The Thrills and Dangers of Day Trading
Many people have seen images of day traders with their multitude of computer screens showing real-time charts and quotes, trading the ups and downs of the markets. It all looks very exciting, doesn't it? The thrill of becoming rich in a short amount of time is appealing to nearly everyone.
Reality
Before you quit your day job, consider the realities of day trading. It often requires a lot of money to begin with, and borrowing money to trade with is generally a bad idea. It can require hours and hours of staring at computer screens, with little time for lunch or restroom breaks. This can lead to physical and mental exhaustion and poor decision making. It can also be very risky, especially when investing large sums of money.
Since most stock prices only fluctuate one or two percent every day, you need to put a lot of money into it in order to make a decent profit. The biggest danger here is a sudden price fluctuation in the wrong direction, causing a massive loss that wipes out all of your gains from the past few days or even weeks. Compounding this problem is that your diminished trading capital will lead to smaller profits in the future, possibly leading to desperate measures such as taking bigger risks to get back on track. All of these factors add up to a potentially stressful situation!
Don't Give Up
If you have a strong desire to make a living or a partial living off of day trading, then don't be discouraged by this article. Instead, take the precautions necessary, begin practicing, and work on the discipline needed to succeed in the long run. There are thousands of successful day traders around the world. It might be wise to have another source of income in case your trading isn't so successful every day. That would help sustain you and reduce your daily stress.
Don't Bet the Farm
Every once in a while you may find a "sure thing" in the market. You may be tempted to "bet the farm" on this perfect trade. More often than not, these kinds of trades do not work out. If you bet more than you should have, it can literally ruin your life. Imagine getting a bank loan of $100,000 for trading and using your house as collateral. You put it all in one trade and then lose fifty percent of it in less than one day. You have instantly lost $50,000 and the bank may want to sell your house in order to get their money back. It can take years or decades to pay back losses like that. It is much safer to trade with money you can afford to lose.
A Good Book
There is a good book out there called, "How I Trade for a Living," by Gary Smith. The author takes time to do his homework each and every day. He watches the financial television shows at nearly every waking hour, reads newspapers and magazines about the global economy, and always pays attention to overseas markets. He uses diligence and discipline to get a good handle on what the local markets are going to do the rest of the day. The result? He makes a sizeable, consistent profit every month with only one bad month in years of trading.
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3 Different Ways UK-Based Currency Traders Can Trade The Markets
Many people here in the UK are turning to currency trading as a potential method of raising extra money at a time when the wider economy is in a huge downfall. It can be done at work on the office computer or it can be done on a full-time or part-time basis from the comfort of your own home. So how can UK-based traders actually start trading currencies?
Well we are very lucky here in the UK because we have very nice tax laws which enable us to trade tax-free because any gains we make are deemed as being profits made from gambling, which are of course exempt from tax. So if you do make any profits you do not have to worry about declaring this income.
There is an exemption to this rule and that's if you trade through a conventional forex broker. There are lots of these brokers online and there are some very good ones which offer competitive spreads and excellent charting facilities. However it is rather pointless trading through a normal forex broker if you live in the UK, when you can just as easily trade tax-free.
This is why the other two options I wish to discuss make more financial sense. The first of these isn't one I would recommend using, although it is an option, and that's using one of the growing number of online bookmakers that provide betting on financial markets. These provide short-term markets throughout the day such as 5 minute, 15 minute and hourly markets as well as markets based on the closing price at certain times of the day such as 12.00 and 16.30.
You can place bets as you would normally using either decimal odds or fraction odds based on whether the price of a particular currency pair will finish above or below a certain level. Some websites will also offer slightly more advanced markets which involve the use of binary bets. However overall I don't really recommend you bet on the markets through a bookmaker because if you are successful you will inevitably find that either your account is closed or your allowable stakes are reduced to such a small amount that's it's not worth your while placing any bets at all.
The final option is the best one, in my opinion, and that's the now well-established spread betting firms. These also provide tax-free betting but are much more professional as they offer sophisticated trading instruments on a wide variety of markets and generally include top quality charting software and trading tools and resources you can use.
Furthermore if you are successful you will generally find that the spread betting company will not mind at all because they can simply copy your trades and place them elsewhere to cover their liabilities and possibly make a profit as well.
So although you are perfectly entitled to use an ordinary bookmaker or a conventional forex broker to trade the markets, the best option is to use a spread betting company in my opinion. Most of them offer spreads that are just as tight as a lot of the top forex brokers and you can trade completely free of tax if you reside in the UK.
