Why you will absolutely fail in trading if you don’t master this
There are many misconceptions about money management. Most think it means trading with stops, but that is only a small part of it. Below is a short part of the complimentary report I’ve found called “How to Safely Double Your Profits in 2009 Trading ETFs.” This little tip alone could save your trading account.
Why use risk controls?
Every trader/investor must guard himself against drawdowns, which refers to the percentage drop in his account size after one losing trade or consecutive losing trades. For example, imagine that after losing a few trades in a row, your $20,000 account is reduced to $12,000; that would be a drawdown of 8,000/20,000 = 40%. If I were to ask some new traders, “In order to be back up to $20,000, what percentage return do you need to generate?” Many would answer, “Since I lost 40%, I have to make back 40%!” This couldn’t be more wrong! Note that after losing 40%, the trader now starts with a lower base, i.e. to undo the $8,000 loss, the return he needs to generate is 8,000/12,000 = 66.6%! That is why I share free training videos on my website to help dispel some of the myths of trading.
The more severe the drawdown, the harder it becomes to undo the damage, as shown in the numbers below.
Drawdown % %Required to get back to break even
10% 11.1%
20% 25%
30% 42.8%
40% 66.6%
50% 100%
60% 150%
70% 233.3%
80% 400%
90% 900%
That is why all professional money managers only risk 1-2% per trade. It’s because no matter how good your trading system is at some point it is a statistical fact you will have 10 losers in a row. Based on risking only 1-2% per trade this is only a 10-20% drawdown and easily recovered. 99% of the hype trading and investing courses in existence don’t say or do this. They say risk 5-10% per trade. It is wrong and will cause you serious financial pain if you follow their advice.
Many of them also use arbitrary stop loss advice. For example, they say, “Place your stop at $100.10 because that is on the other side of a major support or resistance, trend line, MA, etc.”
This makes your risk based on the size of the stop. That is also wrong because the risk can be too large and it’s not the same risk on each trade.
Others reverse this and say risk only 2% total period and let that determine your stop. This is also wrong and will hurt you because it is important to have the correct technical stop.
The answer is to do both. Use a percentage and technical stop together. It works like this. Let’s say the technical stop is $100.10, but based on your entry price that is a 3% risk. Since your plan calls for a 2% risk you simply lower the number of shares you are trading. This lets you stay within your 2% risk and have the correct technical stop. This is exactly what most professional money mangers do.
Some say that this will lower their profits because of trading fewer shares. So what! Study the numbers above again. You know the old quote, “More risk equals more reward.” Well it’s not always true. Sometimes more risk equals more risk! If you lose your money you have no chance to make a profit. Even losing 50% is disastrous because you would then need to make 100% to get back to even.
Like Warren Buffet says, there are only two rules in investing. Rule #1: Don’t lose money. Rule #2: Don’t forget rule #1.
I’d like to add a third rule. Correct money management and position sizing must be mastered to ensure your long term success.
The good news is that it is easy to have correct money management and position sizing. I just explained how to use a combo of a % stop and a technical stop. If you want more of an explanation please visit the free video area on this website and click on the “Why have risk controls” video.
The system of entries, stops and profits taking is only half of your key to success. The other half is money management. If you get this part wrong you will lose your account every time regardless of how good your system is.
Click here for a newsletter on how to safely average 6% per month trading Exchange-Traded Funds.
http://www.etftrendtrading.com/cmd.php?af=1115334
Thanks, and good luck!
PS- In order to access these powerful FREE videos you must first opt in for the complimentary report.
Golds latest move (video analysis)
The move down in gold yesterday surprised many traders and flashed an exit signal based on MarketClub’s daily “Trade Triangle” technology. As we have mentioned before, we felt that gold was in a broad trading range and were not optimistic that it would shoot higher.
The action yesterday confirms that we have more of a two-way market. I expect we’ll see further selling on any rallies from this level.
