Martin J. Pring's Trading Rules - Webinar

Rule 1: When in Doubt Stay Out
Rule 2: Never Invest or Trade Based on Hope
Rule 3: Act on Your Own Judgment or Else Absolutely and Entirely on the Judgment of Others
Rule 4: Buy Low (into weakness), Sell High (into strength)
Rule 5: Don't Overtrade

Rule 6: After a Successful and Profitable Trading Campaign, Take a Trading Vacation
Rule 7: Take a Periodic Mental Inventory to Check How You Are Doing
Rule 8: Constantly Analyze Your Mistakes
Rule 9: Don't Jump the Gun
Rule 10: Don';t Try to Call Every Market Turn

Rule 11: Never Enter into a Position Without First Establishing a Reward to Risk
Rule 12: Cut Losses Short, Let Profits Run
Rule 13: Place Numerous Bets on Low Risk Ideas
Rule 14: Look Down (at the risk potential) not Up (before your reward potential)
Rule 15: Never Trade or Invest More Than you Can Reasonably Afford

Rule 16: Don't Fight the Trend
Rule 17: Whenever Possible Trade Liquid Markets
Rule 18: Never Meet a Margin Call
Rule 19: If You are Going to Place Stop, Put it in a Logical, Not Convenient Place

How you can create wealth

David Schirmer shows how you can create wealth and retire in after just 15 years of work or much less even if you are on a very small wage, working a normal job.

Mastering The Stock Market with David Schirmer

Currency Trading for DUMMIES (Getting Started Edition)

Currency Trading for DUMMIES


GETTING STARTED EDITION


by Mark Galant and Brian Dolan




https://secure.efxnow.com/forex2/eng/ct-dummies.pdf

Jump-Starting Your Personal Finance - Achieving Higher Rates of Return

For many people, it is usually after years of not paying much attention to how they handle money, or after taking bad advice from others they've trusted (including professionals), that they finally realize: "Hey, this is my money and no one really cares more about it than I do. And it will not multiply unless I do something about it". At this point, the path you take can have long-term effects. Let me bring a few important points to your attention to help you on your journey.

Higher Rates of Return

When you finally come to the realization that you need to take a more active role in handling you personal finance there is a natural tendency to look to the stock market. That's usually because stock in a company is one of the easiest securities to acquire. There is also a sense of excitement or prestige with being in the stock market. However, lets put the emotions aside and look at what the real issues are.

One thing you must consider, especially when starting out is the return on investment. The stock market historically gives 7-10% annually. This is not a bad return if you are looking to park a huge amount of cash (say a few hundred thousand and up). But if you are starting out with not much excess cash, you need to get higher rates of return. If you have $5000 and you invest that at a rate of 10% a year, in 5 years you will have about $8000. That is not fast enough if you really want to take control of your personal finances. You will need to learn how to get higher rates of return than that. Remember the higher your rate the less time it takes for your money to multiply.

Assessing Your Options

The question then becomes how can you achieve higher rates of return. Many, at this point tend to gravitate towards using aggressive stock strategies or short-term trading to get higher rates of return. This could take years and many dollars (both in the cost of educating yourself and bad trades) to learn how to do and the probability of success is not very high. But if you are just starting out you don't have that kind of money to loose. Your best alternative for higher rates of return is to start a business that meets certain criteria.

The kind of business you want to start is one with low startup cost and high profit potential. Yes, it does take more effort to manage than a passive instrument such as stocks. But this is where you have a higher probability of getting returns that are in the 100% per year range, and even higher if you play your cards right. And these returns can be much more consistent than with stocks. Here are some other points to consider about starting your business for higher rates of return:

1. No longer is the option of starting your business limited to huge upfront investments (such as buying a franchise). Today it is possible to start businesses with very little money and have high profit margins.

2. The time requirement need not be prohibitive. Many successful businesses are started part-time buy full time employees. Also, depending on the kind of business you start, the internet can help to make it easier to manage.

3. You have more control of your investment. Once you place your money into a stock you have no control over what the price of that stock will be. With your own business, you control it. And there are many resources to help business owners.

4. The long-term prospects of starting your own business are good. You may not hit a home run on your first try (although that has been done before, and is far more likely than making a million on the first stock you pick) but if you keep at it you will improve and so will your personal finances.

Remember to approach your business like an investment. Learn how much is required to start, the expected rate of return, when you expect to make your money back etc. Even if you do decide to take a more active path in the stock market (i.e., trading stocks), take the time to learn how it is done before risking your hard earned money.

To your success.

Rodger Campbell is an entrepreneur and writes on various topics including personal finance and investing. For more insights similar to the article you just read, go to PersonalFinanceBuzz.com [http://www.personalfinancebuzz.com]

Article Source: http://EzineArticles.com/?expert=Rodger_Campbell

Article Source: http://EzineArticles.com/728466

Jump-Starting Your Personal Finance - Achieving Higher Rates of Return
by Rodger Campbell

Stay in Touch wi th the Market

Some investors buy and hold for the long term, stashing their securities in the proverbial vault for years.  While such a strategy may have made sense at some time in the past, it seems misguided today.  

• This is because the financial markets are prolific creators of investment opportunities.  
• Investors who are out of touch with the markets will find it difficult to be in touch with buying and selling opportunities regularly created by the markets.  
• Today with so many market participants having little or no fundamental knowledge of the businesses their investments represent, opportunities to buy and sell seem to present themselves at a rapid pace.  
• Given the geopolitical and macroeconomic uncertainties we face in the early 1990s and are likely to continue to face in the future, why would abstaining from trading be better than periodically reviewing one's holdings?

