Most FOREX traders know every thing including all the indicators, market analysis and money management but lack the right orientation and what it actually takes to succeed in the trade.
It takes, what I call PIP (Practice, Intelligence and Perseverance) to really succeed in the money market.
Patience plays a big part in trading. Take the trades only if you are at least 75% sure of profiting from it. If you are not sure, stay away from the trade. Staying on the sideline is as good as winning.
Never trade against the trend especially with a high volatile pair like GBP/JPY. It may give you a couple of winning trades. But it's going to get you in the long run.
Always have a trading strategy, make a habit to stick to it no matter how desperate you are. Your charts are your FOREX bible. Everything that you need to know about FOREX is on your charts. You will learn something new everyday from you charts.
Specialize in one or two currency pairs. Stay away from the ranging markets. There will be enough of trend break outs on this pair than you ever want.
You must rid yourself of the get-rich-quick mindset. There is a disease that most of the people looking to better themselves have; it is the "make a lot of easy money fast" disease. It comes from reading too many books full of hype and too many infomercials. It will destroy your ability to make significant money at anything, especially trading.
You must not be greedy while trading, learn to get satisfied with the profit you have realized and exit where necessary).
Traders are a greedy bunch. Less greedy once are the most successful once. Don't try to chase every single pip (profit in point)) or market movement. Have a realistic daily, weekly or monthly target as a percentage of your account, not the number of pips. If you have already achieved that target stay away from the market. Your gain should be more than your losses. Do not try to cover all your previous losses from your next trade.
At last ... remember there is no easy way to become a good consistently profitable trader. No one can become a profitable trader overnight. As everything else in life it takes time, patience lots of sacrifices and learning. Don't be afraid of mistakes. You have to practice and make research; Sign up for one good broker now and start practicing. So practice some more. If you do this right, you can make money trading FOREX. Yes I know you can.
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Tuesday, March 31, 2009
Friday, March 27, 2009
Online Trading Revealed
One thing that is most heartening about the investment market is that more and more people are going in the direction of online trading, which means that technology and finance have formed a marriage on the basis of utilitarian benefit for the entire world's economies.
Since more people have access to the platform where they can trade in any commodity they see fit, then more activity will take place in these markets; which can only mean good things for their longevity. The current economic crisis aside, it has been seen that non traditional markets like futures and the Forex market has been gaining popular attention and this is because of the variable higher security that they have and the extreme liquidity of the paper trade.
Once the lid has been lifted over the internet, the barriers to entry are extremely minimal and almost anyone with minimum capital margins can enter the paper trade. But of course, this does not mean it makes trading any easier. It makes it easier to get into the market, getting to the jungle doesn't make it any less thin that it is. You still need a whole load of information and strategies before you should even think about being roped into a deal with an online brokerage and depositing your money with them.
On line trading is a good way to get started, especially with the feedback and support structure that investors and financial institutions have tapped upon to train even the greenest of investors into competent traders.
Since more people have access to the platform where they can trade in any commodity they see fit, then more activity will take place in these markets; which can only mean good things for their longevity. The current economic crisis aside, it has been seen that non traditional markets like futures and the Forex market has been gaining popular attention and this is because of the variable higher security that they have and the extreme liquidity of the paper trade.
Once the lid has been lifted over the internet, the barriers to entry are extremely minimal and almost anyone with minimum capital margins can enter the paper trade. But of course, this does not mean it makes trading any easier. It makes it easier to get into the market, getting to the jungle doesn't make it any less thin that it is. You still need a whole load of information and strategies before you should even think about being roped into a deal with an online brokerage and depositing your money with them.
On line trading is a good way to get started, especially with the feedback and support structure that investors and financial institutions have tapped upon to train even the greenest of investors into competent traders.
Friday, March 20, 2009
Pointers to Develop the Trade System of Your Dreams
You have now tested your trade system at least once and have the results sitting in front of you. So how do you interpret those results and make informed trading system tweaks? Read on and I'll tell you.
As I've mentioned before, trading, as a business, is unique in that you can test your business before you ever risk a cent. You can gain a complete and intricate understanding of how your trade system works. Through testing, you will discover how even a slight change in your system's variables can have dramatic effect. And the more you play around with these variables, the more you will come to understand the relationships between them.
An example of this can be seen in the relationship between risk and reward. Systems that tend to have higher returns also tend to have larger drawdowns (risk). In the past, I have designed systems that return up to 300% p.a. but they have drawdowns of over 100% - that is to say, you're guaranteed to lose your entire float and some when trading this system. In short, the greater the reward, the greater the risk.
With this in mind the astute reader may have realised profitability isn't the only criterion by which you should be evaluating a trading system.
Here are a few other questions you should be asking:
What percentage of wins are you achieving against the percentage of losses?
What is the average value of your wins compared with the average value of your losses?
How much money can your system make, on average, for every dollar that you risk?
How many losses in a row does your system generate?
What is your system's maximum drawdown?
How many trades does your system generate?
And, of course, how profitable is your system?
To fully answer these, and other similar questions, you must analyse the results from your back testing. Unfortunately, with the overabundance of trading statistics which most back testing programs provide, this can be easier said than done. Let's take a closer look at the key metrics you need to pay close attention to.
7 Metrics You Cannot Ignore When Analysing Your Trading System:
1. Win-to-loss ratio
2. Average wins and losses
3. Expectancy
4. Maximum consecutive losses
5. Maximum drawdown
6. Number of trades
7. Profitability
These are merely the bare bones however. They form a simple checklist you should certainly apply to your trade system. To see the importance of these indicators in extensive detail please see the second part
of this article which has a breakdown of each factor.
As I've mentioned before, trading, as a business, is unique in that you can test your business before you ever risk a cent. You can gain a complete and intricate understanding of how your trade system works. Through testing, you will discover how even a slight change in your system's variables can have dramatic effect. And the more you play around with these variables, the more you will come to understand the relationships between them.
