Search This Blog

Monday, March 31, 2008

Charting 101: How To Use Trends - Simple Moving Average

Challenge Accounts:

Investing Account Balance: $201.92 ($0.46 Dividend paid)

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. I'd say that primarily, today, I have a short to bearish outlook. But it 'feels' as if some semblance of normal volatility has returned to the markets. But 'feelings' can often be wrong. I expect the market mixed today. Could go up a little, or down a little. Reason being, is the volume. It's so light lately. I'm keeping a close eye on volume. It's been descending in the previous rallies, so if volume picks up when the market is heading lower? I'll keep that short-term bearish outlook. As far as the commodity markets? I have a 'long bias' and don't see anything on the horizon, though this can change at any time. I have this 'gut' feeling we are in the eye of the storm.

Personal Investing Thoughts: Cash is my largest position. I still hold all of my long term stocks. But I have a bearish outlook for the market. I should say that I'm prepared for a 35% drawdown from the highs. But who knows, as bottoms are a process, not an event. The market could bottom here. It might not. I prefer to bide my time and wait. If the recession is a short one (1 year) then the bottom could come any time as the market will be the first one out of the recession. If the recession is longer (2 years) then we haven't seen the bottom yet. I leave the predicting to God. I might take a nibble soon, but that's all it would be. A nibble.


Yesterday we covered the fact that markets tend to trend. We discussed that there are different types of trends. We discussed the different types of charts. We discussed the rules and importance of trends

Those being

1) Trends tend to continue until proven otherwise
2) Trends come in: Uptrends, Downtrends, and corrections.
3) Trends come in a few phases: Accumulation, Public participation, and Excess speculation.
4) There are long term trends, medium term trends, and short term trends. Usually the larger trend wins the fight when they collide, but this depends on what 'phase' the trend is in. (Accumulation, Public participation, or Excess Speculation)

Now, how to use trends? First you must identify what the trend is for any given time period. To do this? We use moving averages. Today I talk about the easiest moving average to construct - the "Simple Moving Average" or "SMA".



When you have your own brokerage? You don't have to do the math to construct the chart. You just use the chart tools to specify what type of moving average you would like to use? And then you input the time frame. In other words, you could specify that you would like to see a SMA, and then you'd choose the timeframe. Say, 5 days. The brokers charting tools should then plot out the 5 day SMA automatically on the chart for you.

Tomorrow we get into adding weight to the moving averages.

* * *

Investing Account Balance: $201.92 ($0.46 Dividend paid)
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Friday, March 28, 2008

Charting 101: The Importance of Trends

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. I'd say that primarily, today, I have a short to bearish outlook. But it 'feels' as if some semblance of normal volatility has returned to the markets. But 'feelings' can often be wrong. I expect the market lower today. I'm keeping a close eye on volume. It's been descending in the previous rally, so if volume picks up when the market is heading lower? I'll keep that short-term bearish outlook. As far as the commodity markets? I have a 'long bias' and don't see anything on the horizon, though this can change at any time. I have this 'gut' feeling we are in the eye of the storm.

Personal Investing Thoughts: Cash is my largest position. I still hold all of my long term stocks. But I have a bearish outlook for the market. I should say that I'm prepared for a 35% drawdown from the highs. But who knows, as bottoms are a process, not an event. The market could bottom here. It might not. I prefer to bide my time and wait. If the recession is a short one (1 year) then the bottom could come any time as the market will be the first one out of the recession. If the recession is longer (2 years) then we haven't seen the bottom yet. I leave the predicting to God. I might take a nibble soon, but that's all it would be. A nibble.


Yesterday, I discussed the different types of charts, and why I prefer candlestick charts. Today? The topic revolves around 'trends'.

A major tenant of DOW theory is that the markets tend to 'trend'. What is a trend? What are the different types of trends?



Tomorrow I will discuss how to use market trends . . .

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Thursday, March 27, 2008

Charting 101: Types of Charts

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena. Recent rallies in the stock market have been on very light and descending volume, which is a cause for concern. Expect lower market for the next few days.

