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This has been a painful month in commodity land especially for anyone who bought around May 12, the peak of the most current gold rally. Since then, gold investors have lost 20% from its high of $730/oz to Friday?s (6/8) close of $608/oz. However, those that bought on the last day of this past year have a slightly differently perspective. Gold could have then been purchased for $517/oz. Over the past five years gold has averaged a return of 15% per year. No one wants to suffer through a 20% draw down over 4 weeks, but a 41% return in 4 ? months was simply unsustainable. This is why I am a strong advocate of dollar cost averaging. If you made the decision to to try commodity investing and went all in on May 12, you are probably ready to give up now.

Former Treasury Secretary and current Harvard University President Lawrence Summers concluded in a 1988 published research piece that stocks and commodities are out of phase with each other (refer to link below). In one half of the cycle, stocks significantly outperform commodities and then in the second half of the cycle commodities outperforming stocks. This relationship continues to prove itself. Back in the late 90?s the fastest payback of capital was in internet infrastructure companies. Venture capital companies were crawling over each other to invest in the next Cisco. Meanwhile, commodity prices were at multi-decade lows with oil at $15 per barrel and gold at $250/oz. Mining companies were going out of business and projects were delayed due to the low prices and inadequate capital. Obviously the stock prices reflected the business cycle with technology stocks at all their all-time highs and commodity stocks at their lows. The internet frenzy concluded the stock cycle in 2000 and we are now 5 years in to the commodity cycle.

A simple investment strategy can be developed using the above information combined with the fact that bull markets tend to run on average17 years (Adam Hamilton/Jim Rogers links below). For example, the last two US-based bulls markets have been technology in 1982-2000 and commodities 1968-1982. The strategy is to simply dollar cost average into the broad market using an Exchange Traded Fund (ETF) like the SPY (an ETF tracking the S

The Forex or foreign exchange is also known as FX, and can be traded upon by anyone from home who has an internet connection and some knowledge.

The great thing about being a beginner to forex trading is you can trade using “monopoly” money if you want to.

Most people have the belief that trading currency is extremely risky and a gamble. However there are many ways to technically analyse the market and identify the pattern of the movement to the point we can instigate “good” trades on a consistent basis.

So, how would you like a change of direction. For example, imagine if in two weeks from now you were confident enough and skilled enough to place trades on a daily basis which give you a consistent yield of $200-500 per day.

It’s very possible with the correct training. There is a high risk involved though, it’s true. If you don’t have as much covered as possible with regard to the basis of your decision to trade. If your psychology is not right, you won’t stand a chance.

The forex never sleeps. 24 hours per day from sunrise in Australia through to sundown in New York, banks and retail investors trade. Banks in the multimillions.

It must be said, take your time to learn about the forex and what you should do before diving in with a LIVE account and blasting away capital like your on drugs. You can do it. But do it right.

Currency is traded in pairs. That means, as you buy one currency you automatically sell the other currency in the pair. Examples of pairs are the EUR/USD or the Euro against the US dollar, GBP/USD or ‘cable’ or ‘pound dollar’ because there used to be a cable relaying info under the ocean from Europe to US. Another example is the USD/CHF or the dollar against the swiss franc – ‘dollar-swiss’ or even ‘swissy’.

The left hand currency is known as the base currency and the quoted price is always how much of the right hand currency can be exchanged for 1 unit of the base currency or vice versa.

So for example a quote of 1.6452 on the GBP/USD means for every 1 pound you sell you get 1.6452 US dollars. Similarly if you were to buy the pound, the rate is 1.6452USD to the pound.

Currency is traded in lots, multiples of lots or for the retail investor sometimes, in fractions of lots. One lot is equal to 100,000 units of the base currency in a pair.

In the above example, buying 1 lot on the GBP/USD means you are buying 100,000pounds and automatically selling 164,520USD.

