A trader with a mediocre system and great money management skills will fare better than a trader who has a great system but no handle on his money.
Money management is indispensable to the Foreign Exchange trader.
Regardless of how strong a trading system you have, if you do not apply good money management controls, you will find yourself in trouble.
Dustin Pass, one of the foremost experts on Forex trading says, “An individual trading with proper money management skills will do better in a mediocre trading system than a person trading an excellent system who lacks money management skills.” In his ebook, Guide to Forex Live-on-the-News Trading, Pass lists five essential components to an effective money management program:
1. Currency selection
2. Lot size (how much margin will you use)
3. Stop placement (how much margin will you risk)
4. Entry level (when to enter a trade)
5. Limit (how much money will you make)
Currency Selection
Currency selection is important because it dictates how long your margin will be tied up in a particular trade. If you enter a trade on a slow moving currency, understand that your money will be tied up for a longer period, thereby increasing your risk. You may also hinder your ability to enter another trade since your capital is tied up in the first one.
Set Your Stop Placement
The amount of money you place on a trade is a vital factor, too. If you put too many of your eggs into one basket, you will decrease your ability to diversify properly. In order to choose your lot size, you must identify your maximum allowable risk and your maximum risk per trade. Once you have determined these factors, you will need to set your stop placement.
Stop placement is the act of predefining your level of loss tolerance on a given trade. The successful Forex trader will learn to cut his losses and move on. In the overall scheme, it will save you money…and increase your gains.
Entry Levels
Entry level is based on all of the above. Knowing how much you have to play with on a trade and where the nearest resistance level lies will inform you whether to enter or pass on a given trade. Often, the best trades are the ones you didn’t make!
Allocation
One simple principal must guide your limit level: the possible profit must at least be equal to the accepted risk. Allocation is key. Suppose your system is 75% accurate and you lose on the first 25 trades out of 100 total trades? You will need enough margin to hang in there for the next 75 trades.
Good Risk Management
As Dustin Pass so aptly noted, a trader with a mediocre system and great money management skills will fare better than a trader who has a great system but no handle on his money. There is no substitute for good risk management.
Wednesday, May 7, 2008
Forex 101: Managing Risk
Stocks Technical Analysis - Estimating Price Trends Using Technical Analysis Of Stocks
For any normal person, trade is nothing more than the give and take of products or services within an agreed fixed price. for instance if you have bought a package of candy for $ 2, that is trade. You purchased a $ 45000 four-door sedan, then thats trade . You purchased a $ 4.5 million home, and that also is trade. once you have purchased the good or product from the seller for what ever price you have set the deal, that is trade and then the deal if finished.
But for traders on various deals, trade is a priority consideration. They have invested lots of money in an attempt to generate greater profits later. In exchange for goods and different titles with different operators from various deals, they hope that they could reach an enormous profit and pursue their careers until their trading accounts either increase or dehydration.
In addition, for the various governments of the nation , trade is a blessing which everyone should feel grateful . The country's economy is heavily dependent on how the international and local operations in the market perform . a trade is declared successful if only it can translate to an increase of GDP( gross domestic product), that's the indicators of a nations thriving economy. Successful businesses also reflect additional jobs, help the unemployed to have to work and earn for their families.
Trade can be a blessing for the various operators (people engaged in the negotiation of stocks) and the various companies which issue securities to the people to raise extra revenue. when the stock value goes up , the owners of that bulk will get profits when they trade them then.. On the other hand, stocks of companies that is owned by common people are also guaranteed to high profits since the value of stocks on the market are now greater than it was when they were first released. both sides benefit from the trading of securities in various exchanges.
However, if a business man or any trader reaches you to offer his stocks, it does not mean that the agreement is done. when you buy a house or expensive item, you need to first look into the market and then decide base on that information whether it would be cost effective to have an agreement or not this particular time. this is defined as technical analysis.