Being in touch with the market does pose dangers, however.

• Investors can become obsessed, for example, with every market uptick and downtick and eventually succumb to short-term-oriented trading.  
• There is a tendency to be swayed by recent market action, going with the herd rather than against it.  

Investors unable to resist such impulses should probably not stay in close touch with the market, they would be well advised to turn their investable assets over to a financial professional.

Another hazard of proximity to the market is exposure to stockbrokers.

• Brokers can be a source of market information, trading ideas, and even useful investment research.  
• Many, however, are in business primarily for the next trade.  

Investors may choose to listen to the advice of brokers but should certainly confirm everything that they say.  Never base a portfolio decision solely on a broker's advice, and always feel free to say no.

“Top 10 questions a Trading Plan must answer“.

 “Top 10 questions a Trading Plan must answer“. 

A Trading Plan has only one purpose which is to guide the Trader to achieve his goals in Trading and in Life. It must pre-define a course of action to all situations a Trader will encounter. It must contain a system that can be easily followed, otherwise it is likely the trader will eventually not follow it.

Developing your trading plan is an essential process for a trader on his or her road to success, it can be a process which evolves over time as you expand your knowledge and learn about yourself.

Below are all the posts in this series:

1. What are your Life Goals & Trading Goals?
2. What is your Trade Entry Method?
3. What are your Trade Exit Methods?
4. What type of orders will you use to enter & exit?
5. What are your Money Management Techniques ?
6. How will you manage your Position Risk versus Reward?
7. What is your Process for Open Trade Review & finding New Trades Picks?
8. What is your Trading Success Profile?
9. How will you Review your Trading System to measure & improve?
10. What is your Trading Daily Routine-(Part1 & Part 2)?

http://globaltrendtraders.com/trading-plan/top-10-questions-a-trading-plan-must-answer/

Calculating Risk/Reward Ratios

Calculating Risk/Reward Ratios

Risk to reward ratios. If there is a cornerstone to any trading philosophy, it starts at the risk to reward table. Although identifying good risk/reward trades does not guarantee success, not identifying good risk/reward trades almost always guarantees failure. Let's explore yet another important subject in the life of a trader and look at a trade setup we took late Friday in the context of this subject matter.

Determining a Good Risk/Reward Trade

Contrary to popular thought, successful traders can take on any type of trade in terms of size and risk as long as they first understand the implications of the trade and are willing to stomach the losses should they occur. If a trader feels that they have the hot hand, they may choose to press a bet (to make a larger than normal purchase or sell on the belief that the odds are in their favor). They do this knowing that they may suffer greater than normal losses if the trade doesn't pan out. Traders do this all the time.

It is critical, if you are to be successful, to understand that trading is a game of probabilities. Technical traders are simply looking for patterns with a greater than 50/50 chance of repeating themselves over and over again. Once such patterns are identified, traders attempt to recognize such patterns in current charts and then identifying entry and exit points based on those charts. Entry and exit points are typically associated with support and resistance areas of the charts. Ah, support and resistance areas. These were the tools of the early traders, traders that read the tape ... traders that were successful at technical analysis long before the advent of all these derivative indicators, these answers to the problem of technical trading, this onslaught of technical wizardry. The oldest and purest form of technical analysis is support and resistance. Understanding it provides a large portion of the technical analysis that one needs to be successful at identifying entry and exit points.

Calculating the Risk/Reward Trade

In previous chapters we have talked about the need to identify potential trades based on chart patterns. The idea is that you collect a set of candidate charts, charts that have positive prospects for immediate or reasonably near term trading time frames. It is with these candidate charts that one can dig deeper into the possibility of trading that particular issue. The identification of a probable trade centers around the proper identification of realistic entry and exit positions based primarily on support and resistance. Once you have properly identified the support and resistance points you can take those numbers, plug them into a simple spreadsheet and calculate the risk reward. The simplest form of calculation involves nothing more than the following:

Entry Price
Stop Loss Target
Stop Profit Target
The resulting Risk/Reward Ratio

Now, let's apply this to a particular trade. The following graph shows NEM as it looked on May 17th, 2002. Gold is enjoying a significant run up and this trade actually goes against the prevailing trend, attempting to time a quick short trade based on chart patterns. On the fundamental side, there is concern that gold could continue to rise as the dollar continues to weaken and as world events dictate increased fear on the terrorism front. On the other side of the coin, the technical picture shows a potential short candidate given the annotations provided below.

View image here.

Given the chart above, here's an example of the most simplistic risk/reward ratio calculation.
In the end, it turns out that world events and the spot price of gold ended up making this trade a losing trade, but risk to reward calculation remains the same ... regardless if the trade wins or loses.

Ranking Trades and the Spreadsheet

To see if a potential play is worth wagering money on, one must determine what the potential losses are if your analysis is wrong, and what the potential gains are if the analysis is correct. You should always shoot for a minimum of 2:1 ratio, that means that your potential profit should be roughly 2 times your potential loss. This is a rule of thumb that many traders use ... especially the good ones. In the example above, if one enters a trade at the price of $29.12 with a define stop loss exit of $30.68 and a potential target exit for profits at $26, then the ratio is roughly 2:1 (a bit less in this case). That's it. It's really that simple.