An example of this can be seen in the relationship between risk and reward. Systems that tend to have higher returns also tend to have larger drawdowns (risk). In the past, I have designed systems that return up to 300% p.a. but they have drawdowns of over 100% - that is to say, you're guaranteed to lose your entire float and some when trading this system. In short, the greater the reward, the greater the risk.
With this in mind the astute reader may have realised profitability isn't the only criterion by which you should be evaluating a trading system.
Here are a few other questions you should be asking:
What percentage of wins are you achieving against the percentage of losses?
What is the average value of your wins compared with the average value of your losses?
How much money can your system make, on average, for every dollar that you risk?
How many losses in a row does your system generate?
What is your system's maximum drawdown?
How many trades does your system generate?
And, of course, how profitable is your system?
To fully answer these, and other similar questions, you must analyse the results from your back testing. Unfortunately, with the overabundance of trading statistics which most back testing programs provide, this can be easier said than done. Let's take a closer look at the key metrics you need to pay close attention to.
7 Metrics You Cannot Ignore When Analysing Your Trading System:
1. Win-to-loss ratio
2. Average wins and losses
3. Expectancy
4. Maximum consecutive losses
5. Maximum drawdown
6. Number of trades
7. Profitability
These are merely the bare bones however. They form a simple checklist you should certainly apply to your trade system. To see the importance of these indicators in extensive detail please see the second part
of this article which has a breakdown of each factor.
Monday, March 16, 2009
A Basic Introduction to the Trading Mindset
Many people talk about the wonders of trading and how it can best be addressed, but understanding how to determine and identify your entry signals can go a long way in setting the correct path to trading. Therefore, a basic introduction to trading must be in order.
The first goal in trading is for profit, since the penultimate goal for it is to sell for a profit. But take notice that trading is like gambling, where one cannot ascertain or know what exact market forces are at play and what it can ultimately do to spell your trading choices.
Self assurance is another key to your trading success. No one will show you what to do next, you have to plan for yourself, particularly since there are no hard and fast guidelines for this career.
Other people may tell you what to do, and they could be correct for a little while, but please try to remember that the market goes up and down, and trading is about watching the market, analyzing it, and taking action on your own.
Understand and regulate your opportunities and risks.
Many people grabbing opportunities mean that the really great ones disappear.
The random opportunity that will eventually pop up in a trader's career is a crisis in supply. Something has broken off the normal process of supply and demand, dramatically raising the price...and this is a fleeting chance.
Many people will also be chasing these opportunities the same as you do. These may be the regular suppliers, those with surplus stock, or another trader with a source elsewhere.
Wisely judge the risk and do your thing.
Scamming is a job for some, so always be wary of people offering unprincipled deals or tempting offers. Thoroughly read the conditions of a contract, count zeros, and just be cognizant of every possible fine print on documents before signing.
Gambling to win means not letting the house make the rules. The difference between dumb luck and achievement lies in the amount of risk managed. Sometimes you could get a lucky break and at other times not, so risk analysis and management lie at the center of any method that can be considered reliable.
Setbacks happen, and this is a risk in trading, where there are damages and losses. Play at the stakes and risk levels you can afford, don't lay down all your cards and have nothing left to pick up on. Make every effort to understand the market. This will help a lot in figuring out how you could establish the ups and downs of the market you are in.
Each person needs to identify his piece of the pie and the item markets he is interested in.
Trading is a world of compound interest, trials and opportunities. You can invest in buying and selling more items in a single item market, you can pick up when you felt there is a downturn on one item, or you can diversify into other types of items.
The essence of the market is purposeful chaos. This is because the market is the aggregate actions of thousands of people, therefore it cannot be trusted. It will shift on you at the flick of a finger, cancel plans, wipe out profits, render prior knowledge obsolete or even render you flat broke if you don't play your cards right. Patterns change, so don't just rely on it totally. As what the previous point says, one day it could be favorable for you, but that can change the next day, even the next heartbeat. So this is a basic introduction to a trading mindset and this can help you on your way to more profitable gains and planned risks.
The first goal in trading is for profit, since the penultimate goal for it is to sell for a profit. But take notice that trading is like gambling, where one cannot ascertain or know what exact market forces are at play and what it can ultimately do to spell your trading choices.
Self assurance is another key to your trading success. No one will show you what to do next, you have to plan for yourself, particularly since there are no hard and fast guidelines for this career.
Other people may tell you what to do, and they could be correct for a little while, but please try to remember that the market goes up and down, and trading is about watching the market, analyzing it, and taking action on your own.
Understand and regulate your opportunities and risks.
Many people grabbing opportunities mean that the really great ones disappear.
The random opportunity that will eventually pop up in a trader's career is a crisis in supply. Something has broken off the normal process of supply and demand, dramatically raising the price...and this is a fleeting chance.
Many people will also be chasing these opportunities the same as you do. These may be the regular suppliers, those with surplus stock, or another trader with a source elsewhere.
Wisely judge the risk and do your thing.
Scamming is a job for some, so always be wary of people offering unprincipled deals or tempting offers. Thoroughly read the conditions of a contract, count zeros, and just be cognizant of every possible fine print on documents before signing.
Gambling to win means not letting the house make the rules. The difference between dumb luck and achievement lies in the amount of risk managed. Sometimes you could get a lucky break and at other times not, so risk analysis and management lie at the center of any method that can be considered reliable.
Setbacks happen, and this is a risk in trading, where there are damages and losses. Play at the stakes and risk levels you can afford, don't lay down all your cards and have nothing left to pick up on. Make every effort to understand the market. This will help a lot in figuring out how you could establish the ups and downs of the market you are in.
Each person needs to identify his piece of the pie and the item markets he is interested in.
