Archive for the ‘Educational Material’ Category:
My dear American readers/followers. This video is for you. Hopefully after you’ve watched it you understand who are your TRUE masters.
Share trading has always been around (at least during the last 150 years). Many institutional and retail investors spent their lives in trading financial instruments so I can say it is nearly a science. Today, any kind of trading is easily accessible and everybody with an internet access can start speculating on the markets. In this article I will explain how to take advantage of market movements by trading Contract for Differences for profit.
After you read this article please share how it contributed to your knowledge. Was it useful for you?
What are contracts for differences
Contract for differences (CFDs) constitute an agreement between two counterparties, usually called a buyer and a seller. Each party agrees to pay the other party the difference in a price of an asset between two moments in time. For example if you believe that the oil price will rise in the next two days you want to buy a CFD based on Oil and close the deal after two days. If you guessed right the result will be the difference between the price you bought at and the price you sold at multiplied by the number of contract you bought.
Contracts for differences are based on various assets such as shares of stock, metals, currency pairs, oil, commodities, stock exchange indexes and basically on everything that is traded. A good article of what contracts for differences are explains the major benefits of trading those instruments instead of traditional shares trading.
Why trading Contracts for Differences?
CFD trading has many advantages compared to traditional shares trading. Of course there are cons too. Here I will try to just outline the major ones.
CFDs are traded on leverage. This means that you can purchase significantly more than you would on a stock exchange. For example a leverage of 100:1 will allow you to buy Apple shares priced at 5000 US dollars with just 50 USD available in your account. It is a double-edged sword though because it is easier to lose money quickly as it is easy to earn. If the price rises with total of 150 USD you will have earned 150 in addition to your 50. Conversely a fall of 50 USD will wipe out your account. Some brokers offer to trade CFDs on a leverage of 1:1 meaning you pay the actual price of an asset and thus having almost the same conditions as if you were trading on a real stock exchange.
Another major advantage of CFD trading is the lowered costs as opposed to stock exchange trading. When you open an account with a CFD broker you can usually place orders with minimum amounts of 1 contract, which is not possible on a stock exchange. The spreads and commissions paid for CFDs are significantly lower too.
However, the big difference between CFDs and real stocks is your counterparty. At the stock exchange you buy if there is someone to sell. It is a regulated market, so you and everybody know who’s selling to whom. The CFD trading falls into the category of OTC (Over-the-counter) market and in this sense you “bet” against the broker rather than buying assets. Although the CFD gives you almost the same rights as a shareholder, you do not actually own the shares. If the broker disappears you are left with the position against him and not owning anything anymore. Of course, this is an extreme example but you get the idea.
To minimize the risk, you should always choose a well-regulated and reputed broker so your funds and positions receive maximum protection.
How to trade CFDs on shares?
The best thing about CFDs is that you can either profit from rising and falling markets. Suppose you are interested in trading Apple shares. The first thing you need to do is to get informed about the company you are trading as well as to know more about the global economic situation. When you get an idea of how the price has been moving over the time it is time to test your trading skills. Of course, you don’t want to test using your real money so first open a demo trading account and see if you are doing well. If you believe the price will rise place a long order, conversely place a short one.
It is also important to get familiar with the platform you are trading with because sometimes you will have to think and act fast. I recommend at least one month demo trading before opening an account. After you have decided for you start with a small amount and try to never risk more than 2% in a single trade.
Major economic events influence all economies; so for example if there are bad news in China, your CFD will certainly go down. Make sure you understand the charts very well – they reflect the market, i.e. buyers and sellers behavior. In fact some traders say that 90% of their trading is based on what they see on the charts. This is not surprising because there is no better source of information of what is actually happening than the charts themselves.
Patience Can Be Rewarding
By Elliott Wave International
Copy the tiger when stalking and capturing a “pounce-ready” trade.
Tigers know the prey they covet is elusive: they show great patience and care when stalking the target.
I came across this description of the tiger’s technique:
“When hunting, this cat…may take twenty minutes to creep over ground which would be covered in under one minute at a normal walk…the tiger will sometimes pause…move closer and so lessen that critical attack distance…before finally raising its body and charging.
“…they wait until a victim comes close and spring up…This ambush method of hunting uses less energy and has a greater chance of success.”
You must “ambush” high confidence trades. Long-time professional trader and teacher Dick Diamond says patience is vital before the ambush.
I talked to Diamond about his famous 80/20 trade, which he means literally — he says it has at least an 80 percent chance of success. It’s the only trade set-up Diamond will take.
