions: Why do I think this is a good idea? At what price will I admit my idea is not working and close the trade? If appropriate for this trade, at what price will I make some adjustments to the position? At what price will I take my profits? The answers to these questions and others constitute your trading plan. Be sure you have a plan before you establish the trade.

Follow Your Plan

This may be the hardest aspect of trading you must master. Once you have your plan, you must have the discipline to follow the plan unemotionally. Don’t allow yourself to rationalize how the stock is going to rebound or allow your ego to refuse to admit the mistake. When the stock price dips below your stop loss price, close the position.

Don’t hope. Don’t rationalize. Follow your plan.

Evaluate Your Results

Develop a routine of reviewing your trading results periodically. When I review my trades each month, I make an important distinction between my “losing trades” and my “bad trades”. Bad trades result when I break my own rules for entering the trade or lack the discipline to follow the plan. Losing trades are those where I followed all of my rules, but the trade just didn’t work out as planned. These losses are simply a “cost of doing business”. It is critical to treat your investing as a business, not a hobby. In any business, there are necessary expenses to keep the business open. Trading losses are an expected, necessary part of any investment activity. Developing a trading system and following the individual trade plans ensure that your profitable trades will outweigh your losses.

This Isn’t Gambling

A common misperception holds that investing is akin to gambling. In fact, when you closely analyze the actual trades of many investors, they are indeed gamblers. They are following tips and hunches, investing large amounts on expected turnarounds, anticipating mergers, betting on start-ups, and so on. But consider the business of gambling – not the gambler, but the casino. The casino establishes a game where the casino holds a statistical edge; depending on the game, that edge may be rather small, of the order of 1-2%. The casino owner knows that he may have a big winner today at one of the blackjack tables, but that doesn’t concern him because he knows he has an edge. When averaged over all of the different players and games, and over the long term, the casino will come out ahead.

When you work hard to develop the knowledge of the market you are trading, develop a trading system, have a written plan for every trade, follow your plan with great discipline, and learn from your mistakes, you have positioned yourself as the casino owner, not one of the customers.

Top Three Mistakes New Traders Must Avoid

1) Not having a defined trading strategy. To consistently make money in the markets, a trader must have an edge that can be repeatedly exploited. Many traders don’t understand what this really means. Instead, they hop around from one trade to the next relying solely on intuition. While a trader can have periods of success trading without a plan, in the long run it would be extremely difficult to maintain any level of success without a repeatable core strategy.

The most common mistake is there are many traders who have a perfectly acceptable strategy, but consistently find themselves straying from it in order to chase what is hot in the markets. It’s not enough to have a strategy — a trader must refrain from getting away from it when tempted by greed. There are thousands of trading strategies that will work consistently, but all of them will fail without the discipline to stick to them. Trading is more about discipline and consistency, and less about fancy trading systems. A trader will usually be successful so long as they have a method to cut their losses quickly and maximize their profits on winning trades.

2) Ignorance of time frame. This mistake can probably be rolled up into Mistake #1, but is important enough to mention on its own. Knowing your time frame goes beyond what time frame charts you look at for trading. The first thing a trader needs to know is what they are trying to accomplish with a trade. While making money is the obvious answer, I’m talking about determining what move a trader is trying to capture. Often, a trader focuses his entire attention on getting into a trade. He or she has little regard for how they will get out of the trade. This usually leads to wavering back and forth on when to exit. Traders need to know how long they will be in a trade and what they are trying to accomplish. Otherwise, the markets dictate how they will exit. Traders need to define what part of a trend they are trying to capture, then act accordingly. While the signals don’t have to be defined to the point of being mechanical, traders should have a clear and definite direction they are taking in a trade.

There are several different trading styles out there — from scalping a tick chart, to position trading off weekly charts. For instance, if you are trading to capture a several day trend, then your target and stop loss should complement that objective. I often see traders say they are trying to capture a multi-day move. They leave an open-ended target, then panic on an intraday pullback. While there is nothing wrong with leaving an open-ended target, traders need to be willing to suffer through a pullback if they are trying to let a trend run its course.

