Thursday, November 5, 2009

Should You Manage Your Own Portfolio?

PortfolioBy David Bogoslaw

Focus on Stocks

Avi Horowitz, vice-president of volunteer training and support for the Better Investing Volunteer Advisory Board, agrees that the idea of "not being in this alone" has gained traction because of the fear in the marketplace. BetterInvesting and the NAIC have 88 local chapters across the U.S. that help teach members the basic tenets and techniques of investing for $79 a year, usually through online forums. The online stock study team meets the first Wednesday of each month, and those sessions are recorded and available in online archives.

Unfortunately, the focus of the online tools and recommendations from peers on investing sites is primarily on stocks and stock-based funds, which leaves out a lot of other asset classes that advisers say are necessary to have a well-diversified portfolio. TradeKing is one of the few sites that helps investors who want exposure to fixed income assets as well as stock options. OptionMonster.com, a subscription research site that spawned online brokerage TradeMonster.com in October 2008, and ThinkorSwim.com, which is being purchased by TD Ameritrade also do a good job of educating investors about how to trade options, says Aite's Honore.

Possibly the only investing site that comes close to advocating the same widely diversified approach as most financial advisers is Marketclub.com, which educates members about—and provides trading tools for—a wide range of assets, from U.S. and Canadian stocks and mutual funds to foreign currencies, agricultural and industrial commodities in the cash and futures markets, and government bonds.

Marketclub, which charges subscribers $449 a year, isn't an online broker but gives members what they need to trade various asset classes on their existing brokerage accounts.

Scare Rating Services


Marketclub lets users quickly identify which markets are going down or up and to discern trends in all asset classes, says Adam Hewison, the site's co-founder and a former trader on the Chicago Mercantile Exchange. He believes you don't need to make a huge time commitment to manage your own investments. You should be able to tell whether you should stay in or get out of any given asset if you spend even just an hour a week looking at your portfolio with Marketclub's tools.

While there are plenty of online and desktop tools designed to support investors, what's in short supply are ratings services akin to Consumer Reports that assess and compare these products and services. Computerized Investing, a bimonthly publication of the American Association of Individual Investors (AAII), advises readers on the best software and sites for tracking and evaluating their portfolios' performance. Back issues, archived online, can be searched by topic. The AAII Journal, which comes out 10 times a year, offers a discount brokers guide in its February issue, a guide to mutual funds in March, and a tax guide in December that allows investors to plan ahead for what they want to sell or keep, says editor Maria Scott.

It's daunting to go the DIY route. But for those brave enough to make their own investing decisions, there are plenty of resources available.

Bogoslaw is a reporter for BusinessWeek's Investing channel.

You can read the entire article here

Why Gold? Why Now?

The Case for Investing in Gold Today

IF YOU'RE LOOKING to store wealth in something both rare and secure today, you will find nothing to match gold.

Gold always tends to reward cautious savers in times of financial stress, because it is both hard to destroy and tightly supplied.

In short, it is the very opposite of debt.

Gold doesn't corrode or tarnish, and it's relatively useless to industry. That's why almost all of the entire stock of gold mined over the last 4,000 years remains unused today. It exists as either jewelry or bullion, both of which act to store wealth and value.

The world's total store of gold now stands near 160,000 tonnes. But the metal is so dense that, if formed into a single a cube, it would have an edge barely 22 yards in length.

That wouldn't even cover a tennis court!

Gold vs. Paper-Money Inflation


New gold is being found and mined today at the rate of some 2,600 tonnes per annum.

That's a modest increase of 1.6% per year to the above-ground supply. And critically for the value of gold, this annual growth-rate lies beyond the power of politicians or investment banks to increase.

The supply of Euros, in contrast — the most hawkishly-managed major world currency right now — is currently expanding by 11.5% per year.

Thanks to this tight supply, gold grew its purchasing power more than nine times over during the 1970s — the last worldwide surge in inflation. In terms of business assets, it rose 23 times over by the start of 1980 as measured against the Dow Jones Industrial Average.

During the financial collapse of the 1930s — but this time amid a deflation caused by half of all banks in the United States failing — gold bought 17 times as many financial assets as it did before the Great Crash of 1929.

Now debt defaults and inflation are working together today, forcing a fresh crisis in the value of money. Gold has already risen three-fold against the New York stock market since early 2000. It's recently turned higher in terms of residential and commercial real estate, too.

Time to Buy Gold?


Gold doesn't care whether a financial collapse destroys the value of money (inflation) or the value of debt (deflation). Its unique characteristics — indestructibility and tight supply — mean its owners can thrive amid either.

But that doesn't make gold a "forever" investment. Gold will always lose value during stable periods of strong economic growth.