Profits are made on the forex market much like in any business, but with a twist. You can aim to buy and then sell at a higher price. Read more…

In the ?up? scenario, the maximum gain that can be attained isthe stock finishing at $10.00 or higher.At $10.00, you would profit from the full value of the extrinsicvalue of the option which is $.50 and you would also have $.50of capital appreciation from the stock for a total of $1.00.This represents a 10.52% one-month return or an annualizedreturn of 126.32%.It is not realistic to expect this type of return every monthbut remember, recent studies show that premium selling worksapproximately 80% of the time, which is still very good.We stated earlier that the maximum return of this buy-write willbe actualized when the stock reaches $10.00 or above and themaximum return will be $1.00, and no more than $1.00. As thestock goes higher, the option will earn less in directproportion with the increase in capital appreciation.For example, if the stock closes at $10.30 you would receiveonly $.20 from the option. The option would now be worth $.30because with the stock at $10.30, the 10 strike call would have$.30 of intrinsic value.Since you sold the option at $.50, you would see a $.20 profit($.50 – $.30 = $.20). Since you bought the stock at $9.50 and itis now $10.30 you have $.80 of capital appreciation. Combine thetwo and you have a $1.00 profit.Let?s look at what happens when the stock trades up to $12.00and see if you again have a $1.00 return on the position. At$12.00, the option will have $2.00 of intrinsic value (stockprice ? strike price) because it is in the money.You sold the option at $.50 so you have a $1.50 loss. However,you bought the stock for $9.50 therefore you have a $2.50capital gain. Combined, you have a $1.00 profit.In a third example, if the stock trades up as little at Read more…

Monday is the exception to the general rule: if London catches a cold then America sneezes; the FTSE is still heading down and so the American markets will probably follow suit when they wake. And we’re all catching the virus because of the Asian sell off.

This weekend I got scared. I try not to let things influence me but who can not read the papers, right? I figured this to be a minor correction with a chance to make some money on the up-curve but it’s beginning to look like a more significant drop. What began to look cheap on Friday is now beginning to look [still] overpriced.

But you have to be careful of hype. Best approach is to wait and see until tomorrow. Why buy today when prices could be lower tomorrow? Also, with this volatility, it might be wise to wait two days. Sure, you could take a risk and try to catch the bottom of an up-curve, but with no one knowing what’s really going on, Read more…

I’ve got good news for you. If you’ve been struggling to get the results from your trading that you expected, then you’ve probably dismissed the most important thing, and it’s such a common mistake that struggling traders make and the pros don’t: treating your trading as a business you own, not simply something you do.

If it’s so simple, then What does that actually mean?

Let’s take a closer look and see.

While most people know the difference between a hobby and a business, most who aren’t profiting from trading fail to see that they are approaching their trading in the same way they would a hobby, instead of a business.

Hobbies are activities where a person has an interest and they enjoy the activity itself. It’s fun, exciting, enjoyable, and occupying. A hobby is part-time, do-it- yourself and a learn-as-you-go activity.

Unfortunately this is good description of trading for many people, except that they don’t recognize it as a hobby. For most traders, trading is an activity that they simply pour money into, not make a profit from, and it stays in the expense column of their financial report.

A business is an activity where the underlying purpose and everything involved is to make money and show a profit.

There are certain requirements for anyone to go into business, as a business owner.

First of all, you have to have a decent head on your shoulders. Not just anyone can trade, it takes money.

How did you come by the money to trade? You had to be smarter than average.

Perhaps you’re a high level manager, maybe a business owner, or successful professional. Regardless, the markets are not where the average or below average person can be. If you can’t show up with several thousand dollars, you simply can’t trade.

Just by being able to play the game, you’ve shown that you can amass a respectable sum of money, which takes being smarter than average.

Secondly, a business owner has to have reasonably developed management skills for managing the day-to-day operations, the money inflows and expenses, the exposure to risk.

In trading, risk management is at the core of the business. Not only making sure that every trade is properly balanced with regards to the risk involved on any given trade to the potential reward, but the exposure to risk of the account as a whole is critical.