Q: Could you tell me about the 80/20 trade?
Diamond: The 80/20 trade is based on indicators that create a specific trading set-up. A trader must act on this set-up immediately. You must wait, and then pounce like a cat when the opportunity presents itself. Then you set stops. In shorter time frames, like trading from a five minute chart, the 80/20 set up may come along a few times a day. If you’re trading a longer time frame, like off of a 120 minute or 240 minute chart, the 80/20 will come along less frequently, but when it does, the opportunity will be bigger. The 80/20 trade can be especially rewarding for position traders. Sometimes the indicators reveal what I call 90/10 or even 95/5 trades.
Q: What emotional factors do students need to work on the most?
Diamond: Traders must be calm and confident. You can’t be a Nervous Nellie and succeed at trading. Calmness comes from learning the proper trading techniques.
Q: What’s different about trading today vs. when you started out in the 1960s?
Diamond: When I started trading, execution took up to five minutes — now it takes less than a second. Time is money, so computers provide a great advantage to today’s trader compared to pre-computer days. At the same time, while computers allow the trader to see multiple indicators on the screen, one must avoid indicator overload. One must learn to narrow down the number of indicators.
Elliott Wave International’s Jeffrey Kennedy explains many ways to use this basic tool
May 21, 2012
By Elliott Wave International
The following trading lesson has been adapted from Jeffrey Kennedy’s eBook, Trading the Line — 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. You can download the 14-page eBook here.
“How to draw a trendline” is one of the first things people learn when they study technical analysis. Typically, they quickly move on to more advanced topics and too often discard this simplest of all technical tools.
Yet you’d be amazed at the value a simple line can offer when you analyze a market. As Jeffrey Kennedy, editor of the new Elliott Wave Junctures service, puts it:
“A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic or extremely pessimistic.”
In other words, a trendline can help you identify the market’s trend. Consider this example in the price chart of Google.
That one trendline — drawn between the lows in 2004 and the lows in 2005 — provided support for a number of retracements over the next two years.
That’s pretty basic. But there are many more ways to draw trendlines. When a market is in a correction, you can draw a trendline and then draw a parallel line: in turn, these two parallel lines can create a channel that often “contains” the corrective price action. When price breaks out of this channel, there’s a good chance the correction is over and the main trend has resumed. Here’s an example in a chart of Soybeans. Notice how the upper trendline provided support for the subsequent move.
This article was syndicated by Elliott Wave International and was originally published under the headline How a Simple Line Can Improve Your Trading Success. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
By Elliott Wave International
I came across some research on the subject of worry. Here’s how it was presented:
Things People Worry About:
- things that never happen – 40%
- things which did happen that worrying can’t undo – 30%
- needless health worries – 12%
- petty, miscellaneous worries – 10%
- real, legitimate worries – 8%
Of the legitimate worries, half are problems beyond our personal ability to solve. That leaves 4% in the realm of worries people can do something about.
I thought about our gigantic national debt and weak economy. These seem to fit into both subcategories of “real” worries. You can’t do much as an individual to solve the nation’s debt and economic problems, yet you can prepare for a worsening economic downtrend.
Do we see evidence for an economic turn for the worse?
Well, consider that the evidence is so overwhelming that it took 456 pages of the second edition of Robert Prechter’s book, Conquer the Crash, to cover it. And since that book published, Prechter has consistently devoted his monthly Elliott Wave Theorist to the facts and evidence behind his forecast.
Here’s a chart from the book that was updated by Elliott Wave International in March 2012:
The downturn from 2008 is critically important, as it shows that after an almost unbroken 60-year climb, the contraction is underway. It surely has much further to go, because it is still a third higher than it was at the outset of the last debt deflation in 1929.
– The Elliott Wave Financial Forecast, March 2012
The rating agencies are well aware of what the above chart means. You probably know that Standard & Poor’s downgraded U.S. debt from the nation’s long-standing triple-A to AA+. Now, another rating agency has taken their rating even lower:
Rating firm Egan-Jones cuts its credit rating on the U.S. government to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.
– CNBC.com, April 5
Robert Prechter’s bestseller, Conquer the Crash, provides practical information about what you can do to protect your finances in the coming economic implosion. And right now, Elliott Wave International is offering 8 lessons from Conquer the Crash in a free 42-page report that covers:
- What to do with your pension plan
- How to identify a safe haven
- What you should do if you run a business
- A Short List of Imperative “Dos” and Don’ts”
- And more
In every disaster, only a very few people prepare themselves beforehand. Discover the ways you can be financially prepared and safe.
