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Growing trading
April 17, 2021 / 0 Comments

Growing the Trading Account without Following the Rules

A lot of newbie traders have not enough money when they first start trading and all of them have at least heard about the money management. A part of them understand that the money management is important, but they think that it doesn’t concern them. Some traders don’t put enough money in their trading accounts because they don’t want to risk more than a certain amount. Other traders may understand that all the building parts of the trading are important, but still can’t manage to follow all the trading rules. They say that they will grow the trading account and then they will follow all the trading rules.

I’ll grow my trading account and then I’ll follow all the trading rules

I used to think this way because I was afraid of losing the money I worked hard for. I was thinking that it would be easier for me to risk the money made by trading.

Grow trading

It happened to me in the first year of my trading career, when I believed everything that I was reading in the trading books. I found two trading methods in a book I was reading, one of them was a news trading method. I believed that this method was very good and I even believed that risking 10% of the trading account was a good money management for that system. So I said that would build the trading account, using that method, and later I would use the other method for trading and making money. After a couple of consecutive loses I was down 40% of my account. I didn’t have the confidence to continue trading that method. I learned the lesson; I learned that I should never trust the method just because it’s described in a book. I learned that I should test a method before starting to trade real money. I also understood that I should risk less per trade. But I continued to search for holy grails that would give me only winning trades.

Buying a lot of cheap goods

When we are in a shop we may easily buy different things that don’t cost much. We may not need all that goods, but just because they don’t cost much we buy them. So we end up buying a lot of things because when we think about the single piece it doesn’t affect our budget so much, but if we sum all the amounts we realize that we’ve spent a lot.

The same thing happens when trading. Let’s assume that our profit target is $100, but we see only $50 potential profit we think that this time we will take only $50, because we are afraid to take a loss and we prefer a sure profit instead. This may be fine if it’s our last trade in our trading career, because as we don’t know where the price will go we can decide to take profits. It may also be fine if we do it once, because $50 will not make the difference. But if we continue to do it systematically we can discover that this is the cause of our failure as traders. You can read more about this in the article Exiting a trade is as important as entering it.

Preserving the trading capital

Successful traders suggest first to concentrate on preserving the trading capital while gaining experience and then to concentrate on making money. I agree with them. But this affirmation shouldn’t be misinterpreted.

This year it happened to me again to want to grow the trading account, before starting trading it with more trading methods. This time I tested the strategy, but when I was in a trade I closed it prematurely. My profit target was $100 but as soon as I was seeing $50-60 of profit I closed the trade. I was saying that I was doing this for growing the account size. How can we preserve capital, while gaining experience? Personally I was using this excuse to exit the trades prematurely.

This time I remained profitable, but my profit would be bigger if I closed the trades at the targets and not led by emotion.

Giving up an addiction

I think you’ve heard a lot of times phrases like. “This is my last cigarette”, “Today I’m eating the cake, but I’ll start a diet tomorrow” and of course “I’ll build my account and then I will follow my trading rules”. It’s time to start growing your trading account. You can do it only by following your trading plan. If you don’t follow it, why do you have one?

Solutions

To preserve capital, don’t enter the trade if it doesn’t meet your criteria or if you are not sure about the chart formation. But once filled, follow trade management rules, don’t close it prematurely and don’t give it more room.

If you realize that you are not able to follow your rules on a series of trades, try to change them. Test how the method behaves with the trade managing rules that you are able to follow. If you are happy with the result you may trade that way. Otherwise, if you will see that not following the rules leads to losing money, you will be motivated to start following your trade management rules.

Define the rules for growing your trading account and use the rules that are compatible with it. Try scalping instead of trailing stop. This way you can have minor drawdowns. You have to test the trading system and see what works best for you based on the money you have in your trading account.

Trade Plans
March 28, 2021 / 0 Comments

The Basics of Trading Plans

Why Have a Plan?

Why outline a plan? Because your plan will help determine your trading style, strategy and philosophy; i.e., the more ambitious the plan, the more aggressive the trading style should be.  In this case aggressive trading does not mean a greater number of trades, but generally implies more risk, usually in the form of larger commitment of capital invested in a higher number of stocks; in which case you may need to start with four or five thousand dollars rather than $2,500.

By writing down in outline form what you want to achieve and in what time frame, along with your long and short-term objectives and goals, you will be able to see and refer back to what it was you wanted to accomplish in the first place. Trading the stock market is fifty percent planning, twenty five percent execution, and one hundred percent psychology. You need to determine what you think you will get from buying and selling stock in terms of satisfaction, prestige and compensation, then put it down on paper. If you go into the market not sure of what you want out of it, you will almost certainly not put into it, what you need to get what you want out of it.