Over the twenty years to 2000, for example, gold lost 95% of its value in terms of US real estate. So it's no surprise that, as a proportion of world investment portfolios, gold fell from around 2% to effectively zero.

The trend in gold prices finally turned higher at the start of this decade, just as Gordon Brown — now the British prime minister — sold half the UK's national gold reserves at less than $300 an ounce.

Since then gold has trebled and more. But this gain remains small in the context of previous gold trends. It's also been limited by Western governments persuading their citizens that "core" inflation in the cost of living is running at just 2% per year or below.

These official CPI figures, of course, exclude the cost of housing, mortgages, taxes, fuel and saving for retirement. But this trick cannot go un-noticed forever.

New Investment in Gold


New gold investment will continue to grow if the world's major currencies — gold's main competition as a store of value — plunge into the inflationary spiral that many economists fear.

Until there's a dramatic change in monetary policy, the over-supply of Dollars, Euros and Yen look set to keep pushing gold prices higher. And it took a dramatic change in central-bank policy to finally kill gold's last inflation-led surge.

At the start of the 1980s, the Federal Reserve pushed US interest rates up to 18% and above, restoring the world's confidence in its currency and kick-starting the "long boom" of the next 20 years.

Could America survive such strong medicine now? Would Ben Bernanke even dare risk it?

If you think the world's central bankers are about to set interest rates far above the real rate of inflation, you should steer well clear of gold.

But if you fear for your savings — and you want to start investing in gold — you can start today, for free, at BullionVault.

PLEASE NOTE: We will receive a small referral commission for any accounts opened through this article. But the tiny dealing fees and storage charge you will pay would be no smaller without it.

And this ground-breaking service really does give you unique access to live gold market prices, cutting out the middleman and slashing the costs of investing in gold "dramatically" as the Financial Times recently noted.

To find out for yourself, go to BullionVault - Buy Gold Online now.
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Tuesday, November 3, 2009

Trading Experts


If you are looking for trading experts, alerts on stocks, commodities or forex then you can check out Jim Robinson. We will add more experts, but we will start with Jim Robinson.

We spoke with Jim Robinson about trading Stocks, Commodities and Forex

EXPERT: We spoke with Jim Robinson about trading Stocks, Commodities and Forex


I was looking around for someone who knows how to trade futures and through one of my contacts I came in contact with Jim Robinson who has been trading for 30 years.

He has been writing daily email trading newsletters for over 10 years and has by now thousands of traders receiving and following his newsletters everyday.

Free and premium newsletters
If you are interested in some excellent free trading information you can sign up for his free newsletters or for his premium newsletters below:


He also gave us a nice article that I urge you to read to become a better trader, and that is what this blog is all about, getting better, having fun trading.

THINGS YOU NEED TO KNOW TO BE A SUCCESSFUL TRADER
  1. You have to have a exact trading plan.
  2. You have to believe in your trading plan.
  3. When you start trading your plan, you have to follow it - exactly.
  4. If you don't have a plan and follow it, you will not be successful trading.
1 - The trading plan
If I had to make a guess I would say most trader's probably trade their entire career without a trading plan.

Does that sound hard to believe?

Well if you don't mind, let's take a little test here .

Write down your trading plan.
A) How to enter a trade.
B) Where does the stop go.
C) Where do you take profits
.
And to me each of the above needs to be clear cut, no questions asked.

In other words anyone who followed your plan, would know exactly where to enter, where to get out, and where to take profits, at all times.

If your plan reads, I trade double bottoms, triangles, bull flags, or I use Stochastics, Moving Averages, etc. etc, I'm sorry but to me that isn't a plan, that is a hodge podge of chart patterns and technical indicators.

So let me give you an example of what I consider a trading plan, and this is just an example and is not an actual trading plan.

EXAMPLE PLAN - BUY
  1. If the market trades above the 10 day high go long.
  2. The stop if wrong is the most recent 10 day low.
  3. If the trade moves your way, use the low of the last 10 days to take profits.

A sell example would be just the opposite.

Anybody that decided to follow the example plan above would know exactly what they were going to do before they even entered the trade, and they would know exactly what to do while in the trade.

2 - Believe in your plan
This is where paper trading and testing, will come in.
If you see the plan works before you start to trade it, you will be able to stick to the rules.
If you don't have an exact plan, you will never be able to follow it, quite simply because you really have nothing to follow.

3 - Follow the rules
This is where the going gets tough, because most trader's can't follow a plan.
And quit simply that is why most traders lose.
If you have a trading plan you believe in through, paper trading and testing, you will be able to follow the rules, because you will know overall you are going to come out ahead.

4 - You can do it!
If you develop a clear cut trading plan that works, and have the will power to follow it, you will be a successful trader.

