Many day traders fail for one reason, and one reason only, their trade management is not properly planned out to ensure them any long term success. Trade management is how a trader determines precisely how much trading capital he/she is going to risk on a single trade. Trade management to many, is considered more important than the profits they make, because strict risk management can be the determining factor between becoming a successful trader or not. Having the correct trade management is essential to all traders because it provides traders with:

o Long term profits (cut losses, maximize profits)
o Protection of capital
o Preservation of trading confidence
o Removing of emotions

Risk management can very well be different for every trader, because each trader has their own level of risk they wish to accept on each and every trade they place. How a trade is managed also depends on how many contracts a trader is trading with, for example, a one contract trader should look to take profit at just one target, where as a person trading two or three contracts can afford to scale out of their trade by having multiple profit targets. The style of trading is also crucial to determining how much of a stop to use on each trade, for example, for scalp trading, a typical stop could be four ticks, for intra-day trading you might want to use a six tick stop, for position trades a twelve tick stop and for swing trades many traders recommend a twenty-four tick stop (depending on the market you are trading of course). Also, remember when determining your stop levels, it is a good rule to make sure your stops do not exceed between 1-5% of your account on each trade. It is even better if you stay in the 1-2% range, and seldom ever use a 5% stop because this ensures preservation of capital first. An example of this would be to assume you have an account balance of $10,000; the conservative risk management for this account would be to risk only $100-250 on any given trade, thus only risking 1-2.5% of your account on a single trade.

Most professional traders will recommend having a 1:1 (risk 10 ticks to make 10 ticks) or 2:1 (risk 20 ticks to make 10 ticks) risk/reward ratio. When trying to determine which risk/reward ratio to use, it is best to ask yourself how much capital you have to trade, and what you plan on trading. For example, let’s say you use the following trading structure when trading the Crude Oil futures:

o Account Size: $10,000
o 1:1 risk reward ratio ($10/tick)
o Risk on each trade $100-250

source: ezinearticles.com

The procedure of investment in land that awaits future urban development has been carried out for generations by both big businesses and private investors. For several it has been a gainful venture, resulting in many folks gathering large land portfolios and substantial amounts of wealth. Mainly, this investment has taken place in agricultural plots surrounding towns, villages and cities as these are seen as ripe for development as settlements expand. This type of investment has recently been opened up to the masses with many companies offering chances to unite funds for part ownership of land.

The chances to harvest large financial rewards from land investment are great. In some cases it is not even required to offer a large financial inoculation, part ownership schemes have allowed investors to begin investment in land for as little as fifty pounds, paid on a weekly basis. As a result investors differ from those attempting to build up a retirement nest egg to those struggling to get on the possessions stepladder.

In terms of the rewards some estimates consider that an investment of twelve thousand pounds could lead to a return of more than fifty. This will take about ten years but when compared to other investment opportunities the returns are excessive; obviously however, as with most investments the greater the risk, the higher the profits. As a result, those allowing for buying land should always research a number of companies carefully as an approach without intimate knowledge can be seen as foolish. This appraisal should include an appraisal of a company’s credibility and past history in giving investors honest returns.

In the media the land investment business has not received the best of press in recent years. There are still a large number of companies out there that is measured trustworthy; all it takes is a little effort in researching the industry to find them. Once this research has been carried out, the returns from share purchasing can obtained quickly.

Eventually a company that appreciates the privilege of investors to research proposed opportunities is the ideal; in addition, they should also readily supply this information so their clients can make informed choices pertaining to any investments. Part of this information should include reports from local authorities on the transport links, mains supply and chances of planning permission for any plot of land. It is worth remembering however that while the benefits are certainly there, they are never guaranteed; investment is a risk and hence there is always the chance of losing money. As the demand for land for housing continues to grow however, this risk is reducing to some extent, through astute financial investment, profits should become realism.

source: ezinearticles.com

Trading for a living, what could be a more alluring profession? The Forbes list of the 500 wealthiest people in the world is littered with names of people who have amassed huge fortunes in the world of Wall Street. Warren Buffett, George Soros, Paul Tudor Jones, James Simons, Louis Bacon, and Eddie Lampert, just to name a few. In 2007, to make the list of 100 top earners on Wall Street, you needed an income of at least $75 million! The top earners made over $1 billion!