Your plan should cover your style (Trend follower, fundamentalist, Chartist, Cramer-ite or combination) and the philosophy or technique you will use (Swing-trader, mid-term trader), along with detailed risk management techniques as well as entry and exit criteria and whatever trading rules you adopt from your software choice. (i.e., using on-line modified strategies, I will swing-trade low dollar stocks using Jim Cramer’s criteria on the major markets and…)  Post your plan in plain view at your trade station; read it every time you start trading or when doing research.  As you grow into your trading style you can modify or change the plan to fit what you are doing as long as what you are doing is showing a profit.  If you do not show a profit within the first few months you need to stop, review, redo your plan, and start again.

LRT has a trading plan outline and full trading plan available for sale at the LRT store.

Decide on a style

Your MO

A trading style is simply determining what type of trading to favor:

•  Day traders – are out of the market at the end of each trading day

•  Short-term traders – hold positions open for two to five days but not over a weekend •  Swing traders – hold positions open for a few    days to a few weeks

•  Mid term traders – hold positions open for up to six months

Day Trading requires more money to open an account, $25,000 or more, and we do not recommend day trading for beginners.  All other traders should let profits determine the length of time to keep a position open.  Some first time traders set a 25 to 35 percent profit goal to close the trade. Others simply adjust stops to prevent giving back more than 5 percent of the unrealized profits. Still others just let it ride as long as each week shows a profit.  We think first time traders should have well-defined entry and exit points.  Focus on how you will determine your trading style and profit taking strategy.

Favoring a particular trading style does not prevent you from changing to another style of trading from time to time.  At some point you may find that you are doing all four styles of trading; in all likelihood you will probably not stick to just one style of trading. Successful trading is about going where the profits are.  We recommend starting as a short term or swing trader because it gives you time to develop your trading skills and learn risk and money management techniques based on your skill and account size.  As you start to make money and your account grows you can take on a little more risk.  Whatever style you decide on, remember, it‟s not about how quick you can make big profits, but how often you make a profit.  Be realistic. Set your profit targets at obtainable levels and concentrate on risk control and money management.  This is trading, not investing.  Let your profits run and cut your losses quickly.

Trading Rules -Knowing what you want – and what it takes to get it

Whether you are a working person getting up each day taking care of a family or going out and earning a pay check; you have developed a credible work ethic on your own; regardless of what type of work you do or at what level you are.  If you keep a household together or a business together you have demonstrated the ability and self-control to do whatever you set your mind to.  Most of us have jobs we more or less like or can tolerate until we find something else that is better, either within the company we are currently working for or by moving on to another company.  We do this because we have to; we have made commitments to ourselves, our families and to a lifestyle.  Sometimes we‟re not sure what we really want to do, so we go on doing what it is we do because we haven’t set any personal goals for ourselves.  Change is easiest when done in little steps, the first step is deciding to change, and the next step is to focus in on the closest point of the change you want to make. Learning to trade stock and profit from it, will change your life, not because of the money you can make and the freedom it can give you; but because of the self-confidence and sense of control over your own fate that comes with being able to do it.

Taking the first step toward becoming a trader requires learning another way to make money, one that can lead to an alternative way to live your life. One of your first goals would be to learn the basic methodology of trading: Protect Your Capital.  Using risk and money management to control your losses, along with developing a reliable profit making strategy, and understanding the cycles and trends of the overall stock market as well as the different sectors and business groups will put you on the path to successful financial change.  Your first objective may be to find a source of information and data that provides you with what you need to accomplish your goal.  A second goal could be to develop a consistent system of picking stocks that eliminates subjectivity and delivers a high percentage of profitable trades.  Your next objective in support of your second goal may be to identify straightforward entry points which allow you to make quick, confident buy decisions that constitute a totally objective method of entering trades.

A third goal along these same lines might be to formulate a profit ladder that provides predetermined exit points that allow you to maximize profits and protect against large losses should the market move in the wrong direction.  The underlying objective here would be to establish predetermined profit percentages to place stop orders and trailing stops to meet your goal.  The above goals and objectives cover the basic principles and techniques of profiteering and give a broad look at the methods and techniques to be disclosed in later chapters.

In every endeavor there are always rules. Trading rules are merely discipline in print; they are what we call self-governing-success.  A set of simple and practical trading rules can make your trading experience a lot less costly.  You should establish a set of rules that matches your trading style.  Here are some rules for first time traders to consider:

•  Don’t Over-trade

•  Never put more than 2% of your total capital into one position

•  Only buy a stock that meets all of your qualifying criteria

•  Never use Market Orders

•  Trade With the Trend

•  Always check for recent insider trading on stocks you are about to buy

•  Take Windfall Profits when you get them

•  Always use stop orders and/or trailing stops

•  Know the type of trade you are in (Short term, Swing, etc. etc.)