In today’s video, I share with you some thoughts I have on gold based on one important element: how gold energy fields propel this market.
http://www.ino.com/info/533/CD3336/&dp=0&l=0&campaignid=3
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
I Found a Forex LIVE Trading Room that did 1,000 Pips in February
You probably already know that 90% of Forex Traders do NOT profit consistently, or even close to it.
And if you can’t profit consistently in Forex, what’s the point of throwing your money away over and over again?
So, most people therefore eventually do one of two things:
A) Spend thousands for a “professional” trader to show them how to trade properly and still be clueless in the end.
OR
B) Buy junk ebooks, robots, and signal programs that prove to be worthless over and over again!
Needless to say, these bogus services all turn out to be junk. But what about all of the so-called Forex “pros” out there? Well, not very many of them will actually trade in-front of you everyday in a live Webinar…
However, this guy I recently found, is the real deal…
Mr. Colin Atkins started trading Forex about 10 years ago, and is now one of those mysterious 5% of hugely successful traders unlike the other 95% of us.
What he’s done, is created a LIVE trading room where members may log-in 5-days a week, 3-sessions daily and can simply watch him trade (a few trades per session, nice and simple) and duplicate what you see him doing. It’s truly simple stupid.
He averages around 60+ Pips a day (plus his long term trades he emails us) , and managed to do over 15,000 pips in the in these first 9 months of opening up the room! Yes, I know… Insane.
So really, anyone who can simply watch this guy trade can duplicate his winning trades!
No more “signals” or “systems” that never work for any of us. This guy is going to be in the same trades with you, and talking to you live. It doesn’t matter what your Forex experience is, you can finally achieve what you’ve been trying to do…
Stop wasting your money on junk, or thinking that one day you’re going to magically win all your trades.
You’re never going to achieve the results you want. You need to trade with a true professional… Become a professional trader by Colin’s next live trading session and start trading successfully the way you’ve always wanted to…
The link to his site is:
Good Trading!
Your chance to be mentored in Forex by a 35+ year market veteran
It’s time for you to finally start making money in the Forex market.
Over the past week, trader Bill Poulos “spilled the beans” on
the top 4 problems his coaching students face with their Forex
trading…
-and then he showed 10,000+ regular folks just like you how to
solve those problems on a special “three-peat” online training
session.
As of this writing, 4,075 of those that attended his training
have already applied for more information on his brand new
“Forex Profit Accelerator Group Coaching Program”, which just
went live today…
-but the sobering reality is that there’s no way Bill can take
on that many new students, so if you have ANY interest in
finally becoming an Independent Master Forex Trader, you need to
move quickly.
——————————-
YES, 20 MINUTES OR LESS A NIGHT
——————————-
I’ve seen a LOT of Forex educational programs online, and here’s
what stands out about what Bill’s doing with this time-limited
program:
1. He has a totally unique twist on Forex trading that he
specifically designed for BUSY PEOPLE. Essentially, he shows you
how to treat the 24-hour Forex markets as “end of day”
markets… so you make all your trading decisions for the day in
20 minutes or less…
2. He’s giving you most of the benefits of 1-on-1 coaching
(which can cost $15,000… $20,000… or MORE) at a FRACTION of
that investment…
3. PLUS… he’s throwing in his time-tested Forex Profit
Accelerator home study course if you’re able to get into his
group coaching program before it closes…
All-in-all, it’s one of the most generous, solid Forex training
programs I’ve ever seen.
So if you want to:
* Quadruple your profit potential…
* Start with a $500 trading account…
* Trade in 20 minutes or less…
* Enjoy high-probability, lower-risk trades…
* Never have to suffer huge losses…
* and finally become an Independent Master Forex Trader…
…then check out the open enrollment letter Bill put together
for you:
http://www.smartforextraining.com/y/?i=773362&u=1&l=f91
If you think 2010 is YOUR YEAR for finally mastering Forex,
I hope you get into this program in time before it closes.