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The Exciting World of Automated Forex Trading Systems
There are so many new forex trading systems in the past of recent years. The first thing you want to know is how to use the system. When it comes to forex trading system, choose a system that is easy to learn and use but effectual at the same time. You dont want to spend most of your precious time to learn all the complicated functions of trading system. You want to finish your time forecasting and analyzing the currency trading. Some forex trading system offer a platform that doesn't need you to download any forex trading software.Their websites will have all the features of forex trading software. These websites let you login to your account and trade anytime, anywhere. They generally have free tools, resources and functions to help you in trading currencies at the time after you registered. And, there is robot-like software that can do the actual trading for you. There is a huge array of forex robot trading software that you can choose from based on your requirements and specifications. Automated forex trading system can be customized so that it will trade and manage your forex account based on your specific instructions. At any point during the course of the trading, you have the flexibility also to monitor the trade based on real-time alerts and updates. You still have to have some knowledge about the market and how it works. The information you know in combination with an efficient system are your best trading assets.
With an automatic forex trading system, you are not required to do the actual trading yourself which means you are not putting in a great deal of time and are not chained to your computer. This is a huge benefit for many and for most people interested in forex, it is top on their list of benefits. And, for the forex trader who enjoys being tied to the computer trading, it also means he is able to trade through one systems and also be able to trade at the same time trade with a second or third account using an automated platform. But, for those not interested in the daily grind of trading, they can take care of their primary business and still enjoy Forex profits.
An automated forex trading system allow your trades to be made at any time of the day or night, regardless of your presence. With a manual trading platform, some of the profitable trades will be missed when the trader is not able to be at the computer. The nature of automatic trading overcomes this problem and allows profitable trades to take place without any human intervention. You also have the option of taking advantage of multiple forex strategies and different systems when you are running your forex trading on auto-pilot. You can trade through many systems with the same automated trading provider or you can choose to operate with more than one provider. Because different systems are designed to be triggered by different indicators, and emphasize different currency pairs, trading through more than one automated system allows you to diversify your investment, and your risk, and with virtually no additional work on your part. Using an automatic forex trading system eliminates the human foibles and psychology that can often interfere with proper and profitable trading decisions. You are able to make trades that would be impossible for one person to be able to keep up with. An individual is only capable of monitoring a few currency pairs at a time, but utilizing an automated system allows you to multiply the number of pairs you can follow and trades you can execute, because it is the sophisticated software that is doing it all for you.
Even with automatic forex trading systems, you will have a learning curve and the potential for loses. But if you acquired good training through forex trading courses that knowledge combined with a quality automated system should allow you to enjoy consistent forex profits. Choose a system that will work best for you to increase your earning chances and you will be on the right track to becoming a successful forex trader.
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Lifestyle of a Trader
Most people who decide to become traders - stock trading, futures trading or forex trading, want to become traders for lifestyle reasons. What are the main lifestyle benefits of being a trader , and how can you expect to live once you become a full time trader?
Why do many would be traders, intelligent, well educated people who understand the mechanics of the financial markets fail in their trading?
There are a few aspects of lifestyle that are unique to traders. Firstly, trading does not involve answering emails, working in an office, corporate politics, regular working hours or any of the things associated with corporate life, or employment. There is little in common with ordinary employment.
Secondly, successful traders can be extremely wealthy. Their income is not restricted to the amount they can sell, how hard they work, or their position on the corporate ladder.
No matter how hard you work in most jobs, you won't be driving a Ferrari. Paul Tudor Jones, a top trader made more than $700 million in just one year. In trading, the trappings of substantial wealth are within reach. If you've ever wanted to help out your parents, or fund a cause you believe in, money is the key. Trading is all about making money.
Trading can occur wherever you have a computer and an Internet connection. You can trade from virtually anywhere on the planet. If you want to sail the Caribbean on a yacht and trade, you can do so. You don't need to be at a certain place at a certain time, or commute to the office or factory. Trading gives you the gift of time with your family and flexibility.
Whilst trading offers an enviable lifestyle, unfortunately most new traders will never be successful. Why is this?
Well trading is the ultimate expression of capitalism - traders meeting in a market place. There are no distortions. Nepotism means nothing. Charm and appearance are irrelevant. All the reasons that people can make it in employment whilst being useless are no longer applicable.
More than 95% of would be traders fail. They don't have a trading plan, or a profitable system. They lack discipline or suffer internal conflicts. They chase after scams or won't put in the work to learn about the market, forgetting how hard it is to learn any new job. Sometimes they spend all their time on forums, following the herd, or looking for a broker to hold their hands. They won't manage risks.