•  Never give back more than 15% of your profits

•   Never let a profit turn into a loss

Rules are refined, developed, and done away with as a trader’s goals, objectives, discipline and money management techniques develop. Each trader must continually be aware of the risk of trading and abide by their rules religiously; write them down and hang them on your trade station so you can see them every time you trade. Each of your strategies should have its own set of rules that support you goals and objectives.

If you have a strategy with an objective that is based on a percent gain/loss (exit after 100% profit or 10% loss) and you have a rule that says never give back more than 15 percent of your earned profit, and your position starts to decline after making 70% you should know at exactly what dollar value you will be exiting this trade and adjust your downside stop to protect your profit.

Rules should be developed in support of a strategy.  Knowing the mathematical expectation, expected return and Profit to Loss Ratio of all of your real-time strategies is a key part to developing rules that you can live with. Too many rules clutter the trading process, too few rules increase risk.

Record Keeping

In the trading business it is hard to find the right combination of strategy, timing and execution that gives you the results you want. When it happens you need to be able to repeat what you did as soon as you can.  If you keep a checklist of your trades it will make it very easy to repeat a winning process.  We have found that keeping track of the strategy source, the strategy criteria, number of stocks found, sectors and industries are things that should always be recorded. Also, your checklist should include all of the qualifying requirements and conditions for the stock selection process.

Online brokers provide all the transaction records and tax data for you. However, we have found that stock splits, symbol changes and prior year cost basis may not always be easy to recover from your on-line account, so we recommend you make it a habit to print change data as it happens and keep a hard copy on file as a back-up.

Research notes that lead to a winning strategy or any one of a dozen other factors that contribute to the development of a particular stock strategy that turns out to be a big winner, can be used again and again if kept until conditions change on the position or the portfolio or stocks that the research or strategy produced.  Once you are an established trader and have committed to memory all of your winning strategies and techniques, you may not want to save all your notes, but we can‟t tell you the number of times we wished we had saved our research notes and checklist to reconfirm a winning concept and strategy.

Record keeping isn’t going to change what happens to the initial trading process, but you’ll be surprised how it can change subsequent trading for the better and how much time it will save in the long run.

If you are ready to begin trading, go to “Getting Started“.

litecoins
July 29, 2018 / 0 Comments

Six Popular Cryptocurrencies to Keep an Eye on

When you think about cryptocurrencies the first thing that comes to mind is most likely Bitcoin. Since 2009, Bitcoin has definitely become a standard for cryptocurrencies, but it has also started a wave of cryptocurrencies, some of which are aiming to be improved versions of Bitcoin.

Today, there are over 700 cryptocurrencies. However, many of these new cryptocurrencies include a great risk that comes with lesser liquidity and volatile value. That doesn’t mean that some of those aren’t worth checking out. We have picked six altcoins that might spark your attention.

  1. Litecoin (LTC)

Litecoin is one of the oldest decentralized cryptocurrencies besides Bitcoin. It was launched soon after Bitcoin, in 2011, and it’s based on the same model. It uses an open source decentralized cryptographic protocol which can be decoded with consumer grade CPUs.

litecoins

Litecoin is not just a copy of Bitcoin. The creator of Litecoin and a former Google engineer, Charlie Lee, tried to improve on some shortcomings of Bitcoin. The main difference is that Litecoin has a faster block generation rate that results in faster transactions.

  1. Ethereum (ETH)

Ethereum is a decentralized software platform and a programming language that runs on a blockchain. Distributed Applications and Smart Contrast can be run on the this distributed computing platform without any downtime. Applications are run on a cryptographic token called ether.

ethereum

In 2016, The DAO, a decentralized autonomous organization based on the Ethereum platform suffered an attack after which the network split in two. That’s why now there are two separate cryptocurrencies, Ethereum (ETH) and Ethereum Classic (ETC)/

  1. Zcash (ZEC)

Launched in 2016, Zcash is a newcomer to the field of cryptocurrencies claiming to provide better security by offering selective transparency of transactions. It is an open-source cryptocurrency operating without any central authority. All the transactions are published on a blockchain, but information about the sender and the recipient involved in the transaction or the amount that was sent remain hidden.

zcash

The distinguishing feature of Zcash is that it uses public blockchains and allows for private transactions at the same time. Users can choose “shielded” transactions which are encrypted using a cryptographic technique called zk-SNARK, developed by Zcash team.

  1. Dash

Dash was launched in January 2014 (originally as Xcoin and later Darkcoin), and it has quickly gathered a large fanbase. The reason for this is the enhanced anonymity it provides. It is basically a version of Bitcoin that aims to make transactions as untraceable as possible.