This article was syndicated by Elliott Wave International and was originally published under the headline How to Handle an Economic Implosion. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
By Elliott Wave International
Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe.
We invite you to watch the interview below. Then read Robert Prechter’s free report, Discover the Top 100 Safest U.S. Banks.
|What is the best course of action to safeguard your money?|
Read our free 10-page report, Discover the Top 100 Safest U.S. Banks, to learn:
Download your free report, Discover the Top 100 Safest U.S. Banks, now.
This article was syndicated by Elliott Wave International and was originally published under the headline What Is Backing Your Deposits in the Bank?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
EWI’s free EU debt report sheds some light on what’s in store
By Elliott Wave International
How many European bankers does it take to change a light bulb? That’s a joke in search of an answer, but EWI’s European analyst Brian Whitmer explained five months ago that the “light bulb moment” was coming — that’s the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone.
This chart shows how markets in Greece, Ireland and Portugal have behaved over the past five years, including the bailouts. Whitmer says that the turmoil in Greece is due mostly to both social mood and Greek markets having plummeted for more than a year and a half, while the larger EU stock markets have levitated. Once they turn down, he forecasts that what you saw in Greece will be replayed in the eurozone.
To help his subscribers see the light and get the full picture, he compared EU member nations under financial scrutiny to those that are usually viewed as being safe — and showed that they weren’t as safe as most people thought.
Specifically, Whitmer warned that the debt per person in Greece looked eerily similar to the debt per person in highly regarded countries, such as Germany and France — and even to non-eurozone countries, such as the United Kingdom.
In 2010, Britain proposed a five-year, 25% budget reduction that affects nearly every area of the government. While it sounds like a drastic measure, it has played out differently during the past year. According to member of European Parliament Daniel Hannan, statistics show that not only is government spending and borrowing significantly higher than this time last year, but taxes, too, are way up. Whitmer notes that the budget cuts rely heavily on the future and lack near-term bite.
Why has the worst of Europe’s violence taken place on the streets of Athens rather than London? Athenians did not suddenly grow more violent in 2011. What has changed since 2007 is their stock market. Whitmer’s words of advice: “…should your country’s stock market begin to look like Greece’s, watch out. Trouble will be on the way.”
European Financial Forecast Editor Brian Whitmer has covered Europe’s debt crisis since March 2010 — and his forecasts kept subscribers ahead of the downward spiral every step of the way. Read more of his analysis in our free report, “The European Debt Crisis and Your Investments.”
This article was syndicated by Elliott Wave International and was originally published under the headline The Light Bulb Moment for the Eurozone. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Robert Prechter explains what’s the real problem with today’s market
By Elliott Wave International
What is the real problem with today’s market? Watch this excerpt from Robert Prechter’s special, video issue of the August 2011 Elliott Wave Theorist. Prechter shows you how the buildup of dollar-denominated debt has brought us to what he calls a critical market juncture.
Get even more information about current market trends and how to prepare for what’s ahead with our new 14-page investing report. See details below.
|The Most Important Investment Report You’ll Read for 2012|
Every year or two Elliott Wave International (EWI) publishes analysis with a message so critical that they decide to share it, FREE.
They have just released The Most Important Investment Report You’ll Read for 2012, a free report to help you navigate the markets and prepare for what’s ahead. You’ll get hard facts, 25 eye-opening charts and 14 pages of straightforward commentary that will put the volatile market action of the past months into perspective within the “big picture” to help you position for the years to come.
This article was syndicated by Elliott Wave International and was originally published under the headline Prechter: “The Trend Is Exhausted”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
I just got this message from 35+ year market expert Bill Poulos
that I think you’re going to want to see RIGHT AWAY.
It was intended to be seen ONLY by a small group of his private
students, but he let a few others see it, and I’m doing the
Here’s his original message to me:
A group of my private students and I have encountered something
extraordinary taking place in the markets this year…
-and ESPECIALLY in the past week.
I recorded a special ‘report card’ video just for this private
group, but I wanted to share it with you because I think you
need to see what’s been going on.
Your portfolio could depend on it.
p.s. What you’re about to see in this video is something the
average “mainstream” person will, unfortunately, NEVER
understand nor get to enjoy in their lifetime.
