Better Trades asked:


There are few jobs in the world that don’t require training, yet many people believe that trading should require little to know training. Trading on the stock market gives you an unlimited potential for earning money, but all too often, people lose thousands and sometimes hundreds of thousands of dollars simply because they didn’t have the knowledge to make effective trades. Instead of just taking a chance, why not learn how to trade the right way? Allow stock market professionals to teach you the strategies that will work for you.

BetterTrades.com is a method unlike many others. Most online sites that promise to teach you how to navigate the stock market are simply regurgitated information from older sites. They are “canned” presentations that deal with simple techniques you can pick up anywhere.

BetterTrades is something entirely different. Instead of being a website where you can get the same information that is posted everywhere, BetterTrades.com is a method that caters specifically to the individuals enrolled in their courses. The Trading Webshops, the key to this program, are live, interactive courses that you can take in the comfort of your own home. These Webshops will not only teach you the basics of trading, they will teach you how to trade in a way that is beneficial for you.

Wondering how these Webshops work? At BetterTrades.com, you simply sign up for the Webshops that you feel will help you to become a better trader. It doesn’t matter if you’re looking for beginner courses or more advanced techniques, Better Trades is sure to have the course for you. Take as many courses as you like. You can even take a webshop again for refresher purposes.

Why should you work hard everyday and invest in a market, only to lose all of your money? Your money is valuable and taking courses from Better Trades can teach you how to intelligently trade your money and how to use the markets to increase your investment. Because they are invested in making sure you can truly use the training they provide, BetterTrades.com is different than the others. If you need a stock market training you can truly use, you need Better-Trades.com.

This article is originally published here: Better Trades.

Learn More:

BetterTrades can teach you how to intelligently trade your money and how to use the markets to increase your investment.



Nigel Graig

Barry Hurst asked:


There is a lot of money to be made from stocks and shares but the only hitch is nobody knows a sure fire way of a method. Let us now see some of the basics of stocks and shares. You can earn money in two ways by investing in stocks and shares. One is trading and the other is investing.

Buying and selling stocks, shares, futures and options over a short period of time is known as trading. If you buy shares, stocks, futures and options and retain them for a longer period of time then it is known as investing.

Besides the above, there is no get rich quick scheme which works. If such schemes work then almost everybody would be a millionaire. Money can be made by selling stocks and shares but it cannot be done quickly by buying and selling without reason. The patient, careful and intelligent investors definitely make big profits in the stock market when compared to the overeager and reckless speculator.

Stocks and shares should be bought when their prices are low and wait for the price to rise to earn a decent profit over a longer period of time.

A prudent investor should not worry about the downs and ups and look for the long-term cycles. If these simple principals are not followed, there is not going to be any profit for an investor.

Presuming it is going to fetch more money, never buy a stock or share when the price is going up, it is wrong. If the peak price is reached at the time of buying then the investor will be holding a stock or share of which its price will be slowly sliding down and you will ultimately end up with a loss.

There are certain golden rules to be followed when investing money in stocks. Never invest more than three percent of the total portfolio in one stock. Over time, a successful investor should make all efforts to protect the capital base.

When a wrong decision is made, accept it and cut down the loss immediately by five to fifteen percent rather than wait for more time thinking the situation will improve. Follow the performance of the stock and never deviate from the “stop loss point” to limit the loss in case the stock does not perform up to the expected standard.

Never set price targets. Stick on to one style of trading instead of following various trading methods. The performance of a stock or share is reflected in the volume and price it is traded. Never get influenced by the opinions expressed by individuals.

Take note of all the signals emanating from the market which is connected with the stock or share you are holding. Do not get swayed by variations in data during the trading day. Reliance on such swings will lead to wrong decisions. A trader who is stressed out will be making a lot of wrong decisions, so take time out periodically during the day.



Allen

Partha Pati asked:


Submitted by: PARTHA PATI

Class: BBA.LLB, Vth Year

Symbiosis Law School, Pune

 

 

DE_REGULATING INSIDER TRADING

 

Introduction:

Insider trading is a trading of corporation’s stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company. In most countries trading by insiders such as officers, key employees, directors, and large shareholders may be legal, if this trading is done in a way that does not take advantage of non-public information. What is illegal is the trading by an insider on the basis of unpublished price-sensitive information. The prevention of insider trading is widely treated as an important function of securities regulation. In the United States, which has the most–studied financial markets of the world, regulators appear to devote significant resources to combat insider trading. This has led many observers in India to mechanically accept the notion that the prohibition of insider trading is an important function of SEBI. In most countries other than the US, government actions against insider trading are much more limited. Many countries pay lip service to the idea that insider trading must be prevented, while doing little by way of enforcement.