Trading is a world of compound interest, trials and opportunities. You can invest in buying and selling more items in a single item market, you can pick up when you felt there is a downturn on one item, or you can diversify into other types of items.
The essence of the market is purposeful chaos. This is because the market is the aggregate actions of thousands of people, therefore it cannot be trusted. It will shift on you at the flick of a finger, cancel plans, wipe out profits, render prior knowledge obsolete or even render you flat broke if you don't play your cards right. Patterns change, so don't just rely on it totally. As what the previous point says, one day it could be favorable for you, but that can change the next day, even the next heartbeat. So this is a basic introduction to a trading mindset and this can help you on your way to more profitable gains and planned risks.
Friday, March 13, 2009
Trading at Home - How to Start Your Own Home-Based Trading Business
Whether you are in a place where you are tired of receiving too little pay for too much work, or if you are simply in a place where you want to keep the money that you earn for yourself, you will find that there are a number of different options open to you. Most important and most lucrative among them, however, is definitely going to be the opportunity where you can start trading at home.
As more and more people realize that they can trade stocks from the comfort of their own home, and even more importantly, make their fortune doing so, you will find that there is no better time to get started than now. Getting Started When you are looking into the idea of trading stock from home, your eye, trained or untrained, should fall on the E-minis.
At the most basic level, the E-minis are US Stock indexes like the Dow Jones, NASDAQ and S&P 5000. Although your head might be full of the high stress jobs that center on the stockbroker's floor, you will find that these are futures that you can trade quite easily from the comfort of your own home, using your own computer!
Essentially, when you are looking at e-minis, you are looking at smaller units of grown-up futures. They are relatively new to the trading scene and there has never been a better time to get involved. Risk When you are looking at stock market trading, be aware that there is some risk involved. However, what you may not know is that there is a lot less risk than you might think!
When you start off with a solid base of information and when you know precisely how much you stand to gain and what you are risking if you lose, you will find that accounting for your expenses is going to be child's play. While going into this profession without training or good basic information can be dangerous, you will find that having the right information behind you can go a long way.
Rewards whether you want to supplement your income or to replace it entirely, you will find that this is completely possible with E-minis and the trading of such. Many people are unaware of the stresses that they encounter in their work places and during their commutes.
Have you ever thought about how much more time you would get to spend with your family and your friends if you were able to work from home? Think about being able to do that to make more than 800 dollars USD every day! It is possible, so make sure that you consider what this could mean to your life. Make sure that the life that you want is not slipping through your grasp.
There are many things that you can do when you are looking at moving forward with the life that you want, so remember to consider this important opportunity. It could very well make all the difference for you.
As more and more people realize that they can trade stocks from the comfort of their own home, and even more importantly, make their fortune doing so, you will find that there is no better time to get started than now. Getting Started When you are looking into the idea of trading stock from home, your eye, trained or untrained, should fall on the E-minis.
At the most basic level, the E-minis are US Stock indexes like the Dow Jones, NASDAQ and S&P 5000. Although your head might be full of the high stress jobs that center on the stockbroker's floor, you will find that these are futures that you can trade quite easily from the comfort of your own home, using your own computer!
Essentially, when you are looking at e-minis, you are looking at smaller units of grown-up futures. They are relatively new to the trading scene and there has never been a better time to get involved. Risk When you are looking at stock market trading, be aware that there is some risk involved. However, what you may not know is that there is a lot less risk than you might think!
When you start off with a solid base of information and when you know precisely how much you stand to gain and what you are risking if you lose, you will find that accounting for your expenses is going to be child's play. While going into this profession without training or good basic information can be dangerous, you will find that having the right information behind you can go a long way.
Rewards whether you want to supplement your income or to replace it entirely, you will find that this is completely possible with E-minis and the trading of such. Many people are unaware of the stresses that they encounter in their work places and during their commutes.
Have you ever thought about how much more time you would get to spend with your family and your friends if you were able to work from home? Think about being able to do that to make more than 800 dollars USD every day! It is possible, so make sure that you consider what this could mean to your life. Make sure that the life that you want is not slipping through your grasp.
There are many things that you can do when you are looking at moving forward with the life that you want, so remember to consider this important opportunity. It could very well make all the difference for you.
Thursday, March 12, 2009
Day Trading Software - Day Trading Robot Review
The Day Trading Robot is a new product from the same people that brought us the very popular Doubling Stocks product. It was designed to trade stocks exactly like professional day trader James Holt of JP Morgan Asset Management. This isn't forex trading, but my experience is that forex trading can be difficult. The easiest time to trade the forex market is during the European session, but that corresponds to the middle of the night in the Western hemisphere. Some day traders, such as James Holt, are known to earn great money.
There are actually two versions here. If at the site you act like you're leaving by beginning to navigate toward another page they will give you the opportunity to buy the Day Trading Robot for $197, which should enable you to earn from $200 - $500 a day with one trade a day. Or if you order the product at the bottom of the sales letter you will receive a lifetime subscription to a newsletter where you will make one trade every two weeks, but recently investing $200 into a trade and reinvesting all the profits for seven straight of the newsletter trades you would have turned your $200 into more than $1.2 million! In 3 1/2 months!
This might be good for your retirement program! You might want to order both of these programs, or just the one most suitable for you. The Day Trading Robot may soon be your full time job and employment! Just a hint here, if you get in early when these recommendations come out, with hundreds of subscribers likely to buy soon, that is likely to move these penny stocks a lot quickly even if they weren't great picks already - and they are great picks already!
There are actually two versions here. If at the site you act like you're leaving by beginning to navigate toward another page they will give you the opportunity to buy the Day Trading Robot for $197, which should enable you to earn from $200 - $500 a day with one trade a day. Or if you order the product at the bottom of the sales letter you will receive a lifetime subscription to a newsletter where you will make one trade every two weeks, but recently investing $200 into a trade and reinvesting all the profits for seven straight of the newsletter trades you would have turned your $200 into more than $1.2 million! In 3 1/2 months!