With that in mind, it is no wonder that new traders set out to make their fortunes in the financial markets. After all, they are bombarded with advertisements and infomercials describing the next great thing in the world of trading. Starting with accounts as small as just a few thousand dollars, these traders hope to hit it big, and they seek to find that holy grail of trading systems that will lead them to the promised land of Wall Street riches.

I was one of those traders almost 15 years ago. At that time, after subscribing to a couple stock newsletters, I was bombarded with other newsletter writers, telling me they new the way to financial fortune. One service got me interested in commodity trading by sending me some spread trading strategies. These proved to be outdated and ineffective, since markets change over time. I then learned a popular trend following system, had some initial success, and then was hooked on trading. Little did I know that trading is a lot more difficult than I realized.

What I didn’t realize is that the competition in the financial markets is fierce. Wall Street is littered with MBA’s and PHD’s from the Ivy League schools. These people are groomed for Wall Street careers through summer internships at the big investment houses such as Goldman Sachs, Merrill Lynch, or even some big hedge funds. Some of these hedge funds not only hire traders, but top scientific minds from disciplines such as physics, chemistry and engineering.

In 1998 I had the opportunity to work for a hedge fund and commodity trading firm as an execution trader dealing with Asian and European markets. This firm was run by a trader who hired computer programmers that could test and research all of his ideas and then program them into automated trading models. The only orders I needed to execute were the more sizable orders so we could avoid the slippage caused by large stop orders. There were other traders and research staff that all had a hand in developing new models for the system. In spite of this, that firm eventually nearly failed and is now just a shell of itself.

source: ezinearticles.com

A golden rule of trading is don’t bet the house. In other words minimize your trading risk.

One of the cardinal sins for anyone trading is to use money that isn’t trading risk-capital. That is, you use money for trading that you can’t afford to lose, money that if lost will affect your lifestyle and perhaps your ability to provide for your family. Using risk-capital creates tremendous emotional pressure in you, even before you enter your first trade. The less trading risk the easier it is to get into the right trading mindset.

If you’re dependent on the capital you’re trading, it will be nearly impossible to remain objective and to think clearly, and when trading you must remain detached from the individual trades. Clearly, if your livelihood is riding on each trade, every losing trade will amplify the pressure and further distort your thinking. The probability that you’ll be wiped out and substantially hurt is heightened.

Trading risk capital also sets you up for many additional emotional traps that are likely to sink your ship. Let’s go over a few.

One emotional trap is that when you trade money that you need to support yourself you are likely to be in a hurry to make money. You’re impatient to hit that home run and so you’ll start to work with less than favorable probabilities. Soon, you might even start taking trades with the odds against you. You’ll get attached to trades, hang on to them, ride them too long, because of wishful thinking. Worried about making your next mortgage payment, you soon forget to keep it realistic. If it’s only a single, you won’t take the single, hoping for a home run. You’ve forgotten that the markets answer to no one. If you try to force a home run, you’ll soon be tagged out.

Another trap that comes right in with trading risk capital is trading without a plan, the most common mistake made by losing traders. By not having a plan, you create a tremendous amount of uncertainty. This adds to the numerous emotional influences that cause bad decisions.

Trading without a plan means trading without decision guidelines in place. Without knowing in advance what you will do after the trade commences. The plan is what allows you to minimize your losses and capitalize on winners. The trading plan also lets you know whether or not you’ve entered a trade with a reasonable probability of profiting.