Objective:

The article intends to put forth the futility of regulating insider trading in the light of lack of enforceability and market efficiency. Insider trading is an extremely difficult crime to prove. The underlying act of buying and selling of securities is a perfectly legal activity  It is only the malafide intention of the trader which can make this act a crime. Moreover the primary function of the regulation and policy is to foster market efficiency. The article will also analyse the possible effect of de-regulation.

Main Text:

Who is an insider?

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, say, “insider” is any person who, is or was connected with the company, and who is reasonably expected to have access to unpublished price-sensitive information about the stock of that particular company, or who has access to such unpublished price sensitive information.

In the United States, for mandatory reporting purposes, corporate insiders are defined as a company’s officers, directors and any beneficial owners of more than ten percent of a class of the company’s equity securities. Trades made by these types of insiders in the company’s own stock, based on material non-public information, are considered to be fraudulent since the insiders are violating the trust or the fiduciary duty that they owe to the shareholders. The corporate insider, simply by accepting employment, has made a contract with the shareholders to put the shareholders’ interests before their own, in matters related to the corporation. When the insider buys or sells based upon company owned information, he is violating his contract with the shareholders.

For example, illegal insider trading would occur if the Chief executive officer of Company A learned (prior to a public announcement) that Company A will be taken over, and bought shares in Company A knowing that the share price would likely rise.

Information that could be price sensitive includes periodical financial results of a company, intended declaration of dividend, issue or buyback of securities, any major expansion plans or execution of new projects, amalgamation, merger, takeovers, disposal of the whole or substantial part of the undertaking and any other significant changes in policies, plans or operations of the company.

How does insider trading work?

An insider buys the stock (he might also already own it). He then releases price-sensitive information to a small group of people close to him, who buy the stock based on it, and spread the information further. This results in an increase in volumes and prices of the stock. The inside information has now become known to a larger group of people which further pushes up volumes and prices of the stock.

After a certain price has been reached, which the insider knows about, he exits, as do the ones close to him, and the stock’s price falls. Those who had inside information are safe while the ordinary retail investor is stuck holding a white elephant as, in many cases, the ‘tip’ reaches him only when the stock is already on a boil.

The regular investor gets on the bandwagon rather late in the day as he is away from the buzz with no direct connection to the ‘real’ source. He buys the overvalued stock due to imbalance in the information flow.

In 2001, Sam Waksal,CEO of ImClone Systems,USA was sentenced to seven years and three months for breaking insider trading laws.He had learnt from his brother, the COO of ImClone that the FDA would reject an application for the company’s leading drug, and acted upon it.

 

In April this year, 2 Goldman Sachs employees made more than $6.7 million through insider trading by enlisting an analyst who provided information on Wall Street deals and a forklift driver who leaked copies of a market-moving magazine. SEC indicted 13 persons for insider trading.

 

SEC has brought about merely 200 charges for insider trading in the last five years.

In India only 14 cases have been taken up by SEBI for insider trading in 2003-04, which went down to only 7 in 2004-05, This clearly reflects our regulating authority’s dismal performance over the years.

Difficult to prove

While it’s common knowledge that insider trading takes place, it is very difficult to prove. Insiders may not trade on their own account. Flow of information is another important factor, but difficult to track. Regulations are in place to prevent this, but the stock price of a company invariably tends to move up or down at least a couple of weeks ahead of any price-sensitive announcement.

Take the case of IFCI. The stock has been on fire since early January 2007. It gained almost 53 per cent in eight trading sessions from Rs 13.45 before the announcement of its 7-per cent stake sale in NSE was made in January 2007.

The stock also gained 30 per cent in 12 sessions before the announcement to appoint Ernst & Young for advising the company on induction of a strategic investor in the company was made in March 2007. From this level, the run up in the stock has been over 210 per cent.

While it is not possible to say that insider trading took place in this case, little else explains the share price movement.

The expected strategic sale was called off in December 2007, and the stock shed almost 23 per cent in one session. Investors who got on the bandwagon at around Rs 70-74 in early September 2007 and did not sell by this time, would have lost all their gains.