Too often, I see traders entering trades with no real ultimate target and no clear understanding of how to identify when they are wrong in the trade. Stop losses are intimately tied to targets, yet this is an area which confuses many traders. Many traders also mix up their time frames once they are in a trade. Basically, if you’re going to scalp, then scalp and scale or get out on strength. Don’t worry about missing a continuation move that falls out of your time frame. First of all, this wasn’t your planned trade. Second, as humans we tend to have a selective memory. We tend to discard the myriad of times when holding would have been unsuccessful. If you are a trend follower position trading, it makes more sense to trad without a target and keep a very loose trailing stop. Otherwise you will not allow the trend to unfold. Many traders don’t realize their objective, then set incompatible exit orders. While traders don’t need to lock themselves down to a specific time frame, every trade setup in their arsenal should attempt to capture a well defined movement.

3) Thinking about what is supposed to happen instead of focusing on what is happening. Recently, I’ve seen traders fighting the tape on the entire rally off the March lows. I’ve seen very smart individuals going to cash because they can’t see how this rally can be for real with the economic picture so bleak. Many traders are crying foul, saying the government is manipulating this or that, fudging employment data, economic reports, etc. I don’t know if any if that is true, and I don’t really care. I’m not a naïve person. I understand there is a certain amount of manipulation and unfair trading practices that exist. However, I also believe that this behaviour is prevalent in any industry/activity where large amounts of money is involved. Greed is one of the most powerful emotions we have as humans — probably rooted deeply in our survival instincts. There will always be corruption and manipulation in the financial markets. However, this should not stand in the way of any trader stepping in and making money. It’s okay to feel however you want, but in the markets only price pays. The old Jesse Livermore quote says it perfectly: “There is only one side to the stock market; not the bull side or the bear side, but the right side.”

Traders should learn to focus on what is occurring in the markets and try to remain objective. While there is nothing wrong with using your intuition and intelligence to uncover possible themes or trading scenarios, traders should also remain objective and let the markets either agree or disagree with their thesis. It makes no sense to throw up your hands and let the markets run you over because they disagree with your beliefs.

In summary, the cure for most trading mistakes is to have a plan for dealing with whatever the markets throw your way. Once you have a plan you will not react to the markets. Instead you will proactively trade a well thought out plan.

Source:Joey Fundora

Top Three Mistakes New Traders Must Avoid

1) Not Selling Fast When You Are Wrong.

What I can lose on a given trade is always more important to me than what I can make. Most new traders will make a purchase or initiate a short position, but when the trade turns against them, they immediately forget why they bought or shorted the stock. As a result, they will let “hope” take over as their new strategy. Hope is not a strategy! Take your medicine and accept defeat when you are on the wrong side of a trade. Great traders have tough skin and move on.

The solution for this problem is to use stops. I always use stops when I trade. The percentage you are willing to lose will be a direct by product of your own risk tolerance — but use them always. I use approximately a 2% stop on all my trades (sometimes less).

2) Using Multiple Approaches or Strategies. Many new traders think they have a strategy … until they don’t. They feel they are comfortable with an approach, but at the first sign of failure they stray. Thus, they become aimless and reckless. Before they know it they are trading rumours, chasing stocks, and ultimately blowing up their account (before they have any real success at all).

New traders will “over trade” or do what I call “revenge” trading right after a loser. Revenge doesn’t work in the market and the only person that benefits from over trading is your broker. I have one strategy I use. Is it the only strategy that works? Definitely not. As a matter of fact almost every trader I know uses their own approach. Some strategies are proprietary systems. Some are plain vanilla strategies that are very basic in nature. The point is have a plan and an approach! So, learn one thing and be the best at it. There is way too much “noise” out there in the new and old media. Everyone claims to be a bull or bear market genius. Put the media on mute so you can follow and perfect your plan.

Being a voracious learner is absolutely key. Be a sponge and learn as much as you can. If you are a day trader, use the websites and read the books that will help you become the best. There are some phenomenal trading blogs out there. Most information is a click away.