Really the big secrets to a successful system are:
  • Trade with the trend
  • Cut your losses short
  • Let your profits run
Not much of a secret, right, everybody knows that.
Here's where I believe most fail even though we all know to trade with the trend, cut losses short, and let profits run.

Trading with the trend, cutting losses short, and letting profits run, can mean almost anything to anybody and that brings us right back to what we are talking about - we have to have a plan.
  • We have to know how to define the trend.
  • We have to have a specific rule for cutting losses.
  • We have to have a specific rule for taking profits.

Well I could go on and on from here, but I am also one of those people who believes in keeping it simple, so I think this is plenty for one lesson. So please before you ever trade have an exact plan, and then when you start to trade follow it.

You can do it !

Thanks !
Jim :-)

P.S.
When you start trading and feel like you are not quite sure what to do at any given time.
The answer is, follow the plan.

Monday, November 2, 2009

Using Stage Analysis to trade the Dow Jones

Stan Weinstein wrote in his book 'Secrets For Profiting in Bull and Bear Markets' about the four stages that a stock or market could be in.

In the picture you can see the four stages, and in the next table you can read more about every stage:


Phase


Name


What do we see
Stage 1
Basing
MA 30 is turning flat and the market moves sideways.
Stage 2
Advancing
Trading above MA 30 and the market trend is up
Stage 3
Topping
We see a top in the market and MA 30 turns back flat and the market starts to trade sideways.
Stage 4
Declining
Trading dip under MA 30 and we have a downward trend

I thought, what good is a method without first trying it out in the real world? Well to show you how this Four Stage Analysis method works, I will zoom in on the Dow Jones Index, and see if it really works

A picture says more than a thousand words so please take a look at the Chart of the Dow Jones Index and read the labels to understand how you can trade the Dow Jones using this method.


I will explain it a bit more in detail. I will get into the following:
  • when can I go SHORT at a possible top and when do I exit my position?
  • when can I go LONG at a possible bottom and when do I exit my position?
When can I go SHORT at a possible top and when do I exit my position?

Advancing phase
If we look at the chart at the far left then we see phase 2 (advancing phase), so a climbing Dow Jones. Trading is above the MA30 and the line points up.

Topping
We see that after October the MA30 starts to go flat and we see sideways trading taking place. We draw a support line (support 1) at the lows of the corrections that have taken place.

Breakdown
At the beginning of 2008 support (support 1) breaks down and we see that trading dips under the MA30. This can be a good point of entry for or to take a position but most of the times there will be so-called retest of the breakdown point. So it would be better to wait for that moment.

Retest
Between April and June we see a retest and we see climbing prices up to the support line that becomes now resistance.

Go short on the DOW
We wait until trading goes under the MA30. We also see that the RSI and MACD are pointing downward. At this point we go SHORT.

A little summary:
  • there has been a top phase (flat MA30)
  • MA30 points down 
  • prices lie beneath the MA30
  • support is broken
  • we saw a retest
  • we see a further decline

When do I exit my SHORT position?
When we get back at stage 1 (base) we get out. In the graph that is around 8000$. We see that MA30 goes flat again. The MACD becomes positive and also the RSI. Really certain (what is certainty in the stock market?) are we when we get a breakout through resistance 1.

When can I go LONG at a possible bottom and when do I exit my position
This works exactly the same but then the other way around. We draw a resistance line at a possible bottom (resistance 1).

Bottom
We see here that as from April MA30 starts to go flat and that the market starts to move sideways. We draw a resistance line here (resistance 1) where a high was formed each time.

Breakout of resistance (resistance 1)
We get a first breakout at the resistance line (resistance 1).

Long on the DOW
We see that we get a retest of the breakout level and after that we see a bounce back up. We wait for this moment and also until the trading increases above the MA30 line. We also see a positive RSI  and MACD. Here we go LONG and we close our previous SHORT position.

The trading method when you go from long to short and the other way around, is called SAR, or Stop And Reverse.

Conclusion
If you used this method to trade the Dow Jones you would have made a lot of money. You only had to take 2 positions, one Short and one Long and you could have a good night's sleep. Also the method is an easy method, you have to draw support or resistance lines, and you will use a weekly chart of the market, the MA30 and you are all set. You can enhance it all by using extra indicators like the MACD and the RSI.

Links of interest

Sunday, November 1, 2009

Picking a top or bottom


Many traders try to predict a top or a bottom, but reality reveals this to be a futile attempt and one which mostly ends with considerable losses.

If you try to buy at the bottom, then most often prices will drop yet even further or the stock will trade sideways which automatically means dead money for a long time.

If you attempt to predict a top then there is always the possibility that you are wrong and the high you had imagined is in fact the low of an ongoing rally to much higher prices.