Innocent till proven guilty. Considering the sensitivity of the subject and the evidence required to allege and prove it, the instances of insider trading that get reported are far and few. Says Bhavesh Shah, vice-president (research), Asit C Mehta Investment Intermediates: “Majority of the cases that have been reported and acted upon by the exchange and the Sebi have been too few and the action too late. A study of the reported cases on insider trading in Securities Appellate Tribunal (SAT) very clearly reflects a complex web of transactions of unusual nature put through for extraordinary gains by few interested parties. However, in almost all cases the Sebi has not managed to bring the culprit to book for one or the other reason.”

Samir Arora, the erstwhile fund manager of Alliance Capital Mutual Fund, was probed for professional misconduct, fraudulent and unfair trade practices and insider trading. SAT dismissed the charges against Arora on the premise that there was no violation and for want of evidence. Recently, the Sebi has initiated an investigation into sale of 4.01 per cent in Reliance Petroleum by Reliance Industries.

Arguments in favour of legalizing insider trading:

In order to make sense of insider trading, we must go back to a basic understanding of markets, prices and the role of markets in the economy. The ideal securities market is one which does a good job of allocating capital in the economy. This function is enabled by “market efficiency”, the situation where the market price of each security accurately reflects the risk and return in its future. The primary function of regulation and policy is to foster market efficiency, hence we must evaluate the impact of insider trading upon market efficiency.

It is not hard to see that when company insiders trade on the secondary market, they speed up the flow of information and forecasts into prices. Company insiders are in a unique position to make forecasts about the future risk and return of the shares and bonds of their company, hence they might often correctly perceive market prices to be “too low” or “too high”. When they trade on the secondary market, they serve to feed their knowledge into prices, thus making markets more efficient.

Insider trading is often equated with market manipulation, yet the two phenomena are completely different. Manipulation is intrinsically about making market prices move away from their fair values; manipulators reduce market efficiency. Insider trading brings prices closer to their fair values; insiders enhance market efficiency.

Some economists and legal scholars (e.g. Henry Manne, Milton Friedman, Thomas Sowell, Daniel Fischel, Frank H. Easterbook) argue that laws making insider trading illegal should be revoked. They claim that insider trading based on material nonpublic information benefits investors, in general, by more quickly introducing new information into the market.

Milton Friedman, laureate of the Nobel Memorial Prize in Economics, said: “You want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that.” Friedman did not believe that the trader should be required to make his trade known to the public, because the buying or selling pressure itself is information for the market.

Other critics argue that insider trading is a victimless act: A willing buyer and a willing seller agree to trade property which the seller rightfully owns, with no prior contract (according to this view) having been made between the parties to refrain from trading if there is aymmetric information.

Legalization advocates also question why activity that is similar to insider trading is legal in other markets, such as real estate, but not in the stock market. For example, if a geologist knows there is a high likelihood of the discovery of petroleum under Farmer Smith’s land, he may be entitled to make Smith an offer for the land, and buy it, without first telling Farmer Smith of the geological data. Nevertheless, circumstances can occur when the geologist would be committing fraud if he did not disclose the information, e.g. when he had been hired by Farmer Smith to assess the geology of the farm.

Advocates of legalization make free speech arguments. Punishment for communicating about a development pertinent to the next day’s stock price might seem to be an act of censorship. If the information being conveyed is proprietary information and the corporate insider has contracted to not expose it, he has no more right to communicate it than he would to tell others about the company’s confidential new product designs, formulas, or bank account passwords,

This is one of the situations where the insights of modern economics contradict common intuition. The fact that securities regulation in the US is primarily the creation of lawyers is not unrelated of the fact that the US is unique in emphasising restrictions on insider trading.

Insider trading appears unfair, especially to speculators outside a company who face difficult competition in the form of inside traders. Individual speculators and fund managers alike face inferior returns when markets are more efficient owing to the actions of inside traders. This does not, in itself, imply that insider trading is harmful. Insider trading clearly hurts individual and institutional speculators, but the interests of the economy and the interests of these professional traders are not congruent. Indeed, inside traders competing with professional traders is not unlike foreign goods competing on the domestic market — the economy at large benefits even though one class of economic agents suffers.