Recognize that once one has entered such a formula into a spreadsheet and begins using it, one can easily play with the numbers to make them work. For example, let's say that NEM looks like a great short right now, but that the exit is really $31, not $30.68. Now, one could stretch the target to $25 even though the support lies at $26 in order to justify the trade, but the trader inside you knows this is not the case. When setting support and resistance points, one has to realize that if the numbers are fudged, the person fudging the numbers is the one hurt. It's their money that's on the line.

An easy way around the temptation of making the numbers work, is to always look at the support and resistance points first and allow as much slack in the numbers as makes sense. Now, plug in the entry price. Does the risk/reward make sense? If it doesn't change the entry price, not the stop or target prices. Jiggle the entry price to the point where it makes sense and then simply wait until you get that entry point or pass the trade up. There are always more fish in the pond.

Once a number of potential trades are identified, the next step is to take a position in the trade. It is important to realize that no trade is a certainty as they are all probability based. The likelihood of success and failure can be quantified to some degree based on certain risk factors. By quantifying the risk factors and ranking the potential trades based on these risk factors, one can take a systematic approach to trading ... an approach that can pay huge dividends. This is a laborious process that takes time and organization. The simplest way to organize this is via a spreadsheet. Since spreadsheets can contain simple arithmetic equations, you can easily build equations to compute the risk factors described below. When first experimenting with trade rankings, one should error on the side of simplicity as having too many factors is no better than having any at all.

So how can you begin to construct a ranking system that allows you to increase your reward and reduce your risk? It's not so much difficult as it is tiring. Looking back, you must first screen a large number of stocks and then flip through a large number of charts looking for technical patterns that have potential. The primary technical indicators you are interested in are those that have the highest percentage of success. Edwards and Magee go to great lengths to point out all types of technical trading patterns in their bible of technical trading, Technical Analysis of Stock Trends . The obvious factor when ranking trades is to balance the risk versus the reward with the idea that the higher the reward relative risk to the risk, the higher the probability over time that you will make money. The simplest way to calculate the risk to reward ratio, is to pick an entry price for a given stock and then ask yourself, where would you have to consider exiting the stock if it turns out that you are wrong on the trade. For the reward, you ask yourself the same question but the exit is associated with your having a winning trade. Based on how many shares you intend to trade, you can calculate the amount you will loose and the amount you will win. Don't forget to add in your transaction costs as part of this.

This is the fundamental basis of all ranking systems. From there, you can begin to add other variables such as, how long do you expect to be in the trade. The shorter the period of time relative to the risk/reward, the more money you can make over time (assuming you win more than you lose). As your refine your ranking system you will find that stocks with higher betas are naturally more susceptible to short trading periods given their volatility.

Another key variable is a confidence factor. The confidence factor itself if typically based on several factors such as the probability that the technical picture is favourable, the probability of the market contributing to your individual stocks success. Regardless of the factors you experiment with, it is important that you keep your data available for study over time so that you can continue to refine your system. Without constant scrutiny, your ranking system can loose it's value overtime as the markets are dynamic and always changing.


Embellishing the Formula

Once one has mastered the use of the simplest formula for risk/reward, one can consider embellishing the formula to include other criteria. For example, if one could reasonably judge the amount of time it takes a trade to play out, then that knowledge could be incorporated into the spreadsheet in order to rank the trades on a more favourable basis. Think about it. There is only so much capital to use when trading. Using that capital on the highest potential return over some period of time is the desire.

Another key element of gaining the highest potential return on ones money is to associate a confidence factor into the equation based on the stock, the technical pattern being traded, whether the trade is in the direction of short, intermediate and long term trends, etc. Again, there are a number of factors that can be added to the formula to rank the trades and use that ranking as a basis for decision making. The desire is to remove some of the gut feeling that goes into trading with a more logical and less emotional process.

Analyzing the Results

Another advantage of plugging numbers into a spreadsheet s that one than then have a historical accounting of trades taken be they successful or not. Keeping ones historical data allows later analysis of that data in order to improve ones performance in the future.

For example, examining historical data to determine where the largest losses were and then deciding if they were because of failed stop exits could provide fruitful insight to changing trading behaviours. The same is true for wins.

Another exercise would be to look over the charts a month after the trade and examine other data points for exits (both success and fail exits). In doing this, one could speculate on what if scenarios such as, "What if I had maintained the position longer. Would it had continued to perform or would it have turned into a bust?". The imagination can run wild with such scenarios and if you are like most, the amount of time available to ones research is limited to the minimum analysis of old trade data, but there is value in it. It has been said that if mankind doesn't understand the mistakes of the past then we are doomed to repeat those mistakes in the future. Dwelling on the past is not the issue, but learning from it does have benefit. The game of trading is a lonely game. In today's world it is, for the most part, a game of solitaire where individuals from all walks of life stare endlessly at flickering screens while moving piles of money around. One has to show the motivation to sharpen their game as no one else will. As we all know, if one is not on top of your game, at least in this game, one doesn't last long.


Summary

Always calculate your risk to reward ratio prior to making a trade. Refuse potential trades unless the risk to reward ratio is 1:2, that is for every dollar risk, there is a potential for two dollars in return. By calculating your risk to reward for every trade you will ignore marginal trades and you will identify your exit points before taking a trade. Recognize that you want to understand your exit criteria ... at the beginning of the trade, not sometime later. Once you are comfortable with simple risk to reward measurements and are identifying support and resistance zones reasonably accurately, you can consider increasing the complexity of your formula to consider other variables such as time and confidence. Lastly, keep your data points and analyze your successes and failures over time in order to hone your trading strategy.