3) Trading Too Large. I ran a sizable hedge fund and thankfully always beat the indices in good or bad markets. Much of my initiation and experience was baptism by fire. But if a novice trader asked me the one thing he or she should do to get a feel for the market, I would tell them to paper trade or use very small dollar amounts. There is absolutely no substitute for “screen hours.” Tiger Woods hits five hundred to a thousand balls a day, and he is already the best in the world. If trading is truly your passion, then be in front of your trading screen all day. If I miss twenty minutes of trading because I am out of the office, I genuinely feel like I missed the whole day — my rhythm is gone and my edge becomes diminished. You may be able to get away with less screen time if you are a longer term investor. But if your passion is perfecting the short term trading game, you won’t stand a chance. Good luck out there and don’t listen to the pundits.

Source: Joey Fundora

Making Trading Journals Work for You

I’d like to cover some of the features of trading journals that I have found helpful in my work with new and experienced professional traders. My goal as a trading psychologist is to do all that I can to accelerate traders’ learning curves. Sometimes this means helping traders with emotional problems, but just as often such problems are the result of trading difficulties and not their cause. A journal, properly constructed, is a powerful tool for learning—and relearning—markets and cultivating exemplary trading behaviours. Here are some of the principals that have guided my journal-based work with traders:

1. Make journals a part of the daily routine – Even if you don’t trade on a particular day, it is valuable to review the day’s setups and behaviour at key price levels. Reviewing patterns on different time frames can also help traders internalize the context of the markets they are trading, as well as the interrelationships among those markets. The French scientist Louis Pasteur observed that, in matters of observation, “chance only favours prepared minds”. Replaying market days, reviewing your own performance, and identifying missed opportunities prepares you for future performance, as your increasing familiarity with trading patterns sensitizes you to them in real time.

2. Incorporate specifics in your journals – If I had to identify the single most common shortcoming among trading journals, it would be their absence of detail. Entries such as, “I lost my discipline; I have to be more patient,” might be nice as post-it reminders, but are inadequate as journal entries. Journals need to clearly state what happened, your assessment of why it happened, and the specific steps you intend to take to deal with the situation in the future. A good rule is that anyone reading your journal should be able to identify and follow the exact same steps that you intend to take in the future. Your journal should be a planning document, not a statement of intentions.

3. Wherever possible, review your journal entries with a valued colleague or mentor – When I established a training program for new traders, one of my first steps was to insist upon daily review of trading journals. This required me to create a trusting and constructive environment, so that traders would be honest in their entries. Once that openness developed, the daily reviews became proactive planning sessions (usually shortly before the start of the trading day) that addressed issues before they could damage the profit/loss statement. Even more important, the daily review created expectations of accountability, as traders knew that my inevitable question would be, “How did you do with your goals for the day?”

4. Use journals to review positive trading performance, as well as problems – The number two shortcoming among journals is their focus on problems to the exclusion of solutions. If journals become a mere recounting of one’s flaws and inadequacies, traders will inevitably lose interest in them. Traders can learn as much from what they do right as from their errors. My favourite instruction to new traders is to highlight in their journals one thing that they did right the previous day that they want to replicate today and one thing that they could improve upon in today’s trading. This forces traders to stay in touch with their strengths, as well as their failings.

5. Each journal entry should include material about the markets and material about the trader – It is not unusual for traders to emphasize one at the expense of the other. The core concept I stress with traders is that of pattern recognition. Traders display patterns in their behaviours: some of these are positive; others interfere with profitability. Markets enact their patterns as well; it is the trader who can see these as they emerge and act quickly that has the best chance of long-term success. Including material about trading patterns and traders’ patterns makes the journal a learning tool about oneself and the markets.