This might be good for your retirement program! You might want to order both of these programs, or just the one most suitable for you. The Day Trading Robot may soon be your full time job and employment! Just a hint here, if you get in early when these recommendations come out, with hundreds of subscribers likely to buy soon, that is likely to move these penny stocks a lot quickly even if they weren't great picks already - and they are great picks already!
Wednesday, March 11, 2009
The Day Trading Strategy
Forex trading is like a contagious disease, only in the good sense. It is true that when a person learns something about it, they will start to wonder how their life will be once they submit themselves to the process. Now, if you are just new in this market, you must learn everything that you can when it comes to day trading strategy so you end up being successful in your chosen field.
It is true that learning about day trading strategy is fairly a difficult skill to master. in fact, about 50% of those people who wish to enter the process would later on find themselves failing to the job rightly. However, with enough dedication and patience, you are bound to go through the difficult process so you can end up having a profitable strategy that will allow you to experience positive and consistent performance.
Here are some of the best day trading strategies that you must learn:
• It is important to keep your profit objective 3 times higher than what you can actually risk. • Do not permit more than a 1% move placed against you from your own entry point. • Just in case the futures suddenly create an intermediate lower high intraday, you can do the process of exiting half of your position. When this takes place, it simply connotes a weakening market hence it will be a whole lot tougher for open positions to persist in working. • When the time comes when momentum fades and you see that buyers are thinning out, it is the best time to take your profit. You can do this by means of cautiously checking the intraday chart as well as the time & sales window.
It is true that learning about day trading strategy is fairly a difficult skill to master. in fact, about 50% of those people who wish to enter the process would later on find themselves failing to the job rightly. However, with enough dedication and patience, you are bound to go through the difficult process so you can end up having a profitable strategy that will allow you to experience positive and consistent performance.
Here are some of the best day trading strategies that you must learn:
• It is important to keep your profit objective 3 times higher than what you can actually risk. • Do not permit more than a 1% move placed against you from your own entry point. • Just in case the futures suddenly create an intermediate lower high intraday, you can do the process of exiting half of your position. When this takes place, it simply connotes a weakening market hence it will be a whole lot tougher for open positions to persist in working. • When the time comes when momentum fades and you see that buyers are thinning out, it is the best time to take your profit. You can do this by means of cautiously checking the intraday chart as well as the time & sales window.
Friday, March 6, 2009
Transitioning From Part-Time to Full-Time Daytrading - Ensuring Sufficient Income
One of the toughest times of my life - that threatened my own psychological well being as well as the potential safety and security of my family - was in early 2004, when I first made the leap from part-time to full-time trading.
I had the required knowledge. I had the required skills. I was a great technical analyst. And I had some demonstrated success in the markets.
But I was lacking in other areas. I was grossly undercapitalized. And despite my appearance as being someone with a positive and confident attitude, inside I was consumed with doubt and fear. Of course, I was unable to admit to either at the time.
Well, there's nothing I know of that's more effective for bringing all your fears out into the light, than quitting your full-time job to pursue a full-time career in market speculation.
With no other form of income available to support my family, it was all up to me to continue to generate the market returns that I 'knew' I was capable of achieving. Of course, almost instantly, my results failed to meet my expectations.
Thankfully, I still had the discipline to respect my stops, ensuring I did not have to face a single catastrophic loss. Although in some respects a single catastrophic loss could be seen as a blessing - at least it gets it over with quickly. Instead I spent the next few frustrating months grinding my way into a soul-destroying drawdown.
My mindset was a mess. I doubted my analysis, hesitating at entry until I got in way too late, or missed the trade entirely. And it seemed as if the only trades I did enter without hesitation were those entered out of frustration from missing the previous trade, rather than from good analysis. Typically, those trades do not provide the greatest edge.
I would take profits quickly; fearful that the market would snatch them back from me.
And I even ventured to depths I never thought I'd go - asking a broker for some trades. In his defense, his analysis may have been great. I just wasn't in the right mindset to be profiting from any recommendations, no matter how great the trader or analyst.
Basically, fear of not being able to provide for my family led to doubt and indecision, which rendered me incapable of applying my trading plan in a consistent and disciplined manner, leading to realization of the very fear that it sought to avoid.
Fortunately, I was able to recognize the problem before the damage to our finances and my marital status was irreversible. Although I must admit, I took both right to the edge.
So, I took some time out to rethink my plans. I returned (with tail between my legs) to full-time work. And I set about preparing for my next assault on full-time trading.
I am forever indebted to my wife for her patience and her support in helping me see the reality of the situation. (Guys, just because we are hardwired to perceive it as nagging, it doesn't mean it's not the truth. :-) Just don't tell her I said that, ok!)
So anyway, what's the point of all this?
Well, I did things differently the second time around, and I suspect that my thoughts on making the successful transition could be of benefit to others. I get quite a few emails from traders who are thinking of making the same transition - from part-time trading alongside a full-time job, to full-time trading. Typically they're after my thoughts about how capitalized they need to be, or about what levels of returns are realistic on a full-time basis. Of course, I'm not able to provide a useful answer. We all have different standards of living and therefore different income requirements. A decent budget will tell you what your income requirements are. And your part-time trading results will tell you whether you're able to achieve this level of income, given your current level of capitalization and your current percentage returns. Working out whether or not you have the ability to cover all expenses is really that simple.
However, and it's a big however, part-time trading success does not mean you're ready psychologically for the transition to full-time.
So, given my experiences and my desire for you to avoid some of the same pain, here's how I set myself up for my second (and so far successful) transition to full-time trading:
I first established other forms of part-time or passive income which were sufficient to cover all living expenses.