Article written by Technical Analysis Today - www.tatoday.com


http://www.otrader.com.au/stock_and_option_trading_articles/risk_to_reward_ratios.asp

Ignore shares and get poorer.

Diary of a private investor: ignore shares and get poorer
Our private investor is back - and he says that savers who are prepared to take some risk will prosper.

Despite the Gulf of Mexico oil spill last year, BP shares are doing well Photo: PA

By James Batholomew

10:51AM BST 06 Jun 2011

After the glorious year of 2010 - for the stock market anyway - this year has, so far, been a damp squib. First it was up, then it relapsed, then it rose once more before retreating again. As I write, it is within 2pc of where it started.

As Lady Bracknell said in The Importance of Being Earnest, "this shilly-shallying is absurd". Which is it to be? Will shares finally rise or fall?

On the bearish side, I'm told, by people who ought to know, that Greece is bust, whatever the politicians say. Another well-placed individual has the same opinion about Ireland.

If either is right, shares could fall heavily on the day the default is announced. Some people say "it is already in the price", but I doubt it.

On the other hand, shares still look good value. I own some in BP which, at 458p, stands at a mere 6.8 times forecast earnings for 2011.

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Its adventures in Russia do worry me a bit and, of course, the shadow of the disaster in the Gulf of Mexico still hangs over it. But rarely in its history have the shares been treated with such disdain.

Professional and lifelong investors are now generally back in the stock market. But many private individuals are still holding back.

Over the past few years, I've talked to quite a few people about their investments and found they can be divided into four sorts.

The first thinks shares are too risky. They remain almost entirely in cash. In some cases they have good reason. Some have a limited amount of money and a very specific thing - such as school fees - which they want to be sure they can pay.

Others argue that shares are unpredictable and they don't know anything about them. Better to keep the money safe in the bank. These people have their reasons. But over the long term, I've seen so many of this sort, who were once well off, become very gradually much less so. I knew the daughter of a Seventies multi-millionaire who inherited her fair share. She kept the money in a building society and is now, frankly, just getting by. It's frustrating. She could have stayed rich.

The second group consists of those who have made quite a bit of money but have not had much time or interest in managing it. They were then persuaded by persistent, charming salesmen to invest in certain funds. For these salesmen, nothing was too much trouble. They visited them in their homes. They brought wonderful, sophisticated brochures and "personalised" recommendations.

The untold story which the salesmen never quite got around to explaining in detail was the full extent of the commissions and expenses involved. The people in this group have generally had a pretty thin time of it over the past dozen years.

The FTSE 100 is still rather lower than it was in January 2000, and all those commissions have eaten a substantial hole in the dividend income.

The third sort are thrill-seekers. To be honest, I know only one person in this group. There was a time when he got very excited about shares and was dealing on an hourly basis, following recommendations from a broker. After initial success, he lost a bundle and decided to give it all up.

Long-term, persistent portfolio investors are the fourth group. They have built up experience and understanding. They tend to have done best.

But where does that leave the sort of person who has other things to do and does not want to spend time building up experience in shares?

My flippant answer would be "poorer". You make your choices and live with the consequences. Trying to be more helpful, let me suggest this: how about putting, say, 15pc of free cash in a selection of lowest-possible-cost tracker funds? And then increasing the amount each year up to a level with which you are comfortable?

This way, you will not give away a fortune in commission. You will keep most of the dividends. You will not have to worry about selecting individual shares. And you are likely - though not guaranteed - to be richer in 10 years than otherwise. You could go for a mixture of, say, half of the invested amount in a FTSE 250 shares fund, a fifth in a Far East fund, another fifth in a US fund and a 10th in an emerging markets fund.

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/8558975/Diary-of-a-private-investor-ignore-shares-and-get-poorer.html

A 5% return may end up being a better deal than a 20% return!!!!!

The time it takes to realise a gain, plays a huge part in determining our annual rate of return and the overall attractiveness of the investment.

If one is able to get a 5% return in a month, can we argue that it is a better investment than one that earns us a 20% return over a two-year period?

The Reasoning:
5% rate of return in a month
= yearly rate of return of 60% (0.05 x 12 months = 0.6).

20% return at the end of two years
= yearly rate of return of 10% (0.2 / 2 years = 0.1)

Premise:
The above argument is premised on being able to re-allocate the capital that you had out at 5% for a month, at attractive rates in the preceding months.

But in theory, if you could reallocate your capital five times over a two-year period and each time earn 5% a month, it would still produce better results than getting a 20% return at the end of a two-year period.

The year is the base time standard by which one compares different investment returns.

Rules to remember:
1. The time it takes to achieve the projected profit ultimately determines a great deal of the investment's attractiveness.
2. Always adjust the return to put it into a yearly perspective.

Is day trading for you?

It's no secret that stocks can earn phenomenal returns in the long term. Some of the shares in Warren Buffett's portfolio were picked up almost 20-25 years ago. But Jayesh Shah doesn't have so much patience. "I don't remain invested for more than 20-30 minutes," says the Ahmedabad-based bank manager. Shah dabbles in stocks and makes an average of 12,000 a month with his ultra shortterm trading strategy. Viral Nagori, who teaches computer science at a government college in the Gujarat capital, has a relatively longer investment horizon. He sells his stocks as soon as he is `800-1 ,000 in the green.