Once again, a mechanical adoption of regulation from the US is inappropriate. Given the higher degree of automation of the Indian markets, it is not difficult to imagine a situation where trades by insiders are disclosed to the market within five minutes of the trade being matched by the computer. Such a reporting requirement would harness the informational potential of insider trading, and enhance market efficiency by speeding up the full impact of the trade upon market prices

Conclusion:

Even if restrictions on insider trading were considered desirable, their sound implementation is extremely expensive. A wide variety of individuals can be classed as insiders by virtue of possessing information material to securities prices — top management, upstream and downstream producers, regulatory and enforcement authorities, professional advisors, etc. Further, the universe of associates through whom insiders could route their trades is very large — family, friends, business associates who are “paid” in information, etc. Enforcement of restrictions upon insider trading runs the risk of either being ineffective or being a witch hunt. Even if there are pockets of high quality enforcement, they would not appear fair in an environment where insider trading is otherwise rampant. Even in the US, where significant resources have been expended on deterring insider trading, there is anecdotal evidence that a great deal of successful speculation continues based on insider trading.

Hence, if we view securities regulation in terms of maximising the impact upon market efficiency given a scarce supply of regulation and supervision, then insider trading would be a low priority.

 



Jon

John Forman asked:


Clearly, anyone who trades does so with the expectation of making profits. We take risks to gain rewards. The question each trader must answer, however, is what kind of return he or she expects to make? This is a very important consideration, as it speaks directly to what kind of trading will take place, what market or markets are best suited to the purpose, and the kinds of risks required.

Let s start with a very simple example. Suppose a trader would like to make 10% per year on a very consistent basis with little variance. There are any number of options available. If interest rates are sufficiently high, the trader could simply put the money in a fixed income instrument like a CD or a bond of some kind and take relatively little risk. Should interest rates not be sufficient, the trader could use one or more of any number of other markets (stocks, commodities, currencies, etc.) with varying risk profiles and structures to find one or more (perhaps in combination) which suits the need. The trader may not even have to make many actual transactions each year to accomplish the objective.

A trader looking for 100% returns each year would have a very different situation. This individual will not be looking at the cash fixed income market, but could do so via the leverage offered in the futures market. Similarly, other leverage based markets are more likely candidates than cash ones, perhaps including equities. The trader will almost certainly require greater market exposure to achieve the goal, and most likely will have to execute a larger number of transactions than in the previous scenario.

As you can see, your goal dictates the methods by which you achieve it. The end certainly dictates the means to a great degree.

There is one other consideration in this particular assessment, though, and it is one which harks back to the earlier discussion of willingness to lose. Trading systems have what are commonly referred to as drawdowns. A drawdown is the distance (measured in % or account/portfolio value terms) from an equity peak to the lowest point immediately following it. For example, say a trader’s portfolio rose from $10,000 to $15,000, fell to $12,000, then rose to $20,000. The drop from the $15,000 peak to the $12,000 trough would be considered a drawdown, in this case of $3000 or 20%.

Each trader must determine how large a drawdown (in this case generally thought of in percentage terms) he or she is willing to accept. It is very much a risk/reward decision. On one extreme are trading systems with very, very small drawdowns, but also with low returns (low risk – low reward). On the other extreme are the trading systems with large returns, but similarly large drawdowns (high risk – high reward). Of course, every trader’s dream is a system with high returns and small drawdowns. The reality of trading, however, is often less pleasantly somewhere in between.

The question might be asked what it matters if high returns in the objective. It is quite simple. The more the account value falls, the bigger the return required to make that loss back up. That means time. Large drawdowns tend to mean long periods between equity peaks. The combination of sharp drops in equity value and lengthy time spans making the money back can potentially be emotionally destabilizing, leading to the trader abandoning the system at exactly the wrong time. In short, the trader must be able to accept, without concern, the draw-downs expected to occur in the system being used.

It is also important to match one’s expectations up with one’s trading timeframe. It was noted earlier that in some cases more frequent trading can be required to achieve the risk/return profile sought. If the expectations and timeframe conflict, a resolution must be found, and it must be the questions from this expectations assesment which have to be reconsidered, since the time frames determined in the previous one are probably not very flexible (especially going from longer-term trading to shorter-term participation).



Kenneth

singapore trader asked:


Trade and Trade the Plan

 

 Successful stock market trading begins with a winning trading plan. It’s as simple as that. If you develop a well-conceived trading plan to guide your actions in the stock market you will already have the advantage over most of your market competition. Put simply, it gives you the edge you need to win over the long haul when trading the stock market or forex market.

