Nobel Finance Sydney – Money Matters Newsfeed

By Adnan Kaleemi

If you want any success in trading, you will have to control your risk exposure. Money management simply means how much you are putting in each trade you are taking in terms of risk exposure and dollar amount. The standardization process of your trades comes from money management. Standardization does not mean that you will have every trade similar because every trade is different due to its nature or entry, exit and pattern used as a criterion. What standardization does is that it effectively keeps your risk level within the same parameters for every trade you take. If you want any progress in your trading, you will have to control your risk exposure.

How do you feel when you take a position of 10K lot with 100 pips of stop in EURUSD? The loss is 100 in dollar amount. What will your feelings be and how would you handle a position of 100K lot when your stop loss is 50 pips. In this case the dollar loss amount is 500. Of course there is more exposure to risk in the markets and a greater emotional response. In the second case, the stop in pips is half but just by increasing the position size, the dollar amount of loss increased five times. Now let’s see how can these two trades be standardize. This can be done only by position sizing. Use the money management calculator provided to you to do these calculations. Here is how you do it. Suppose the portfolio size is 5,000 dollars.

Your risk in each trade you take is 2%. In the account size box put the dollar amount of your total equity in the account which in this case is 5,000. In the risk per trade box put the 2 in the %age of my total account size. Entry let’s say is 1.1500 and stop is 1.1600 and the stop is 100 pips. This gives you a maximum loss of 100 dollars in the trade. This gives you a calculation of one mini lot size of your position for this trade. To use the second example, we will now use the stop of 50 pips. Entry will be same 1.1500 and stop will be 1.1550. If you are taking a position of 100K lot, by using the money management calculator, you can see you are risking 10% of your account size in this trade. This is very high.

To take a position of single 100K lot you have to bring the risk level down to 2%. This can be done in two ways. One, your stop should be 10 pips instead of 50 pips or if you can not change your stop size, then you have to wait till your account size increases to 25,000 if you want to keep the stop to 50 pips. At this point you have understood the importance of position size and lot size calculation. By keeping the risk exposure to 2%, you are standardizing every trade you are taking and regardless of how big the position is or the stop loss level, if you use these powerful techniques used by top traders, you will have a geometric growth in your account with controlled risk exposure and emotional response.

Martingale type of strategies state that as the value of an account is decreasing, the size of the following trades increase. As the account suffers losses, the trading size increase in order to cover the losses.

This type of money management strategy is practiced in gambling where the systems or the games are negative expectancy. No type of money management can change the odds of the game or change the expectancy of the system. A simple example is a coin flip.

You can bet on heads or tails. If you win you win 1$ and if you lose, you lose 2$. This is negative expectancy. If after 100 flips, you have 60 heads and 40 tails, you will win 60$ and lose 80$ netting a loss of 20$.

Although you won 60% of the times, your wins were half the size of your losses. However, by practicing martingale, you can increase your bet size after every loss to 2$ to win 2$, in this case if a streak of wins start, you can manage to come up as a break even player.

This type of money management is highly dependent on streak of consecutive wins. Classically, the gamblers or traders try to take advantage of the streaks in the game. However, this is not going to change the negative expectation of the game. Any losing streak lasting for long enough will chew up the capital.

The theory behind doubling of size of the bet is that eventually the losing streak has to come to an end. I do not recommend this method of money management in forex, stocks, options or any other type of trading. The risks are too great and there is a good chance that 4-6 or more losing trades will ruin the account.

There are other better money management techniques which are antimartingale in nature. This will be discussed further in my other articles on money management techniques here on ezine articles.

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By Adnan Kaleemi

How many indicators do you need to generate forex signals? There are hundreds and thousands of them available with the internet based softwares. But wait there is a little problem in trading with computer generated forex trading singals- they follow exact same parameters all the time and follow the linear analysis. The markets never move linearly. They move in a zig zag fashion. They are like driving a motor car and finding a route from point A to point B. To get to point B, there can be a lot of ways, however some of the routes can be shorter than the others and some can be followed easily. You have to decide if you want to save time, gas, money or all three.