I hope you'll consider this idea for yourself. As always, it's not advice as I don't know you or your circumstances - it's just what I did and what I believe all serious traders should consider (blah, blah, blah, standard financial disclaimers).
Don't be too quick to rule this out. Don't listen to that voice in the back of your head that says this isn't possible for you, or it'll take too long. The fact is that if you take the time to do this first, it eases the pressure significantly.
I can trade now without any requirement for profit. I could enter a drawdown that lasts the next two years and it just wouldn't matter (apart from the frustration). Food will still be placed on our dinner table. Any trading profits I get are a bonus - we don't need them to survive. This is a powerful place to be.
I trade with my mind at ease.
So how do you achieve this?
(1) First, be sure you really want to go full-time. Full-time trading is a tough way to make a living. Sure, it's easier when you have alternate sources of income to support you through the 'drawdown periods', however for most of us life will not be like the trading course infomercials'. I really hope you can make a living trading from your laptop while sipping a Pina-Colada on the beaches of the Caribbean. More likely though, you'll be isolated in your home trading office for eight or so hours a day, staring at a screen. And if you take my recommendation for alternate sources of income in addition to trading, your 'free time' will be spent trying to manage some form of business or part-time job. It's not easy.
Many people may find that their personal and family circumstances are better suited to part-time daytrading, or perhaps a longer timeframe. Can you manage to trade the first two hours of the emini session? That may be sufficient for your style of trading. Can you trade the first two hours of the UK forex session? Or could you perhaps be happy with trading an end of day strategy using daily charts? These shortened trading sessions, along with some time for study or analysis in the evening, may be all you need to make a very profitable and enjoyable part-time trading business.
(2) Second, confirm that you really do have a proven track record that warrants going full-time. If you're implementing alternate forms of income, then your trading results don't need to completely cover your budget requirements, however given that this is likely your longer term goal it may be wise to ensure you've achieved that standard of return now. In any case, you need to have demonstrated consistent returns over a significant period of time.
(3) Now, let's find alternate sources of income.
The ideal would be some form of passive income. It'd be great if we all had a bunch of rental properties and could live off the rental returns, but I assume most of us aren't in that fortunate situation. Congratulations if you are. For the rest of us though, the most obvious source of part-time income is through a part-time or casual job or business, within your current field of expertise.
Are there opportunities to work for your current organization on a part-time or casual basis outside of market hours, or perhaps from home? If you can work part-time, but only during market hours, find another market that operates after-hours. It's a global economy - there's a market open somewhere.
Or once again, have you considered just trading the morning session, or afternoon session. A full-time trader doesn't have to spend 8 hours a day in front of the screen. Are you able to find part-time employment around these shortened sessions?
If your current employer provides no options, look further afield to other employers within the same industry.
Even better, do you have sufficient experience to start a consultancy business in your current field? You don't have to be recognized as an expert. You just need some skills that can be marketed to the industry, with sufficient demand available that this can be operated part-time around your trading and provide sufficient income to survive. Seriously, think about it - there are lots of options available.
Or look to other areas entirely...
Is your spouse able to (and willing to) make a job or career change that will potentially provide greater income?
Are you able to teach anything at all? A musical instrument? Dance? Take up coaching or refereeing in a sport? Why not start tutoring local kids in basic math, science or whatever else excites you? There is no shortage of small, home based businesses that can be operated at minimal cost around your trading timeframe requirements.
I know this is not the idea that most of you have of 'full-time' trading, but it doesn't need to always be this way. I plan to always have alternate forms of income, but you might like to phase it out over time so that you really are solely a full-time trader. Consider this a transition phase only.
I also know it's tough to be working full-time in your trading, and also running a business or working elsewhere part-time. But if you want this bad enough, you'll find a way. I've done it despite a young family. How badly do you want it?
Work out your budget. And find sufficient income to cover it, such that it allows you to trade during market hours.
This process may take a while to put into place, but I believe its well worth the effort. You might be able to handle the psychological challenges of moving straight to full-time trading. Certainly, some traders have done it. But many have failed as well. If the downside risk of failing at your full-time trading venture is too great to accept, then take whatever time is necessary to mitigate that risk. Find alternate sources of income, which can support you while still allowing you to trade full-time.
I had the required knowledge. I had the required skills. I was a great technical analyst. And I had some demonstrated success in the markets.
But I was lacking in other areas. I was grossly undercapitalized. And despite my appearance as being someone with a positive and confident attitude, inside I was consumed with doubt and fear. Of course, I was unable to admit to either at the time.
Well, there's nothing I know of that's more effective for bringing all your fears out into the light, than quitting your full-time job to pursue a full-time career in market speculation.
With no other form of income available to support my family, it was all up to me to continue to generate the market returns that I 'knew' I was capable of achieving. Of course, almost instantly, my results failed to meet my expectations.
Thankfully, I still had the discipline to respect my stops, ensuring I did not have to face a single catastrophic loss. Although in some respects a single catastrophic loss could be seen as a blessing - at least it gets it over with quickly. Instead I spent the next few frustrating months grinding my way into a soul-destroying drawdown.
My mindset was a mess. I doubted my analysis, hesitating at entry until I got in way too late, or missed the trade entirely. And it seemed as if the only trades I did enter without hesitation were those entered out of frustration from missing the previous trade, rather than from good analysis. Typically, those trades do not provide the greatest edge.
I would take profits quickly; fearful that the market would snatch them back from me.
And I even ventured to depths I never thought I'd go - asking a broker for some trades. In his defense, his analysis may have been great. I just wasn't in the right mindset to be profiting from any recommendations, no matter how great the trader or analyst.
Basically, fear of not being able to provide for my family led to doubt and indecision, which rendered me incapable of applying my trading plan in a consistent and disciplined manner, leading to realization of the very fear that it sought to avoid.