Dash, short for Digital Cash, was developed by Evan Duffield. It operates on a model of decentralized governance that allows Dash to fund its own development instead of relying on donations or pre-mined endowments.

  1. Ripple (XRP)

Ripple stands out among the rest of the entries in this list because it’s not exactly a cryptocurrency. It is a real-time gross settlement system (RTGS) that uses a native cryptocurrency called XRP. Built on an open source internet protocol, Ripple aims to provide secure and instant financial transactions across the world.

Ripple was launched in 2012 and XRP is now the 3rd largest cryptocurrency with a market capitalization of $51 billion. What makes XRP different from other cryptocurrencies is the fact that it doesn’t need mining.

  1. Monero (XMR)

Monero is an open source cryptocurrency with a strong focus on privacy and security. It was launched in April 2014, and it attracted a lot of attention with its unique privacy properties. Monero uses “ring signatures”, a new technique that makes it virtually impossible to trace the movement of money.

Monero builds on Bitcoin and uses various mechanisms to overcome vulnerabilities in Bitcoin’s protocol. Because of this, Monero has attracted many enthusiasts in the field and is completely funded by donations.

Stock-trader-looking-at-monitors
July 24, 2018 / 0 Comments

Learn to Trade: Margin Trading

To be a margin trader means to use funds you lend from a broker. This way, you trade assets with borrowed funds. The asset in question then becomes the collateral for that loan that you took from your broker.

This has great potential to significantly increase the profit. However, it is also quite possible for it to cause incredible losses. Creating a financial leverage is a well known two-edged sword in the world of finances.

Due to the high-risk nature of this line of trading, it is only possible by use of margin accounts. But, let’s take it slow and go one step at a time.

What is Margin Trading?

In very general terms a margin is a border, an edge of something. However, in the financial world, the word margin has a slightly different meaning. Namely, the margin, in this case, is related to the collateral we have mentioned previously. The margin is used to cover the credit risk the margin trader poses for the lender. Essentially, it is the sum of money that you would have to ensure from your funds. The margin can vary greatly, which usually depends on the resource in question. For an example, a margin for currency futures is usually quite low. In fact, it would rarely get over 6 percent of the total value of the contract. However, if stocks were in question they would require quite a bit more. To be a bit more precise, you would usually have to cover at least 30 percent of the value and up to one half of it. One should bear in mind that the margin requirement will always follow the stock and how volatile it is. The more volatile the stock in question is, the higher the requirement will be.

Margin Accounts

Since margin traders accept the risk that comes with it, they must use a special type of an account. These margin accounts are quite different from the usual cash accounts. Margin accounts are usually offered by brokerages to create a possibility for the investor to borrow funds which he can then use to purchase securities. They always expect the investor to put down a certain amount before borrowing the rest. This is usually 50%. The broker will, of course, charge for the service in question and the securities are a collateral. The main difference between a margin account and a cash account is that you cannot short sell with cash accounts. Also, certain instruments can only be traded in them. For an example, futures and commodities.

The Risks of Margin Trading

Margin trading is definitely one of the riskier businesses out there. For that reason, there are multiple entities monitoring it and governing it. The Federal Reserve Board, Financial Industry Regulatory Authority, and even self-regulatory organizations (for an example – stock exchanges) as well as every single brokerage company.

For example, the New York Stock Exchange follows the margin debt sum. And, as of the 11/2017, the debt was almost 560 billion dollars.  Of course, this does not come as a surprise. After all, almost every single equity index was at an all-time high or near it.  It is relatively common to see margin debt follow market peaks. However, those who follow the movement of the market over longer periods are worried. They can compel investors to sell their assets to cover their margin calls which worsens the drop of stock prices. This pressure can cause complete market crashes.

Consensus: Leave it to the pros

We can all agree that this form of trading is definitely not something you would recommend to a beginner. It is a smart choice to leave it to traders with experience and those who are familiar with the risks. Even if the leverage can significantly increase your gains. If you do not have the experience one needs for a margin trader, you should stick to long-term investments.

 

 

 

2
April 18, 2018 / 0 Comments

The Inherent Risks of Trading on Margin

The main risks that come with margin trading are these.

