The Trader's Essential Tools

I trade between whole numbers

I trade between whole numbers because generally corrections that occur between the whole numbers are smaller and more manageable than corrections that occur close to non-whole numbers. The experienced traders are generally taking profit at whole numbers, selling into volume, while the inexperienced are buying into an ending trend, thus being caught in and carved up in a correctional profit taking trap.

It's better to trade after a whole number once the correction is completed, rather than before a whole number when the correction is about to begin. For example I don't buy at $1.80 - $1.90 as the price approaches $2.00. (see chart) Being a whole number, I went long, after the correction finished and the market proved itself to me by also moving into new highs on volume, confirming that the market was actually moving higher (the entry signal price bar would be above the $2.00 plus mark), then trading to the next whole number, to exit at $3.00. With more experience and Elliot Wave analysis you will learn to see market re-balancing and support points as the market moves through time and price. You will learn to see the 10 patterns corrections fall into, giving you an understanding of their beginning, middle and end. In the mean time until you have developed a recognition and understanding of larger corrections that occur close to whole numbers, it's best to avoid them.

Use some rules to stay cool

I need to manage myself emotionally and my position logically. A winning or losing journey can cause high anxiety. If you've developed enough intuitional, emotional trading intelligence, that's fine. If not you will need to develop a little organisational logic or run for cover!

Trade management for me is a set of logical rules I've developed to suit my trading personality. It delivers signals without any emotional decisions, from entry to exit. Being in a trade that has a set of trading rules to cover the many possible mishaps that occur along the way is very comforting. It keeps my mind clear and centred on what I need to do at every point of my position. If you don't have a set of trading rules to manage the trade or if you break or change the rules whilst in the trade it means you have become emotional, and loss will surely find you.

A trade management plan also offers the structure upon which to modify and hone your learned trading insights to improve and build your trading results. You can refine your signals as you learn to discriminate more details within a trade. It can also include organizational aspects such as preparing your mind with some focusing exercise (like meditation), clearing your workspace, having buy/sell dialogue boxes checked and ready to go, peace and quiet - or loud music if that suits you! All your software needs to be checked and ready to use. There is nothing worse than having technical glitches when you have your money in the market and its moving fast!

A mechanical method is a good place to start learning some of the basic trading rules you will want to make your own. The mechanical method I use as 'trade management' is a Japanese concept called Renko, which is now becoming common in basic charting programs. Visually it has simple black and white boxes making it easy to understand. Using Renko on daily default setting is fine - the box size is calculated much like the Average True Range (ATR) taking into consideration the daily range. The clear change in box from white to black is the trade management exit signal. Because Renko takes the price and range into its calculation it is essentially taking the personality of the trend into consideration. Renko doesn't take time into the equation.

(Another formidable concept is the Darvas Boxes). Renko gives the market room to move, that is, it allows the market to run, accommodating any reasonable swings but protects profits. It's not a perfect concept but it does take a balanced stand on most of the necessary aspects that normally elude us in riding a trend to the max. It manages the common error of placing stops too close or taking profit too early for no just

Why Price Moves - An Introduction

You'll find in many trading books, websites or courses a statement to the effect that 'price rises because there are more buyers than sellers', or 'price falls because there are more sellers than buyers'.

While I understand what the author is trying to say, it's not quite correct.

There are not more buyers than sellers, or more sellers than buyers. Any transaction involves both a buyer and seller. The number is the same - one buyer and one seller. So, across the whole trading session, the number of buyers will always match the number of sellers. It's fairly obvious when you think about it.

So, why does price move?

Let's move away from the markets for a second and think of a housing auction. Someone starts off the auction by making a bid. But the auction process doesn't end there. A second bidder soon comes into the market and outbids the first. Why do they do that? They want a piece of the action. They want the ultimate prize - in this case, the house, and they're willing to pay a higher price to get it. Then another bid comes in higher, and again, and again.

At some point it will come down to two parties competing to get the house. Eventually, one party gives up - they've hit their limit and won't pay any more, so they drop out of the auction. There are no more buyers, so price doesn't go any higher.

So price rises only while there are people willing to pay a higher price. Once no-one is willing to buy at a higher price, price will stop rising, and the house will be sold. The winner is the one most desperate to get the house.

The financial markets work through a similar auction process, except that it works in both directions, up and down.

At any given moment there is both a bid and an ask price. A number of buyers are sitting in the market trying to buy at the bid, and a number of sellers are waiting, trying to sell at the ask. Sitting on the sidelines as well is a quantity of people waiting to enter the market, either through a buy or sell transaction.