Personal Investing Thoughts: Cash. Bearish outlook for the market. I should say that I'm prepared for a 35% drawdown from the highs. But who knows, as bottoms are a process, not an event.


Ok, the first thing to learn with charts? Is that there are different types of charts. Mountain charts. Line charts. Line Bar charts. Candlestick charts. I discuss the different types in this video:



Tomorrow, I'll discuss the just a few of the basic introductory tenants of technical chart analysis.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Wednesday, March 26, 2008

Charting 101 (Series): An Introduction (VIDEO)

Challenge Accounts:

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena. Recent rallies in the stock market have been on very light and descending volume, which is a cause for concern. Expect lower market for the next few days.

Personal Investing Thoughts: Cash. Bearish outlook for the market. I should say that I'm prepared for a 35% drawdown from the highs. But who knows, as bottoms are a process, not an event.

I've spent how long in these videos, and on my daily blog talking about Money Management principles? 3 or 4 months?

Well, I guess it's time to take a look at some charts, and delve, just a little bit, into charting and technical analysis. This is the 'introduction' video to the series of videos that I will have on "Charting 101" ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click this link to view the entry ...)



Here is the blip.tv version of the video.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Tuesday, March 25, 2008

Challenge Project: Business Plan for Phase 1

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. I should say that I'm prepared for a 35% drawdown from the highs. Recent rallies has been on very light and descending volume, which is a cause for concern. But who knows, as bottoms are a process, not an event.


Ok, we've had the Challenge Project going now for a while now. We started out with $500, and we now have about $897.92 in various accounts. But what, exactly, is the 'plan' for the Challenge Project? I've discussed the need to have a business plan, or money management strategy for your account. So what is the current 'business plan'?

Well, it's going to be run according to 'stages' or 'phases'. The Challenge Project currently has one goal at the moment. And that goal is not trading. At least not while it is in the current 'phase'. As I discussed in this video, the infusion of capital to the low-funded account is absolutely critical. Therefore, the goal is to increase the amount of trading capital. That's the first priority at this stage. I'll take trades from time to time, so long as the risk from those trades do not hurt the month to month goal of increasing the account equity in the stock / futures options trading account.

Herein, I present the outline for the Challenge Project while it is in the current "Tiny" phase.



As I stated before, the first priority is increasing account capital. Trades will taken in this stage, only so far as the risk from those trades do not interfere with that goal.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Monday, March 24, 2008

Talk You Will Hear Regarding "The Next Great Depression"

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. Expecting, by the time this has played out? For 35% drawdown from highs for this bear market; but who knows, as bottoms are a process, not an event. Personal ideas? Open Swiss Bank Account with $10,000.00 USD, and start diversifying into foreign currencies. 1) Yen 2) Swiss Franc 3) U.S. Dollar 4) Euro and 5) Chinese Hyuan. I'm currently looking into updating the passport.


Ok. Try to browse through YouTube, and get some sort of information regarding the Stock Market, Finances, or the general health of the economy.

You're going to hear talk regarding why we *must* go into a Depression. Why it's inevitable.

For the entire 12 years I've been in this business, I've heard this. The stock market crash of 1996. The stock market crash of 1997. The stock market crash of 1998. The stock market crash of 1999. The stock market crash of 2000. The stock market crash of 2001. Etc, etc. You can ask my wife about them. We've gotten that stuff in emails, in the mail, etc, until she knows ever line of it, and how they sell their stuff.



If we do get a crash out of this? It's only going to be because the broken watch is right twice a day. Not because of any skill on the part of the bears. Those guys missed one of the largest bull runs (and money to be made in it) in human history.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Sunday, March 23, 2008

The Current Talk You See About Abolishing the Fed

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. Expecting, by the time this has played out? For 35% drawdown from highs for this bear market; but who knows, as bottoms are a process, not an event. Personal ideas? Open Swiss Bank Account with $10,000.00 USD, and start diversifying into foreign currencies. 1) Yen 2) Swiss Franc 3) U.S. Dollar 4) Euro and 5) Chinese Hyuan. I have to update my Passport I guess, and get all the paperwork for the introducing broker.