1.Rate risk and interest charges

Every margin account has a rather high-interest rate. Over time, the interest cost on your margin debt can add up. This occurrence can make your gains on margined securities significantly smaller, as it can erode them. Another thing that’s important to know is the fact that interest rates on margin debt aren’t fixed. These can fluctuate during the period when you (the investor) have margin debt. In this environment where the interest rate is rising, margin loan interest rates will go even higher. In the end, this will add to the interest burden for every investor that’s engaged in margin trading. That’s why you need to pay close attention to interest rates if you don’t want them to “eat” your gains.Trading on Margin

2. Amplified losses risk

Margin trade can increase gains, but unfortunately, it can also increase losses. We’ll explain how is it can happen to lose over 100% of what you initially invested during margin trading.
So, for instance, you invest $10,000 without a margin and buy 100 stocks at $100 each. If shares fall to $50 after six months, your stocks will be worth $50 dollars each, and your share sale proceeds will be $5,000. This way, you only lose 50% of your initial investment. Not great, but you’re not in the red yet.
On the other hand, if you made a margin investment of $10,000 on those same $100 stocks, and bought 200 shares, you’ll lose a lot more.  If shares fall to $50 after six months, your share sale proceeds will be $10,000, the interest on margin loan that’s 8.5% will amount to $425. In the end, you won’t just lose your entire investment. You will be in debt to your brokerage for another $425, or another 4.25%.
Even worse, if the security you bought takes a plunge and drops to zero instead of 50, the loss comes to $20,425. Your investment return would be minus two hundred and four percent.  In the worst case scenario like this, you wouldn’t just lose your entire investment; you would also have to repay your $10,000 margin loan as well as the interest that’s $425.
If you owe to your broker, you need to repay it in full, as this debt binds you just like a debt to a bank or any other institution.

3. Margin callMargin Call

If you bought stock on margin, and it suddenly has a sharp plunge (or if you were short selling, if that stock suddenly peaks in price), you’ll have to meet the margin call. This is the point where you’ll have two choices. Either to provide a lot of money or some marginable security at a very short notice. That’s why you need to have a backup at all times.

4. Forced selling

If you are unable to meet the margin call, your brokerage is able and it will sell those margined stocks without notifying you. If the market’s plunging, a forced liquidation like this might mean that your position will be sold at most unfavorable moment possible. This can generate a serious loss. Even worse, if those margined stocks eventually recover, all of this would’ve been for nothing.  Unnecessary whipsawing.

5. Additional vigilance while monitoring an account or a portfolio

If you want to get into margin trading, it requires additional vigilance while you monitor the margin portfolio or account. This will ensure that your margin doesn’t fall under a certain level. When the market is especially volatile, doing this will be incredibly stressful.

a-bull-vs-bear
October 24, 2017 / 0 Comments

Some of the Most Common Mistakes New Day Traders Make

Trading in the stock market is great way to earn a lot of money really fast. With the development of technology, individuals can now break away from the stock market floor to trade from their home computers in their PJs. However, although the concept seems easy enough, it isn’t. One such trading technique that is often coined is day trading. This is pretty much what it sounds like: trading in the space of one day.

day-trader-mistake

When you’re day trading, you are opening and closing trades within minutes of each other in order to score a profit. The process is very high risk bu

t, if mastered, can make you a lot money very fast. Many beginners go into the day trading game with little knowledge about what to expect and what they need to analyze. This results in some enormous failures and there are hundreds of them. If you want to learn how to become a day trader, you will need to start by avoiding common mistakes.

Make sure you don’t make the mistakes that every beginner makes and take some friendly advice from the professionals. If you know what mistakes are commonly made, you can aim to avoid them. This is what this article was made for. Here, we will discuss some of the most common mistakes beginner day traders make, so hopefully you can avoid them.

Never Planning Ahead

This is a huge one that beginners always forget. When they jump into day trading they don’t make a plan or form a strategy and this leads to great losses. Beginners will not fully understand a stock when they position themselves and do not have a strategy for entering and closing. When you enter a trade you need to have a strict goal and price you want. Never go in blind and understand what you want from the stock.

In addition to not planning, when a beginner does plan, they never stick to it. They let emotions and tensions to cloud their rules and strategy. If you see a stock starting to go up, don’t gamble, close when you said you were going to close otherwise you could lose everything.

Trading too much in One Day

When you first start it may be tempting to sit at the computer all day and trade, trade, trade. Some go into the game believing that the goal is to never stop trading if you want a chance at profiting. This is the wrong mindset to have with day trading and, in some cases, you can even take a few days off from the computer if you’re doing it right. It is also good to not get stuck with one strategy or stock. If something worked last time, it might not work again. So mix things up.Stock-trader-looking-at-monitors

Riding Solo

Among all these mistakes, one of the biggest is trying to teach yourself everything and figure out the strategies by yourself. You may hear that self-education is the best way to learn but you will need some guidance when it comes to day trading. This is because the risk factor is so great you can’t afford to make mistakes. Join a chatroom and talk to some of the professionals about their experience. They might be able to share some insight into their stock picks.