There can be three different routes serving three different purposes. Forex Signals work the same way. The most important decision you have to make is what time frame do you want to trade. In shorter time frames, a longer term moving average will not work. It will require other type of signals for trading the shorter time frames. In intermediate term time frames, you can have different type of market indicators.

In my five years of extensive research on market timing, I have come to know that the best way to analyze the market is to use own understanding of the markets. This includes volume studies, market acceleration studies and market profile. To judge where the market players stand in the particular time frame. These market players can be big banks or smaller single accounts. The market has a direction all the time and that direction is determined by the longer time frame traders.

To judge where these players are going is like sitting in a game of chess and seeing what you opponents next move is. A correct analysis of the markets come from observation and judging whether the move is going to continue or abort. If it is going to abort, is it going to reverse? Keep your analysis and Forex Signals simple and trade able. Do not over complicate them with using a lot of indicators and custom fitting them. Good luck with your trading and happy journey from point A to point B.

In the previous article we discussed the importance of choosing the time frame to trade and touched some basic ways to generate the indicators for Forex signals. In this article we will discuss the value in assessing the markets with market generated information itself. This will require you to analyze what is going on in the market in the current time.

Ask a simple question- where is the market going right now and how well is it succeeding in its course. If it is succeeding then the current move is intact and there is initiative buying or selling in the current direction. It there is a change in the acceleration of the market, this will tell you that ‘something has changed’. Now the next question is if something is changed how are the current market speculators going to respond to this change.

Is there going to be more initiative by the speculators to continue the current direction of is there going to be a responsive buying or selling in the opposite direction. This whole concept comes from the Market Profile studies done by some of the pioneers in the market theories earlier and are very powerful when analyzing the markets. At this point I am not going in the details of studying the markets using these theories rather I am discussing the basic concepts of market technical analysis. So there are two parts of the story that when joined together will make sense.

One is initiative buying or selling and continuation of that with more initiative buying or selling and the other is initiative buying or selling with responsive buying or selling in the opposite direction. This is how the financial markets work and it is similar to any other markets also. It is a two way auction process of bidding and asking, supply and demand. The whole idea of the market speculation is to maximize trade and to form an agreement on price between buyers and sellers. The market is a two way auction searching for buyers and sellers as it goes up and down and when it finds them, it reverses and again starts finding buyers and sellers. Please re read the article again to grasp this important concept. This will be the basis of our future articles on Forex signals.

Timing is the key in the markets. You might have heard of this several times that the market indicators are used to predict the entry. The better the timing of these signals and indicators, the better the edge of the trader. Market edge is what you need when you are looking for the forex signals.

The observation of the signals start by looking at a singal bar on the daily chart. According to the Dow theory, an uptrend is a series of ups and a down trend is a series of downs. Keep it simple. This is what you should look for timing the markets. Up closes with good follow through and volume is required to see if the market is in an uptrend. The same process is true with down trends when the closes are down and the volume is good. As the volume dries, you will see that the bars shrink in size or in other words the range shrinks.

Another question is why the range shrinks and expands differently in the forex markets? It is true with other forms of markets also but commodity and future markets are more volatile sometimes. The answer is not simple and will require pages and pages of examples and analysis but I will try to explain. When there is range contraction, there are two basic reasons. One there is an absence of big players in the markets and the floor traders are active at this point. This point is further explained by the shrinking of the range after the New York close around 4 to 5 PM EST. This is when the big institutions close. The time the market expands again is around 2 AM EST when the banks open in London and Asian counties link Singapore and Japan. So the big players are required to move the big markets like forex.

The other reason is the auction theory which says that the market auctions up till it finds a seller and the market auctions down till it finds a buyer. The spikes in prices are the areas where forex markets rush up and down to find buyers in down spikes and sellers in up spikes. This is the reason why the spikes are over 50% areas of exhaustion. We will continue our discussion on market timing signals. I hope you have understood the basic concepts in the three articles on forex signals.