Good Trading!
p.s. I’ve seen this developer’s trading programs disappear in a
matter of days in the past, and it’s a near certainty it will
happen again… so IF YOU VALUE YOUR TIME, I really urge you to
check out his letter here, and then ask yourself how what he has
to say stacks up against how YOU currently trade:
http://www.smartforextraining.com/y/?i=773362&u=1&l=f91
Free “end-of-day” Forex group coaching program
Dear Forex traders,
Here’s the scoop…
TOMORROW, on Monday, March 8th, 2010, the doors finally open to
35+ year market veteran Bill Poulos’s brand new “end-of-day”
Forex group coaching program.
As is par for the course with Bill’s releases, he’s limited the
number of new students he lets in to the program.
So to further help “weed out” the tire-kickers, Bill just
released a TON of extra Forex training materials that he put on
a special Member’s Website Preview for you.
Here are just a few of the goodies you’ll get on the preview
site, beginning TODAY:
** Preview access to his PIP FEEDER service where you can get
daily lists of the Forex pairs that have met his rigorous
trade alert criteria. In fact, these are Forex pairs that
have a high probability of entering into potentially
profitable positions any day now. He’ll eventually be
charging $197/mo for this service, but you can see a sneak
peek for a few days.
** The “Pip Vault”, which contains actual Forex trade example
“screen capture” videos, so you can see exactly how you
can trade in less then 20 minutes a night.
** Day-by-day “trade diaries” that show you the trading
decisions Bill has made each night on some really
great trades (you’ll also see a trade that’s not really going
anywhere yet, and how he manages that situation).
** Previews of the actual CD-ROMs that ship with the course so
you can see exactly the type of material that’s on them.
** and a TON more…
But don’t take my word for it. Go ahead and check it out now by
visiting the web page here now:
http://www.smartforextraining.com/y/?i=773362&u=1&l=f90
Your username is: readyto
Your password is: enroll
Good Trading!
p.s. This complimentary preview access will be expiring in a few
days, and likely taken offline, so I urge you to get in now
while you can if you have any interest learning how to
dramatically up your “pip potential” while saving hours a day at
the same time.
Get in here:
http://www.smartforextraining.com/y/?i=773362&u=1&l=f90
Forex Smart Start Profit Strategies
(This post contains your access instructions
to a ‘closed-door’ Forex group coaching
training session on Wednesday.)
Over the past year, one of the top Forex educators has
quietly coached a handful of regular folks just like you on how
to become what he calls “Independent Master Forex Traders”.
His goal is to take average, ordinary traders who are among the
90% that consistently LOSE…
-and turn them into independently-thinking, precision trading
MACHINES that are among the 10%… the 5%… or even the top 1%
of Forex traders on the planet.
But here’s the problem for most people: 1-on-1 coaching can be
downright EXPENSIVE, like $15,000… $20,000… or MORE.
That’s just not realistic for most people.
HOWEVER… what if you could be a “fly on the wall”, listening
in to a private, closed-door Forex coaching training session,
picking up the “tried & true” profit strategies the “elite” hold
close to their vest…
Well, that’s what’s happening on Wednesday, March 3rd.
This 35+ year market veteran is giving you a sneak peek inside
his “trading vault” on a brand new, complimentary training
session he calls:
>>> Forex Smart Start Profit Strategies <<<
He yanked his most popular Forex tips & techniques straight out
of his high-end coaching program, and he’ll be revealing them
all you to on Wednesday.
You’ll learn the top 4 instant tweaks you can make TODAY to
protect & grow your Forex portfolio FOREVER, including:
* How the crummy economy & chaotic world events create MASSIVE
amounts of profit potential in the Forex markets (including at
least 5,604 potential pips in just the past few months using
these specialized techniques)…
* How to dramatically reduce your “time in the trenches” trading
Forex by spending only 20 minutes a day. These 2 discoveries
make it all possible…
* How to reduce your risk in a trade to ZERO with this simple
profit-taking trick (HINT: it’s the complete opposite of how
most traders think about going after a profit)…
* How to automatically get an edge over other traders by
entering the market at these high-probability “sweet spots”…
* The telltale signs a market “hurricane” is about to hit, & how
to protect your portfolio by avoiding these dangerous & risky
market conditions…
* The simple, time-saving, step-by-step mechanics of placing a
trade using real broker-provided trading software…
…and much, much more…
The information in this training session is so critical, that
it’s being held 3 different times on Wednesday, March 3rd in
order to fit your schedule:
* 12:00pm Eastern (New York Time)
* 4:00pm Eastern (New York Time)
* 9:00pm Eastern (New York Time)
WARNING: Each session can only accommodate a limited number of
attendees, so to reserve your place, make sure you register here
right away:
http://www.forextrainingmaterial.com/y/?i=773362&u=1&l=f85
Good Trading!