I once entered a bull call spread on the Euro, a small trade, and it seemed conservative enough. I didn’t bother to follow my normal practice of calculating break-even and other important numbers before I entered the trade. I did it immediately afterward, but that was a stupid mistake. As soon as I sat down and did the simple math, it was apparent that the price would have to be in a very tight range on the day of expiration in order for me to make a profit. All the other scenarios resulted in a substantial loss, which is exactly what I got. $3,000 out the window.

source: ezinearticles.com

All Traders should have a mantra, as follows:

I will educate myself on how the market works.

I will learn how to find and place a trade.

I will create a trading plan and trade my plan.

I will not chase the market with emotions.

I will decide to be a day trader or an overnight trader (or longer) before I enter the market to help to control my emotions.

I will be patient and wait for a market set up.

I will never trade without a protective stop loss order.

The market will meet my criteria or I will not trade.

have refined a standard procedure that I use for the process of creating a trading strategy. I always start with the big picture and make increasingly more detailed decisions about the strategy.

I begin with the assessment of what type market action I want to trade and what kind of trader I am. Then I end up with making decisions on exits, and how far away to put my money management stops.

How can you adapt my strategy making to your personal psychology?

You Must Pick the Market

The first decision you must make is what type of market you want to trade. Although this may look like an easy decision, in fact, it is a difficult judgment, because most new traders only consider the profit aspect. They simply try to pick the strategy that they think will make the most money. Focusing on money will probably lead you to make the wrong decision. It is the psychological aspect of trading each of the markets that is the most important consideration. It does not make sense to create a very profitable strategy if you are unable to trade psychologically.

What is Your Trading Time Frame?

You need to decide whether you will day trade or trade on daily or weekly charts. It is very difficult to have a job and trade intra-day. It is not totally impossible, just very difficult.

Most people want to trade part time and still hold down a day job. If you want to do this, it is better to trade daily or weekly charts. You will only be able to look at the market outside of your working hours and your strategy design will have to take this into account.

The strategy should not require you to check the market during the day. I think that there is only a certain amount of money that you can get from the markets and that depends on the time frame you choose to trade.

Time frame choice is a personal decision, and of course there are no right or wrong answers. The ultimate decision is personal preference influenced by financial your considerations. But you have to make this decision before you start looking for indicators, as the choice of indicators is influenced by the time frame selection.

source: ezinearticles.com

The economic downturn has many people worried about recession, and inflation rates seem to be rising every other week. In light of such uncertain times, have you ever wondered if investing your hard earned dollars into the stock market is the prudent thing to do? Or are you already considering alternative forms of investment? If so, consider online commodity trading, because depending on your knowledge, risk appetite, and the commodities you choose, you have the potential to earn big returns on your investment.

But if you’re a greenhorn at the commodity market, or even at trading for that matter, you might be wondering what commodities trading is all about. Commodities trading is where traders trade contracts for goods, and not for the goods themselves; goods such as food like corn or malt, or metals like gold and silver. The traders don’t have to deliver the goods to some end-consumer at the end of the day, because they don’t have the goods to begin with, and most likely never will have them. A trader would instead buy a contract if he thought that the price for a commodity would be going up in the future. He would then sell the contract if he thought the price would depreciate. Think of it as a kind of insurance plan for the traders and investors; regardless of price fluctuations, both the buyer and the seller are guaranteed the price stated in the contract at the time of trade. Just like any business transaction, there is always a buyer and seller in every trade made, but neither the buyer or the seller is required to own a particular commodity in order for the trade to happen. The only thing that a trader has to do is to deposit enough capital with a brokerage firm to ensure that he would be able to pay for his losses if his trade loses money. This is known as commodity futures trading.

So now that the concept of commodities trading is out of the way, why trade online?

Online commodities trading involves the transmission of orders by customers to either buy or sell a commodity to a commodity exchange via an electronic marketplace. Unlike the traditional offline method of trading, no brokers are required to represent customers. However, having an online broker would cost you less commissions-wise than if you were to have a full-service broker. As such, you stand to be more profitable on your trades than if you were to trade offline.