Conclusion

So there you have it, three of the biggest mistakes new day traders make. Although there are only three points each one is detailed enough to learn from. To sum up: plan ahead and stick to your plan, don’t go trade-crazy and mix up your strategies and, finally, join a community and learn from the guys already profiting. With time, you will become an excellent day trader.

stock-market
July 26, 2017 / 1 Comment

How to Read a Stock Chart Like a Pro

Every time you tune into some TV channel specializing about the stock market, you must be overwhelmed by the amount of raw data they are showing to the viewers. The success in stock market depends on how well you can interpret and analyze the data, i.e. the stock charts. A stock chart tells all about the stock market. There are various types of charts such as candlestick charts, support and resistance, trend lines, OHL (open-high-low-close), point and figure and others which are viewable in different frames. One common thing about all charts is that the charts are either daily, weekly or monthly and always shows a pattern.Analysing stock market data

Stock Chart Types

Although there are different types of stock charts available, most charts display price and volume of stocks. Candlestick charts are one of the most common patterns used by Japanese people and became popular worldwide. Candlestick charts are used when you have a dataset that contains low, open, high or close values for each time period. The candlestick charts look like box either filled or hollow. Many traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of the price action of a stock. From the candlestick charts, a trader can easily get the relationship between the open and close value and the high and low value of a stock for a particular time frame. The open and close are considered the most vital information in the candlestick chart. As a general information, a hollow candlestick indicates buying pressure and filled candlestick indicates selling pressure of a stock.

Line graph analysis

Support and Resistance

In the stock market, support and resistance are two important values in the stock chart. Someone wants to invest in the stock market must understand the meaning of these two values thoroughly. Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. When the price declines towards the support level, the stock value goes very low. As a result, the buyer wants to buy more stock, but the seller is less inclined to sell. As the price reaches the support value, it is believed that demand will overcome supply and prevent the price from falling below support. Resistance is exactly opposite to the support. Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. As the stock price rises towards resistance value, the seller wants to sell stocks, but the buyer is less inclined to but due to high price. As the price reaches resistance value, it is believed that supply will overcome demand and prevent the price from rising above resistance.

Trend Lines

Out of all the technical jargons in the stock market, the trend line is the hottest topic among technical analyst and traders. A trend line is a chart that gives a quick understanding of the market from the uptrend and downtrend of the stock values. Trend line charts are the most important for a newcomer or a veteran in the stock market.

Stock Market Trading
June 20, 2017 / 0 Comments

Stock Market Futures: Everything You Need to Know

Want to know what are stock market futures? Here is everything you need to know about them. Stock futures are trade contracts that give you the necessary power required to buy or sell stocks at the agreed fixed price by a specific date in the future. When you accept the contract, you are required to uphold all the terms of the agreement. The contracts have consistent specifications like the method of payment, tick size, price per unit quotation, expiry date and market lot.stock-market

Stock Futures math

Futures Price = (Spot Price + Carrying Charge)
The stock futures price is usually higher than the spot price. Futures price is a price for which a commodity can be sold or bought for delivery in future. The spot price is the present-day market price at which a commodity can be sold or bought for immediate delivery and payment. Carrying Charge or Cost of Carry is the storing cost of a physical commodity like metals or grains over a period of time or until the futures contract matures less all the expected dividends within the contract period.stock-market-bids
Example:
The spot Price of ABC = 2000 and Interest Rate = 8% p.a.
So, the Futures Price contract for 1 month =2000 + 2000*0.08*30/365 = 2000 + 13.15= 2013.15

Meet the Players

1. Hedgers

Hedgers can be exporters, importers, manufacturers, and farmers. The main aim is to buy and sell futures in a bid to secure future price of a commodity to be sold later in the cash market. Those holding the contract for a short time will want to get as high prices as possible while for long term holders it is vice versa. Usually, almost all the risks associated with price volatility are reduced. Hedging sometimes can be used to lock the price margins between the price of raw materials and that of the finished product.

2. Speculators

The other market players’ main aim is to benefit from the risks associated with the futures market. Speculators profit from the price changes that hedgers try to protect. When hedgers are trying to reduce risk the speculators are trying to increase it in order to maximize their bottom line. If the hedger is anticipating a future decline in prices then he or she would be selling to the speculator such a contract at a low price. Also, the speculators enter the market for the sake of profits only through selling and buying futures but not owning the commodity.

Characteristics of Stock Market Futures

  1. Contract size – it is also referred to as a lot. What this means is that one contract can have many shares and the number of shares included is the size of the contract. When buying and selling futures, a single share is not usually traded. For example, if a contract has 300 shares, the selling and buying will involve the whole bunch.Stock-market-chart
  2. Expiry – there are three types of maturities associated with stock futures. They include near month contracts (1 month), middle month contracts (2 months) and far month contracts (3 months). All maturities expire on their particular contract months (last Thursday of the contract month) and they are traded simultaneously. All stock futures contracts are for future transactions. So, the contract duration determines how far in the future it will be settled.
  3. Leverage – this is having control of commodities worth more than your capital. With just a small amount of cash, you have the green light to enter into a stock futures contract worth more than what to can afford, at the moment, to pay. A small shift in prices can mean a huge loss or profit.
  4. Pricing and limits – the stock futures market price quotations are done in the same way as in cash market, that is, per unit, cents or dollars. However, there are restrictions on the price movements for a futures contract. So, there is an upper and a lower price boundary set per day that heavily relies on the previous day closing.