p.s. I don’t think I’m supposed to tell you this, but I found
out that if you attend any one of the 3 training sessions on
Wednesday, you’ll get a chance to download some additional
complimentary training videos & ‘action manuals’ torn straight
from the presenter’s high-end coaching program.
Pick your time & grab your spot here:
http://www.forextrainingmaterial.com/y/?i=773362&u=1&l=f85
(if you see a blank page, that means the registrations are full)
Gold “Driven by Changing World” Says Barrick’s Munk as India Eyes IMF Sales
By: Adrian Ash, BullionVault
THE PRICE OF GOLD in the wholesale market fell again on Wednesday in Asia and London, erasing the final $7 of last week’s 3.4% gain for US investors as the Dollar held steady ahead of Fed chairman Ben Bernanke’s two-day testimony on banking reform and his zero-interest-rate policy.
European stock markets reversed a slight drop by lunchtime, while government bonds ticked higher and crude oil fell through $79 per barrel.
Silver bounced higher from $15.67 an ounce for the second time in a week.
“Since the Chinese New Year, there has been little buying interest in the physical gold market, which seems to have capped upside,” says Walter de Wet at Standard Bank.
“We anticipate to see range trading [in gold] between $1165 and $1050 in the weeks to come,” says Axel Rudolph in his Bullion Weekly for Luxembourg’s Commerzbank.
UK buyers saw gold slip to a one-week low of £710 an ounce in morning trade Wednesday.
The Euro-price traded 3% below last week’s record peak, turning higher from €804 an ounce.
“I hate living in a world where gold is the only security remaining, but people have lost optimism, and I do not see anything to break this trend,” said Peter Munk, founder and chairman of the world’s largest gold producer, Barrick Mining, at an investor meeting in Zurich on Tuesday.
“What drives gold is a changing world,” Munk is quoted by the Tages Anzeiger newspaper.
“We sit here at the beginning of a new world.”
Greek schools, airspace, ports, trains and government offices were closed Wednesday as “hundreds of thousands” civil servants took to the streets in protest against the government’s austerity program, aimed at cutting the budget deficit from almost 13% to 8% of gross domestic product over the next 12 months.
Germany also breached Eurozone deficit rules in 2009, new data showed today, with government spending exceeding tax receipts by 3.3% of GDP.
“This year it is going to go up quite a bit, to 6% or just below,” reckons Goldman Sachs’ chief economist in Frankfurt, Dirk Schumacher, because “Unemployment will increase further.”
Spanish banks BBVA and Santander saw their shares fall towards new 7-month lows after Barclays Capital analysts downgraded their outlook to “[reflect] market concerns for a more severe and prolonged downturn in Spain.”
Fitch Ratings declared a complex €200 million mortgage-backed security originated by Germany’s Hypo Real Estate to have triggered an “event of default”, saying it expects Euromax IV “to be the first of several” such European structured finance notes to breach their terms.
Reuters says the European Central Bank is planning to extend its unlimited loan facility for Eurozone banks when it meets next week.
“It all depends on how market conditions develop, nothing has been decided yet,” the newswire quotes its un-named source.
Heavy sellers of their “Legacy” Gold Reserves from the late 1980s to 2008, West Europe’s central banks have virtually halted their bullion sales according to new data from the mining-financed World Gold Council.
Excluding the International Monetary Fund’s gold sale of 213 tonnes – made to India, Sri Lanka and Mauritius between Oct. and Nov. – signatories to the latest Central Bank Gold Agreement have sold only 1.6 tonnes of gold since Sept.