Technical analysis is in finance and investments is the study of an asset or safety (in this case, security is the product) price action (change of prices the quantity and open interest) in the market to predict profitable price movements. It generally uses different cards from both the past and present of price fluctuations in order to arrive at a price well-established trend. Such price trends will help you decide if could take advantage when you trade a particular stock at that time or not.
Stocks trading are still profitable, he understands the risks that can endanger your investment. By using technical analysis in the business of your actions, you could eliminate the risks in your investment.
But for traders on various deals, trade is a priority consideration. They have invested lots of money in an attempt to generate greater profits later. In exchange for goods and different titles with different operators from various deals, they hope that they could reach an enormous profit and pursue their careers until their trading accounts either increase or dehydration.
In addition, for the various governments of the nation , trade is a blessing which everyone should feel grateful . The country's economy is heavily dependent on how the international and local operations in the market perform . a trade is declared successful if only it can translate to an increase of GDP( gross domestic product), that's the indicators of a nations thriving economy. Successful businesses also reflect additional jobs, help the unemployed to have to work and earn for their families.
Trade can be a blessing for the various operators (people engaged in the negotiation of stocks) and the various companies which issue securities to the people to raise extra revenue. when the stock value goes up , the owners of that bulk will get profits when they trade them then.. On the other hand, stocks of companies that is owned by common people are also guaranteed to high profits since the value of stocks on the market are now greater than it was when they were first released. both sides benefit from the trading of securities in various exchanges.
However, if a business man or any trader reaches you to offer his stocks, it does not mean that the agreement is done. when you buy a house or expensive item, you need to first look into the market and then decide base on that information whether it would be cost effective to have an agreement or not this particular time. this is defined as technical analysis.
Technical analysis is in finance and investments is the study of an asset or safety (in this case, security is the product) price action (change of prices the quantity and open interest) in the market to predict profitable price movements. It generally uses different cards from both the past and present of price fluctuations in order to arrive at a price well-established trend. Such price trends will help you decide if could take advantage when you trade a particular stock at that time or not.
Stocks trading are still profitable, he understands the risks that can endanger your investment. By using technical analysis in the business of your actions, you could eliminate the risks in your investment.
How to Find Good Stocks That Will Survive 2008 Market Crash
Finding good stocks that are able to survive stock market crash is really tough. However, these simple financial ratios can help you to discover these tough stocks. The stocks are so tough, that will only grow stronger after the recession. Make sure you stick with it if you want to be rich from stock market.
Earnings per Employee
You can calculate the staff productivity by dividing the total earnings by the number of staffs. As different industries have different ratios, you should compare staffs' ability to bring value to the company in the same field. Compare yourself a bank with $12k profits per staff with another bank of $98k profits per staff, I bet you can notice the difference.
Good employees maintain the business operation, but great workers will sustain the business growth. And in stock investing, earnings growth does matter, especially during depression. Though times never last, but tough people do.
Return on Asset
ROA can be calculated by dividing the net profits by the number of assets that the company owns. It indicates how efficient the management is in turning the assets into profits. Compare with other stocks on how they do is something you should consider. Lower ROA can be attributed to not having enough expertise to manage the assets or not having the right assets in the first place.
During recession, companies with the lowest return on asset (ROA) are prone to be acquired by stronger companies. Unfortunately, not all low ROA stocks hold the value they want in the eye of larger companies. Therefore, better avoid this type of stocks.
Liquidity Ratio
Liquidity ratio measures if the stock is able to meet the short term obligations. It can be calculated as current or quick ratio. Either way, it is about the liquid asset over its current liabilities. This ratio is critical during recession as the interest rate will increase substantially that time. Although Federal Reserve maintains the interest rate recently, there is no guarantee it will be the same in 2008.
Recently, I noticed some good companies holding substantial liquid assets like never before. This indicates the stocks are preparing themselves of any possibilities of higher interest rates next year, or having enough cash to buy profitable asset at cheaper price in 2008.
Either there is market crash, recession or economic depression in 2008, make sure you get ready yourself. Market crash can be bad to some, but offer great opportunities to smart investors. So, make sure you are one of them.
