Benefits of CFDs (from MF Global)
Trade on margin
CFDs are traded on margin, starting from 4% for FX CFDs and 5% for Share, Index and Commodity CFDs. This is a more efficient use of your capital because you only have to allocate a small proportion of the total value of your position to secure a trade, while maintaining full exposure to the market. This enables you to magnify the returns* on your investment.
Benefit from rising and falling markets
CFDs give you the potential to profit when the markets fall, as easily as when they rise. You can also hedge your long share positions in falling markets by shorting with CFDs. CFDs provide you with more trading flexibility and give you more opportunities to profit. It is just as easy to sell a CFD as it is to buy. Going short in the physical market may also require a higher margin on the value of the position. CFD providers do not usually distinguish between a long and a short position in this regard. Therefore, on this basis alone, a CFD is a more effective means for a trader to benefit from falling markets (and short term intraday movements) and can also be used more easily to hedge long positions in the physical market.
Margins & Leverage
Margin and leverage are terms that are sometimes used interchangeably, but it is important to distinguish between them.
Margin is the amount of deposit required to secure a position starting from 4% for FX CFDs and 5% for Share, Index and Commodity CFDs. The margin is calculated as a percentage of the notional value of the position and is charged to cover the traders’ account in the event that the position moves against them. The CFD Margin requirement set by a CFD provider is determined by a range of factors including the liquidity of the underlying instrument and its capitalisation.
Leverage, also known as gearing, is the ability to take a position with notional value greater than the cash outlay required. For instance traditional share trading has leverage of 1:1. That is, for every $1 of investment the trader is required to pay $1 in cash. A Share CFD position with a 5% margin requirement has leverage of 20:1. That means for every $1 of cash invested the profit or loss will be multiplied by factor of 20. Leverage means returns are magnified and this applies equally to gains and losses.
Share CFDs - Corporate Actions / Dividends
Share CFDs generally reflect the corporate actions of the underlying share, which includes receiving (or paying) dividends where appropriate (excluding franking and imputation credits). If you hold a long Share CFD position over its ex-dividend period you are entitled to receive the amount of the dividend. Alternately, if you hold a short Share CFD position over the ex-dividend period, you are liable to pay the amount of the dividend. Share CFDs are also subject to other corporate actions such as bonus and rights issues.
Friday, February 11, 2011
Personal Investment Tips
Smart Investing Tips (cited from suite101.com)
Research, Stragtegize, and Diversify Investments
Smart Investing is for Everyone - Alan Cleaver
Smart investing means developing the best personal investment strategy. Make the perfect plan with financial advisement, being sure to diversify investments.
An investor's financial future depends on smart investing. Over a period of time, money can be made, lost, or remain relatively stagnant. With a well thought-out personal investment strategy, founded upon solid research and a little help from a personal finance planner, the likelihood that investments will bring back expected returns will rise. Do some background research, consult with a financial adviser, and make a point to diversify investments.
Research Investments and Options for Smart Investing
The first step for smart investing is to ask questions. Figure out foundational expectations before going in to develop an investment strategy with a personal adviser. What types of investments make the most sense, and what are the expenses and risks involved with those investments? Is social responsibility an issue when putting money into mutual funds? What are financial goals five years, ten years, and thirty years in the future? How important are savings and investments and how much money can be set aside to meet these goals?
Once the questions are developed, research investments and different options, investigate types of life insurance policies, socially-responsible mutual funds, and the costs involved with stock and bond investments. Taking a look at personal needs and then taking the time to find the answers can make decision making with a financial planner much less overwhelming. It will also help prioritize personal needs and wants, that a finance planner may not have the foresight to inquire about.
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Making a Personal Investment Strategy
The next step for smart investing is to make the plan. The help of a personal finance planner can be a great asset at this point as guidance and more in-depth knowledge may be needed to make the best decisions. Talk with a professional about financial goals, debt management, and options. Be sure to ask questions that could not be answered previously. Be honest and realistic about risk tolerance, the priority of investments over financial needs, and personal goals.
What is in a personal investment strategy? This is the road map for a lifetime of smart investing. It includes an assessment of present financial situations, future projections, and all of the financial decisions in between.
Why Diversify Investments
No personal investment strategy is complete without diversification. Smart investing means reassurance that the risks involved are cushioned by the use of multiple investment avenues. Mutual funds may not be as risky as stock trading, but as a single investment they could be considered risky. What if one fund yields a small return after the associated expenses are covered?