The 18-member agreement limits total gold sales to 400 tonnes per year until 2014. It says IMF sales will be “accommodated within the ceilings.”
The IMF said last week it wishes to sell a further 191 tonnes of gold in the open market as part of a refinancing program agreed before the global banking crisis spread to sovereign governments, thus reviving the Washington body’s role as advisor and lender of last resort.
“It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility,” said an official from the China Gold Association to the China Daily today.
Speaking on condition of anonymity, he said China would continue to buy gold direct from its domestic gold mining industry – now the world’s No.1 by volume.
“The RBI doesn’t want to take a credit risk as there are concerns on the Dollar and Euro now,” said an un-named official at the Reserve Bank of India to Reuters early on Wednesday.
“Gold is a safe bet…We buy at market prices [and] are closely looking at the gold market.”
The world’s No.1 consumer market for physical gold, Indian household demand “enjoyed a solid recovery [after] an extremely weak first quarter” in 2009, says the World Gold Council, analyzing data from London’s GFMS consultancy – the leading information providers for the global gold industry.
Unlike China, India has almost no domestic gold mining output.
India’s private-household gold demand rose 13% by volume and 57% by value between Oct. and end-Dec. from the same period in 2008, say the GFMS figures.
During full-year 2009, mainland Chinese households grew their physical gold demand 9% by volume and 22% by value. Gold investment demand for bars and coins surged 37% to equal $2.5 billion.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Leading Economic Indicators Keep Rising, but …
 |
Last Thursday the Conference Board published its Leading Economic Index (LEI) for the U.S. In January this historically-reliable indicator increased 0.3 percent after shooting up 1.2 percent in December and 1.1 percent in November. This was the tenth consecutive rise!
Five of the ten components made positive contributions: The interest rate spread, stock prices, supplier deliveries, factory workweek, and consumer expectations.
The LEI’s much more important year-over-year percentage change also rose … from 6.7 percent in November, to 8.1 percent in December, to a very healthy 8.7 percent in January. And as you can see on the chart below, it’s approaching a high level by historical standards, too.
So the LEI is probably reaching its zenith in the year-over-year change. I would also note that six-month percentage change weakened from 6.2 percent in December to 4.8 percent in January.
So what does all of this mean?
First, it means that the big economic picture is still looking good. The bounce will probably continue for at least another two quarters, thus supporting a continuation of the medium-term stock market rally.
But thereafter the outlook isn’t so bright …
The Huge Interest Rate Spread
Is Important for the LEI
When you look deeper beneath the surface of the LEI, the picture is becoming even more ominous. Especially noteworthy is the contribution of the positive spread between short-term and long-term interest rates. Without it, the LEI would have been down 0.1 percent last month.
You might ask then: What’s wrong with that?
Well, there is nothing wrong with long-term interest rates moving higher than short-term rates. In fact, this is a major tool of monetary policy to subsidize the banks and get bank lending going again. But herein lies the problem …
 |
| Too much easy money can ultimately damage the banking sector. |
In a post-bubble world, monetary policy has much less traction than under normal conditions. If too much debt and too many bad loans are weighing on the banking sector’s balance sheet, monetary policy becomes a rather toothless tiger.
That’s why relying on monetary indicators in forecasting the economy or the stock market becomes dangerous. Moreover, it’s very important to watch the particulars of the LEI.
For instance, the way I use the LEI gave me a bullish signal for the economy after the release of the June 2009 reading in mid-July. And it worked.
However, if the index were to continue to rise while the yield curve (the most heavily weighted component) remained steep and most of the other components began turning down, I would begin to doubt the validity of the LEI’s positive readings.
Remember, Secular Downtrends are Very Volatile
During secular economic downtrends and major crises, volatility increases dramatically — not just in the financial markets, but also in the economy. At least that’s what history tells us.
 |
| The LEI has just flashed a warning sign. |
For example, if you look at the 1930s or the 1970s in the U.S. or the past 20 years in Japan, you can unequivocally see it.