Welcome to the world of intra-day trading, where tens of thousands of small investors throng every day to make a fortune from the minute by minute change in stock prices. Small businessmen, retirees, salaried professionals, academicians, even students, are playing the intra-day market and making money from it. They buy stocks in the morning and sell them before the closing bell, pocketing profits from the trade. Of course, they often end up making losses, but this does not stop them from starting afresh the next day.

For the buyer, the biggest draw of intra-day trading is the instant gratification it offers. You can literally see your money grow as the stock price goes up. It also gives the buyer the feeling that he is in control of his finances. "When you invest in a mutual fund, you have to wait for the net asset value (NAV) to go up. Here, you can see your profits immediately," says Nagori.

Unfortunately, the lure of quick money has also sucked in people who should not be indulging in intra-day trading. Experts say that a day trader should be able to monitor the stock markets from opening bell at 9.00 a.m. till the trading session ends at 3.30 p.m. During those six and a half hours, the markets and your stock holdings need your undivided attention. "Day trading is not for someone who has a busy profession or holds a full-time job elsewhere," says Rohit Gadia, CEO of the Indore-based CapitalVia Global Research. Gadia runs a website that offers tips on stocks for intra-day trading.

It's a world where many of the established canons of stock investing are turned on their heads. "Day trading is a different game with different rules," says AK Auddy, executive director of intradaytrade.net. The website gives daily tips on stocks for day trading to its members . Here are 10 basic rules of intra-day trading that can help you make money. Follow these tenets to avoid losing your shirt in this highrisk arena.


Invest what you can afford to lose

Intra-day trading carries more risk than investing in stocks. Invest only the amount that you can afford to lose. An unexpected movement can wipe out your entire investment in a few minutes. In January 2009, the Satyam Computer scrip fell more than 80% from Rs 188 to Rs 31 in one day. If it is a leveraged position, you could lose more than you invested.

Choose highly liquid shares

Day traders must square their positions at the end of the trading session. This is easy if you are trading in large-cap , index-based stocks, which are very liquid and get traded in large volumes every day. Don't dabble in mid-cap and small-cap shares, where the traded volumes are not very large. You could end up holding shares that have no buyers at the end of the day.

Trade only in 2-3 scrips at a time

It's prudent to diversify your portfolio when you are investing in stocks, but when it comes to day trading, confine yourself to just 1-2 stocks. You can have up to 8-10 large-cap , indexbased stocks on your watch list, but don't trade in more than 2-3 stocks at a time. Stock movements need to be tracked closely by the day trader and you won't be able to monitor more than 2-3 stocks at a time.

Research watch list thoroughly

Read up on the 8-10 stocks on your day trading watch list. You should know about all corporate actions (stock splits, bonuses, dividends, result dates, mergers, etc) as well as technical levels of the stock. There are websites, such as khelostocks.com, where you can feed in the price (high, low and closing) to know the resistance and support levels.

Fix entry price and target levels

Before you buy, fix your entry price and target level. The psychology of the buyer changes after he has bought a stock, which could interfere with his judgement and nudge him into selling too quickly. This might cost him the opportunity to fully gain from the upside. If you set yourself a price target and adhere to it, your psychological frame will not change.

Use stop losses to contain impact

A stop loss is a trigger for selling shares if the price moves beyond a specified limit. It helps the buyer limit his losses in case the share belies his expectations and moves down (or up). Suppose you buy 20 shares of Reliance at 940 each and set a stop loss of 920. If the share falls to `920, your shares will be sold. In this manner, your losses will be curtailed even if the share drops to `900. A stop loss takes the emotions out of the decision to sell.

Don't be an investor

Day trading and investing are like chalk and cheese. Both involve buying shares but the factors considered are completely different. One takes into account technical data, while the other looks at its fundamentals. Don't mix the two. Often, if an intra-day bet goes wrong, the buyer does not book his loss, but takes delivery of the shares and then waits for the price to recover. This can be a mistake because the shares were bought with an ultra short-term horizon. They may not be worth investing in.

Book profits when targets are met

Greed and fear are the two biggest hurdles for the day trader. Just as he should not flinch from booking losses when the trade goes wrong, he should book his profits when the shares reach his target. If he feels that there is more upside to the stock, he should reset the stop loss. Suppose you invest at `100 for a target of 110 and set a stop loss of 95. If the price goes up to `110 but you are bullish, raise the stop loss to `108. This will reserve some profit.

Don't fight the market trend

Even the most sophisticated analysis cannot predict which way the market will move.
All technical factors may be bullish but the market may decline. Technical factors only point to the likely movement of the market, they don't guarantee it. If the movement is not as per your expectations, don't try and be a contrarian. You may end up losing more.

Small is beautiful

While stock investments can yield stupendous returns, be content with small gains from intra-day trading. Day traders get a leverage of almost 3-4 times their investment , so even if your stocks go up by 3%, you would have earned 9-12 % on your investment. In any case, it's rare for large-cap stocks to move by more than 5-6 % in a day. Even if you get a return of 10-12 % on your capital, it's not bad for a day's work.

Trading versus Investing

Saw these interesting postings in Blackspy fundamental blog.  

There is a saying:  "It is not a sin when you buy a stock at its low price."  This implies that one is able to value the stock confidently, thereby knowing the probability of upside is higher than the probability of the stock going down.  