Conclusion

Lastly, the profits and losses are determined by the prices between the closing price and the opening price of the futures. For example, if an investor buys “Y” futures at $530 each in November, he or she may sell the same futures at $550 each in the same month. In that case, the investor would bag a profit of $20 per future. But if he or she sells the same futures at $505, then he or she would make a $25 loss per future.
References
http://money.howstuffworks.com/personal-finance/financial-planning/stock-future.htm
http://www.bseindia.com/markets/Derivatives/DeriReports/FAQsStockFutures.aspx?expandable=5
https://www.kotaksecurities.com/ksweb/Research/Investment-Knowledge-Bank/what-are-futures-contracts
http://www.investinganswers.com/financial-dictionary/optionsderivatives/futures-1002
http://www.sharemarketschool.com/futures-understanding-the-basic-terms/
https://www.thebalance.com/what-are-futures-definition-and-examples-1031172

Trade Pits
July 20, 2013 / 0 Comments

Trade Pits

Are you frustrated staring at your trading account and wondering why things are not working out for you?

Are you looking for a way to improve your trading month in month out?

Do you want to regain your confidence and take your trading to the next level?

If you answered ‘YES’ to any of the above questions then I urge you to listen and stop making excuses for your trading failures. I’m sure your well aware that most traders decimate their account within 6 to 12 months of starting to trade. Are you aware that you could be on your way to becoming one of these traders? It’s a horrible feeling when this happens but it’s the rollercoaster ride that’s inevitable with trading.

So if you want to take your trading to the next level, where do you begin?

You purchase a complete trading course and after a hard day at the office you come home and use the last bit of energy you have left to study the financial markets. We applaud your efforts and definitely encourage you to learn all you can about trading but there’s one glaringly obvious problem.

Theory is NEVER quite the same as reality.

The ‘examples’ found in your trading courses, simply don‘t exist in the real world.

No matter how much study you do, you’ll never find those beautifully crisp continuation patterns when you’re sitting at a computer looking for a trade and you won’t find a company with a pristine balance sheet to trade. We’re not going to lie to you – it’s never going to be that easy.

You’re all alone and there’s no one you can talk to who will be able to help you improve your trading skills so that you don’t make disastrous mistakes in the market.

There’s only one way you can perfect your trading and that’s by ‘leaning over the shoulder’ of professional traders to see what they’re doing right and what you need to do to replicate their success. Follow real trades from seasoned traders in real time.

Let’s use an analogy and rewind back to when you were in school

You studied hard to get good grades at school – and it was a lot of hard work that paid off for you in the long run. But, what if you had the smartest kid in class whisper all the answers in your ear while you were taking exams?

I want you to imagine what it would be like if you had unstoppable confidence and successful traders telling you what they’re doing, why they are doing it, and exactly how they were doing it so you can replicate their success instantly!

It sounds too good to be true, right?

Introducing Trade Pits

Trade Pits is the only way to look over the shoulder of our professional traders and discover the exact trades they’re making – so you can learn and profit from the best. In an instant you’re able to throw punches in a higher weight class.

Skip past all the research, studying, mistakes, hard work, and staring at your computer screen for hours while your eyes go square:

Effectively manage your risk

Piggyback off the success of professional traders with a proven track record

Maximise your trading potential

Protect your assets

We deliver trade recommendations that have been researched by our in house professional traders, always translating our analysis into clear understandable terms. Better still, you get the rare opportunity to get into a trader’s head and know exactly what he is thinking as he places the trade.

We’re doing all the hard work so you don’t have to. We’re focused on helping you improve your trading by taking the time to explain all the aspects of the trade to you so you can take on the financial markets with confidence.

If you learn better by watching or you need a little extra help in order to get to the next level with your trades, then Trade Pits is a service you should have in your arsenal. It gives you the opportunity to participate in markets once reserved for financial institutions.

Today, the Trade Pits community has over 800 members who continue to benefit from our trade recommendations. They have learned how to trade from our trading professionals. You can too!

What’s included:

Live weekly market update: With the most critical market information, including updates and changes in market conditions. Outlining the trades entered and exited. See all the winning and losing trades.

Trade recommendations received via SMS, email, and webinars.

Daily execution and position management.

Get a better understanding of entry and exit points and see which trades are the best opportunities for you.