Fortunately, I was able to recognize the problem before the damage to our finances and my marital status was irreversible. Although I must admit, I took both right to the edge.
So, I took some time out to rethink my plans. I returned (with tail between my legs) to full-time work. And I set about preparing for my next assault on full-time trading.
I am forever indebted to my wife for her patience and her support in helping me see the reality of the situation. (Guys, just because we are hardwired to perceive it as nagging, it doesn't mean it's not the truth. :-) Just don't tell her I said that, ok!)
So anyway, what's the point of all this?
Well, I did things differently the second time around, and I suspect that my thoughts on making the successful transition could be of benefit to others. I get quite a few emails from traders who are thinking of making the same transition - from part-time trading alongside a full-time job, to full-time trading. Typically they're after my thoughts about how capitalized they need to be, or about what levels of returns are realistic on a full-time basis. Of course, I'm not able to provide a useful answer. We all have different standards of living and therefore different income requirements. A decent budget will tell you what your income requirements are. And your part-time trading results will tell you whether you're able to achieve this level of income, given your current level of capitalization and your current percentage returns. Working out whether or not you have the ability to cover all expenses is really that simple.
However, and it's a big however, part-time trading success does not mean you're ready psychologically for the transition to full-time.
So, given my experiences and my desire for you to avoid some of the same pain, here's how I set myself up for my second (and so far successful) transition to full-time trading:
I first established other forms of part-time or passive income which were sufficient to cover all living expenses.
I hope you'll consider this idea for yourself. As always, it's not advice as I don't know you or your circumstances - it's just what I did and what I believe all serious traders should consider (blah, blah, blah, standard financial disclaimers).
Don't be too quick to rule this out. Don't listen to that voice in the back of your head that says this isn't possible for you, or it'll take too long. The fact is that if you take the time to do this first, it eases the pressure significantly.
I can trade now without any requirement for profit. I could enter a drawdown that lasts the next two years and it just wouldn't matter (apart from the frustration). Food will still be placed on our dinner table. Any trading profits I get are a bonus - we don't need them to survive. This is a powerful place to be.
I trade with my mind at ease.
So how do you achieve this?
(1) First, be sure you really want to go full-time. Full-time trading is a tough way to make a living. Sure, it's easier when you have alternate sources of income to support you through the 'drawdown periods', however for most of us life will not be like the trading course infomercials'. I really hope you can make a living trading from your laptop while sipping a Pina-Colada on the beaches of the Caribbean. More likely though, you'll be isolated in your home trading office for eight or so hours a day, staring at a screen. And if you take my recommendation for alternate sources of income in addition to trading, your 'free time' will be spent trying to manage some form of business or part-time job. It's not easy.
Many people may find that their personal and family circumstances are better suited to part-time daytrading, or perhaps a longer timeframe. Can you manage to trade the first two hours of the emini session? That may be sufficient for your style of trading. Can you trade the first two hours of the UK forex session? Or could you perhaps be happy with trading an end of day strategy using daily charts? These shortened trading sessions, along with some time for study or analysis in the evening, may be all you need to make a very profitable and enjoyable part-time trading business.
(2) Second, confirm that you really do have a proven track record that warrants going full-time. If you're implementing alternate forms of income, then your trading results don't need to completely cover your budget requirements, however given that this is likely your longer term goal it may be wise to ensure you've achieved that standard of return now. In any case, you need to have demonstrated consistent returns over a significant period of time.
(3) Now, let's find alternate sources of income.
The ideal would be some form of passive income. It'd be great if we all had a bunch of rental properties and could live off the rental returns, but I assume most of us aren't in that fortunate situation. Congratulations if you are. For the rest of us though, the most obvious source of part-time income is through a part-time or casual job or business, within your current field of expertise.
Are there opportunities to work for your current organization on a part-time or casual basis outside of market hours, or perhaps from home? If you can work part-time, but only during market hours, find another market that operates after-hours. It's a global economy - there's a market open somewhere.
Or once again, have you considered just trading the morning session, or afternoon session. A full-time trader doesn't have to spend 8 hours a day in front of the screen. Are you able to find part-time employment around these shortened sessions?
If your current employer provides no options, look further afield to other employers within the same industry.
Even better, do you have sufficient experience to start a consultancy business in your current field? You don't have to be recognized as an expert. You just need some skills that can be marketed to the industry, with sufficient demand available that this can be operated part-time around your trading and provide sufficient income to survive. Seriously, think about it - there are lots of options available.
Or look to other areas entirely...
Is your spouse able to (and willing to) make a job or career change that will potentially provide greater income?
Are you able to teach anything at all? A musical instrument? Dance? Take up coaching or refereeing in a sport? Why not start tutoring local kids in basic math, science or whatever else excites you? There is no shortage of small, home based businesses that can be operated at minimal cost around your trading timeframe requirements.
I know this is not the idea that most of you have of 'full-time' trading, but it doesn't need to always be this way. I plan to always have alternate forms of income, but you might like to phase it out over time so that you really are solely a full-time trader. Consider this a transition phase only.
I also know it's tough to be working full-time in your trading, and also running a business or working elsewhere part-time. But if you want this bad enough, you'll find a way. I've done it despite a young family. How badly do you want it?
Work out your budget. And find sufficient income to cover it, such that it allows you to trade during market hours.
This process may take a while to put into place, but I believe its well worth the effort. You might be able to handle the psychological challenges of moving straight to full-time trading. Certainly, some traders have done it. But many have failed as well. If the downside risk of failing at your full-time trading venture is too great to accept, then take whatever time is necessary to mitigate that risk. Find alternate sources of income, which can support you while still allowing you to trade full-time.
To Roth Or Not to Roth is the Question
There are two options for planning your retirement finances. You can either contribute to a traditional IRA or A Roth IRA.