Which way price will move from here is a function of which side is more desperate to make the transaction. If buyers are not desperate to buy they will place their orders at the current bid, or lower, and wait for a seller to hit their price. However if buyers are desperate to get into the market - if they perceive the price as being great value and are willing to pay a little more because they want in - they'll be happy to take the ask price. If this happens in sufficient quantity to exhaust all the sellers at that ask price, then the ask price will rise to the next group of available sellers. The desperate buyers will now have to take even higher prices, if they still want to get into the market. So, price rises while the buyers are more desperate, or more eager, than the sellers. Price rises while there is more demand for buying, than there is for selling. Price rises while the greed of market participants is greater than the fear of market participants. Price rises while buyers are willing to pay a higher price to get into the market.

As price rises though, fewer buyers will perceive value in buying this high, whereas more sellers will be attracted to the higher prices. Eventually, the market runs out of desperate buyers - no one is willing to pay a higher price at this time - and the rally will stop. Equilibrium has been reached.

Consider now, what happens if the sellers decide they have to get out, for whatever reason - perhaps they believe price will shortly fall. They become desperate enough to accept the bid. If this occurs in sufficient quantity to exhaust the buyers at this bid price, the bid price will move down to the next group of buyers. If the sellers are still driven by fear of missing out on a sale, they'll then have to accept the lower bid, again driving prices lower. So, price falls while the sellers are more desperate, or more eager, than the buyers. Price falls while the fear of market participants is greater than the greed of market participants. Price falls while sellers are willing to receive a lower price to get out of the market, or sell short.

As price falls though, fewer sellers will perceive value in selling this low, whereas more buyers will be attracted to the lower prices. Eventually, the market runs out of desperate sellers - no one is willing to sell at a lower price at this time - and the price fall will stop. Equilibrium has been reached.

So, basically, price rises when demand is more desperate than supply. And it rises to a point at which there are no more buyers willing to pay a higher price.

And price falls when supply is more desperate than demand. And it falls to a point at which there are no more sellers willing to sell at a lower price.

That's why price moves. It's not because there are more of one side than the other. It's because one side is more desperate than the other.

Happy trading (not too desperately though),

Lance Beggs

Copyright 2008. Lance Beggs. All Rights Reserved

What You Need to Know Before You Even Start Trading

Determine Your Risk Tolerance

Risk tolerance differs for every person. Your stock analyst and broker know this quite well and they will help you assess your risk tolerance, making sure that your investments do not surpass your risk tolerance.

Risk tolerance is determined by considering various factors, like how much money can you afford or allocate to invest, and what your long-term financial objectives are.

Let's take an example. Consider that you aim to retire in the next ten years and have no savings yet. In such a case, you have to have a large risk tolerance so that you can fulfill your aim of retiring.

In case you are twenty as of now and plan to start investing for your retirement, then you can do with a lower risk tolerance.

One simple thing has to be noted that how you feel or how much risk you feel in the investment is in no way related to your risk tolerance related to your long-term financial objectives.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?

Now, having invested in stocks, if you observe that the stock prices are dropping a bit, what can you do?

You might sell out if you have a low risk tolerance or let your money ride and wait patiently for things to improve. This risk tolerance, though, is based on how you feel about your money and not on your financial objectives.

Any good stock analyst or an expert stock broker can easily help you figure out your investment risk tolerance, and they will guide you on investing correctly, as per your case.

To put it shortly, your risk tolerance has to relate with your long-term financial objectives and also with how you feel about investing your hard earned money.

Things You Got to Know Before You Start Online Trading

About Online Trading

The revolution of the Internet has perhaps made the biggest impact on the history of online trading. Using the Internet, communication has become very effortless and we can now stay in contact every single second of the day no matter what time zone you are in. This has led to amendment of laws that now permit seamless trading at any given moment.

The kinds of activities using online trading include stocks, forex, futures and option trading. Prior to the Internet the process was slow as written instructions and memos had to be signed for deals to be made. Retail traders suffered and had limited flexibility then and many good business opportunities would be missed.

As almost all the brokers today offer service of online trading to their customers, the costs of trading have considerably reduced.

In case you are new to this business I suggest that instead of being hasty, you should first avail some basic information about online trading, if you don't want to end up losing your hard earned money.

You can get this information online. There are a number of websites that offer free courses and e-books on online trading, and there are many forums where you can talk with other people about this.

Free information is good, but it has its drawbacks too. Advisable is to invest in what you wish to learn but on the same hand do not let this process hamper your trading activities.