You can barely browse through YouTube's finance videos without hearing talk about abolishing the Federal Reserve. Get rid of the Fed. The Fed is the anti-christ. The Fed is doing this, and the Fed is doing that. Ben Bernake this. Ben Bernake that.

Now mind you, I hate what the Fed is doing to the strength of the Dollar right now. I'm not 'pro-Fed', but I'm not 'anti-Fed'. Consider me neutral.

But for those that want to abolish the Fed? Let's not forget the problems the Fed has helped ease, or completely eliminate over the last 100 years.

Quick question.

You abolish the Fed.

What would you have to stop the fraudulent business practices that went on before the Fed / Central Bank, and when economies were based off of a hard currency?

How would you stop panics? How would you stop instigated panics? How would you stop bank runs (both instigated and psychological) How would you stop gold hoarding with bank runs (just one tactic)? Although I believe the primary mission of the Fed has been lost, and they elongate the problems? Let's not just forget about the problems that were around over 100 years ago because we weren't there. The volatility that could be brought about at a whim, and instigated as moves to both hoard gold, and ruin a competitors business, whether your competitor was a bank or not. You could always ruin your competitors bank.

It goes back to what I said before. It's not the Fed, or free market, or the currency that is the problem. Human beings are the problem.



* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Friday, March 21, 2008

Question: Have I Ever Thought of Working for a Fund?

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. Expecting, by the time this has played out? For 35% drawdown from highs for this bear market; but who knows, as bottoms are a process, not an event. Personal ideas? Open Swiss Bank Account with $10,000.00 USD, and start diversifying into foreign currencies. 1) Yen 2) Swiss Franc 3) U.S. Dollar 4) Euro and 5) Chinese Hyuan. I have to update my Passport I guess, and get all the paperwork for the introducing broker.


I've been answering some of the questions that have been thrown my way lately. One of which? Is have I ever thought of working for a fund? Have I ever thought of becoming an investment adviser? Of getting some licenses?



* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Thursday, March 20, 2008

Question: What About Papertrading?

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. Expecting, by the time this has played out? For 35% drawdown from highs for this bear market. Personal ideas? Open Swiss Bank Account with $10,000.00 USD, and start diversifying into foreign currencies. 1) Yen 2) Swiss Franc 3) U.S. Dollar 4) Euro and 5) Chinese Hyuan. I have to update my Passport I guess.


I'm going to start answering some of the questions that have been thrown my way lately.

One of which is: What about Papertrading? Well . . . . I believe if you are serious about getting involved in the markets you should papertrade. But you should understand there are aspects of trading real money that can never be reflected with papertrading. When a trade starts moving against you? It's much easier to dump out of a papertrade and take the loss, than it is with real money. With real money, your mind reels at the thought of taking the loss.



Some good online sites that simulates a hypothetical portfolio can be found here at Investopedia, as well as here at Virtual Investor.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Wednesday, March 19, 2008

Question Series: Why Don't I Sell This Information?

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. Expecting, by the time this has played out? For 35% drawdown from highs for this bear market. Personal ideas? Open Swiss Bank Account with $10,000.00 USD, and start diversifying into foreign currencies. 1) Yen 2) Swiss Franc 3) U.S. Dollar 4) Euro and 5) Chinese Hyuan. I have to update my Passport I guess.


I'm going to start answering some of the questions that have been thrown my way lately.

One of which? Is why don't I sell this information for income for the benefit of those who are interested in the Stock market for Day trading, stock swing trading, the Forex, or commodity futures trading?

I believe that, in a way? I will receive value by offering it for free. Job security. And that's worth a whole lot when you love what you do . . .



* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Tuesday, March 18, 2008

Trading and Investing Thoughts for 3-18-08

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07

Personal Trading Thoughts: Cash. No positions. Short - bearish outlook to sell rallies in stock market, but extremely wary as this market remains very volatile. Looking only for long positions in the Commodity Futures arena.