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By Monica Hendrix

Everything about forex trading can be learned yet only a small minority achieve currency trading success. So what separates out winners from losers – its their mindset. Here are the traits the millionaire traders all have and you should too.

1. Acceptance Of Responsibility

They accept that no one else can give them success and they don’t try and buy it from vendors on the net – promising success for a few hundred dollars – they do their homework, devise their forex trading strategy and do it on their own.

You can only rely on yourself and that is what most forex traders never accept and they blame everyone else but themselves for their losses – If you cant accept responsibly don’t trade.

If you want to be a success you need a trading edge and you need to give that to yourself. Devising a method is only half the battle the other half is in the mind and following your system through inevtiable losing periods.

2. They Understand Market Behaviour

I teach forex trading and am absolutely stunned by the amount of novice traders who don’t know how and why prices move. Here are the most common errors

Day Trading works – This has to be the dumbest way of trading and destined to fail, yet more novices try it than any other method.

You need to predict to win – NO you will lose. You are relying on hope and if you do rely on hope, get ready to lose all your equity.

Markets are Scientific – Rubbish! Of course their not and all the people who think they are lose.

The pros see trading as an odds game, which will see them lose for long periods – but if they keep trading the odds they will win longer term. They know they have trade momentum and the reality of price change not rely on hope. The successful forex trader works smart rather than hard and knows the logic of why prices move.

If you believe any of the three examples we gave you above you have no idea of market behavior and logic and need to do more homework.

3. Confidence

If you understand how and why markets really move you can devise a forex trading system you can have confidence in and confidence is vital for the next trait:

4. Discipline

This is essential to help traders trade their systems through losing periods and keep in mind if you don’t follow your method with discipline you have no method in the first place.

Trading relies on attitude and accepting the markets for what they are and devising a forex trading system to trade the odds. You need to understand the markets, gain confidence and discipline and apply your method through the bad periods to lead you to ultimate currency trading success.

The points above may sound easy but trading with discipline is very hard and rely it is this trait above all others that separates winners from losers.

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By Derric Goodwin

Currency trading is the world’s largest market made up of nearly $2,000,000,000,000 in daily volume. Yes, that’s $2 trillion with 12 zeros. And as more and more investors continue to catch on, the market will continue to grow at a very rapid pace.

Currency trading is done electronically by telephone, computer, or Reuters — also known as a financial market data and news service provider. However, currency trading is not suitable for everyone, which holds true for most home base business opportunities. It’s the perfect financial market and the “basis” for the buy or the sell on the currency conversion rate.

Currency trading is taking advantage of shifting foreign exchange rates and is the most profitable and attractive online investing opportunity mainly due to the fact that it can be done from the home office or the work office, wherever that may be, from anywhere in the world.

Trading

Trading circulates between major banking centers all around the world which permits traders to earn healthy profits during rising and falling markets. For example, trading between two non-US Dollar currencies will usually occur by first trading one non-US Dollar against the US Dollar and then trading the US Dollar against the second non-US Dollar currency.

Trades can be made 24 hours a day simply because the trading markets are located all over the world and because of the diversity in time-zones. And, thanks to modern technology interfaces like those used by large currency trading brokerage firms with deep pockets, trading opportunities in the currency trading market are now readily available to individuals like you and me. Trading currencies affords investors both large and small alike to make money quickly and efficiently, with low risk.

Currency

Currency trading uses the acquisition and release of substantial quantities of currency to leverage the shifts in relative value into profit which occurs when one country’s currency is traded for another country’s currency at the prevailing exchange rate.

Currency trading may be one of the most liquid forms of trading, but it is also a volatile market that requires strategy if you wish to make money, which leads into the very next section.

Strategies

Strategies that utilize cross currency pairs allow for profit potential in flat or neutral markets. But, making a profit is only half the equation. The other half of the equation requires that you devise strategies to sustain those profits long term. In other words, you need to learn proven strategies and make money consistently.