Read on
Make Money with Low-Risk Investments
Investing Basics for Families
Expert Tips for Retirement Investing
This is why it is so important to diversify investments. Put money in a combination of stable investments such as bonds and CD's, more variable types, such as mutual funds, and then some individual stocks. Take out a life insurance policy and set aside a certain amount of money for a retirement fund or personal savings account. With an array of investments, each of which has been examined for potential, risk, and personal suitability, an investor is guaranteed to profit. Research investments, learn about different options, seek guidance, and diversify. Following these tips makes smart investing attainable for everyone.
Sources:
Investor Education Fund
"Knowing your situation: A Personal Investment Strategy." (Money Instructor.com).
Read more at Suite101: Smart Investing Tips: Research, Stragtegize, and Diversify Investments http://www.suite101.com/content/smart-investing-tips-a188669#ixzz1DhHGxcLu
Research, Stragtegize, and Diversify Investments
Smart Investing is for Everyone - Alan Cleaver
Smart investing means developing the best personal investment strategy. Make the perfect plan with financial advisement, being sure to diversify investments.
An investor's financial future depends on smart investing. Over a period of time, money can be made, lost, or remain relatively stagnant. With a well thought-out personal investment strategy, founded upon solid research and a little help from a personal finance planner, the likelihood that investments will bring back expected returns will rise. Do some background research, consult with a financial adviser, and make a point to diversify investments.
Research Investments and Options for Smart Investing
The first step for smart investing is to ask questions. Figure out foundational expectations before going in to develop an investment strategy with a personal adviser. What types of investments make the most sense, and what are the expenses and risks involved with those investments? Is social responsibility an issue when putting money into mutual funds? What are financial goals five years, ten years, and thirty years in the future? How important are savings and investments and how much money can be set aside to meet these goals?
Once the questions are developed, research investments and different options, investigate types of life insurance policies, socially-responsible mutual funds, and the costs involved with stock and bond investments. Taking a look at personal needs and then taking the time to find the answers can make decision making with a financial planner much less overwhelming. It will also help prioritize personal needs and wants, that a finance planner may not have the foresight to inquire about.
Ads by Google
$1500 Cash in 1 Hour All Credit Histories OK. Great service. Cash wired in 1 Hour! www.Cash-In-1-Hour.com.au
Jobs for Proofreaders Looking for Proofreading Jobs? Start Your Search Now at CareerOne. www.CareerOne.com.au
Making a Personal Investment Strategy
The next step for smart investing is to make the plan. The help of a personal finance planner can be a great asset at this point as guidance and more in-depth knowledge may be needed to make the best decisions. Talk with a professional about financial goals, debt management, and options. Be sure to ask questions that could not be answered previously. Be honest and realistic about risk tolerance, the priority of investments over financial needs, and personal goals.
What is in a personal investment strategy? This is the road map for a lifetime of smart investing. It includes an assessment of present financial situations, future projections, and all of the financial decisions in between.
Why Diversify Investments
No personal investment strategy is complete without diversification. Smart investing means reassurance that the risks involved are cushioned by the use of multiple investment avenues. Mutual funds may not be as risky as stock trading, but as a single investment they could be considered risky. What if one fund yields a small return after the associated expenses are covered?
Read on
Make Money with Low-Risk Investments
Investing Basics for Families
Expert Tips for Retirement Investing
This is why it is so important to diversify investments. Put money in a combination of stable investments such as bonds and CD's, more variable types, such as mutual funds, and then some individual stocks. Take out a life insurance policy and set aside a certain amount of money for a retirement fund or personal savings account. With an array of investments, each of which has been examined for potential, risk, and personal suitability, an investor is guaranteed to profit. Research investments, learn about different options, seek guidance, and diversify. Following these tips makes smart investing attainable for everyone.
Sources:
Investor Education Fund
"Knowing your situation: A Personal Investment Strategy." (Money Instructor.com).
Read more at Suite101: Smart Investing Tips: Research, Stragtegize, and Diversify Investments http://www.suite101.com/content/smart-investing-tips-a188669#ixzz1DhHGxcLu
Online Trading
some stuff about online trading from http://www.theonlinetradingguide.com/
Online trading definition is a basic understanding of online trading processes. Since the invention of Internet people have beena able to do practically everything virtually. Due to the Internet online trading has become one of the most popular ways to trade as far as stock trading turned out to be as available to independent investors as possible. Online trading gives both beginners who've just had a single day trading course and advanced traders an opportunity to trade stocks, options, forex and futures all over the world without physical presence of a broker and with much lower commissions, because everything is done online.