 

A stock market trading plan will not guarantee your success in the markets, but a good plan will enable you to work methodically toward your stock market trading goals while reviewing on a regular basis what is working and what is not. It will act as a roadmap for your trading journey. It will enable you to respond positively and constructively no matter what happens with your individual trades. And, most importantly, it will help you control the only thing a trader can control: his or her own actions.

Finally, stock market trading is a business. It can be a fascinating and sometimes thrilling business, but in the end it is a business. A trading plan helps you treat it as a business.

Here are some important elements of a trading plan.

 

 1. Why am I trading? What are my goals? 

 

The answers to these questions might seem obvious, but they usually are not. Take some time to ask them of yourself, and seriously consider the answers. You may be surprised by what you learn. And whatever the answers, you will have a clearer picture going forward of what this enterprise means to you, and that will help you survive any rough patches.

 

 2. What markets am I going to trade and why? 

 

It is often best to specialize, especially for beginning stock market traders. Many pros make a great living trading the same stock day every single day for years. Choose a market that is appropriate for your experience level and trading style. Consider other factors such as available margin, volatility and liquidity.

 

 3. What is the concept or philosophy behind your trading methodology?  

 

Your trading system must have a concept behind it. Whether you are a value investor like Warren Buffet or a trend trader like George Soros, you should understand why you are doing what you are doing, how your beliefs about the markets define what you will do as a trader.

 

 4. What will be your specific method? 

 

In other words, specifically how will you execute your trading ideas? Will you buy breakouts or pullbacks? Buy oversold or sell overbought? Or will you use specific technical setups such as moving-average crossovers or another indicator-based strategy? Under exactly what conditions will you enter? When will you know to exit?

 

 5. How much money will you risk on any single trade? On trading in general?

 

This is critical. Of course, start small. But just as importantly, have a plan in place for how much you will risk, emotions don’t cloud your judgment when the time comes. The key is to find an allocation that doesn’t cause any stress but still makes the trade worthwhile financially. One of the biggest problems with newer traders is that they are trading way too big in relation to their account size. Like when you are forex trading. Trading forex at 100-1 leverage is like introducing your mistress to your wife. Yes, you can do it, but that doesn’t make it a good idea.  Normally they don’t get along too well.

 

6. What will my trading rules be?

 

This is also critical. Your trading rules include entry and exit rules, rules governing maximum daily, weekly or monthly losses, maximum risk on any given trade, the maximum number of trades per week, etc., etc. These rules enforce discipline and keep you out of trouble. What stock price will enter at, what stock price will I will exit. Be discplined.

 

7. How will I record and evaluate my trading performance?

 

Allow me to repeat myself: This is critical. In fact, this might be the most important element of trading for new traders in the stock market. A new stock market trader who evaluates his trades, winners and losers, in an effort to learn what works and what does not, will make quantum leaps forward in terms of ability and profitability. If you have a working trading plan and evaluate every single one of your trades after you have closed it you have already beaten 95% of the competition.

 

8. What are my rules for managing profits?

 

What’s the problem with profits? Well, believe it or not there is one, and it’s a serious one. It’s called euphoria, and it clouds the judgment perhaps more than any other emotion related to trading. Start piling up the profits for the first time and it won’t be long before you are convinced you are king of the world. About 30 seconds later you’ll be broke, following a series of unwise and exceedingly risky trades. So have a plan for protecting closed profits when you have reached your goals for the week or the month. Don’t give them all back.

 

9. How will I reward myself for following my trading plan?

 

Don’t leave this out. Following your trading plan will bring rewards in the form of profits, but you should also consciously reward yourself for doing so because it is such an important part of successful trading. So if you finish the week or the month (or even the day) without having broken any of your trading rules, find a way to reward yourself. You deserve it. You are in rare company.

 

If you follow your plan you are improving your chances of becoming sucessful stock market or forex trader.

 

Happy Trading

 

About the Author

CFD FX Report is a real time tool for clients with an interest in the trading of stocks, indices and commodities globally.CFDs (Contracts For Differences) are one of the worlds’ fastest growing trading instruments that allows clients to profit from a rising and falling market. The CFD FX Report is a company comprising of expert traders that analyse the market daily and are able to make recommendations for the following day trades based on this analysis. The CFD FX Report is released everyday at 6.30 p.m. (Singapore time) for review by the clients for the next trading day.