What can we learn from the actions of Alam Maritim Chairman below?  Many 'investors' in the stock market are using such a strategy already.  Is this a strategy one can employ profitably, safely and consistently? 

-----

Alam Maritim Chairman disposed 100,000 shares back to market

Still remember DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares on 10 Dec 2010 at my previous post??
http://hongwei85.blogspot.com/2010/12/alam-maritim-chairman-acquired-100000.html

Now he disposed back all the 100,000 shares to open market again~ sign -_-"

On 10 Dec 2010, he acquired 100,000 shares at the price RM 0.89
On 14 Dec 2010, he disposed 30,000 shares at the price RM 1.04
On 16 Dec 2010, he disposed 25,000 shares at the price RM 1.04
On 17 Dec 2010, he disposed 45,000 shares at the price RM 1.056

Just in one week, Dato earned about RM 15k in open market.

Here is the earlier post of when the Alam Maritim Chairman bought the stocks.

Alam Maritim Chairman acquired 100,000 shares.

DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares at 10 Dec 2010.


Why he bought it? He has too much cash and do not know where to spend?
No no! He knows somwthing is worth by putting his money in this company. Nobody know how the company is running other than chairman.

Post modified: 23.12.2010
Here is another portfolio of a trader (copied from a blog)

I'm a long term investor, not so much on daily trading, slowly allocating part of my money into short term trading. Below is my year 2010 investment portfolio and total profit received. Can those active short term traders share your portfolio? I would like to benchmark my trading method to see if long / medium term investment is more lucrative or short term active trading is more lucrative.

Purc. Date Stock Buy Value P Unit C Unit Cost Dividend Sell Price Profit Selling Date Total Month Hold
19-Apr-10 GPacket 1.15 3 3 3,495.04 0 0.92 -735.04 11-Oct-10 6
9-Dec-10 Pchem-ca 0.335 10 10 3,390.00 0.41 710.00 9-Dec-10 1
26-Nov-10 Pechem 5.04 2 2 10,080.00 5.4 720.00 8-Dec-10 1
26-Nov-10 Pechem 5.04 6 6 30,240.00 5.6 3,360.00 9-Dec-10 1
4-Oct-10 Supermax 4.18 1 1 4,200.00 0 4.41 210.00 8-Dec-10 3
11-Mar-10 Maybank 7.5 1 1 7,555.25 0 9 1,444.75 11-Oct-10 7
11-Nov-09 Maxis 4.75 1 1 4,780.00 390 5.34 950.00 11-Oct-10 12
18-Feb-10 Genting 6.65 0.5 3,350.00 10 1,650.00 11-Oct-10 8
18-Feb-10 Genting 6.65 0.5 2,850.00 10.8 2,550.00 22-Dec-10 10
23-Feb-10 BJTOTO 4.25 2 2 8,562.55 320 4.17 97.45 8-Nov-10 9
1-Dec-09 Gamuda 2.81 1 1 2,850.00 100 3.83 1000.00 21-Dec-10 12

Total profit made: around 11,957.16 (some of the shares I didn't keep track of brokerage fees)

The amount of capital he employed into his portfolio peaked on 26th November 2010.
The total amount at risk was = 2,850 + 2,850 + 4,200 + 30,240 + 10,080 =50,220.
His profit of 11,957.16 gives a return of 23.8%.
His individual stock holding period returns will be higher.

Since January 2010, the KLCI index has risen from around 1250 to 1500, giving a return of 20% for the year.

Confusing Investing with Trading

Benefits Of Trailing Stops

Benefits Of Trailing Stops

Jun.08, 2010

One great way of playing the market is by using a trailing stop to simply follow the stock up. A trailing stop is ideal because it follows the stock up when the stock does go up, but it does not pull back as the stock pulls back. This allows you to limit your losses and secure your gains.

There are a ton of advantages to using trailing stops.

1. It Limits Your Losses

Everybody has wins and losses. They key is to limit any losses that you do have. This way any loss you do have will play a minimum role in your overall return.

If you decided to place a 10% stop for instance you would be risking only 10% of the investment that you just made. If the stock suddenly pulled back 50% you would get out near the top and could wait for it to turn around before getting back in.

2. It Does Not Limit Gains

A second advantage of using trailing stops is that it does not limit the potential gain of the position. If you bought a stock and placed a 10% stop loss on it you would not be limiting your gains, only your losses. The stock could double and you would still be in it. Only once the stock starts to turn around 10% or more would your stop be activated and your position would be sold.

3. Takes Emotions Out

Emotions have a big impact on our trading. We want to hold onto a stock when it is going up and we want to keep holding on and convince ourselves everything will be ok when it is crashing.

Sometimes you can create your own plan of action and end up side stepping that plan because you got scared. Well the great thing about trailing stops is that they are automated. You just have to set them up and then forget about them.

The trailing stop will follow the stock up and the trailing stop will eventually get you out of the position (hopefully for a profit). The only thing you need to do is to figure out how far behind you want to trail the stock and then walk away.

This is a perfect way to “stick to the game plan” when you cannot trust yourself to do it.

3 Questions to Ask Yourself When Buying a Stock

3 Questions to Ask Yourself When Buying a Stock

May.03, 2010

Trading in the stock market can be a very emotional experience. It can be hard to focus on logic and actually make rash decisions when your money is on the line. That is why, whenever you are thinking about investing into a stock you should ask yourself these three questions.