Stock online trading is based on buying and selling stocks. Today stock online trading is the most popular method to trade owing to computers, because information on stocks was available only to brokers and you had to call a broker and pay brokerages for buying or selling stocks and now this information is widely available. Since this modifications occurred traders can control their investments with the help of Internet.
Stock option online trading is based on buying and selling options and very perspective financial products. This system gives traders a perfect chance to control and protect their stocks and generate their investment benefits as far as an option is an agreement to buy or to sell certain financial product. The main idea of stock option online trading is that an option you buy has its fixed price and time limitation.
Forex online trading is another speculative online business based on buying and selling foreign exchange, gaining profits due to rise and fall of currency rate, namely on the difference between the currency pairs price.
Futures online trading is another kind of online trading which is based on buying and selling financial products (commodities, labour, currency) by means of futures contracts. Such contract specifies a particular date (delivery date or final settlement date) in the future when a certain financial product should be bought or sold and this product's price.
Speaking about online trading it's necessary to say about safe online trading. It's obvious that in order to trade online you'll have to open your online account and choose online trading software. When you choose a certain website for your future account, you should search for information about a company you are going to fix upon and make sure that it has a trustworthy reputation. The same refers to choosing online trading software, platform and online trading portal.
In conclusion it's necessary to say that online trading is a perfect opportunity to trade and earn money but still it's obvious that online trading is not for everyone. That's why before you start trading, you should find out more about online trading pros and cons, online trading concepts and of course about online trading tips. Knowledge is a main key for your successful online trading, don't ever identify online trading with gambling because the results of such approach can be disastrous.
Ensure your finances are structured accordingly before you hit the trading floors online...If debt free advice is required...ensure you seek quality advice.
Online trading definition is a basic understanding of online trading processes. Since the invention of Internet people have beena able to do practically everything virtually. Due to the Internet online trading has become one of the most popular ways to trade as far as stock trading turned out to be as available to independent investors as possible. Online trading gives both beginners who've just had a single day trading course and advanced traders an opportunity to trade stocks, options, forex and futures all over the world without physical presence of a broker and with much lower commissions, because everything is done online.
Stock online trading is based on buying and selling stocks. Today stock online trading is the most popular method to trade owing to computers, because information on stocks was available only to brokers and you had to call a broker and pay brokerages for buying or selling stocks and now this information is widely available. Since this modifications occurred traders can control their investments with the help of Internet.
Stock option online trading is based on buying and selling options and very perspective financial products. This system gives traders a perfect chance to control and protect their stocks and generate their investment benefits as far as an option is an agreement to buy or to sell certain financial product. The main idea of stock option online trading is that an option you buy has its fixed price and time limitation.
Forex online trading is another speculative online business based on buying and selling foreign exchange, gaining profits due to rise and fall of currency rate, namely on the difference between the currency pairs price.
Futures online trading is another kind of online trading which is based on buying and selling financial products (commodities, labour, currency) by means of futures contracts. Such contract specifies a particular date (delivery date or final settlement date) in the future when a certain financial product should be bought or sold and this product's price.
Speaking about online trading it's necessary to say about safe online trading. It's obvious that in order to trade online you'll have to open your online account and choose online trading software. When you choose a certain website for your future account, you should search for information about a company you are going to fix upon and make sure that it has a trustworthy reputation. The same refers to choosing online trading software, platform and online trading portal.
In conclusion it's necessary to say that online trading is a perfect opportunity to trade and earn money but still it's obvious that online trading is not for everyone. That's why before you start trading, you should find out more about online trading pros and cons, online trading concepts and of course about online trading tips. Knowledge is a main key for your successful online trading, don't ever identify online trading with gambling because the results of such approach can be disastrous.
Ensure your finances are structured accordingly before you hit the trading floors online...If debt free advice is required...ensure you seek quality advice.
Forex Trading
Forex trading is good way to build your personal wealth as well.
Few tips from http://www.freeforextips.net/
Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Games are fun except when you lose real money...
Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 months for demo trading.
Consider this: 90% of beginners fail to succeed in the real money market due to lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals
Tip 4. Always take a look at the time frame larger than the one you've chosen to trade with.