Earnings per Employee
You can calculate the staff productivity by dividing the total earnings by the number of staffs. As different industries have different ratios, you should compare staffs' ability to bring value to the company in the same field. Compare yourself a bank with $12k profits per staff with another bank of $98k profits per staff, I bet you can notice the difference.
Good employees maintain the business operation, but great workers will sustain the business growth. And in stock investing, earnings growth does matter, especially during depression. Though times never last, but tough people do.
Return on Asset
ROA can be calculated by dividing the net profits by the number of assets that the company owns. It indicates how efficient the management is in turning the assets into profits. Compare with other stocks on how they do is something you should consider. Lower ROA can be attributed to not having enough expertise to manage the assets or not having the right assets in the first place.
During recession, companies with the lowest return on asset (ROA) are prone to be acquired by stronger companies. Unfortunately, not all low ROA stocks hold the value they want in the eye of larger companies. Therefore, better avoid this type of stocks.
Liquidity Ratio
Liquidity ratio measures if the stock is able to meet the short term obligations. It can be calculated as current or quick ratio. Either way, it is about the liquid asset over its current liabilities. This ratio is critical during recession as the interest rate will increase substantially that time. Although Federal Reserve maintains the interest rate recently, there is no guarantee it will be the same in 2008.
Recently, I noticed some good companies holding substantial liquid assets like never before. This indicates the stocks are preparing themselves of any possibilities of higher interest rates next year, or having enough cash to buy profitable asset at cheaper price in 2008.
Either there is market crash, recession or economic depression in 2008, make sure you get ready yourself. Market crash can be bad to some, but offer great opportunities to smart investors. So, make sure you are one of them.
Revenge of the Penny Stocks
There has been a lot of talk about how 2008 will turn out financially. The word recession has been thrown around a lot perhaps for shock value but maybe not. Lets pretend for a moment that these predictions of s recession are accurate. How would that effect the stock market? Well, the stock market will always be there even if the numbers change. However, in a recession, everything is relatively a penny stock. So even though penny stocks have received bad press they will always be there during good and bad times.
Recessions are times when all companies are struggling to make a profit right. Yet that does not stop people from investing. People are more desperate and then to exercise more faith in a company and hence willing to take more risk when economic times are tough. During times like these people can afford to be more picky and avoid the more risky stocks. Penny stocks are risky no matter how the economy is but are a great investment if done wisely.
If there was a recession then penny stocks would get a lot more attention since people would have less money to spend and would not be as picky. There would be less negative talk about a stock that would present more people than ever before with an opportunity to invest. People would see it as more of an opportunity than a gamble. You see its all about perspective and approach. Anybody can lose money doing anything if done incorrectly. Penny stocks can make you a lot of money if invested in correctly.
All the people who talk bad about penny stocks are either the ones who have got burned investing in them or the ones who know nothing at all about them except what others have told them. It makes for interesting stories but the truth is that the gains of penny stocks will kick butt against any other stock type. Other stocks can make great gains but definitely not as quickly as penny stocks.
So will 2008 be a recession? I do not think so. Will it be a good year to invest in penny stocks? Well of course it will be. Just invest cautiously. Penny stocks have never represented a bad investment just one that should be approached with caution. Its easy to take the advice of others without really knowing the truth but including penny stocks as a part of your portfolio is a smart move any day of the week.
Recessions are times when all companies are struggling to make a profit right. Yet that does not stop people from investing. People are more desperate and then to exercise more faith in a company and hence willing to take more risk when economic times are tough. During times like these people can afford to be more picky and avoid the more risky stocks. Penny stocks are risky no matter how the economy is but are a great investment if done wisely.
If there was a recession then penny stocks would get a lot more attention since people would have less money to spend and would not be as picky. There would be less negative talk about a stock that would present more people than ever before with an opportunity to invest. People would see it as more of an opportunity than a gamble. You see its all about perspective and approach. Anybody can lose money doing anything if done incorrectly. Penny stocks can make you a lot of money if invested in correctly.