1. Why Am I Getting Into This Stock


Why are you actually getting into the stock? Is it because you heard somewhere that it is going to go up and you didn’t want to “miss out”? Or you have some fundamental or technical reason for getting into the stock. Unless there is something solid backing your decision it may be better to just walk away.

2. How Am I Going to Limit My Risk


Even if you have found a stock which you believe with 100% confidence will make you money, you may be wrong. Something may change. It happens, a lot of successful traders invest into bad stocks the trick is limiting your losses.

Maybe you want to only risk a small portion of your account on that one stock, or maybe you want to place some sort of stop to get you out of the position if the stock falls against you too much. Either way, it is important to limit your risk; otherwise you will lose all of your money on the first bad trade you make.

3. When Will I Get Out?


Something that people often forget is their exit strategy. Sure it is important to know when to enter, but even the best entry signal in the world will not help you out that much if you lose it all by holding onto the stock for too long. Figure out what you are trying to accomplish beforehand.

Why Would Someone Start Trading Stocks

Why Would Someone Start Trading Stocks

Apr.20, 2010

Trading in the stock market is a fantastic way to gain some extra money, grow your long term wealth, and to keep your mind sharp. There is basically no limit to the amount of money that a stock trader can make off of their investment and this can translate into unbelievable wealth.

What are the reasons to trade in the stock market? Below are the 4 reasons why someone would want to trade in the stock market.

1. It Can Be Very Profitable


There is no limit to the amount of money that someone can make in the stock market. There is also really no limit to how fast someone can make money. This is why you hear stories about people turning small amounts of money into millions of dollars in just a couple years.

Of course that is not the norm, but it does happen from time to time.

2. Extra Cash Flow


It is always nice to have some extra income and the stock market is one of those places that people can go about getting it. The only thing to remember is that it the extra income it brings is a byproduct of months or even years of experience. If you need the extra income tomorrow this is not the best way to get it.

3. Early Retirement


The Stock Market can make you a lot of money and in many cases it can even lead to financial freedom. All you need is the ability to make a decent return on the money and the ability to get enough money together and you can trade away living off of the money that you make off of the market alone.

4. Keeping Your Mind Sharp


When you trade the stock market you are constantly learning from your mistakes. This helps to challenge you a little bit and keep your mind sharp, which can actually be a good thing and help you have a quicker mind well into old age.

Should You Start Stock Trading?

Should You Start Stock Trading?

Jun.10, 2010

The stock market can be a terrific place to grow your money and to grow your overall wealth. Trading stocks can be extremely powerful and can lead to large gains. But it is not for everyone, most people will quit after they find out how much work is involved in learning to trade.

In addition to all the effort that it takes to make it big in the stock market there are also a few things that you will need to have in order to be successful trading stocks.

1. A lot of Confidence

A trader needs to be confident in themselves and in their own trading method in order to make it big in the stock market. Most newbies fail because instead of making decisions for themselves they listen to everyone else. The problem with this is that they never learn from their mistakes or even know why they are buying the stock in the first place. If you make your own decisions you may have losses here and then, but at least you can learn from them and try to do better next time.

So confidence can help you get past any problems you may have.

2. The Ability to Control Your Emotions

Trading in the stock market can definitely be an emotional thing. If your stock goes up you automatically want to hold onto it forever and you dream of becoming a millionaire. If stocks are going down you start panic selling and just try to get out without losing your shirt. Really whenever money is involved our emotions are going to be connected with it and they will impact how we make decisions.

Having the ability to control your emotions is an essential thing for all traders.

3. Eager to Learn

There are always going to be bumps in the road when it comes to the stock market, or really when it comes to anything in life. The best thing that you can do is to continue to learn from your mistakes and improve over time.

If you lose money, figure out why. If you make money also look at what that was. The more you learn the better you will do in the future so being a little curious can be a good thing in life.

Long Term Investing Vs Short Term Trading

Long Term Investing Vs Short Term Trading

Jun.10, 2010

Investing into stocks over the long term and trading stocks are two conflicting points of view. So, which one is better? Well this really depends; each strategy has its advantages and disadvantages.

Long term investing is simply the process of buying strong companies and holding onto them for the long term. Because the companies are fundamentally strong they are unlikely to go out of business any time soon and in fact they are very likely to increase in price as time goes by.

Trading stocks in the short term is actually a completely different strategy. Instead of holding onto stocks for the long term short term traders tend to use things such as chart patterns and technical indicators to attempt to catch the short term movements of stocks and hopefully make a larger profit then if they were to simply buy and hold the stock.

Which strategy is best? There are defiantly advantages and disadvantages to each method. The best strategy for you really depends on you and where you are at.

Trading stocks in the short term does have a lot more potential then buying and holding. If you can make short term gains relatively consistent over the long term then you can do pretty well for yourself. However it does take a lot of work and there are no guarantees that you will make any money. It is like starting a business most people will fail their first time around, but those who can keep getting back up and learning from their mistakes will likely do well eventually.

If you are willing to put all of the time and energy into short term trading the rewards can be pretty nice.
However if you just want something that is considered to be safe yet does have some potential then you can take a look at long term investing. The main advantages of long term investing are that it is passive and it is a relatively secure way of making a decent return over the span of a couple decades.

Basically it comes down to this, if you want to earn a relatively safe return passively then investing in the stock market can be a great idea. If however you want to attempt to increase your returns and put some extra time into it then trading stock might be better suited for you.