It gives the bigger picture of market price movements and thus helps to clearly define the trend. For example, when trading with 15 minute time frame,ake a look at 1 hour charts.
In the same way: trading with 1 hour charts would require obtaining a picture of daily, weekly price movements.
Few tips from http://www.freeforextips.net/
Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Games are fun except when you lose real money...
Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 months for demo trading.
Consider this: 90% of beginners fail to succeed in the real money market due to lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals
Tip 4. Always take a look at the time frame larger than the one you've chosen to trade with.
It gives the bigger picture of market price movements and thus helps to clearly define the trend. For example, when trading with 15 minute time frame,ake a look at 1 hour charts.
In the same way: trading with 1 hour charts would require obtaining a picture of daily, weekly price movements.
Thursday, February 10, 2011
Stock Broking Tips
Stock Broker Advice from http://www.sharestobuy.com.au
Advice from a stock broker can definitely be very useful; however, the quality and genuineness of this advice unfortunately can vary greatly from one stock broker to the next. Stock brokers earn their living by taking a commission every time their clients buy or sell a stock. Therefore, all stock brokers have a financial incentive to get you to trade more; sometimes this leads to them giving you advice that is really just a ploy to collect a commission from you, with no real basis in legitimacy. However, there are some honest stock brokers out there who value the repeat business of their clients and understand that the more accurate advice they give the more likely their clients are to stick around and help the broker attract new clients.
For beginning stock traders and investors, finding an honest stock broker can be especially useful, especially if you are totally new to the investing world and don’t understand the terminology, expenses, fees, or just the overall process. A stock broker can be a great resource to walk you through every step and explain the way things work at least for the first few trades you make. Keep in mind however, that a full service stock broker can be expensive; it may be worth the money however if you are completely new and really have no idea what you are doing.
A key trick to finding an honest stock broker that will likely end up giving you honest stock trading advice, is to find a broker that is willing to work with you even though you might be trading on a much smaller scale than some of their other high dollar clients. A broker who is willing to provide you with quality stock market training and teach you the ropes, probably has a genuine interest in his or her clients doing well, thus they are probably an honest person that is worth giving some of your money to in order to learn effectively.
One big advantage to taking advice from your stock broker, assuming you have found an honest one, is that they can provide excellent insight and valuable advice on how to effectively diversify your portfolio in order to minimize risks and maximize long-term investment gains in the market. Most brokers have a great deal of stock market information to share with you as well as in-depth experience in the business and a good college education, often times they have excellent gut instincts about what is coming next in a given stock, although this trait is admittedly more difficult to find in most stock brokers.
It is crucial to not rely completely on stock broker advice however, brokers are human too and they can make mistakes just like everyone else, even if you find the most honest and accurate stock broker out there. However, especially if you are a beginning trader, by following the advice of a quality stock broker you are likely to make fewer mistakes than if you were trading or investing on your own because you can learn from mistakes the stock broker has made in the past and hopefully avoid committing these same mistakes by taking their advice.
One important point to remember is that there are some honest stock brokers out there, but remember that they all make more money the more transactions you make through them. So, make sure you don’t blindly take stock broker advice, take it with a grain of salt and do your own research to confirm what they are telling you, especially when starting with a new broker.
We offer a stock newsletter that comes with a free trial that we think you will agree has some of the best stock advice around, sign up for the free trial to get started.
Advice from a stock broker can definitely be very useful; however, the quality and genuineness of this advice unfortunately can vary greatly from one stock broker to the next. Stock brokers earn their living by taking a commission every time their clients buy or sell a stock. Therefore, all stock brokers have a financial incentive to get you to trade more; sometimes this leads to them giving you advice that is really just a ploy to collect a commission from you, with no real basis in legitimacy. However, there are some honest stock brokers out there who value the repeat business of their clients and understand that the more accurate advice they give the more likely their clients are to stick around and help the broker attract new clients.
For beginning stock traders and investors, finding an honest stock broker can be especially useful, especially if you are totally new to the investing world and don’t understand the terminology, expenses, fees, or just the overall process. A stock broker can be a great resource to walk you through every step and explain the way things work at least for the first few trades you make. Keep in mind however, that a full service stock broker can be expensive; it may be worth the money however if you are completely new and really have no idea what you are doing.
A key trick to finding an honest stock broker that will likely end up giving you honest stock trading advice, is to find a broker that is willing to work with you even though you might be trading on a much smaller scale than some of their other high dollar clients. A broker who is willing to provide you with quality stock market training and teach you the ropes, probably has a genuine interest in his or her clients doing well, thus they are probably an honest person that is worth giving some of your money to in order to learn effectively.