The best trading journals I have observed have been ones that are creative and rigorous. Here are the two most important steps I believe you could take to turbo charge your journal:

1. Make it a multimedia project – Writing a journal in diary form is good, incorporating annotated charts is better, but including video is best of all. Programs such as e-Signal allow you to take screen captures of the market at any time of the trading day and also allow you to replay market days and review their unfolding. Better yet are desktop video programs such as Camtasia that create highly compressed video files of your desktop activity. This allows you to capture the day’s trade in its entirety, which you can then annotate by adding a voice track. Ninety percent of pattern recognition is repetition: seeing enough variants that you become sensitive to essential and inessential features. While static charts are better than nothing, they do not capture the unfolding of patterns: the very thing that traders need to be able to recognize and act upon. Videos provide the opportunity to see patterns over and over again, accelerating the recognition process. Multimedia journals also actively engage the trader and allow traders to process markets via multiple modalities (images, sound, text, etc.). Educational research tells us that learning is most likely to occur when learners are actively involved in the acquisition of knowledge and skills. An engaging, multimodal journal is apt to be a better learning vehicle than a dry diary.

2. Incorporate metrics – I could write a book on this topic. It is absolutely amazing how much more traders can get from their journals if they include basic statistics about their performance. Trading tendencies that escape normal notice suddenly stand out when summarized statistically. Areas for work and areas of improvement also stand out. With statistics, we can not only say that a trader made improvement, but can actually measure that improvement and track it over time. Such statistics capture improvements that will eventually show up in the profit/loss statement, but which may not be immediately evident.

Here are my favourite trading metrics for active traders:

* Number of winning, losing, and scratched trades;

* The average size of winning and losing trades;

* The average holding time per trade, and the average holding time broken down by winning, losing, and scratched trades;

* The number of winning, losing, and scratched trades broken down by long and short positions;

* The number of winning, losing, and scratched trades broken down by time of day;

* The average holding time per trade for long and short positions and broken down by time of day;

* The number of winning, losing, and scratched trades for days categorized as uptrending, downtrending, and neutral;

* Daily profit/loss, also broken down for days categorized as uptrending, downtrending, and neutral;

* The sequences of winning and losing trades during a day and from day to day;

* The largest winning and losing trades during a day and during a week;

* The largest winning and losing days during a week and during a month.

Less frequent traders can keep these statistics manually. Very active traders will benefit from programs that automatically capture trade data and summarize performance, such as Trader DNA (www.traderdna.com). The data provide very helpful benchmarks that allow traders to diagnose problems and track improvement.

Here are a few of the areas for improvement that commonly emerge from statistical analyses of performance:

* Holding onto losing trades as long or longer than winners;

* Trading with a persistent long or short bias that is not supported by market trends;

* Significantly different profitability during morning vs. afternoon trading hours;

* The tendency to have strings of winning and losing trades;

* Significantly different profitability during different market conditions, such as trending markets or volatile ones;

* The tendency to give back the results of many profitable trades in a few large losing ones.

When you combine rigorous metrics with a multimedia journal, the result is the kind of ongoing quality improvement process that typifies the finest business organizations. The best trading journals are technologies for learning and self-improvement. This takes time, effort, and creativity, but the results are worth the investment.

Forex Trading Simplified

Forex is the world’s most liquid and volatile trading market today. If you are new to FOREX trading, then you should have a good knowledge of its basic principles, and a better understanding of how the market works. 95% of traders who lose do so because they never took the time to learn the basic principles, and from the mistakes of others before them.

Get educated with all the basic fundamental elements and principles of the FOREX Market by getting an online FOREX Training course. Majority of those who fail miserably are those whose knowledge of the market is fairly limited in scope, or have none at all. Getting educated is just one step to having a successful career in currency trading, but it is by no means a guarantee to making sure profits.

Maximize Profits

• Learn how to maximize your profits by adopting various trading methods, and how it fits into your plans and expectations. Be familiar with the various systems applied by other traders to gradually get a basic knowledge of which system works for the various trading deals. Constantly scan for other trade deals done by large corporations, and banks since they are the ones mostly needing a continuous flow of currencies.

Be smart

• Learn and practice good Money and Risk Management skills to make trade decisions based on hard facts, not from emotion. In FOREX, values and rates are always fluctuating – so always keep your smarts on the alert in order to know when to buy or sell a currency. The technical aspects of currency trading is only as good as the trader whose interpreting it, so get a good understanding when to take a risk or when to let it pass by.