Perhaps, they don't want to succeed, and are more comfortable relating to people on their own financial plane. The losing trader has not yet overcome the obstacles between them and success.
The 5% of successful traders want to be profitable, but their primary drive is to succeed by fulfilling their true potential in the market place. The successful trader stands out among those who criticise him on the way by achieving the peak of what most people can only aspire to - true independence and self mastery after overcoming many hurdles.
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Psychological Share Trading.
The title sounds very outlandish and somewhat unnerving. But in reality it is about one of the most common and basic traits in our nature that in reality make us what we are, and only too often this will dictate how and why we trade the way we do, Often to our own detriment and financial hardship.
They are your own every day emotions. These emotions can be found hard at work every day in the stock market, not only when the trading floor is open but also after hours as well, for they will dictate what happens in tomorrow's trading and how the market will then behave.
The first one is FEAR. There is a good acronym that is very apt here .False Expectations Appearing Real.
Fear can and does assume many forms. The fear of missing the boat will cause you to abandon your preset price and chase the share price upwards. Therefore you end up paying more than you originally planned for.
It is exactly that same fear that will make you hang onto a falling stock in the hope that its share price will rebound at a later date. Or a sudden large sell off in a stock is sometimes enough to trigger a panic feared sell off, which feeds upon itself causing the share prices to drop across the board, often in other unrelated stocks or sectors.
The fear of the unknown is another classic example. The Oil price rises recently have been typically affected by this. A whiff of a cyclone somewhere in the Caribbean is enough to send oil prices spiralling upwards or the possibility of lower oil stock reserves in the future is another catalyst that can and does affect the oil price.
GREED is another prevalent emotion. For example: - Having made a profit, greed makes you want to hang on for still more. Not being content with a reasonable profit we hang on till sometimes it is too late, often to see the share price recede quickly and we end up with a smaller profit than we already had in the first place.
ANGER is a dangerous emotion usually directed at the stock which is not performing as we would like it too. And we will punish the stock by selling it off. There that showed it! Now I feel better we tell ourselves.
Irrational when you look at it in the right perspective. But we do it every day.
WISHING AND HOPING is always to be found in abundance in the stock market. We are forever looking for that elusive pot of gold at the end of the rainbow.
LUCK. We believe is either good or bad depending on our current ATTITUDE.
Attitude, I will not cover today as volumes could be written on as to how attitudes can also govern your daily trading.
Another good acronym here for LUCK is: - Labouring Under Correct Knowledge.
I firmly believe that you can make some of your own luck by sticking to a preset criteria or trading plan that firmly puts the odds in your favour. Anything else that happens is a bonus.
IMPATIENCE is yet another emotion that effects our trading. We get tired of waiting for the right stock to come along which fits our trading criteria. So we bend the rules a bit rather than miss out.
We fool ourselves that we MUST be trading otherwise we will miss out on the action, rather than being patient and waiting for the right stock to come along, Which they will always do eventually, quite often when you have just tied up your funds elsewhere.
It is also impatience which makes us sell off a stock because it is not behaving the way we expect it to, or the profit level does not meet with our preconceived expectations
Does any of these occurrences sound familiar?
Is there a cure? Yes there is, but it involves detaching from and facing your emotions. This can be one of the hardest things that you will ever have to do.
It is only when you can sit back and honestly look at why and how your trading is being effected by your everyday emotions that can you gain an insight as to how the stock market is working and reacting on a daily basis.
Being aware of your emotions and the role they play is one of the first steps to successfully detaching yourself from the herd.
Secondly, is seeing in yourself the Triggers that set your emotions off that makes you react and trade the way you do.
Most importantly if you cannot be honest with yourself, then who are you kidding?
With this insider knowledge you have gained, trading patterns will begin to emerge in the trading habits of others, the reasons why the Stock market is acting like it does becomes more readily understood and predictable.
This results into a keener insight as to what is happening currently in the market place every day, everywhere.
The end result is that you have become more aware of the reigning emotions running rampant in the market and are more readily equipped to use these same forces to your financial advantage.
But it all takes honesty, work and effort. That I will leave up to you. For it is a personal quest that only you can undertake.
For me it is still an ongoing battle, but the odds are now more in my favor than they were.
The worst part of it all is that by knowing why the Emotions can and still do effect my trading, does tend to strip away a lot of my excuses I used to use when things did not work like I had planned.
Here's to your profitable, unemotional trading
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