On a traditional IRA, employees have the convenience of contributing through deductions made from their pay. In this option, you make your contributions tax deferred until your retirement or until your withdrawal. You can establish many IRA accounts up to one year before you reach the age of 70 ½. There are annual rebates available for the contribution to such IRAs.
However in Roth IRA you forget your tax break now in anticipation of getting it at the time of retirement. There is much sweeter version of Roth available under which you can combine the features of traditional 401(k) IRA with a Roth IRA, which is called Roth 401(k).
The employees can contribute to this Roth 401(k) through a deduction from the payroll. And the contributions are after tax, so that the participants can enjoy the withdrawals free of taxes after the age 59 ½.
The Roth 401(k) follows many rules of a traditional IRA. The maximum annual contribution permitted is $15,000. However your employer may fix a limit lower than this. The employer may be willing to provide a matching contribution to yours, however the contribution will go into a traditional IRA. If you are 50 or older then you can additionally contribute $5000 making it a total contribution of $20,000.
You may continue maintaining a traditional IRA and direct all or a part of your new contributions to a Roth IRA. And your contributions to such Roth IRA are irrevocable, meaning they cannot be transferred to any traditional IRA account. Both the traditional and Roth IRAs require distributions after the age of 70 ½.
A Roth 401(k) IRA is a greater benefit at the time of retirement. As per the present development, the funds can be rolled over directly without paying any tax to a Roth IRA. This feature is not available presently for the traditional 401(k) account.
Refer to the following points before taking a final decision to call for a Roth 401(k)
a. Future taxes are always difficult to predict. If you anticipate a higher tax bracket for you at the time of retirement then you should go for Roth 401(k)
b. At the time of retirement you are not going to claim deductions for dependents. Also you are not going to claim deductions for mortgages. So you may face a higher tax bracket. In that situation Roth 401(k) can come to your advantage.
c. Roth 401(k) offers the benefit of a rollover of your funds directly to a Roth IRA. This Roth IRA will not require distributions after the age of 70 ½. This will increase the probability of tax for the gold top of assets and you can bequeath assets in higher value to your heirs.
d. It is not necessary to meet the income criteria while participating in Roth 401(k). Roth IRAs are limited to adjusted gross income of $110,000 to individual taxpayers and $160,000 to married couples. If your income is about the threshold for a Roth IRA, then Roth 401(k) is an attractive option for you.
e. If you invest for a longer time (say for more than five years) in Roth 401(k), then you are going to benefit from a tax free growth.
You need to weigh all options keeping in mind your long term goals. If no-tax option for the withdrawals attracts you and your employer is also making you available Roth 401(k), then it is a very good addition to the retirement planning strategies.
There are all sorts of financial decisions you take in your life. You make gifts to your children; you make investments and acquire real estate. Do you really know the tax implications of these decisions, which can save you thousands of dollars?
On a traditional IRA, employees have the convenience of contributing through deductions made from their pay. In this option, you make your contributions tax deferred until your retirement or until your withdrawal. You can establish many IRA accounts up to one year before you reach the age of 70 ½. There are annual rebates available for the contribution to such IRAs.
However in Roth IRA you forget your tax break now in anticipation of getting it at the time of retirement. There is much sweeter version of Roth available under which you can combine the features of traditional 401(k) IRA with a Roth IRA, which is called Roth 401(k).
The employees can contribute to this Roth 401(k) through a deduction from the payroll. And the contributions are after tax, so that the participants can enjoy the withdrawals free of taxes after the age 59 ½.
The Roth 401(k) follows many rules of a traditional IRA. The maximum annual contribution permitted is $15,000. However your employer may fix a limit lower than this. The employer may be willing to provide a matching contribution to yours, however the contribution will go into a traditional IRA. If you are 50 or older then you can additionally contribute $5000 making it a total contribution of $20,000.
You may continue maintaining a traditional IRA and direct all or a part of your new contributions to a Roth IRA. And your contributions to such Roth IRA are irrevocable, meaning they cannot be transferred to any traditional IRA account. Both the traditional and Roth IRAs require distributions after the age of 70 ½.
A Roth 401(k) IRA is a greater benefit at the time of retirement. As per the present development, the funds can be rolled over directly without paying any tax to a Roth IRA. This feature is not available presently for the traditional 401(k) account.
Refer to the following points before taking a final decision to call for a Roth 401(k)
a. Future taxes are always difficult to predict. If you anticipate a higher tax bracket for you at the time of retirement then you should go for Roth 401(k)
b. At the time of retirement you are not going to claim deductions for dependents. Also you are not going to claim deductions for mortgages. So you may face a higher tax bracket. In that situation Roth 401(k) can come to your advantage.
c. Roth 401(k) offers the benefit of a rollover of your funds directly to a Roth IRA. This Roth IRA will not require distributions after the age of 70 ½. This will increase the probability of tax for the gold top of assets and you can bequeath assets in higher value to your heirs.
d. It is not necessary to meet the income criteria while participating in Roth 401(k). Roth IRAs are limited to adjusted gross income of $110,000 to individual taxpayers and $160,000 to married couples. If your income is about the threshold for a Roth IRA, then Roth 401(k) is an attractive option for you.
e. If you invest for a longer time (say for more than five years) in Roth 401(k), then you are going to benefit from a tax free growth.
You need to weigh all options keeping in mind your long term goals. If no-tax option for the withdrawals attracts you and your employer is also making you available Roth 401(k), then it is a very good addition to the retirement planning strategies.
There are all sorts of financial decisions you take in your life. You make gifts to your children; you make investments and acquire real estate. Do you really know the tax implications of these decisions, which can save you thousands of dollars?
Wednesday, March 4, 2009
Are Gold and Silver Markets Being Manipulated?