Access to our partners, Intelligent Financial Markets to give you the trade execution support you need.

There’s no other way that you could get access to a team of trading experts like this. Trade Pits gives you all the support you need to successfully create a second income with trading minus the headache and stress!

No matter how many times you’ve tried before.

No matter how confusing the financial markets may be.

Especially if you have lost your confidence and are looking for a way to improve your trading month in month out, Trade Pits is the fastest way to get up to speed.

You’re covered from every angle, so you have everything you need to succeed.

What others are saying:

Trade Pits helps me to trade with confidence. Everything is done for you. Instead of taking hours scouring for trades like I used to, with the click of the mouse and a quick telephone call the trade is executed for you. How simple is that. I have full confidence in recommending this style of trading to anyone who shows any desire to trade. S Rex, Two Rocks, Western Australia (July 2013)

[Trade Pits is] very helpful. More confidence in trading. Yes … I’d say I got good service from [ICS & IFM] hopefully we can all make some money together in the future. It’s not very expensive. John Pass, Alexander Heights, WA (July 2013)

“I love it!!!! I have been trading a limited group of agricultural markets for months but Trade Assist has opened up a whole smorgasbord of markets and opportunities which is backed up by expert knowledge and service.” Bruce H, NSW (May 2012)

Please note that we strive to service the needs of all our clients and the testimonials are an indication of the experience these clients have had with us. No guarantee is being made that your experience will be the same.

A similar service could easily be sold for $198 per month and all together Trade Pits is valued at $2376 in yearly membership alone. This is a complete steal at this price, considering that you could recoup your monthly membership fee with a single trade.

In fact, we debated long and hard about charging the full amount.

For a LIMITED TIME ONLY we have decided to offer this service at a fraction of the cost.

We will offer the complete service to you for a subscription fee of ONLY $97 per month.

Click the “Add To Cart” button below and start profiting NOW!

(Note: You will be taken to a secure checkout page to complete your order)

Secure your membership at $97 per month and put the strategies into action.

There’s absolutely no reason, why your trading won’t improve using this service. Trade at your own pace and spend only as much time as you feel is convenient.

Remember at $97 per month, you could make back your investment with your first trade and you can try it out with…

Our 30 Day Money Back Guarantee

The Trade Pits service comes with a 30 day money back guarantee, try it out and test the results for yourself. If you’re not completely satisfied with the service and what we have promised you, we will refund your membership.

At any point you may cancel as it’s a NO LOCK IN CONTRACT.

We have put together a quick and easy process to help you get the most from your Trade Pits service, so you can start using it straight away

Once you have completed your payment you will receive an email welcoming you to the Trade Pits community.

Your membership and access will be automatically setup.

You will be assigned an account manager.

Daily Market Report

Stay up to date with the latest market news:

International and Australian markets;
Big economic announcements;
Coverage of major asset classes; and
Market related events.

The daily market report has insights that will keep you up to date with the financial markets. These insights are written for novice traders as well as traders with some knowledge or experience.

How Much Is Your Trading Success Worth To You?

What would it mean for you to be trading the financial markets with unstoppable confidence and a service that assists you to trade?

How would it feel to accelerate your trading results, and potentially have the same returns as some of the most seasoned professional traders?

What price would you attach to paying off some bills, giving your family the support and assistance they deserve?

Now we could easily sell this system for $2376, and there are enough people that are smart enough to pay that price.

But for now you have the unique chance to secure the Trade Pits service for only $97 per month.

What is it going to cost if you continue on your current path…

Your time wondering why things are not working out?

Losing your hard earned money?

Losing your confidence?

If this is relevant to your current situation then it’s time to make a decision, right now!

It’s really a no brainer…

We aim to build your trading skills on solid market principles and intelligent money management, so that you continually improve your trading.

Because we know that it’s not just about the trades, it’s about getting a comprehensive understanding of the market fundamentals.

So you understand all the decisions that you make, and eventually, trading becomes a predictable and repeatable science.

What more could you want?

With Trade Pits:

You get professionally researched trades, covering all asset classes, delivered to you via email and SMS.
You get access to our trade desk of experts who will answer all of your trading and market questions.
You can learn more about the finance markets while taking profitable trades.

The bottom line: Trade Pits gives you the best opportunity for success in the financial markets by leveraging off professional traders giving consistent results.

Go ahead and click the “Add To Cart” button and start profiting now!

The longer you wait the more days you are trading without confidence.

Once we receive your payment confirmation, we will email you instructions for immediate access.

Don’t pass up this opportunity to improve your trading results, trade confidently with a seasoned professional. Get started NOW!

To Your Trading Success,

Adam Prideaux, CEO Investment Capital Systems

P.S If you want to become a successful trader, take the next step and get on this now…