How to make Money in the Stock Market.This blog looks at how you can make money trading and investing in Forex, Stocks Options and Futures.


Saturday, 23 February 2008

Trading Psychology

When I first started trading many years ago one of the things that struck me was how even when using the same trading system, getting the exact same signals, people would invariably come up with different results.  It seemed really strange it wasn't until I realised the difference was not in the systems but in the individuals that I started to look into trading psychology.  Trading can be compared to top-class sport.  It very often places the same level of mental stress and need for psychological preparation that you find  in top-class athletes.  When you speak to or read about the best traders in the world it becomes apparent that they know  being mentally prepared is absolutely essential in today's markets.  Traders, just like athletes face unbelievable amounts of stress ,pressure and expectation that cannot be easily understood by the ordinary amongst us.


If you read any of the well known trading books such as the Market Wizards, you will find that most of these top-class traders indicate that psychology and the mind ,play as much if not more of a part in their success than picking the right trades.  As human beings, we are not generally wired to be successful traders we all know that successful trading is about letting your profits run and cutting your losses short, however in reality, most human beings find it easier to take a quick profit and hang on to losing trades in the hope  that they will come good in the end.  It is not easy, mentally to suffer the drawdowns that we often experience as traders without some form of help or guidance about the mental side of trading and investing.


A number of the top trading houses and investment banks have started turning to trading coaches to help their top traders as they realise that success in trading is as much mental as it is about picking the right trades.Part of my business  is as a Trading Coach , my interest in Trading and Investing coupled with my qualifications in NLP (Neuro Linguistic Programming) lend themselves naturally to helping traders deals with the mental challenges of trading and investing. Over the next little while I am going to write some articles on this blog focusing on how you can improve the mental side of your trading and create wealth through the power of effective mental preparation.



Best wishes




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Tuesday, 19 February 2008

Commodities -How to invest without using Futures or Leverage

In the last month the volatility in the stock market has been greater than it has been for some time, we have seen three figure up and down days regularly.  In an environment such as this it is easy to understand why some people lose sight of the macro environment.  If we look at what is actually happening in the world then it becomes a bit more obvious the the areas we could consider investing in.  One investment area that has been consistently on the up over the last few years is commodities.


Most commodities have performed extremely well over the last few years, the obvious ones like the precious metals we are fully aware of, some of the less well known is commodities are also doing extremely well.  The question is can we take advantage of these also. For many years I traded commodity futures this is definitely not a market for the fainthearted, but until recently was the only way that most people could invest in things such as Corn, Wheat, Cotton and Coffee. In the last little while however ETF's that invest in these commodities have become available.  It is now possible to buy, ETF's that follow the price of individual commodities such as the ones I have mentioned earlier, in fact ETFS securities in London allow you to buy ETF's that track pretty much any commodity that is traded on the futures exchanges including things such as Live Cattle and Pork Bellies.

With the increasing affluence in countries such as India and China we are seeing unprecedented command for all commodities, not just the Base metals for construction and infrastructure but foodstuffs such as sugar , and wheat.The demands being placed on these crops are such that we are starting to experience real pricing pressure on a lot of our staple foodstuffs.This pressure is unlikely to go away and in fact is likely to increase as these markets demand more and more of the types of food we eat and take fro granted in the west e.g. Chocolate, Refined sugar products breakfast cereals etc.An other pressure on crops such as corn will be the increased demand for meat and poultry, it takes a lot of corn to feed livestock and as demand for meat products increases then there will be a subsequent demand for feed for them.

One of the best performing ETF's this year is the Powershares Agriculture ETF (DBA ) it is up around 30% this year already







This trend is likely to continue for a good while yet as the demand for agricultural commodities is far outweighing the supply, I recently bought the DBA again(the Green B on the chart) and intend to hold it for the longer term.The other ETF's that I like are in Cotton (CTN) Sugar (SUGA) and Coffee (COFF). Coffee and Sugar have run up quite fast of late so I am waiting for a pullback to enter these but have recently added the cotton ETF as I think we may see Cotton breaking out sometime soon.

I will talk in a bit more detail about some of the other ETF's that are available in Oil etc in a subsequent posting, but if you are not too keen on trying to pick an individual commodity there are some good baskets that you can look at DBA is one as is AIGG (Grains) AIGS (Soft's-Sugar, Cocoa etc). Another very interesting basket to look at is the Rogers Commodity Index, which is a basket of commodities that tracks picks from Jim Rogers of Quantum Fund fame, Jim has been singing the praises of commodities for many years now and as in the past has proved to be very accurate in predicting Macro trends to invest in.The table below outlines what is contained in the RJI Index and the percentages of each commodity it holds.





This will give you a broad exposure to pretty much all commodities and is a great way to gain exposure to these markets, Jim reckons we are still only midway through this commodity bull cycle and sees another 5+ years or so before we risk reaching a top.This could be one to add to your portfolio and top up  pullbacks. Certainly I am of view that in the 2-3 years most if not all commodities are likely to definitely outperform the stock markets and also probably prove less volatile. I currently am holding a lot in the commodity sector and will be adding to my holdings on weakness.


If you want to learn more about Jim Rogers views on the markets I highly recommend any of these books he has written, they are not only highly informative but also a good and easy read.









Good Trading



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Wednesday, 13 February 2008

Bear with me !!