We provide sms and email service for our trade ideas as well as full member support. The trading tool that traders needs. Free 1 week trial



Kenneth

Dick Wheeler asked:


Once you have decided that your company needs a presence in an upcoming show by having a trade show exhibit, it is important to understand the ins and outs of trade show booth selection. In order for the exhibitor to choose the appropriate trade show display, it is necessary to know the distinction among the five basic types of trade show exhibits.

It is makes good sense, then, to do your homework before you select a trade show display. The trade show industry identifies exhibits as either custom, custom modular, pre-owned, portable or rental. Each trade show display type suits a specific need depending on show requirements.

The top option is the custom trade show booth which is built from scratch with exacting booth space specifications in mind such as width, height and depth. With the custom build, you can have a one- of- a kind, eye-catching trade show exhibit that incorporates new design elements, materials and AV components that enhance your company’s powerful image. The custom trade show display can be the right choice when announcing a major breakthrough product or when you need to display your company’s dominance in its field.

The next trade show display option is the custom modular trade show exhibit which offers the dramatic trade show exhibit imaging without the higher cost of the custom trade show display. Its highly flexible components allow you to reconfigure the design or size of your booth from one trade show to the next. The custom modular trade show booth has interchangeable components such as back walls, counters, display pedestals and exterior panels. It uses lightweight structural materials such as aluminum, Plexiglas and high-grade fabrics. The benefits of the custom modular trade show booth are its simplified assembly, space-saving packing, and lower shipment and handling costs. This type of exhibit is a good solution for the exhibitor who wants a very high quality of design yet requires size flexibility and affordability.

Another option is the pre-owned trade show display that saves your company when you face a time or budget crunch. You can cut your trade show exhibit design time and construction costs by more than half when you select a previously owned trade show booth display. Professional trade show display companies have impressive inventories of top quality pre-owned exhibits for sale or rent. They often own exhibits that their clients have formerly used. You can find numerous options depending on size, design, scope and price similar to trade show display rentals. Be sure to select an exhibit configuration that fits your booth space and then modify the graphics and structural elements to conform to your staffing, image, communications and traffic requirements.

Yet another trade show exhibit option is the portable trade show booth. It is extremely easy to install and dismantle due to its skeletal frame that has attachable laminate panels which clip together offering multiple structural styles. It is lightweight and highly portable and is able to meet a variety of trade show display configurations while offering a distinctive creative image. Accessories such as bridges, counters, alcoves and backlighting can enhance the versatility of the interchangeable portable trade show display systems. The portable trade show display system can convert from tabletop to island trade show exhibits easily. It adapts to a multitude of trade show display situations with minimal effort. The ease of transporting and assembling is the key to the portable trade show exhibit. Cost-saving portable trade show displays are an especially suitable option for the first-time exhibitor and for appearances at smaller, regional shows.

Another way to go is to rent a trade show booth rather than purchasing one. Renting can be the perfect solution for an occasional island trade show exhibit; when you need to supplement your regular trade show exhibit; when you have a trade show booth scheduling conflict; or when a simultaneous trade show appearance requires you to exhibit at more than one location at the same time.

By selecting the appropriate type of trade show booth for your next show, you will be able to establish a trade show exhibit that will convey your company’s identity that fits your precise needs for any given trade show appearance. This is true wherever you have your custom trade show exhibit, custom modular exhibit, pre-owned trade show display, portable trade show booth or rental trade show exhibit– whether at the Las Vegas Convention Center, the Moscone Center in San Francisco, the Santa Clara Convention Center or the San Jose McEnery Convention Center.



Lawrence

Jason Ng asked:


Have you ever heard of the terms Scalping, Swing Trading, Trend Trading and Momentum Trading? Wonder if you are any of them? Wondering what suits you? Here’s a quick definition.

The different forms of trading are actually better differentiated by time frame more than the techniques that are involved. Because of the difference in time frame, different techniques must be used in order to reap profits from the capital markets.

From the shortest holding period to the longest, we have Scalping, Momentum Trading, Swing Trading and lastly, Trend Trading.

Scalping is a term used for a method where trades are opened and closed within a very short time scale, perhaps anything from a second or two to a few minutes. This is a day trading method where Scalpers make several, perhaps hundreds of trades a day, accruing small profits intraday for an overall daily return.

