Archives for Trading

Last week the markets were undeniably focused on the Facebook IPO. Many investors considered its lackluster debut a huge disappointment.  I admit even I thought all that hype could turn the new issue into a lottery ticket for early investors, but I’ve never thought highly of the company and I explained why you shouldn’t invest in Facebook in my article “When To Unfriend Facebook“.

Two weeks ago I published an article title “5 Stocks To Play on The Avengers Box Office Success“. In that article I told readers to buy Viacom (VIA) based off of Paramount’s 8% take from the total box office. In addition to Paramount being the weakest unit and the one holding Viacom’s earnings down. The company has yet to release earnings, however, last Tuesday Warren Buffet announced he was increasing his stake in the company. I’m not saying Mr. Buffet is taking investment advice from Asset Investing, but…..

I also put out two articles “3 Stocks Headed For A Correction” and “It’s Time To Sell These 3 IPOs“. Which I discussed the expiration of lockup agreements and how just the perception that additional shares will be dumped on the market will cause a stock to go down. In those articles I recommended short selling six stocks and next to the name is how the stock has performed since the release of the articles –

  • Mattress Firm Holding Corp. (MFRM) (-$2.43) (-7.11%)
  • Intermolecular, Inc (IMI) (-$0.36) (-5.34%)
  • Digital Domain Media Group (DDMG) (-$1.56) (-25.44%)
  • Angie’s List (ANGI) (-$0.94) (-7.20%)
  • Delphi Automotive PLC (DLPH) (-$0.99) (-3.63%)
  • Manning & Napier, Inc. (MN) (-$1.06) (-8.17%)


Look for more articles, investment ideas and stock tips all week and make sure you don’t miss anything by following us on Twitter – @AssetInvesting

The IPO market looks to be warming back up as the level of companies filing to go public is at its highest since pre-2008. Now with Facebook, one of the most followed IPOs of all time, the focus is squarely on new offerings. There are a lot of ways to make money from initial public offerings other than buying shares before it starts trading. Nearly every company seeks to protect the value of its IPO by having its existing shareholders bound by a “lockup” agreement. This prevents insiders and pre-IPO investors from selling their shares on the open market usually for a period of 90, 180 or 360 days. If an investor times it correctly they can make good money from shorting the IPO or hedge their losses by selling stock or buying put options before the lockup period expires. Here are three stocks that are going down based on shares entering the market….Read The Full Article Here

One common factor among people who fail in trading is that they lack trade systems. If you don’t have this yet, you may essentially be just floundering around in your chosen investment market. The only way to secure profits and cut losses is to follow a custom blueprint.

Anyone can claim to have guidelines in place. They can still end up losing though if they don’t make sure that their policies are appropriately structured. There are three major components that you should give your undivided attention to.

Trade Entry

This is the point at which you buy a specific security. This is a valuable factor simply because it gets the ball rolling for you. You should not however overanalyze this particular part of your trading plan. Some investors place too much importance on it that they spend an inordinate amount of time scouring over expert reports and tips just to find perfect indicators. The sad fact is that there simply is no perfect entrance.

The best strategy is to take a simple and direct route. You might find it helpful to pick freely available entry rules from known traders and tweak what they do according to your specific preferences. If however, you prefer to devise your own entrance rules, remember to take into considerations such elements as trend, liquidity and volatility.

Money Management

This is the point in your trading system where you set the risk levels that you are comfortable with. With the right policies in place, you have some assurance that you will not end up with losses that are too devastating for you to bear. It is a doubly crucial component because it is one of the very few things that you can successfully control in the highly unpredictable world of investing.

Unlike entries, it is best to create a more custom guide for risk level control. This is because traders do not all have the exact same levels of tolerance for risk. Copying from someone else might still leave you dissatisfied.

Trade Exit

Some trade systems incorporate exit rules with risk management. It is often a good idea though to treat this as a separate chunk altogether. This is because your policies for leaving are really what makes up profit management.

The most significant step in managing your profits is setting your stops. These are what you need to make sure you get the best chance of profiting from your trades. At the same time, stops also make sure that you are able to leave at some point when values start to drop. In other words, exit policies are crucial because they help prevent emotional trading. People who act based on their feelings tend to let go too early or hold on too long. The end result for both incorrect decisions is the loss of profit potential.

A trading plan is what you need the most to make sure you improve your chances of emerging a winner. Although losses are still part of every trader’s life, a good system can protect you from losing too much.

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Many seasoned traders know that position sizing or determining the size of each trade is a vital part of any trading plan. Many beginner traders however make the mistake of not paying adequate attention to this step. They believe that it is enough to simply define the initial stops. This however is a very incomplete way of trying to manage your risks.

Determining the size of every trade is crucial for the protection of your trading float. When you are certain about the number of units that is ideal for you to deal with, you are protecting your capital from getting eroded. Moreover, when you fully delve into proper position sizing, you are also able to identify your win and loss potentials.

What many investors don’t realize is that size matters. The amount that you put in is the indicator of how much you might earn or lose. The more units you purchase, the higher your chances of winning. This is why some immediately invest a lot, thinking that the more risks they take, the more rewards they get. Deciding on this factor however based only on the opportunity to profit well is not advisable. Remember that a big investment also magnifies your chances of losing. To arrive at the best option for you, your risk management system should incorporate a scientific way of defining the extent of an investment.