One big advantage to taking advice from your stock broker, assuming you have found an honest one, is that they can provide excellent insight and valuable advice on how to effectively diversify your portfolio in order to minimize risks and maximize long-term investment gains in the market. Most brokers have a great deal of stock market information to share with you as well as in-depth experience in the business and a good college education, often times they have excellent gut instincts about what is coming next in a given stock, although this trait is admittedly more difficult to find in most stock brokers.
It is crucial to not rely completely on stock broker advice however, brokers are human too and they can make mistakes just like everyone else, even if you find the most honest and accurate stock broker out there. However, especially if you are a beginning trader, by following the advice of a quality stock broker you are likely to make fewer mistakes than if you were trading or investing on your own because you can learn from mistakes the stock broker has made in the past and hopefully avoid committing these same mistakes by taking their advice.
One important point to remember is that there are some honest stock brokers out there, but remember that they all make more money the more transactions you make through them. So, make sure you don’t blindly take stock broker advice, take it with a grain of salt and do your own research to confirm what they are telling you, especially when starting with a new broker.
We offer a stock newsletter that comes with a free trial that we think you will agree has some of the best stock advice around, sign up for the free trial to get started.
CFD Trading Tips
Good one from http://www.learncfds.com
LearnCFDs.com is first and foremost about real trading ideas and strategies that help you become a better trader over time (not overnight). There are no get rich quick tips here so if you are looking for the next Holy Grail then you have come to the wrong place.
If you are looking to build a solid trading foundation that can weather all market conditions then you are in the right place. No hype. Just simple and effective trading strategies to build a steady, rising equity curve with minimal drawdowns.
1. Preserve Precious Capital – PPC
This fantastic money management/capital preservation idea was unashamedly taken from Marcel Link's brilliant trading book titled "High Probability Trading". Marcel goes on to explain in his book how in his early days a fellow trader saw him overtrading and suggested Marcel concentrate on preserving precious capital. He said “Forget about making money; just try as hard as possible not to lose any. Every dollar you have is precious, and fight as hard as possible to keep it in your pocket and out of someone else's”.
What is the point of having the best CFD trading or share trading system in the world if you have lost all your money? Therefore your goal will always be to keep your losses small.
2. Ensure you have an edge
It goes without saying that you need a positive expectancy trading system or an edge in the markets. There is a saying at poker tables along the lines of “if you look around the table and you can't see who the sucker is, its you!” In trading there are professionals who are dedicated to stripping money off you and you have to be diligent, disciplined and confident about your edge in the markets. Work hard and stay focused on keeping your edge.
3. Control your CFD leverage
CFD leverage is so powerful when things are going well and it can be so easy just to keep increasing position sizes as you are winning but the inevitable loss is always lurking around the corner. One lady managed to turn $50,000 into $750,000 in 10 months during the 2004 bull market, only to give half of that back in 1 bad week, March 2005. Ouch.
Start small with your CFD leverage and keep your total exposure low relative to your capital base. If you are starting out trade from zero leverage up to a maximum of 3 times your account size.
4. Use CFD stops religiously
Stop losses make sense. They help minimise your loss which helps you with CFD Tip number 1 – preserve precious capital. Every trade your enter should have a clearly defined CFD stop assigned to it and ideally you should have identified that CFD stop outside of live trading.
You see it's very easy to get emotionally charged when your position is falling rapidly and more than possible to give yourself reasons as to why your stock is going to miraculously head in your direction. It probably isn't and HOPE is not going to help. Define a CFD Stop outside of market hours and stick to it.
5. Establish clearly defined, realistic Trading Goals
“All I want to do is make a measly $1,000 a week trading with my $10,000. That's achievable isn't it?”
Alongside your 1st rule, preserving precious capital, your 1st major goal when starting out in CFDs is to keep your account in tact and stay in the game for the 1st year. Survival is paramount if you are going to make a decent living out of CFD trading. A mentor of mine, Jim Rohn, used to say “If you don't know where you are going, well you will get there” See the truth is, you will end up somewhere but is that really where you want to be? Wouldn't it make sense to attempt to plot a path towards a steady and successful CFD trading career?