Personal Investing Thoughts: Cash. Bearish outlook for the market. Expecting, by the time this has played out? For 35% drawdown from highs for this bear market. Personal ideas? Open Swiss Bank Account with $10,000.00 USD, and start diversifying into foreign currencies. 1) Yen 2) Swiss Franc 3) U.S. Dollar 4) Euro and 5) Chinese Hyuan


Each day I have a 'header and footer' on my daily blog. I thought it might be time to start including a brief summation for what my own personal thoughts are in regards to the markets for that day, as you can see above.

I've tried to make a video about 40 times (literally) in regards my general outlook for the markets. It always ends up being 10 to 20 minutes long, which is much too long for YouTube, so I end up having to scrap it. The end news is: Not good. The financial markets are in worse shape than they've been in, for nearly 3 decades. Things are bad.

Housing:

The housing market is not coming back anytime soon. Just as we'll never again see $30.00 Oil, (at least for a lonnnnng time and some major discoveries), we're not going to see housing back to the prices they were at before the bubble burst, 'in a couple of years'. Those days are gone, and they're not coming back. At least for another 20 years.

The housing crisis, where I live? Isn't even halfway done yet. It all comes down to the number one rule.

The market is always right.

And in housing, no one is buying. When I say 'no one' - what I mean the buyers in relation to the inventories. It's a classic "bid / ask" spread. For the number of homes out there for sale? No one is buying them. People are renting them out, rather than sell. With no buyers, the housing market will drift even lower. Worse yet, the Bank owns half of them. And there are no buyers. The Bank can't make money (and will lose it) on homes that have no buyers, and they have to sit and hold.

Oil:

The high price of oil is NOT due to some greedy speculator. They are giving you the most fair price, given the horrible supply / demand situation. The middle east has peaked, and everyone knows it. We have tons of Oil in Canada. Canada is now the United States #1 supplier of Oil. More oil is there, than all of the Middle East ever had, put together as a matter of fact. But the problem is the cost basis. I've heard various numbers, but the average number it comes to from both sides is that it costs $50.00 a barrel, just to get it out of the ground. That's our base price. That's where we start off from. But there is no infrastructure to support it. It's not speculation. It's free market at work. Traders are giving the most fair price, for all of the variables with the given supply / demand situation.

I sit and listen to the GMR and FRO shareholder meetings. Everyone of them have made the same comment. They're not concerned about a recession. Why? Demand. China and India can't get the Oil fast enough.

In addition, you have Bernake cutting the rate to help the credit crisis, and further weakening the dollar. Which only increases the pressure on oil.

The Investment Banks:

Of course, I do believe that some Wall Street Moguls brought on Bear Sterns demise with the rumor mill. However the point is not that the rumor mill was the nail in the coffin? But that Bear Sterns had become so involved in a bubble, that they were weakened to the point of being susceptible to such a tactic.

There was a crazy bubble. It's called housing. 1800 sqr foot homes selling for 1 million dollars is a bubble. Not just in California. Heck, I was in northern Nevada last year, and found 1700 sqr foot homes selling for $950,000. Homes in Michigan (which was already in the recession) were 1 1/2 times the value they are now. And Investment banks were knee deep in speculating the mortgages sold. Not only was housing a bubble, but all the investment banks lied through their teeth about how involved with CDO's they were. It spread to bonds. Everywhere.

The market has exposed it's own Achilles heel.

Liquidity.

Let's put it in perspective. JP Morgan is basically, borrowing from the Fed to get this put through. Because it costs so much? Not really. It's not like JP Morgan is rolling in the cash. They are buying Bear Stearns at a price cheaper than the Yankees are paying for superstar Alex Rodriguez.

The Fed:

The Fed is desperately trying to avoid another repeat of the 1970's at this point. And I don't see how it's possible. I heard rumors that they're actually thinking of taking it to zero if need be. Eventually, the Dollar will be so devalued, they will need to do what they did in the 1970's. Fire Bernake, and bring in someone that is willing to raise the rates to 12%. PPI is what? Around 10.4%? How long can the CPI hold off in the low 4%'s? How long can the producers hold off costs from the consumer? I would be shocked not to see 9% CPI eventually.