Trading commodities online also provides you with almost everything you need the moment you log into your trading account. Most online brokers are equipped with real time information, ranging from futures news, price quotes, charts, technical analysis programs, and other research material that are made available for their clients. As such, those who wish to embark on online trading on their own are able to make more informed decisions when trading because the same tools have been made available for them online.

source: ezinearticles.com

Many people start trading in Forex using short term trading techniques or even scalping techniques. In my opinion learning such techniques is a much harder task than learning longer term trading techniques like swing trading. That was my experience. It may not be your experience. However I believe that swing trading has a number of advantages over the short period trading systems.

1. Pay less in spreads.

Traders don’t pay commissions in Forex instead they pay spreads – the difference between buy and sell prices. So if you execute 10 trades in a short time period with a currency that has 2 pips spread you already short of 20 pips. That’s the reason I believe a good trading strategy to start with should have less number of executions in the same day and it should have a higher profit target. Swing trading allows you to do that. A trade last for a few days and take-profit levels are usually well over 100 pips.

2. Better emotional control.

Short time trades usually require traders continuously monitor their trades. It can be really stressful for a trader who just starting his career in Forex. You may be already familiar with the emotional roller coaster of observing the price going in favor and against your position. On the other hand longer-term swing trading may require only a small amount of time to monitor the trade. You still need time to study the market and look for the signals of your system. But once you execute the trade, set up the stop-loss and take profit orders then all that left is to come back to you charts once or twice a day to monitor the progress of your trade.

3. Level of noise.

When you work with the higher time frame charts for swing trading you can easily spot the price patterns that you need to trade. Quite in contrary shorter timeframe charts have the level of noise pretty high. Look at one-minute charts everything is buried in random noise so it’s hard to see any price pattern appropriate for a trade.

source: ezinearticles.com

If you are actively trading in the New York Stock Exchange, one of the most active exchanges in the world, you should be very thankful. Its total daily transactions are averaging approximately at U.S. $50 billion, making it the largest stock exchange in the United States in terms of dollar volume. There are many individuals who want to get their feet wet on the ground of this New York City-based stock exchange.

Yet, you are luckier if you are actively involved in trading foreign currencies, or commonly known as Forex trading, which is considered to be the largest market on the world. Its average daily trading turnover is approximately U.S. $2 trillion, exceeding the combined magnitude of all other equity markets, including the New York Stock Exchange. Thus, you are luckier since you have the opportunity of getting more profits out of that $2 trillion traded everyday.

If you are not yet involved in Forex trading, then you are currently missing the benefits of trading foreign currencies-24 hour trading time, transactions conducted in real time, extreme liquidity, and others. Thus, you should decide to get a Forex trading account and start trading right away.

However, just like other types of investment, you must be aware of what kind of ground you are stepping into. In other words, before getting a live Forex trading account, you must be properly educated first about the background of Forex trading. You must learn how you will maximize your earning potentials as well as decrease the risk that you are into through practicing with free demo accounts. Moreover, you must have a trading system to follow and the necessary tools that will help you analyze varying conditions of the Forex market to position yourself on the profiting aspect of a certain trade.

Once you know what you are getting into, you are now ready to get your live Forex trading account, web-based trading system and platform, and other tools that you will need in your Forex trading career. Most neophyte Forex traders obtain their trading accounts and platforms through a Forex brokerage company or agents. There are many brokerage firms out there and you need to be selective, or else you will suffer the adverse consequences.

source: ezinearticles.com

How do CFDs Work?

Contracts for Difference (CFDs) can sound rather complicated but are really very simple. With a CFD you pay the same price as you would for the underlying share. That means CFDs work in almost the same way as ordinary share dealing but have a range of additional features.

One benefit of trading CFDs is that you get the opportunity to take a larger position than you normally would if trading ordinary shares for the same outlay. When trading shares your broker will usually ask you to pay for the full amount of the transaction. With a CFD deal your broker will just ask you to make a deposit on the deal, which initially is often as low as 10% of the transaction value.