Too many traders put too many eggs in too few baskets, and with the uncertainty of the markets, it is imperative that the trader fully understand and manage risk so that the business will survive any downturns and keep the doors open next month and next year.

Thirdly, the smart business owner understands the necessity of a team, a solid support staff.

Any business that is a one-man show is destined to limited success at best. Quite often, the story doesn’t have a happy ending. The number of hats Read more…

In this article I will explain why proper money management planning should be the most important part of your investment preparation. If you have never implemented money management in your investing/trading, read the 5 basic principles described in this article and learn how to use a proper money management in your financial activity.

What is money management?
Money management is 80 percent of the investment plan and the most important aspect in online investment, trading the stock market or investing in hyip – high yield investment programs (the remaining percentage are used for implementing a system/method).

Why is money management so important?
I can’t emphasize enough the importance of using money management in any financial endeavor. When it comes to the bottom line, money management is the only mathematically proven way for leveraging your money and achieving your goals in the quickest way.

For a proper money management you will need to include these 5 principles:

1. Proper money management controls the amount of money you will invest each time, based solely on the account equity curve (your profits/losses over time). You must not use money management to generate buy and sell signals.

2. Proper money management takes into account both risk and reward factors. Know your risk potential at any time; don’t “close one eye”. It’s easy to think only about what would be your profits.

3. Proper money management takes into consideration the value of the entire account. Your capital is the most important thing (you can’t invest with $0). Don’t let few minor losses destroy your entire capital and force you to make hundreds percentage in profit just to retrieve your principal.

4. Proper money management discounts all factors that cannot be mathematically proven or formulate. Your thoughts and emotions can’t be implemented in proper money management plan/formula.

5. Proper money management formula should give you one outcome for an each set of variables, without any guesswork.

Proper money management wouldn’t work if you don’t already have positive expectations from the system/method you apply in your investment. No matter what, even if you have the best money management plan, there isn’t any money management formula that will mathematically turn a losing situation into a winning one.

You must understand that leveraging your money with Read more…

If you read that stock XYZ is heading into the S

When first exposed to the concept of technical trading (making trading decisions based on price chart patterns and price movements), most people will think they have finally found a sure-fire way to make money in the markets. The running joke is that technical traders are searching for the ?Holy Grail? in their trading ? ie they are looking for that perfect combination of price movement, chart patterns, and chart indicators that will always result in a profitable trade and never give a false signal.

Of course just like in real life, the search for the Holy Grail in trading is never ending. In other words, there has never yet been a system discovered which would always result in profitable trades and never give a bad signal.

One of the most common, and indeed still the most useful, types of chart patterns to study is the moving average (abbreviated MA). A MA is simply a curve that represents previous price action that is usually plotted directly over the price chart. If you were looking at a MA curve on a daily price chart (one price bar per day), each MA chart point is the average of ?X? number of days? price points added together and then divided by ?X?. This gives you the average price for that number of days. The first MA chart point cannot be plotted until ?X? days have elapsed, and then each successive chart point is plotted after that. The starting day for ?X? is bumped up one price bar each day, so that every point on the MA curve represents the latest ?X? days. This is much easier to see than it is to describe!

The resulting MA curve follows the price bars somewhat, but a larger ?X? produces a more gentle MA curve, (and further removed from each day?s price action). A smaller ?X? number produces a MA curve that is a little choppier and more close-fitting to the underlying prices.

A MA can be plotted for any desired time frame, not just for daily charts. Some common price charts day, hour, 15-minute, 5-minute, 1-minute, and tick data. There are also weekly, monthly, and yearly price charts. It really doesn?t matter the time-frame of the chart as for as a MA is concerned. The MA is simply calculated based on the default period for the chart it is being plotted on. Almost all charting programs have some type of MA-plotting capability, but the more expensive charts usually give you more options and more ways to vary and adjust the MA curve.