And just like the 1970's, then the real pain begins. Because just like the 1970's, before the rate hike? Employment was ok. Then no longer. Then we saw unemployment hit the double digits for months on end.

By not bringing out a reasonable recession, and by trying to delay it? The Fed has made the entire situation and recession worse. Heck, this monster is all of their creation as it is with Greenspans irresponsibility. Guy should be brought up on charges.

As far as the broad sector? I'm not a buyer in the market, until two things happen.

The DOW is in, or near the 10's again.

9 months pass.

I need to see time play out, and I need the prices to reflect the ignorant risk that's been out there for far too long. We still don't have all the facts out in the open by all the banks on the credit crisis, and those that need to be eaten by those who can survive it? Need to do so. The weak get eaten in this sort of environment. Not the deathly ill. Just the weak. My largest position remains cash. Back on January 4th is when I figured we were settling into an official bear market. I expect to see the bear pull out 35% drawdown before it's done.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Monday, March 17, 2008

Question Series: Why Don't I Give Out Stock Picks?

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


I'm going to start answering some of the questions that have been thrown my way lately.

One of which? Is why don't I give out stock recommendations or 'stock picks'? I discuss that in the video below.

I would rather discuss my reasons as to why I focus in on what will make you a better trader. Regardless of whether you trade the stock market, day trade, are involved outside of the market in avenues such as the Forex or Commodity Futures.



* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Friday, March 14, 2008

Systems and Methods

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


In order to make profits you have to enter and exit the market. Be it the stock market, the forex, commodity futures, or whatever. Pretty simple, right?

Well how? How do you pick, based off a chart, when to enter and exit the market? Generally, this is where you need a system, or a methodology.

A trading system is governed by a set of rules that do not deviate based on anything other than market action. Emotional bias is therefore reduced because the systems operate within the parameters known by the trader. The parameters can be trusted based on historical analysis and real world market studies, so that the trader who is familiar with the trading system and its operating characteristics can have confidence in a pre-determined trading strategy.



* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Thursday, March 13, 2008

Money Management: Investing and Diversification

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


In the previous entry, I discussed how important it is to consider the overall strategy, or business plan that you are going to use when approaching your account.

In this video, I would like to discuss a strategy of money management that applies to investing, not trading.

Diversification

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click here to view the entry ...)



So do some research on diversifying into different sectors. Diversifying into different types of investments.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Wednesday, March 12, 2008

Money Management: An Overall Strategy as it Relates to Your Account Size

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


In the previous entry, I discussed how important it is to consider the psychology impact of a loss. The psychological impact lower accuracy rates will have on you.

How does this all fit together? It means you must develop an overall strategy. A 'business plan' if you will, for you trading.



* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Tuesday, March 11, 2008

Money Management: The Psychology and Impact of Accuracy

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


In the previous entry, I discussed how important it is to consider commissions if you are a low funded trader, and how it relates to your account size with a given time period.

Although I have discussed Accuracy rates previously? I thought it best to examine them a bit differently, once again. How accuracy relates to your account size, and the psychological impact that accuracy rates have on your trading.


Your accuracy rate equates to your account size. The smaller your account? The less wiggle room you have until your drawdown kill switch should be hit, and the less room you have until you are in the danger of overtrading.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Monday, March 10, 2008

Money Management: Commissions

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


In the previous entries I discussed the importance of considering your account size. I discussed how important it is to consider drawdown and have a drawdown kill switch, and how it relates to your account size. We discussed overtrading. In the following video, I discuss commissions.



So basically, for any trade you put on, you must make sure that commissions represent a small percentage of that trade, so that your cost basis is not through the roof.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Friday, March 7, 2008

Money Management: Overtrading as it Equates to Your Account Size

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


In the previous entry, I discussed how important it is to consider drawdown, and how it relates to your account size. In the following video, I discuss how to determine when you are overtrading. And how overtrading relates. And how it relates. To what? Your account size



So basically, you must consider how many trades you can fit within a period, before you face drawdown problems.

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Thursday, March 6, 2008

Money Management: Drawdown as it equates to your Account Size

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07 ($0.01 Paid in Interest)


I have returned to the topic of Money Management for a while here. Why? Because it's just that important.