Diary of a Private Investor: how the pros make money from turbulence

Diary of a Private Investor: how the pros make money from turbulence

Unfortunately there is no foolproof system to deal with these sort of situations. When a panic occurs, it is usually right to buy.

By James Bartholomew
Published: 9:49AM BST 27 May 2010


What a daunting few weeks this has been in the stock market. In normal times, one or two worries present themselves. Recently they have had to form a queue.

It was bad enough when we were just worrying about Greece and its budget deficit. One of the scary numbers I came across was that German financial institutions hold $37bn in Greek bonds. That, I presume, is not counting money lent in forms other than bonds. If Greece defaulted, some major German banks would take a big hit. Think through all the consequences of that and you get to higher lending costs around Europe and renewed recession.

My shares quoted in Hong Kong were probably not too worried about that but they spiralled down for a different reason. China has tightened lending to quieten down property prices. And what are my biggest holdings in that area? Why, property companies of course.

Back home, growing anguish about the coalition government's apparent aim to tax capital gains more heavily in future is encouraging people to sell sooner rather than later. On Friday last week, I myself sold some Healthcare Locums (at 223p) held by one of my children to use up the tax free allowance under the current rules. The fear must be that many people will decide not to reinvest after selling if the new regime is harsh.

Then came news that the North Korean dictator has taken it into his head to prepare for war. Next came a crisis among Spanish banks. For those of us who are pretty fully invested, the bad news has been relentless. It has been like the charge of the light brigade: "Cannon to the right of them, cannon to the left of them, cannon in front of them … into the mouth of hell rode the six hundred"

Unfortunately there is no foolproof system to deal with these sort of situations. When a panic occurs, it is usually right to buy. But sometimes it is better to get out because the fears will turn out to be justified. As concerns about an uprising in Russia increased in 1917, I expect prices of Tsarist bonds fell back. It probably looked clever to buy on the dip. Unfortunately, as it turned out, when the communists took over, the bonds lost all their value except as wallpaper. So it all depends on how things actually turn out. Right now, if Greece and Spain do not default and if North Korea thinks better of starting a war, shares are cheap. On the other hand …

Investment obliges you to take a view on how things will turn out in politics and all sorts of other things. That is one of the things that makes it so interesting. Another aspect of investment is the influence of personality. I tend to be optimistic and that is probably key to why I think that we will probably muddle along. In any case, it occurs to me that even if North Korea attacks, this will probably not stop people going to have a drink at the pubs owned by one of my companies, Enterprise Inns. Some things you can rely on.

Last week I was even sanguine enough to buy more shares in Paragon, a mortgage lender, which came out with good results and made hopeful noises about restarting active lending. The purchase turned out to be horribly timed. I bought at 151p and, after the market falls, they are licking their wounds, as I write, at 133p. On Monday, my fears about Greece increased, and I wanted to reduce my exposure to further market weakness without selling any of my favoured companies. So I tried something I have never done before. I bought a few shares in an Exchange Traded Fund (ETF) designed to go up if the stock market goes down. It has the strange name, DB X-trackers FTSE 100 Short, and I bought at 938p.

Incidentally, I was astonished to see how big this fund is. The market capitalisation is an amazing £1.4bn. I had not realised just how big the business of being bearish on shares has become. This is just one of a number of such funds. But on Tuesday, the market fell so far and so fast – with Enterprise Inns down 10pc for example – that I decided the bearish trend had gone too far. I sold my bearish ETF for a little profit at 981p.

Unfortunately this bit of good timing was with only a tiny amount of money. Overall, I have been nearly fully invested and my portfolio had taken a bit of a battering.


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Some comments:

Thank you Jo.
Padraig, I am sorry but you are wrong in so many ways. Long term 'investing' is just as risky as short term trading. It's all a 'gamble' as you put it, I prefer the term 'bet' as it is all about calculated risk. You're right in that gambling loses in the long run but proper trading is not gambling. You are also right that it is impossible to pick market movements correctly all the time. One does not need to and I am often wrong, but I manage my risk effectively and ensure I capitalise on the times when I am right so that I make money. I do this over and over and over. The stock market is not the only thing to money on and markets do not go up all the time. How can you say that the only way to make money is in a strong bull market,just sell futures!

And yes as you have all pointed out Warren Buffet is succesful, but he not the only one in the world. Please measure your success your own way. Mr Buffett is not the only succesful investor in the world. There are thousands. Mr Buffet has done extrememely well but I could not replicate his success with his style as my personality is not suited for the long term approach. In reality I will not be as rich as him because the volumes in the market will not accommodate my short term approach and that is fine by me. I make money and so do many others.

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Don't see your point, Paul. Stock or currency, bull or bear, you can make money. Day trading is fine if you're after 5% gains here and there, but most of us are here for 5 years or so, therefore long positions on shares are a much better idea.

I too am mostly all-in, James. It’s been a pretty stressful year or two, hasn't it? I've gone from 50% up to 35% down since Xmas, crazy times.

I agree entirely with you on the topic of your post, probably one of the most important lessons for any new PI for that matter.

Confident in Sarkozy talking tosh, I managed to pull out a blinding FTSE short (a proper CFD short, not an ETF) following the brief rally last week. It's shooting up today, but that was a lot of resistance on the 5k line it broke through on Tuesday, so I'm not too confident s/term - any any ideas for next week??!

http://www.telegraph.co.uk/finance/personalfinance/investing/shares-and-stock-tips/7767939/Diary-of-a-Private-Investor-how-the-pros-make-money-from-turbulence.html