CFDs allow you to benefit from any market conditions providing you deal the right way. Not only can you profit from a rising share price by ‘going long’ you can also benefit from a falling share price by ‘going short’ (i.e. sell a CFD on a share you do not own). In these volatile markets going short can enable you to make profits where trading ordinary shares may not.

The best part of all about trading CFDs is you don’t pay any stamp duty – which effectively removes one of the greatest costs you face when trading normal shares.

Because of their geared structure, CFDs are high risk investments. Please read our full guide to CFDs and the CFD Important Investment Notes for full information on how CFDs work and the risk factors you should consider.

CONTRACTS FOR DIFFERENCE – TRADING STRATEGIES

HINT: TRADE THE FACTS

The same rules apply to CFDs as they do to share trading – In essence, they’re both about getting the direction of the instrument correct. Trading on rumours is a classic investor trait, which can often lead to losses as the event never materialises and the share price falls back.

source: ezinearticles.com

A trading plan is like a map to the trading goals or objectives. It where your rules are used to maximize your winning advantage when you have it and minimize your losses. No one can predict the future or where the market is going, but a sound trading plan will help traders or investors to keep them focus on the target. Investors or traders must aware that when they buy or trade shares, they are actually buying a business. To be successful in the business, they need a plan to succeed.

A good trading plan must cover some basic issues including your goals and objectives. It should also address the emotional, psychology, outside life issues that might influence your ability to trade well. Other than that it must also cover three essential areas namely: Entry, Exit, and Position Sizing.

Bellow is a sample of a written trading plan:

My Trading Plan

1. My goal is to make $200 per day over the 20 day trading period a month.

2. I understand that I cannot predict and control the markets. I will control myself by adhering strictly to my trading plan.

3. The only factor to be taken into account during trading should be the facts and not any preconceived ideas no matter how well-founded, or other people’s opinions.

4. I will only trade on days when I am rested, relaxed and not distracted. I will stick to my trading plan, as it will help to prevent me from making trades that are poorly conceived and executed. I will not trade on days when I am feeling sick, tired or when I am distracted by other events in my life.

5. The instruments that I will trade are Australian Stocks listed on the ASX.

6. I will start my trading at 09.00 and finish at 11.30 every trading day.

7. I will ensure that of the 15 hours per week devoted to trading.

8. Each day, I will ensure that yesterday’s trades are analysed and that my trading journal is updated.

9. I am a a risk averse trader and always seeking to minimise risk wherever possible. I will achieve this via diversification and risk management regime.

10. My maximum exposure in the market will not exceed a combined total of 10% of my capital at any one time.

11. My maximum exposure in any one sector will not exceed a combined total of 5% of my capital at any one time.

12. For every trade I enter, I will decide in advance where to place my stop loss. Full exit to be taken when stop loss is reached without exception

13. When my trading equity exceeds the amount I need to trade my strategies, I will withdraw the surplus and transfer it back to my bank account.

14. I will utilise a trailing stop which I will position10% below the lower high in an uptrend or 10% points above a higher low in a downtrend.

15. I will close my whole position immediately upon the price crossing the moving average.

16. I will close half my position upon a 50% increase/decrease in volume compared with the previous price bar.

17. In addition to recording all my trades, I check to confirm that all trades are executed in accordance with my plan.

18. I will update my trading journal regularly with my thoughts about each trade and my conclusions about the day as a whole.

19. If I break one of the rules detailed in my trading plan I will stop trading for a full day and focus on the reasons why there was a breach of discipline.

20. After a winning trade I will guard against over confidence and ensure that my attitude remains consistent, and remind myself that executing the trade in accordance with my plan is more important than the outcome of the trade.

21. After a losing trade I will examine the trade and learn what I can from it, check to ensure that I executed all aspects of the trade in accordance with my plan, and professionally unemotional with the loss.

source: ezinearticles.com