New investment strategies and instant electronic trading now ensures high returns for the investors. But an offer is nothing more than an offer and the opportunity will pay off only for those who approach currency trading equipped with the proper trading strategies.

In doing so, you must keep in mind that currency trading is really nothing more than a zero sum game. And, a few great reasons why it is such a great way of entering the capital markets are: (1) it’s easily accessible thanks to the widespread use of the Internet, and (2) currency trading is all commission-free with relatively low transaction costs.

Profits

This exciting and rapidly growing financial market provides a home based business the opportunity to generate profits in one of the hottest financial activities today, and leverage gives the currency trader the ability to make extraordinary profits while at the same time maintaining risk capital to a minimum.

Trading currency allows traders to earn profits during rising and falling markets. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies. On the flip side of the coin, if the outlook is pessimistic, we have a bull market in which a trader profits by selling the currency against other currencies.

You need to devise strategies to make profits in the market on a sustained basis. Unlike most managed programs or mutual funds the primary form of compensation for currency trading is a percentage of profits.

Systems

Not too long ago, the barriers to entry for currency traders were very high, so much so that only large banking and institutional firms had access to the tools and the systems necessary to play in the currency trading game. Modern monetary systems are far superior to the barter system people used back in the old days.

There are many simple systems that work well. Understanding both forecasting systems and how they can predict the market trends will help currency traders be successful with their trading. Learning currency trading is easy when you use the best mentors and systems available.

So, as you can see, currency trading is a platform where individuals speculate on the exchange rate between two currencies. It’s open and available every day of the year due to it’s global nature, and it is the gateway to the biggest pile of money on planet earth. What better way to start and grow a home based business!

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By: Raynor James

There are many emotional factors connected with the ownership of Real Estate. Do the historical returns on Real Estate investments justify the confidence so many investors have in them?

The ownership of land has been something that has been rooted deep in the minds of man. Land is seen as the one investment that is solid and permanent. The American Dream has long included the ownership of your own home, but when you move beyond this natural impulse to own property that you can call yours and look at Real Estate purely from an investment opportunity, how does the picture change? Have the historical returns on Real Estate Investment measured up to the confidence it has received.

The answer is a cautious yes. Between 1926 and 1996, the annual average rate of return on Real Estate was 11.1%. During the same period the rate of inflation was around 3%. So, it was obviously a better investment to buy Real Estate than to bury cash in jars in your backyard. However, the rate of return for small stocks checked in a bit higher at around 12% while the Dow Jones Industrial Average was a bit lower at 10%. These figures would suggest that Real Estate investments were right there at a par with Stock Market Investments.

Real Estate Investors might want to make the claim that land ownership and its value as an investment predates the Stock Market by thousands of years. They will point to the role that the ownership of land played in the Middle Ages in determining wealth and even nobility. This is true, of course, but in many ways irrelevant to a discussion of the historical returns on Real Estate investments. The new global economy has created a whole new playing field and return of investment must be determined within the scope of this. It is all well and good to study the past to get clues to the future, but in investment the past only offers clues and not answers.

A look at the historical rates of return on Real Estate investments shows that they tend to be more stable and less likely to spike up and down in erratic and unpredictable fashion like the Stock Market. Many investment advisors suggest all portfolios have at least 10% invested in Real Estate for a hedge against market fluctuations. On the other hand, Real Estate investments tend to have high transaction costs and to be in larger units. All properties are unique and each has its own characteristics and potential.

These negative factors have led to the popularity of investments in Real Estate through REITs which are Real Estate Investment Trusts. REITs are a sort of mutual fund of Real Estate which gives investors a way to invest in Real Estate without the problems of high transaction costs or property uniqueness. If you are considering Real Estate investment, either on an individual basis or through a REIT, the historical record should give you some confidence. As much as past performance can reassure us of future success, Real Estate’s past has indicated that it is a safe, sound, and high return investment.

Article Source: http://www.realestateinvestmentarticles.net

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