All the people who talk bad about penny stocks are either the ones who have got burned investing in them or the ones who know nothing at all about them except what others have told them. It makes for interesting stories but the truth is that the gains of penny stocks will kick butt against any other stock type. Other stocks can make great gains but definitely not as quickly as penny stocks.
So will 2008 be a recession? I do not think so. Will it be a good year to invest in penny stocks? Well of course it will be. Just invest cautiously. Penny stocks have never represented a bad investment just one that should be approached with caution. Its easy to take the advice of others without really knowing the truth but including penny stocks as a part of your portfolio is a smart move any day of the week.
Saturday, May 3, 2008
Tips For A Smooth And Successful Garage Sale
Do you find yourself lost within the clutter of your home? Or do you always feel that a few extra bucks could help you make ends meet? Then why not have a garage sale, after all one man’s trash is another man’s treasure.
You don't have to have a lot of stuff to start selling. You could ask for handouts from neighbors, family, or friends, something they think they can part with, this way combined with your things you are sure to provide your customers with a variety of purchasable items.
When you think you have all the things you need to get started, then you should begin planning, starting with the sale date. It would be most effective to schedule the sale on a weekend far from any holiday or any special day within your community. You should probably also anticipate the weather for that day so that you can adjust if the weather is uncooperative. Regarding the time, it would be best to hold it in the morning.
The next step is to make the event official by having it announced in the most popular periodical in your area, or by putting up posters, or both. If possible, maybe you could also have a local radio station mention the affair. Publicize the event on bulletin boards.
Buy several stickers, post-its, and different colored markers, and use them before the day of your sale. This would help you organize your products. You may need to borrow some tables and racks so that you can better display your merchandise. Also, prepare smaller bills and coins for change. If you have a container with several compartments then you should place the money there, keeping in mind that this should be something you could carry around. Clean and remove some of the stuff from the garage if you are having the sale there and mark items in the garage that you are not planning to sell. Also make sure that the garage is well lit on the sale date. Place electrical equipment that are for sale near an electrical outlet or set up an extension cord. Check signage ordinances in your neighborhood and set some of them up on nearby street corners, make them noticeable with big and bold letters, and eye-catching colors.
Put your goods in order one or two hours before you open. Lastly, don't be afraid to bargain with customers. You are expected to put a reasonable price on your stuff but that doesn't mean that you should submit to the buyer, unless of course if you really want to get rid of that object.
You don't have to have a lot of stuff to start selling. You could ask for handouts from neighbors, family, or friends, something they think they can part with, this way combined with your things you are sure to provide your customers with a variety of purchasable items.
When you think you have all the things you need to get started, then you should begin planning, starting with the sale date. It would be most effective to schedule the sale on a weekend far from any holiday or any special day within your community. You should probably also anticipate the weather for that day so that you can adjust if the weather is uncooperative. Regarding the time, it would be best to hold it in the morning.
The next step is to make the event official by having it announced in the most popular periodical in your area, or by putting up posters, or both. If possible, maybe you could also have a local radio station mention the affair. Publicize the event on bulletin boards.
Buy several stickers, post-its, and different colored markers, and use them before the day of your sale. This would help you organize your products. You may need to borrow some tables and racks so that you can better display your merchandise. Also, prepare smaller bills and coins for change. If you have a container with several compartments then you should place the money there, keeping in mind that this should be something you could carry around. Clean and remove some of the stuff from the garage if you are having the sale there and mark items in the garage that you are not planning to sell. Also make sure that the garage is well lit on the sale date. Place electrical equipment that are for sale near an electrical outlet or set up an extension cord. Check signage ordinances in your neighborhood and set some of them up on nearby street corners, make them noticeable with big and bold letters, and eye-catching colors.
Put your goods in order one or two hours before you open. Lastly, don't be afraid to bargain with customers. You are expected to put a reasonable price on your stuff but that doesn't mean that you should submit to the buyer, unless of course if you really want to get rid of that object.
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