Generally as a rule we all want the stock market to go up, it feels right , it means things are all well with the world at large.However any of you who have been investing for more than a few years will know that sadly markets do not always go up.So what to do when they start to go down or start behaving in a very volatile fashion like they have been doing lately, I guess there are three things you could do:


1 If you are a long term investor-hold off and wait for the inevitable good times to come back-I find this hard to do sitting through drawdowns watching your capital disappear drop by drop

2 Move to cash, certainly this makes it easier to sleep at night but unless your timing is immaculate it can mean that you miss out on a lot of money making opportunities

3 Use some form of investments that allow you to make money as stocks go down.


I have spoken before about my use of options, however options are not for everyone and in certain accounts(like my ISA in the UK) you cannot use options.Lately there has been a growth in a number of what are being labelled Contra ETF's-basically ETF's that go up when the market declines-they can be on indices such as the Dow, S&P 500 or the Russell or they can also be on certain commodities such as Oil.

I personally like to use Proshares ETF's go here for a list of the short ones that they offer   .They offer a vast range but I tend to favour the more liquid ones such as DOG (Short Dow) or DXD (Ultra Short Dow-twice the index).I also use the PSQ and the QID which are the short and the ultra short on the QQQQ index. These are a great way of either hedging some of your longer term positions or trading to take advantage of some of the volatile swings that we have seen of late. I use them for both purposes.

The advantages of being  able to trade the market long and short as well as being able to hedge are immense and can make a real difference to your returns over the short and long term. I urge you to check out the opportunities that are available with using these types of fund.


Over the next few weeks I will share with you some of the ETF's that I will be purchasing and using to try to rid out the volatility in the market that we are currently experiencing.


All for now


Good Trading



Friday, 8 February 2008

Broken China ??



We are all well aware of the impact of the sub-prime debacle on the US and European markets.There is also a lot of debate going around about so called "decoupling" basically the premise that not all markets are so intertwined with the US that they are likely to suffer if the US does go into a recession.

One of the markets identified as possibly not being linked to the US is China, that being said though there is a definite desire within the Chinese government to try to put the brakes on their economy without causing it to slow down to much.So is China Broken?

(In my view ) One of the greatest investors of all time doesn't think so. here is a recent article from Fortune magazine which puts Jim's perspective on China.



NEW YORK (Fortune) -- You might expect Jim Rogers to be gloating a

little bit. After all, the famed investor has been predicting a

recession in the U.S. economy for months and shorting the shares of

now-tanking Wall Street investment banks for even longer. And with fears

of a recession sparking both a worldwide market sell-off and emergency

action from Federal Reserve chairman Ben Bernanke, Rogers again looks prescient - just as he has over the past few years as the China-driven commodities boom he predicted almost a decade ago began kicked into high gear.

But when I reached him by phone in Singapore the other day there was little hint of celebration in his voice. Instead, he took a serious tone.

"I'm extremely worried," he says. "I have been for a while, but I just

see things getting much worse this time around than I expected." To

Rogers, a longtime Fed critic, Bernanke's decision to ride to the

market's rescue with a 75-basis-point cut in the Fed's benchmark rate

only a week before its scheduled meeting (at which time they cut it

another 50 basis points) is the latest sign that the central bank isn't

willing to provide the fiscal discipline that he thinks the economy

desperately needs.

"Conceivably we could have just had recession, hard times, sliding

dollar, inflation, etc., but I'm afraid it's going to be much worse," he

says. "Bernanke is printing huge amounts of money. He's out of control

and the Fed is out of control. We are probably going to have one of the

worst recessions we've had since the Second World War. It's not a good


Rogers looks at the Fed's willingness to add liquidity to an already

inflationary environment and sees the history of the 1970s repeating

itself. Does that mean stagflation? "It is a real danger and, in fact, a


Where the opportunities are

The 1970s, of course, was when Rogers first made his reputation - and a

lot of money - as George Soros's original partner in the Quantum Fund.

And despite his gloomy outlook for the U.S., he still sees opportunities

in today's world. In fact, he sees the recent correction as a potential

gift for investors who know where to head in global markets: China.

Rogers has been fascinated with China ever since he rode his motorcycle

across the country two decades ago, and he's been a full-fledged China

bull for several years. In December he published his latest book, an

investor-friendly tome titled "A Bull in China: How to Invest Profitably

in the World's Greatest Market." And that same month he sold his beloved

Manhattan townhouse for $15.75 million to a daughter of oil tycoon H. L.

Hunt and moved his family full-time to Singapore - the better to be

closer to the action in Beijing and Shanghai. (He bought the New York

mansion 30 years ago for just over $100,000; not a bad return on his


But in a November interview with Rogers, he admitted that he was rooting for a serious correction in China to cool off an overheating market and bring back prices to a reasonable level.

With the bourses in Shanghai and Hong Kong both some 20% off their

recent highs as of late January, Rogers says he's starting to consider

new investments.

"I'm delighted to see what's happening in Shanghai and Hong Kong," he

says. "As I've said, if things hadn't cooled off, the Chinese market was

in danger of turning into a bubble. I find this most encouraging. The

government's been doing its best to try and cool things off. Mainly

they've been trying to deal with real estate but it's having an effect

on stocks, too. I would suspect the correction isn't quite over in

China. But I'm gearing up. I didn't put in any orders for tomorrow but

I'm starting to prepare my list of things to buy in China. Whether I buy

this week or this month or this quarter, who knows. But I'm starting to

think about buying new shares in China for the first time in a while.

And I'm not thinking about buying in America."

Ultimately, Rogers doesn't think that the troubles in the United States

will be much of a drag on the prospects for the People's Republic.

"Anybody who sells to Sears (SHLD) or Wal-Mart (WMT) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."


Having been someone who has had an an uncanny knack of being ahead of the curve on most of the recent big Macro trends, I personally would not be betting against Jim being right again this time.


Good Trading