In the previous video, I discussed how important it is to consider your account size when considering other money management principles. In the following video, I discuss how drawdown as a variable must be planned out - and how it relates. To what? Your account size.



More money management videos will follow that discuss how other factors and principles of money management, relate to your account size

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.07 ($0.01 Paid in Interest)


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and tolerance for risk.

Tuesday, March 4, 2008

Money Management: Account Size as it Relates to Trading

Challenge Accounts:

Investing Account Balance: $201.46

Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.06


Here we are again!! Money management!

The principles I covered earlier, while key and will assist you in trading? Are the bare elements of money management principles. Each of those principles can be expanded upon, and there can be further discussion and explanations. These explanations will assist you to see more of the underlying strengths of the base principles.

Here is the first video. It is the key and what everything in money management revolves around.

Your Account Size



More money management videos will follow that discuss how other factors and principles of money management, relate to your account size

* * *

Investing Account Balance: $201.46
Stock / Futures Trading Balance: $684.39
Online Savings Balance: $12.06 (Deposit Inbound)


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research.

Monday, March 3, 2008

Investment Series - What are the Risks?

Challenge Accounts:

Investing Account Balance: $131.46

Stock / Futures Trading Balance: $684.39 (Deposit Inbound)
Online Savings Balance: $2.06

In this daily blog, thus far, I have talked a lot about trading in the stock market and futures options. In a continuing investment series over the last week or so, I've switched gears for a little bit, and talk about investing; which I've been doing for the last few days.

Now mind you, I still trade. As a matter of fact, I just took my profits from an OJ trade.

Thus far with investing however, I have discussed timing accumulation shares for dividends; doing so with larger companies, using seasonality in determining when to accumulate, DRIPs, Dollar Cost Averaging and Fair Value. I discussed aspects of my own reverse scaling hybrid money management system.

But what are the risks? How you should you view those risks? I discuss that in the following video:



So that's all I have to say (for now) for Investing. We'll continue onwards and upwards.

* * *

Investing Account Balance: $131.46
Stock / Futures Trading Balance: $684.39 (Deposit Inbound)
Online Savings Balance: $2.06

Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research.

Sunday, March 2, 2008

Airelon's Thoughts: March 2008

Challenge Accounts:

Investing Account Balance: $131.46

Stock / Futures Trading Balance: $664.39
Online Savings Balance: $2.06




Herein, is my monthly outlook that I post near the beginning of each month . . .



A few things when I watched congress talking with the Fed chairman? Bernake did not even try to sugar coat it. He knows. Unemployment figures will be rising. Inflation will be rising.

* * *

Investing Account Balance: $131.46
Stock / Futures Trading Balance: $664.39
Online Savings Balance: $2.06


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research.

Saturday, March 1, 2008

The Low Funded Challenge Accounts: March 2008

Challenge Accounts:

Investing Account Balance: $131.46 (Dividend Payment Received the other day)

Stock / Futures Trading Balance: $664.39
Online Savings Balance: $2.06




These sub-accounts were created by me back in October 2007 as a main feature of this blog. Their purpose, as well as the purpose of many of the articles in this blog, is to assist the low-funded trader understand what principles he needs to consider when trying to get started in the markets, or if starting up again because his account has been wiped out. That as long as one enters this business with the proper principles, strategy, education and emotional discipline in hand, you can 'make it' in this business. These are actual sub-accounts at my brokerages that I own, and I will look to for growth. I will announce actual trades and investments that I perform in them, and the reasons for my decisions as a means to educate others.

In the beginning of this experiment, I placed $130.00 with Sharebuilder as a long-term investment account, and I placed $370.00 in the account for trading Futures options. I thus termed this the "$500 Challenge". Since we now have $797.88 as a cumulative total in these accounts, not $500, I will term this the "Low-Funded Challenge" instead of the "$500 Challenge". At times I will refer to them simply as the "Challenge" accounts. I later added a small ING Savings account that has $2.06 in it.