Traders usually use more than one MA curve per price chart, and make trading decisions based on when the MA curves cross each Read more…

Just because you call yourself a securities trader doesn?t make you one in the eyes of the Internal Revenue Service. In fact, Uncle Sam is predisposed to consider you merely an investor, and thus deny you more favorable tax status, unless you meet a number of tests that are frustratingly open to interpretation.

That?s right: the tax code contains no actual definition of trader status. Instead, the IRS has issued guidelines that the courts have further delineated by case law, most of which denied taxpayer appeals. What we?re left with is a blurred image, like a photograph of a trader taken from a speeding car.

According to the IRS, to qualify as a trader:

? You must seek to profit from daily market movements in the prices of securities and not from dividends, interest or capital appreciation;

? Your activity must be substantial, and

? You must carry on the activity with continuity and regularity.

To help determine if you meet these three tests, the IRS considers these qualifiers:

? Typical holding periods for securities bought and sold;

? Frequency and dollar amount of trades during the year;

? Extent to which you pursue trading to produce income for a livelihood, and

? Amount of time you devote to the activity.

Swoosh, right? What is ?substantial? activity? ?Continuity and regularity?? And what?s an acceptable holding period? Is a week too long? A month?

We know who investors are: They?re our hardworking neighbors who buy securities and hold them for such long-term goals as a college fund or retirement.

Traders, on the other hand, buy and sell securities solely to take advantage of short-term market changes. Your profits come from price swings, not dividends and interests. Since your holding period is brief, often a day at most (hence the term ?day trader?), there?s no need to perform due diligence on the companies you trade.

Who cares how the IRS classifies you? You do! Investors are subject to the 2% threshold for deductible investment expenses (and hence cannot write off most of their expenses) and are limited to a $3,000 capital loss deduction. But as a trader, you write off 100% of your expenses, and if you elect the mark to market accounting option, can offset all of your losses against income.

Here?s how to claim and protect your trader status:

Step one: Prove beyond doubt that you are a bona fide trader; that is, you ?seek to profit from daily market movements.? The best way to accomplish this is by showing a pattern of high trading volume and short holding periods. Keep your personal investments well separated from your trading business. The IRS is looking for ?earnest intent;? that is, you work diligently to manage transactions, conduct strategy sessions and make frequent trades.

Step two: Clear the ?substantial activity? hurdle. The hallmarks the feds Read more…

Where’s the beef? Remember that old commercial? I have no clue why, but I think of that commercial every time someone mentions that volumes are once again not nearly as robust as we’d like to see in a rising market.

Over the years, one of the most popular adages about trading stocks was that you’d like to see the volume “confirm” the movement. Well that’s all fine and dandy, but you often run the risk of sitting around watching stock move higher and higher on no volume, and then kicking yourself for not getting involved. What’s going on here?

The market is not the same as it was just 5 years ago folks. This market is driven by program trades, not widespread participation as was always the situation in the past. In years gone buy, live people, making big decisions would make a move to buy stocks, and as they were buying other managers would see the action and they’d buy and so on and so on. Often volume and price appreciation “grew” on each other.

But today, it’s computers. Really bright fellows with slide rules (well, maybe little calculators now) and degrees decide what is the “buy area” and sell area for a basket of stocks, based on all sorts of parameters, some of which you’d never know of. For instance there are programs designed to kick in when the futures get too high. Some kick in based on the amount of foreign currency that the particular bank holds. (why? as the currencies fluctuate, they buy and sell stocks as hedges against the currency) Some programs are tied to interest swaps, some to interest rate derivatives, etc etc.

But when they hit, they hit with a vengeance. It’s not uncommon for a big outfit like Merrill to buy a basket and drive the DOW up 60 points in literally 15 minutes. Was there an accompanying rise in volume? Yes, but NOT in direct relation to the size of the point move and that is very very important folks. Program trades don’t allow time for other investors to analyze what’s going on. They Read more…