Momentum trading is another day trading method where the trader sees an acceleration in a stock’s price, earnings, or revenues and takes a long or short position in the stock with the hope that its momentum will continue in either an upwards or downwards direction. Once momentum slows down or falls, the trade is exited. The holding period is commonly from a few hours up to a whole day.

Swing Trading is a style of trading that attempts to capture gains in a stock within one to four days. This is mainly used by private, at home traders. The individual trader is able to exploit the short-term stock movements without the competition of major traders. Swing traders use technical analysis to look for stocks with short-term price momentum. These traders aren’t interested in the fundamental or intrinsic value of stocks but rather in their price trends and patterns.

Trend Trading is a trading strategy where traders commonly hold their positions for up to a month. It is a trading strategy that attempts to capture gains through the analysis of an asset’s momentum in a particular direction. The trend trader enters into a long position when a stock is trending upward (successively higher highs). Conversely, a short position is taken when the stock is in a down trend (successively lower highs).

All in all, Swing Trading and Trend Trading seems like the way to go for most private traders who has a day job or who cannot afford to day trade the market.

I too am a Swing Trader and have enjoyed tremendous success for the past few years using what I call the Star Trading System. Read about it here at http://www.mastersoequity.com



Allen

Anthony Green asked:


Trading is much more of a psychological problem then a methodological one, only the traders who have first accepted this have a chance of being consistently successful traders. Without an understanding of trading psychology and the various issues that circumvent method, there will be virtually no chance to overcome the fear, confusion, and despair that can be inherent in trading. Ultimately, after a series of consecutive losses, method becomes replaced with a feeling that it is impossible to do anything right; if for no other reason than this situation, trading psychology is more critical than trading method.

New Trader Scenario

Consider a scenario where a trader develops a method for day trading an index future. The method gives 15 trades per day, and the trader has gotten to the point where they are able to paper trade with the following results: 9 wining trades averaging $85 each, and 6 losing trades averaging -$65 each thus giving $375 average daily gains. The trader has achieved these results for three consecutive months; their paper trading goals have been met and it is time to start trading real money.

Real money trading begins, but things quickly change. Instead of trading their method like they did when paper trading, the trader starts skipping trades trying to pick the winners instead of accepting the 40% losers; of course, they invariably pick more losers than winners. Trying to then correct this problem, the trader decides that maybe they are entering their trades too late. So now instead of letting the setup complete and then doing the trade, the trigger is anticipated so the trade can be entered earlier – the losses get worse.

With the continued losses the emotions take over: What is wrong, why am I such a pathetic loser? Maybe its not my fault, maybe the method just doesnt really work.

The problems get worse with each trade, more emotions and more loses – the trader quits trading. The trader now decides that their paper trading results werent really adequate to begin real money trading. They will go back to paper trading and studying again.

Thoughts that are going through the traders mind now: Maybe I should try different trading methods until I can eliminate those losing trades then I will be ready to trade real money again. Really, maybe I should just quit trading altogether maybe I am just a loser, and thats why I cant trade.

The Trading Psychology Plan

What should be very apparent from this scenario is that the trader never traded their paper trading method plan after transitioning to real money trading. Unfortunately, the trader is unable to realize what they have done, instead their emotions first place blame on the method thinking that it really doesnt work, and then on themselves for being such a pathetic loser. The final result being that the trader quits trading, and if the real underlying reasons for what has happened arent accepted and changed, this trader will never be able to trade real money even if their paper trading results become 100% winners, which of course is not going to happen.

The trader had a trading method plan, but they did not have a trading psychology plan. They did not have a way to make the transition from fear and emotion directed trading to actually trading the method as designed. They did not have a plan to objectively access and understand their given non-method actions, and then define a setup for replacing them.

The trading psychology plan must begin with an honest assessment and acceptance for what really happened: the trader never traded their method plan; there is no other blame to be placed, or excuses to be made. There is nothing wrong with the trading plan, and regardless, the trader has not traded it in order to be able to make that evaluation. As well, traders cannot internalize trade loses where they lead to their viewpoint of themselves you are not a loser because your trade is a loser.

Trading Psychology Plan Components

Accept that losing will be a normal part of trading. Not only is it impossible to be perfect, it is not an objective or necessary to be a profitable trader.