All of these secular economic and stock market downtrends have been severe. Yet all of them have, from time to time, been interrupted by huge jumps in GDP growth — like the 5.7 percent reading for U.S. in the fourth quarter of last year.
I think the weakening in the six-month rate of change of the LEI has to be treated as a first warning sign. A warning sign telling us that the economy is not on a durable growth path. A warning sign, that the second half of this year may become very disappointing.
And with the S&P 500 trading at a 12-month trailing price-earnings ratio of 24.7 and yielding just 2.1 percent, all that’s needed for a major stock market downturn is a slowdown and some disappointment in rather exuberant analysts’ earnings estimates and strategists’ economic outlooks.
Best wishes,
Gold Tumbles as China is Uninterested in IMF’s Sales
Crude oil price continues sliding in European morning with the front-month contract extending weakness to 78.3, after a -1.8% Tuesday. Investors remain worried about the unexpected decline in US consumer confidence.
After of Bernanke’s Testimony, the data in focus is Eurozone’s industrial new orders which rose +0.8% m/m in December, compared with a contraction of -1% as forecast by the market. On annual basis, the reading expanded +9.5% following a -0.6% decline in November. In Germany, Gfk consumer confidence slid to 3.2 (consensus: 3) in March from an upwardly revised 3.3 in February.
The slightly stronger-than-expected data help recouping some of the losses the European stock markets incurred earlier in the day. Given the strong direct correlation between stock market and oil, we expect this should give some support to oil price.
The euro also recovers modestly against USD, although it stays at a 9-month low. The rebound is probably due to market expectation that Fed Chairman Ben Bernanke will reiterate the central bank’s accommodative monetary stance in the congressional testimony. Bernanke will likely restate that the Fed will keep the policy rate at 0-0.25% for an ‘extended period’.
A newspaper in China reported that an official from the China Gold Association said the county is unlikely to buy gold from IMF. ‘It’s not feasible for China buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility’. Rather, the official stated China will increase gold reserves by acquiring gold mines abroad.
The news is disappointing as the market had hoped some central banks or official sectors will absorb IMF’s remaining gold sales of 191.3 metric tons.
Gold price plunges with the benchmark contract breaking below near-term support at 1100. Currently trading at 1190.5, the yellow metal has fallen for a 3th consecutive day.
Source: Oil n Gold Report
The High Velocity Market Master 2.0 has arrived
I attended the High Velocity Market Master webinar yesterday and they
revealed a powerful upgrade to the system. The best part is, they are not
even charging extra for it!
Not only was the improved 2.0 system impressive, the results are what
really caught my attention, so did the simplicity of the system, the level
of support they provide and all the extras they throw into this trading
package.
I’ve seen systems retail for as much as $10,000 with much less support and
flexibility. The package comes with everything you need to transform your
trading career…
http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/
*The High Velocity Market Master Indicator Suite – totally custom
indicators you’ll immediately be applying to your charts.
*5 Full Length In-Depth HVMM Training CD’s – comprehensive training you can
watch and learn at your own pace.
*HVMM Manual and Guide to Markets & Timeframes – see the key trade set-ups
in detail.
* High Velocity Market Master 2.0 totally FR EE – potential to increase
your winning edge with the new upgrade that’s been under wraps.
* Ultimate Day Trader System at no cost! – a super-intuitive new course
that you get before anyone else (it’s not even on the market yet!)
*PLUS access to the exclusive Owner’s Club – you’ll have admittance to live
training rooms, full coach support and much more!
The way I see it, this system will give you what you need to be up and
running in no time.
Your small window of opportunity to grab the system and the extras is
closing. The guys at the HVMM headquarters provide a high level of support,
so they can only allow a limited amount of new subscribers before their
support team is at max capacity. Make sure you order before they reach
that point.
Get your HVMM + BONUSES now:
http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/
Good Trading,
Alan
P.S. I know a few people had trouble ordering yesterday – try it again
today. With so many orders flooding in, their server had a few hiccups.
You still have a bit of time left:
http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/