Simple Goal writing procedure
Identify what it is you want
Focus on it daily
Kill all distractions that move you away from your goal
Gently bring yourself back to point 2
6. Keep a CFD trading or Share trading journal
A CFD trading journal allows you to record the trades you make just like you would with a diary entry on your life. Your CFD trading journal enables you to gain clarity on the reasons why you entered or exited a trade and will form the most powerful learning experience you will ever have in the CFD trading field.
Hindsight is the most powerful educator and when you look back on your thoughts and strategies, certain patterns will emerge – the good, the bad and the ugly. Take note of these and map a path to recovery.
What to record in your CFD trading journal:
What you bought or sold, profit or loss
Time trade was done
Reasons behind the trade – Technical, fundamental, tip or dart board
Include a chart showing proposed entry, stop and profit target
7. Have a well defined trading plan
Are you a discretionary trader or a mechanical system trader? Either way you need to establish a sensible trading plan that identifies the following:
Entry Strategy – Test hundreds of entry set ups. Prove to yourself that it works
Money management strategy – How much of your capital to place on each trade
Risk Management strategy – How much risk to allocate to each trade based on money management rule and stop loss size
In profit stop loss – You need to identify a Stop Loss when in profit. For example a trailing stop loss
Record keeping strategy – Keep your trading statistics up to date and a daily CFD trading journal
8. Be Disciplined
Now that you have created your CFD trading plan, be disciplined to stick to it. Consider the countless hours and sleepless nights that went into researching your trading methodologies. The testing, re-jigging then testing and testing again. Trust what you have done is right and trust that you have a tested edge in the markets. The rest will take care of itself.
9. Scale in and out of CFD trades
Most successful traders trading accounts are neutral for most of the year. But there is usually a window in any 12 month period of 2-4 months where profits are unbelievable. The thing is you don't know when that is going to be so you need to keep your capital in tact (PPC) during those lean months. Then when the market turns its time to start adding aggressively to winning positions. All the greatest and most successful traders in our time have learnt this powerful strategy.
10. Keep a positive mindset
Don't treat trading like it's life or death. Have some fun (Funny Trading Videos) and take your time to learn the key foundations to successful share and CFD trading. Along the way keep a positive mindset and a positive attitude and by staying patient the 'purple patch of profits' will happen.
LearnCFDs.com is first and foremost about real trading ideas and strategies that help you become a better trader over time (not overnight). There are no get rich quick tips here so if you are looking for the next Holy Grail then you have come to the wrong place.
If you are looking to build a solid trading foundation that can weather all market conditions then you are in the right place. No hype. Just simple and effective trading strategies to build a steady, rising equity curve with minimal drawdowns.
1. Preserve Precious Capital – PPC
This fantastic money management/capital preservation idea was unashamedly taken from Marcel Link's brilliant trading book titled "High Probability Trading". Marcel goes on to explain in his book how in his early days a fellow trader saw him overtrading and suggested Marcel concentrate on preserving precious capital. He said “Forget about making money; just try as hard as possible not to lose any. Every dollar you have is precious, and fight as hard as possible to keep it in your pocket and out of someone else's”.
What is the point of having the best CFD trading or share trading system in the world if you have lost all your money? Therefore your goal will always be to keep your losses small.
2. Ensure you have an edge
It goes without saying that you need a positive expectancy trading system or an edge in the markets. There is a saying at poker tables along the lines of “if you look around the table and you can't see who the sucker is, its you!” In trading there are professionals who are dedicated to stripping money off you and you have to be diligent, disciplined and confident about your edge in the markets. Work hard and stay focused on keeping your edge.
3. Control your CFD leverage
CFD leverage is so powerful when things are going well and it can be so easy just to keep increasing position sizes as you are winning but the inevitable loss is always lurking around the corner. One lady managed to turn $50,000 into $750,000 in 10 months during the 2004 bull market, only to give half of that back in 1 bad week, March 2005. Ouch.
Start small with your CFD leverage and keep your total exposure low relative to your capital base. If you are starting out trade from zero leverage up to a maximum of 3 times your account size.
4. Use CFD stops religiously
Stop losses make sense. They help minimise your loss which helps you with CFD Tip number 1 – preserve precious capital. Every trade your enter should have a clearly defined CFD stop assigned to it and ideally you should have identified that CFD stop outside of live trading.
You see it's very easy to get emotionally charged when your position is falling rapidly and more than possible to give yourself reasons as to why your stock is going to miraculously head in your direction. It probably isn't and HOPE is not going to help. Define a CFD Stop outside of market hours and stick to it.