Getting the right guiding figure to enter a trade isn’t as complicated as you would imagine. You simply have to divide your already predefined maximum loss in dollars by your stop size. The result is the maximum number of units you should purchase on a single trade.

To settle on your maximum loss, identify the percentage of your float that you can bear losing. It is perhaps most sensible to settle for a loss of about 2% because this is neither too small nor too big. To identify your stop size, get the difference between the entry price and initial stop.

In some cases, you may need to further refine this part of your risk management strategy. Depending on your tolerance for risks, you may still view the resulting size as too huge for you. In this case, it would be wise to add another rule to keep your investment money safe. You can set a maximum percentage figure that corresponds to a specific dollar value over which you are not willing to lose. You can say for instance that you are not willing to lose more than 20% of your total float. Hence, if the result of your initial size calculations goes over this, you can follow your extra rule to further scale down your purchase of units.

Position sizing may seem like a technical trading step. In reality though, it is just a sensible way of making sure you don’t drown with the weight of your losses. Do not consider trading without paying due attention to this step. Put as much importance on it as you would on identifying your stops and the size of your float.

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Like a lot of investors in various asset markets, you may be taking a good trading risk management strategy for granted. This may be because of the common idea that handling market assets is all a game of odds. There may be some truth to this concept but it is not entirely correct to say that you are powerless.

Believing that nothing is within your sphere of control is the fastest route to considerable losses. It’s as if you are putting yourself at the mercy of the unforeseen forces of fate. If this is an accurate description of market investing, then you are just as likely to make profits on a gambling table.

The truth is that there are two things that you can control. These are your trading psychology and your market risk management rules. Both of these factors are part of a greater whole that comprises your trading plan. Managing risks however, often plays a more important part because it can influence your thoughts and feelings in such a way as to allow you to trade more logically and make profits possible.

The term isn’t too difficult to understand. It simply involves, setting the rules that will determine the kinds of losses that you are willing to sustain. This means, you are given the power to indicate your loss limits so you never have to endure too many falls or too big a loss.

Some people have a slightly incorrect notion of a risk management strategy. They may think that any approach that limits the number of losses is an ideal one. They forget however that the size of each loss can have a significant impact on how successful a specific tactic is.

Take for instance a single loss that can instantly cut down $1000 from your account. Compare this to five losses that amount to no more than a $100 each. In these scenarios, it is clear that your single loss can be more devastating than you string of small losses. A good method therefore considers more than just the number of failures that you sustain.

A comprehensive approach to investment risk management looks at several different factors. You need to look into how much you are willing to set aside as capital for trading. You also need to figure out the number of units you will purchase on each trade. Once these are set, you have to determine the maximum amount that you are willing to lose on any single trade and the predefined loss figures that will give you the sign to exit specific trades.

Proper control of your risks is not as straightforward as you would imagine. Creating a solid plan can take some time to think over and to establish. It is however, a step that you can’t afford to skip. Because it is one of the very few factors that you can completely get a grip on in trading, you should take full advantage of it. Start incorporating a risk management strategy into your trading plan. Doing so can only mean greater gains for you.

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You should take a successful trader’s word for it when he tells you that it pays to learn how to trade. It is true that this profession has its risks and can lead to losses just as much as it can lead to profits. Nevertheless, the results of unraveling the inner workings of market investing can be very rewarding.

Genuine Freedom

The first obvious advantage of becoming a professional trader is the potential financial profits that you can gain. As most people already know, buying and selling assets is one of the most lucrative businesses known to man. Although different assets have different leverage potentials, it is a fact that even those that are not leveraged can lead to significantly large gains. You should primarily learn about trading because of the opportunity to gain the kind of financial freedom that you and your children can enjoy for years to come.

On top of improving your finances, market investments can also change the way you live your life. They can give you freedom from the rigid structures of office work and politics. Never again will you have to deal with limiting work obligations and difficult co-workers.

A reputable course can also teach you to be more specific. On top of your general motivation to earn more, you will also be taught the importance of creating specific objectives that can push you close to success and how to make sure you achieve them.

Control of Your Path

Once you become convinced of the advantages of learning to trade, a good educational course can also give you the power to determine your path. It can be very convenient for you to simply entrust your money to an account manager or pay for the advice of a full service stock broker.

Experts can make up for your technical limitations. Managed account experts can fully take charge of investing your cash while full assistance brokers can give you advice if you prefer to trade on your own but don’t know how. Obviously though, expert help can sometimes leave you in the dark when it comes to determining exactly what should happen to your money. Add to this the disadvantage of having to listen to contradictory pieces of advice. Learn how to trade so you can call the shots yourself.

Logical Approach

There is a common misconception that putting your money on any of the different markets is similar to putting your fate on the hands of chance. This is not entirely correct. There are factors that you can manage successfully to make sure you have a better shot at making solid profits. A learning guide can teach you how to master your emotions and thoughts so you can approach trading more logically. Moreover, expert instruction can give you the right skills to identify your risk levels and rationally abide by the rules that you set to avoid losses that go beyond the risk criteria that you determine.

There is every reason to learn how to trade. This is the one key that can truly give you the life that you want and deserve. Fortunately, you can now educate yourself without having to enroll in a full school course. Expertly made short courses are all within reach of eager and interested investors.

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