Many people didn't believe for years that the gold and silver markets in the world were being manipulated. However, given the current economic state and the constant intervention of central banks, it's quite evident to see that this is happening. The only way these markets are able to be seen as not being manipulated is by believing that they are the only market that isn't being taken advantage of, because every market is being used by the central banks such as the Federal Reserve for their own benefit. Why are the banks manipulating the price of gold?
Well, for one, the competitiveness of the precious metals influences interest rates for other methods of spending, which typically are preferred to be kept low. There are many investigations and reports that are being made about the use and manipulation of gold and silver in the economy, which makes it hard to know which one is best trusted. However, you must at least understand that the gold and silver prices, supply, and other elements are in fact being controlled by the government.
You can see a clear example of this manipulation in the increasing demand for gold and silver as other investments become less attractive. More and more people are demanding gold, and somehow less is being given out, as the world governments hold out for the big gold rush that appears to be looming in the future. Add to that the fact that the GATA (Gold Anti-Trust Action) committee can't get the Fed to give up information about the precious metals and the situation that is currently going on with the U.S. gold reserve. Obviously, this is in part due to privacy laws and such, but is still further proof that the government is tugging on the strings of the precious metals markets every single day.
If people were to buy large quantities of gold and stop using currencies for commerce, even on a small scale, drastic things could happen. The collapse of national currencies could have a devastating effect on the world economy and governments will try as hard as they can to keep that from happening. However, with the current economic situation in the United States and abroad, the Federal Reserve and other banking an money controlling entities may not be able to keep a tight reign on the gold and precious metals markets. They very well may set their own level according to market supply, demand and who is investing.
It seems that the state of things is nobody's business, except for Wall Street. However, it still leaves many people wondering what the deal is with the markets in the end. Many people are concerned by the government's lack of openness about where their money is going, where markets are being toyed with, and why they are using these markets to their advantage in every way possible.
This creates a lot of misleading answers to questions about the gold supply, the use of gold in the current economy, and even the state of the gold and silver markets and how they will play out over time. Although these markets are typically independent from other economic situations, if they are being manipulated by anyone, they cannot be depended on nearly as much as people might have thought.
However, with the state of the economy and the pace of quick change in today's volatile markets, gold cannot be manipulated forever. The economy may eventually force the price of gold and silver through the roof as it busts through artificial price controls by the Fed. Do you want to wait until the price of gold skyrockets before you add it to your investment strategy?
Remember, you should always study the market carefully and talk to experts before embarking on any investment ventures.
Well, for one, the competitiveness of the precious metals influences interest rates for other methods of spending, which typically are preferred to be kept low. There are many investigations and reports that are being made about the use and manipulation of gold and silver in the economy, which makes it hard to know which one is best trusted. However, you must at least understand that the gold and silver prices, supply, and other elements are in fact being controlled by the government.
You can see a clear example of this manipulation in the increasing demand for gold and silver as other investments become less attractive. More and more people are demanding gold, and somehow less is being given out, as the world governments hold out for the big gold rush that appears to be looming in the future. Add to that the fact that the GATA (Gold Anti-Trust Action) committee can't get the Fed to give up information about the precious metals and the situation that is currently going on with the U.S. gold reserve. Obviously, this is in part due to privacy laws and such, but is still further proof that the government is tugging on the strings of the precious metals markets every single day.
If people were to buy large quantities of gold and stop using currencies for commerce, even on a small scale, drastic things could happen. The collapse of national currencies could have a devastating effect on the world economy and governments will try as hard as they can to keep that from happening. However, with the current economic situation in the United States and abroad, the Federal Reserve and other banking an money controlling entities may not be able to keep a tight reign on the gold and precious metals markets. They very well may set their own level according to market supply, demand and who is investing.
It seems that the state of things is nobody's business, except for Wall Street. However, it still leaves many people wondering what the deal is with the markets in the end. Many people are concerned by the government's lack of openness about where their money is going, where markets are being toyed with, and why they are using these markets to their advantage in every way possible.
This creates a lot of misleading answers to questions about the gold supply, the use of gold in the current economy, and even the state of the gold and silver markets and how they will play out over time. Although these markets are typically independent from other economic situations, if they are being manipulated by anyone, they cannot be depended on nearly as much as people might have thought.
However, with the state of the economy and the pace of quick change in today's volatile markets, gold cannot be manipulated forever. The economy may eventually force the price of gold and silver through the roof as it busts through artificial price controls by the Fed. Do you want to wait until the price of gold skyrockets before you add it to your investment strategy?
Remember, you should always study the market carefully and talk to experts before embarking on any investment ventures.
Tuesday, March 3, 2009
Protecting the Tax Advantage of Your Deferred Compensation
The American Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.
Given the potentially huge tax consequences for non-compliance with the rules, you should consult with your organization’s benefit specialist and your tax professionals to figure how your compensation might be affected by these new rules.
Deferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.
An option for independent corporate directors and individual board members who receive 1099 income for their services may consider is to freeze their nonqualified plan and adopt a qualified plan such as the “one person defined benefit plan”, called the Solo-DB Plan. Qualified retirement plans are exempt from the requirements of the American Jobs Creation Act.
The Solo-DB plan allows the highest deductible contributions possible in a qualified retirement plan. For example in 2005 one can contribute up to $170,000 of compensation into a tax-deferred Solo-DB plan.
Defined benefits plans have been around for a long time. But, recent pension legislation has raised the contribution and deductibility limits as well as simplified plan fund requirements. Thus, defined benefit plans like Solo-DB have become much more attractive to upper-income individuals with self-employment income. The Solo-DB plan will allow you to aggressively fund your retirement while cutting your taxes significantly.
Individuals who qualify for the Solo-DB plan include sole proprietors, independent contractors, and small business owners age 45 or older who can contribute more than $41,000 annually to the plan for at least three years.
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