Asset Protection and Wealth Creation Strategies – Trading 101
Since I am one of the greatest tightwads that ever walked the planet, I only like to buy positions when we are at the height of despair and despondency, and traders are raining off the Golden Gate Bridge. Similarly, I only like to sell when the markets are tripping on steroids and ecstasy, and are convinced that they can live forever.
Some 99% of the time, the markets are in the middle, and there is nothing to do but deep research, looking for the next trade. That is the purpose of this letter. Over the four decades that I have been trading, I have learned a number of tried and true rules which have saved my bacon countless times. I will share them with you.
Don’t over trade. This is the number one reason why individual investors lose money. Look at your trades of the past year and apply the 90/10 rule. Dump the least profitable 90% and watch your performance skyrocket. Then aim for that 10%. Over trading is a great early retirement plan for your broker, not you.
Always use stops. Risk control is the measure of the good hedge fund trader. If you lose all your capital on the lemons, you can’t play when the great trades set up. Consider cash as having an option value.
Don’t forget to sell. Date, don’t marry your positions. Remember, pigs get slaughtered. Always leave the last 10% of a move for the next guy.
You don’t have to be a genius to play this came. If that was required, Wall Street would have run out of players a long time ago. If you employ risk control and stops, then you can be wrong 40% of the time, and still make a living. That’s little better than a coin toss. It you are wrong only 30% of the time, you can make millions. If you are wrong a scant 20% of the time, you are heading a trading desk at Goldman Sachs. If you are wrong a scant 10% of the time, you are running a $20 billion hedge fund that the public only hears about when you pay $100 million for a pickled shark at a modern art auction. If someone says they are never wrong, as is often claimed on the Internet, run a mile, because it is impossible.
This is hard work. Trading attracts a lot of wide eyed, naïve, but lazy people because it appears so easy from the outside. You buy a stock, watch it go up, and make money. How hard is that? The reality is that successful investing requires twice as much work as a normal job. The more research you put into a trade, the more comfortable you will become, and the more profitable it will be. That’s what this letter is for.
Don’t chase the market. If you do, it will turn back and bite you. Wait for it to come to you. If your miss the train, there will be another one along in hours, days, weeks, or months. Patience is a virtue.
When I put on a position, I calculate how much I am willing to lose to keep it. I then put a stop just below there. If I get triggered, I just walk away. Only enter a trade when the risk/ reward is in your favor. You can start at 3:1. That means only risk a dollar to potentially make three.
Don’t confuse a bull market with brilliance. I am not smart, just old as dirt.
Tape this quote from the great economist and early hedge fund trader of the thirties, John Maynard Keynes, to you computer monitor: “Markets can remain illogical longer than you can remain solvent.” Hang around long enough, and you will see this proven time and again (ten year Treasuries at 2.4%?!).
Don’t believe the media. I know, I used to be one of them. Look for the hard data, the numbers, and you’ll see that often the talking heads, the paid industry apologists, and politicians don’t know what they are talking about (the Gulf oil spill will create a dead zone for decades?).
When you are running a long/short portfolio, 80% of your time is spent managing the shorts. If you don’t want to do the work, then cash beats a short any day of the week.
Sometimes the conventional wisdom is right.
Invest like a fundamentalist, execute like a technical analyst.
Use technical analysis only, and you will buy every rally, sell every dip, and end up broke. That said, learn what an “outside reversal” is, and who the hell is Leonardo Fibonacci.
The simpler a market approach, the better it works. Everyone talks about “buy low and sell high”, but few actually do it. All black boxes eventually blow up, if they were ever there in the first place.
Markets are made up of people. Understand and anticipate how they think, and you will make a lot of money.
Understand what information is in the market and what isn’t and you will make more money.
Do the hard trade, the one that everyone tells you that you are “Mad” to do. If you add a position and then throw up afterwards, then you know you’ve done the right thing. This is why people started calling me “Mad” 40 years ago.
If you are trying to get out of a hole, the first thing to do is quit digging and throw away the shovel. A blank position sheet can be invigorating.
Making money in the market is an unnatural act. We humans are predators and hunters evolved to track game on the horizon of an African savanna. Modern humans are maybe 5 million years old, but civilization has been around for only 10,000 years. Our brains have not had time to make the adjustment. In the market, this means that if a stock has gone up, you believe it will continue. This is why market tops and bottoms see volume spikes. To make money, you have to go against these innate instincts. Some people are born with this ability, while others can only learn it through decades of training. I am in the latter group.
by John Thomas, The Mad Hedge Fund Trader