The onset of online trading has changed the rules of the game. It is no longer a monopoly of the 'big' traders anymore and even small retail traders like us have a good chance to make money.

Are Your Images of Your Trading Day Motivating Or Frustrating?

The images of today's society are thrown at us to encourage us to want bigger and better, more, and faster. We are literally bombarded with high priced images and images that draw on our human desire to succeed in our lives. Status symbols are all over the place and often we know from the beginning which ones will excite us. Whether we want large yachts, expensive cars, million dollar homes, or a life of financial freedom, we all want something and we focus on the images that spark desire in our lives.

The day trading lifestyle often conjures up images of successful people playing hard with their expensive toys. Day trading attracts the people who want some of the biggest and most expensive toys because it is a known profession built off of success and money. However, since there isn't a quick short cut into the mainstream of monetary award, many people who came into day trading with hopes of a financially rewarding experience are now finding those same image that once motivated them a source of discontentment, overwrought with feelings of failure and impatience, and frustration. A successful image no longer feels good.

Those who hold onto their frustration or even the images that once spurred them into trading often do not do as well as those who realize that trading is nothing more than a process that deals with skill, knowledge, and a basic understanding that their chosen path is not an easy one. Setbacks do not mean failure when you are more focused on the education and experience than the big reward at the end of a really good year. You can get there, but you will get there faster if you hold the process above these images of fast cars, hot women and men, and large scale life. You didn't walk onto a movie set but you are dealing in real life. And real life isn't so simple. The market isn't simple. It moves around on you like a squirming fish out of water.

How do you use the images in your head while you are trading? Are you thinking about the financial gain and the next big toy or are you feeling the thrill of the trades that brought the house down, the good calls you've made, or the adrenaline rush as the ticker tape climbs right before the closing bell? The images that you flip through your mind during the trading day will either serve you well or they will work against you in the long run. Images of physical possessions generally do not motivate a trader on a bad trading day in the same positive way that images of the most exciting trade of the week do. It is all about focus.

When you focus on the reward, you become terribly frustrated when the reward seems to be slipping farther and farther away. This has the potential to rock your confidence and bring negative emotions into your trading day. This of course, can lead to some pretty costly mistakes if you allow it to. When you keep your focus on the process you can often take a loss without harm and walk away to the next trade with a little more knowledge under your belt and a little time to refocus your energy on the next event. Focus can either create energy of take it away, depending entirely on what you choose to focus on during your day.

As you go through your trading day, you are bound to find different motivating images that flash across your mind. When you find the ones that really seem to get your juices flowing in a positive direction (regardless of whether you are coming off of a winning trade or a losing trade) then you will know where to redirect your mind when it starts to lose its focus.

The use of motivating images has been used for decades in order to inspire athletes, artists, trading experts, and all kinds of people who deal in a rather aggressive and unforgiving environment. When you learn to harness your images and help them to help you, your trading day will be inspired, not frustrating, no matter what happens.

In the mean time, Good Luck on your journey to success...

OR if you would like to immensely improve your trading and investing results, check out http://www.Secrets2Trading.com

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Cash in on Trade Finance, While Tracking Trends

Trade Finance

This is what they say, 'invest', and trade finance

• describes the administration of money, banking, credit, investments and assets for international trade connections.

Parties involved with trade finance are mostly importers, exporters, financiers, insurers and other service providers.

How to stay in the game?

Understand the product and what factors control its value. And, understand the process to avoid mistakes or unnoticed errors.

You want to have a safe deposit, get insurance for the trade, and know the risks involved when the products are transferred to the buying or receiving party.

Caution!

Of course, do not rush into an opportunity, access the situation, and understand the areas of risk in areas which are vital in Trade Finance situations.

You must also know the import or export options you have. After which, you should access the risks of each option, and make preparations for the outcome.

Although the outcome may not be as expected, the result should be 'close to the line you plot on the graphs.'

Preparation

To know what the process is all about; and to monitor its progress, you must do some research on this type of trade condition.

Try to obtain information about the receiving party, the import, and export facilities available. Credibility is established through consistency and the rate of successful results.

Caution, be cautious!

Despite the knowledge of many risks and likely occurrences, one must be careful when the plan you desire to implement require a loan; a big sum.

Trade regulations may seem desirable on your side, but may vary on the receiver's side. Trading products may include:

• Goods that brought in; and are in the process of handing over to a buying party; with the receiving party's order being held.

Accompanied by quality control measures are in place.

The basics and simple advices are at least, understood by you now, so a little more confidence depends on yourself. The present time is NOW, time to 'MOVE OUT!'