5. Establish clearly defined, realistic Trading Goals
“All I want to do is make a measly $1,000 a week trading with my $10,000. That's achievable isn't it?”
Alongside your 1st rule, preserving precious capital, your 1st major goal when starting out in CFDs is to keep your account in tact and stay in the game for the 1st year. Survival is paramount if you are going to make a decent living out of CFD trading. A mentor of mine, Jim Rohn, used to say “If you don't know where you are going, well you will get there” See the truth is, you will end up somewhere but is that really where you want to be? Wouldn't it make sense to attempt to plot a path towards a steady and successful CFD trading career?
Simple Goal writing procedure
Identify what it is you want
Focus on it daily
Kill all distractions that move you away from your goal
Gently bring yourself back to point 2
6. Keep a CFD trading or Share trading journal
A CFD trading journal allows you to record the trades you make just like you would with a diary entry on your life. Your CFD trading journal enables you to gain clarity on the reasons why you entered or exited a trade and will form the most powerful learning experience you will ever have in the CFD trading field.
Hindsight is the most powerful educator and when you look back on your thoughts and strategies, certain patterns will emerge – the good, the bad and the ugly. Take note of these and map a path to recovery.
What to record in your CFD trading journal:
What you bought or sold, profit or loss
Time trade was done
Reasons behind the trade – Technical, fundamental, tip or dart board
Include a chart showing proposed entry, stop and profit target
7. Have a well defined trading plan
Are you a discretionary trader or a mechanical system trader? Either way you need to establish a sensible trading plan that identifies the following:
Entry Strategy – Test hundreds of entry set ups. Prove to yourself that it works
Money management strategy – How much of your capital to place on each trade
Risk Management strategy – How much risk to allocate to each trade based on money management rule and stop loss size
In profit stop loss – You need to identify a Stop Loss when in profit. For example a trailing stop loss
Record keeping strategy – Keep your trading statistics up to date and a daily CFD trading journal
8. Be Disciplined
Now that you have created your CFD trading plan, be disciplined to stick to it. Consider the countless hours and sleepless nights that went into researching your trading methodologies. The testing, re-jigging then testing and testing again. Trust what you have done is right and trust that you have a tested edge in the markets. The rest will take care of itself.
9. Scale in and out of CFD trades
Most successful traders trading accounts are neutral for most of the year. But there is usually a window in any 12 month period of 2-4 months where profits are unbelievable. The thing is you don't know when that is going to be so you need to keep your capital in tact (PPC) during those lean months. Then when the market turns its time to start adding aggressively to winning positions. All the greatest and most successful traders in our time have learnt this powerful strategy.
10. Keep a positive mindset
Don't treat trading like it's life or death. Have some fun (Funny Trading Videos) and take your time to learn the key foundations to successful share and CFD trading. Along the way keep a positive mindset and a positive attitude and by staying patient the 'purple patch of profits' will happen.
Tuesday, February 8, 2011
Finance Tips
Finance Tips 101 (excerpt from http://www.financetips101.com)
The common questions among people these days is how to save money in such a tough financial enviroment. If you are one of those who ask this same question, this article is for you.
Saving money is a daunting task. It is easy to say “I am going to save money from now on”. Unfortunately, not all who promised such was able to make it come true. There are challenges along the way. And such challenges had proven to be extremely tough. Hence, the issue of how to save money is a real challenge.
One of the basic ways to save money is to create a reasonable objective. Make sure you control your expenses. And make sure you get good value for your money. By getting good value of your money, it means not wasting your hard earned dollar for a low rate product.
But then, it also means that you should spend your money for items that you really need. Bear in mind that spending is not dependent on a whim. It is according to needs. Hence, when buying a product or service, ask this question to yourself. Do I need this product or service? Or do I just want it and might not get what I pay for?
If you want to save money, make sure you have a goals. You need to have both a short term and a long term goal. For instance: I want to be able to start a small business a year from now. The capital should not be a overly large amount since you will start with a small business and grow it over time.
The first step is to identify your business and compute how much is the capital that you will need in order to start with your business. The figures that you will come up with should be based on a thorough feasibility study. Avoid hunches or guessing. Once you come up with your capital, record it. That amount of your capital is going to be your target or goal.
If you want to raise your capital in one year period, compute how much you must save in 12 months. Saving on a monthly basis will be easier. You should set a realistic goal and expectation. Your current income should be able to sustain your monthly saving.