I also had three rules for the "Challenge" accounts. At the beginning of each month, I review and consider where we stand, and how those three rules impact the current months decisions. So let's do that for February.

Rules for the Challenge Account:

1) The initial investment is $500.00, to be split amongst the accounts. We did that back in October of 2007. $130 went to Sharebuilder for longer term investments, and $370 went to the Xpresstrade brokerage for futures options purchases. Xpresstrade was later bought out by "optionsXpress", therefore this is now the optionsXpress account.

2) Each month, I can contribute $100.00, that can be split amongst the accounts however I choose. In other words, I can send $30.00 to Sharebuilder, $70.00 to optionsXpress; or $100.00 to optionsXpress, and nothing to Sharebuilder, etc. We deposited $100 last month to optionsXpress, bringing our balance to $683.49. We had then one trade that went south, in which we lost about $79.00 or so. We then had one trade that went in our direction, and made us $179 or so. We received a dividend payment in our Sharebuilder account of $0.32 therefore, our balance there is currently $131.46

Now we have arrived in a new month; March. This month I'm going to do something a little different. I am going to contribute $20.00 to the optionsXpress account, $70.00 to the Sharebuilder account, and $10.00 to the ING account.

Our optionsXpress balance is currently $664.39. If an opportunity arises to my methodolgy for a trade where the risk is under the $100 that will be coming in for this month, then I will do so. I will try to keep the risk as close to $89 as humanely possible. As of todays date, I see Cotton as a possible trade, but I have to keep my eye on it and see how it shapes up. The $20.00 will be sent to optionsXpress today, March the 1st, which means it probably won't clear until about 3/6/2008, or so; bringing our account balance to $684.39 before any trades.

I will send $70.00 to the The Sharebuilder account on March the 3rd, 2008. Sharebuilder is pretty quick about clearing funds, so this will raise the balance to $201.46. Given the state of the economy and market I want to start building this account up. Why? Because I feel the market is going to be trying to find a bottom for the next 6 months to 1 year. Whenever that happens (I honestly have no idea), I want that account as funded as humanely possible so that we can start to look for great Dividend stocks to buy. The market is down about 7% for the year as I right this. That's -7%. But we're at least bringing in 3.07% interest on that money right now. Mind you, we only have $131.46. Now mind you, Stagflation is not coming. It has arrived. What do we mean?

Housing numbers continue to plummet. Unemployment is rising. The money you make on interest in a money market account now isn't keeping up with inflation. Inflation is at 4.28%. However, the commissions would eat me alive for what little shares I could purchase in the Sharebuilder account. We discussed last month that for every $45.00 stock we buy, we want at least 15 shares, or $680.00. And simply because, or when we have $650.00 in the account, does not necessarily mean that we will purchase an investment stock. Patience means that we must wait for the right opportunity. The Sharebuilder account will earn approximately 3.07% interest on the money that's in there 7 day yield, and there are no fees for either account. Which means we are earning -1.21% on that money, relative to inflation. But that account isn't planned to be using the money market yield to grow. We are beginning to add to this account for it's growth. So I figure we should start building that account up by a little, and earn a little more interest at the same time; so we are ready when it does come time to purchase long term stocks.

I will be sending $10.00 to the ING account on March the 3rd, 2008. This account usually takes a few days to clear.

3) I'll be using regular investment and trade vehicles. Bonds. Stocks. ETF's. Futures Options. In March, we are on the lookout for any Futures options trade where the risk is under $90.00 or so. The risk / reward ratio should be at least 1:2. As well, any losses we experience, we'll hold off until we can bump the account equity back up, and have it greater than when we entered the trade.

If it is one thing that I've learned, is that the next time I perform this experiment, I will start out with a higher amount than $500. Probably $1300.00. Open-mouthed

Marches Balances after contribution (before trades)

Sharebuilder Balance: $201.46

optionsXpress Balance: $684.39
ING Orange Savings Balance: $12.06

* * *

Investing Account Balance: $131.46 (Dividend Payment Received the other day)
Stock / Futures Trading Balance: $664.39
Online Savings Balance: $2.06


Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research.

Search Investing and Trading Articles and Products