Replace the focus of winning and losing with the objective of following your plan. This was not done while paper trading, as the trader had a specific profitability goal that they used to tell them when they were prepared to trade real money. They did not understand that the reason they achieved this goal was because of how they followed their plan.

Remain neutral and non-judgmental towards yourself. If profitable trading is ever going to be possible, this is mandatory. There is no way that you are going to be able to trust yourself to manage risk while you are also telling yourself that you are stupid or a pathetic loser each time you lose or feel that you have done something wrong.

Eliminating your emotions is not the objective; I actually do not think this is possible. Emotions are always going to enter into trading learn to control the emotions, instead of having them control you.

Accept that emotions are a part of life; they arent by definition good or bad, and actually if you can shift the focus of what the emotion represents, they can be very beneficial for the trader. For instance, if I am feeling confused and that causes an emotional response or hesitation, I want to feel that emotion. This emotion becomes a warning to me that I should wait and try to find more chart-market clarity before taking a trade, something that can be very typical when markets are in congestion.

Start slowly this may be the most important component of your plan. For instance, begin trading real money for an hour at a time, and then assess what you have done, always asking yourself the question: did I follow my plan, or did I take non-method trades.

Granted, you will not be able to approximate your paper trading results as the expectancy of that plan was achieved by averaging 15 trades per day. However, not only will this help further to shift the focus from how much money did I make to did I follow my plan, it will also allow you to acclimate to the logistics of real time-real money execution, and the related initial emotions, where all of a sudden the market feels like it is moving considerably faster. By doing this you will build-up to trading your full plan at a pace that wont cause you to become so overwhelmed by the process, and immediately cause you to avoid what you had intended to do as fear and emotion becomes too strong.

You have a great trading method and trading plan. You have profitably paper traded, and you ARE now ready to start trading real money just be sure that you have a trading psychology plan that is as good as your trading method plan, and that you realize that neither will be of any use to you without the other.



ARAV

Best Coffee Maker asked:


Fair Trade coffee is the first commodity to be set up with an independent monitor. This monitor makes sure the Fair Trade agreement is adhered to, supporting the small farmers growing coffee around the world. The Fair Trade agreement, whether it is for coffee, chocolate, or any other number of items, creates a fair partnership between consumers and the producers of item in question. You may have seen this label on other foods or hand made items at your local store. The Fair Trade movement is to ensure that small farmers and craftsmen get a fair price for their work… whether it is for a crafted item or for a harvest. In the case of Fair Trade coffee, it is the coffee farmers who get a boost from the agreement.

The Fair Trade coffee farmers are grouped into cooperatives around the world. The farmers receive a living wage (they are guaranteed a minimum of $1.26/pound no matter what the market is paying); credit at a fair price; and long lasting relationships with the buyers. Fair Trade payments are invested in education, health care, economic independence and environmental care. Fair Trade certified coffee is the first product to use this independent monitoring system. The system ensures that the coffee was produced under fair labor conditions for the workers. This is very important, as coffee production is very labor intensive work for all concerned.

Why is Fair Trade Certified Coffee so important? More and more people around the world are caring about how their products are produced. Is the product good for the earth? Are the workers treated well and paid sufficiently for their time? As more consumers learn of this trend, they are jumping on the bandwagon to purchase more Fair Trade products.

Over 100 companies have signed on to offer Fair Trade coffee. You may recognize some of their names: Starbucks, Peet’s, Equal Exchange, Tully’s, Green Mountain and Diedrich are but a few. These companies represent over 7,000 retail shops around the world.

The environment needs the support. Small farmers like the ones represented in the Fair Trade coffee farmers’ cooperatives take the best care of the land. Supporting Fair Trade means you are supporting the environment with your purchasing power. Fair Trade coffee farmers are too poor to clear cut the land or buy chemical pesticides and fertilizers. Their coffee is grown in small plots of mixed crops, and is grown organically.

Why can’t the farmers do this by themselves? You’d think with the popularity of gourmet coffee, they’d be doing just fine. The truth is the price of coffee beans is volatile. It rises and falls dramatically on a daily basis. The grower gets only a very small piece of the pie, while the consumer pays a high price at the stores. The grower then is kept in a cycle of poverty and debt, as the grower is often paid less than it costs him and his family to grow and harvest the coffee. Buying Fair Trade coffee will help farmers and their families all around the world to break out of this cycle and live a better life.



Dennis