What if you can not afford the amount for the monthly savings?
You should adjust if you can not sustain the monthly target. One alternative is to lengthen your time frame. Make your target 1 ½ to 2 years if necessary.
Start to make your adjustments as well. Trace and take note of your expenses. Keep a notebook and write them down. Make a detailed notation of your every day expenses. Do not leave even the smallest detail. Most often than not, there are expenses that are not really necessary. And usually, this shabby item carries the most weight out from your expenses. You should be able to determine what is important and which are just whims.
Examine your expenses and determine those that you could possibly remove from your expenses. For instance: Do your own manicure instead of going to a salon. Check your utilities like cables or satellite TV. If you could settle for regular cable and cut the HD access, it could add a few dollars back to your pocket.
How about the paid channels that you are not really watching? Why pay for those that you are not really watching in the first place? Further, conserve energy by turning the lights off if they are not being used. Bottom line is to make sure you are really using the items and the utilities that you are paying for.
Create your budget list. Having a budget helps you to control your expenses. There is going to be lesser chance of over spending. Also, you will be mindful of what you are spending because your spending money is set at a certain limit. A budget can also make sure that what you surchase is only those things that you need.
Saving money will take a proper and accurate evaluation of your current financial capabilities versus your future aspirations. It is important that you can balance the two in order to be able to make the most out of what you have now.
Think about this, saving money can ensure that you are secure in your future. It helps you to really think about your current and future financial situation. Through this type of thinking, you will no longer find the issue on how to save money a great challenge.
The common questions among people these days is how to save money in such a tough financial enviroment. If you are one of those who ask this same question, this article is for you.
Saving money is a daunting task. It is easy to say “I am going to save money from now on”. Unfortunately, not all who promised such was able to make it come true. There are challenges along the way. And such challenges had proven to be extremely tough. Hence, the issue of how to save money is a real challenge.
One of the basic ways to save money is to create a reasonable objective. Make sure you control your expenses. And make sure you get good value for your money. By getting good value of your money, it means not wasting your hard earned dollar for a low rate product.
But then, it also means that you should spend your money for items that you really need. Bear in mind that spending is not dependent on a whim. It is according to needs. Hence, when buying a product or service, ask this question to yourself. Do I need this product or service? Or do I just want it and might not get what I pay for?
If you want to save money, make sure you have a goals. You need to have both a short term and a long term goal. For instance: I want to be able to start a small business a year from now. The capital should not be a overly large amount since you will start with a small business and grow it over time.
The first step is to identify your business and compute how much is the capital that you will need in order to start with your business. The figures that you will come up with should be based on a thorough feasibility study. Avoid hunches or guessing. Once you come up with your capital, record it. That amount of your capital is going to be your target or goal.
If you want to raise your capital in one year period, compute how much you must save in 12 months. Saving on a monthly basis will be easier. You should set a realistic goal and expectation. Your current income should be able to sustain your monthly saving.
What if you can not afford the amount for the monthly savings?
You should adjust if you can not sustain the monthly target. One alternative is to lengthen your time frame. Make your target 1 ½ to 2 years if necessary.
Start to make your adjustments as well. Trace and take note of your expenses. Keep a notebook and write them down. Make a detailed notation of your every day expenses. Do not leave even the smallest detail. Most often than not, there are expenses that are not really necessary. And usually, this shabby item carries the most weight out from your expenses. You should be able to determine what is important and which are just whims.
Examine your expenses and determine those that you could possibly remove from your expenses. For instance: Do your own manicure instead of going to a salon. Check your utilities like cables or satellite TV. If you could settle for regular cable and cut the HD access, it could add a few dollars back to your pocket.
How about the paid channels that you are not really watching? Why pay for those that you are not really watching in the first place? Further, conserve energy by turning the lights off if they are not being used. Bottom line is to make sure you are really using the items and the utilities that you are paying for.
Create your budget list. Having a budget helps you to control your expenses. There is going to be lesser chance of over spending. Also, you will be mindful of what you are spending because your spending money is set at a certain limit. A budget can also make sure that what you surchase is only those things that you need.
Saving money will take a proper and accurate evaluation of your current financial capabilities versus your future aspirations. It is important that you can balance the two in order to be able to make the most out of what you have now.
Think about this, saving money can ensure that you are secure in your future. It helps you to really think about your current and future financial situation. Through this type of thinking, you will no longer find the issue on how to save money a great challenge.
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