Learn as you progress

• Forex evolves in parallel to the developments and advancements of technology. Keep an open mind for new and updated methods and technologies to use in your daily trading activities. And never forget to keep abreast of free learning materials available on the Internet, as well as to read up on any news that might impact the industry.

Be disciplined

• Follow a system based on solid facts and data’s gathered from research, and tips from expert traders. Determine weak and strong points to make decisions based on a valid assessment. Keep a focused mind on your trading business at all times, and most importantly, always follow the rules and regulations of the trade, no matter what.

If you want to be on the winning side most of the time, and become a successful trader, you should follow these essential trading tips.

Source:Bart Icles

Trading – ten common elements of success

From time to time I have been asked to offer my perspectives on things I have found common in successful traders. I have always struggled with my reply to that question because there are only a few traders of which I have gained enough understanding of what they do every day to achieve their results.

1. They all have a tested, positive expectancy system that’s proved to make money for the market type for which it was designed.

2. They all have systems that fit them and their beliefs. They understand that they make money with their systems because their systems fit them.

3. They totally understand the concepts they are trading and how those concepts generate low-risk ideas.

4. They all understand that when they get into a trade, they must have some idea of when they are wrong and will bail out.

5. They all evaluate the ratio of reward to risk in each trade they take. For mechanical traders, this is part of their system. For discretionary traders, this is part of their evaluation before they take the trade.

6. They all have a business plan to guide their trading. You must treat your trading like any other business.

7. They all use position sizing. They have clear objectives written out, something that most traders/investors do not have. They also understand that position sizing is the key to meeting those objectives and have worked out a position sizing algorithm to meet those objectives.

8. They all understand that performance is a function of personal psychology and spend a lot of time working on themselves. You must become an efficient rather than inefficient decision maker.

9. They take total responsibility for the results they get. They don’t blame someone else or something else. They don’t justify their results. They don’t feel guilty or ashamed about their results. They simply assume that they created them and that they can create better results by eliminating mistakes.

10. They understand that not following their system and business plan rules is a mistake.

Source: Charles Kirk

Fifteen investment lessons from Jesse Livermore and John Paulson

To be a great trader you must be disciplined. Following a set of rules can make the difference between successful story telling versus ruminating on last week’s losses.

Jesse Livermore, one of the best traders of all time, and John Paulson, one of the best traders of the last few years, both have a set of rules they follow religiously. Their success serves as your opportunity to enhance your investment savviness.

Jesse Livermore, one of the greatest investors of all time, has been featured in many investment books. The most popular was “Reminiscences of a Stock Operator” by Edwin Lefevre in 1923. During the course of his life he made and lost millions, going broke several times before committing suicide in 1940. These are his seven greatest trading lessons:

1.     Cut your losses quickly.

2.     Confirm your judgments before going all in.

3.     Watch leading stocks for the best action.

4.     Let profits ride until price action dictates otherwise.

5.     Buy all-time new highs.

6.     Use pivot points to determine trends.

7.     Control your emotions.

John Paulson, a hedge-fund manager in New York, led his firm to make $20 billion in profits between 2007 and early 2009. By betting heavily against first the housing market and then later financial stocks, his firm made a killing. Paulson’s success netted him a paycheck of some $4 billion, or more than $10 million a day. His funds during this time had returns of several hundred per cent.

Here are his eight investment lessons:

1.     Don’t rely on experts, be skeptical.

2.     Always have an exit strategy.

3.     Debt markets can do a better job predicting problems than stock markets.

4.     Always educate yourself on new investment vehicles.

5.     Don’t underestimate insurance (such as put options).

6.     Experience counts.

7.     Don’t fall in love with any single investment, keep emotions aside.

8.     Don’t risk too much on any single trade, diversify risk.

By applying any of the above fifteen lessons you can become a better trader. Success takes time, and these rules will lead you in the right direction.

Source: Investment Postcard