Is Bitcoin An Investment Or A Cult?

Bitcoin’s buckets of media attention — way out of proportion to its roughly $6.9 billion in value (assuming there are 12.34 million minted Bitcoins trading at $556 a piece) – leads me to conclude that the force is strong with the argument that it’s a cult.

After all, this week Tokyo-based Mt. Gox, Bitcoin’s once-dominant mechanism for exchanging real money for the virtual currency, appeared to have collapsed — in the wake of a reported theft of 740,408 Bitcoins worth about $414 million — which represents about 6% of all Bitcoins.

With Mt. Gox ceasing to process transactions, anyone with an account there is probably out of luck — after all Tokyo financial regulators are declining to help Mt. Gox customers, saying that since Bitcoins are a product rather than a currency, the regulators have no authority over it.

And that collapse is reinforcing my basic belief about Bitcoin — it’s a cult that is almost completely immune to logic. I would have expected that Bitcoin proponents would view Mt. Gox’s collapse as great news.

That’s because it would draw more media attention to Bitcoin. And that media attention would make people who own Bitcoin feel even more special — probably causing their brains to release a reinforcing dose of Dopamine.

What would it take to deprogram Bitcoin cultists? I could imagine that if I had sunk most of my savings into Bitcoin and lost it all to the Mt.Gox collapse, my wife would not be very happy with me. And perhaps there are some individuals out there who have been shaken out of their Bitcoin reverie by the realization that losing all their money would cause their personal life to collapse.

Bitcoin believers view as good news that Mt. Gox has lost market share over the last year. While it handled 80% of all Bitcoin transactions at one point in 2013, Genesis Block, a virtual currency research firm, reports that newer exchanges such as Slovenia’s Bitstamp and Bulgaria’s BTC-e have taken over where Mt. Gox left off.

I would derive less comfort from dealing with an exchange in Bulgaria — famous for its skills at hacking — than one in Tokyo. But obviously hackers know no geographic boundaries.

It’s just that if you wanted a legal authority to help you get back your Bitcoins if they were stolen, you might prefer an exchange in a country with a well-developed legal system. But if you think that way — you aren’t a Bitcoin believer.

Bitcoin has a long history of volatility due to hacks — after which its price seems to rally. After all, back in June 2011 a hacker crashed the crypto-currency — bringing its value from $17.50 down to pennies. Anyone who bought Bitcoin after that is now sitting on huge profits — even after Mt. Gox’s collapse — it trades at $556 according to CoinDesk.

But I have interviewed many Bitcoin enthusiasts and they view all bad news as good. Consider my April 2013 interview with Kent Liu – a Master’s in Material Science student at Cornell. He told me that Bitcoin has superior “fundamental principles” and prefers investing in Bitcoin to stocks “because no company can change the world.”

Another believer is Rick Falkvinge, the founder of Sweden’s Pirate political party who told the New York Times, “My thoughts and my heart go out to all of those others in the community who lost a lot more than me today. [Despite losing $80,000 in Mt. Gox I remain] absolutely bullish on Bitcoin.”

Despite all this bad news, electronic currencies could become mainstream. On the surface, they appear to be cheaper to produce than paper and coins. But governments would only adopt electronic currency if they could control its creation, assure that it could not be hacked — a feat that may be impossible to achieve, and encourage businesses to accept it as a means of payment.

But a central tenant of Bitcoin believers is that it is a stateless currency — meaning that no government can control how it is created, traded, or used.

The consequences of that belief are becoming clear to anyone who used to be able to access their Bitcoin account at Mt. Gox.

Still — the possibility that there are people who bought their Bitcoins for pennies on the dollar after the price collapsed in June 2011 and have stored them on an exchange that has not been hacked suggests that there is money to be made.

Young People Do Not Know How To Use Their Money

The educational charity has said that young people realise that going to university is going to be a costly process and that they will probably emerge with debts in the form of loans, leading to them taking a year out to save and try to reduce the impact. "There's no doubt that young people now recognise that they're going to be incurring considerable financial expenditure in the years immediately after they turn 18," said Alastair Mathews, director of policy at pfeg.

According to the charity, the decision about whether to go to university should be part of financial education taught in secondary school. A classroom debate between the benefits of going straight to university after high school or of taking a gap year could be useful, pfeg suggests, allowing issues about finance and borrowing - whether that be through personal loans, online loans or other means - to be considered. Some are taking a year off after university to financially prepare themselves, Mr Mathews suggested, which could mean there is less need for them to take out debt consolidation loans in the years after they graduate to control their debt levels.

"Young people need to be better prepared for the future by having more financial education while at school". Part of that financial education could be to look at these very questions: "What is the best way to spend these years between 18 and 21?" Mr Mathews said.

The pfeg director of policy added that going to university brings with it a number of stresses and strains on individuals when it comes to financial management, with experience of the so-called real world being picked up through being solely responsible for money for the first time. Considering the long-term financial situation is part of this, according to Mr Mathews: "At university they've got to live independently as well and make all sorts of decisions about buying, spending and saving for future needs as well as present ones."

Recent research by NatWest highlighted the trend to consider a gap year to finance university life, with 54 per cent of those pondering whether to take a year away from studying to save some money. According to NatWest figures, school leavers are set to make a combined 212 million pounds in the 12 months before heading to university.

At the beginning of October, Abbey noted that nearly a third of students starting university in 2007 were doing so without any kind of insurance in place to protect their belongings. The financial services provider found that the average student takes 3,300 pounds of belongings and equipment with them to university, suggesting the cost of replacing such items which are not covered by insurance could be very high and even result in the need for a quick loan.

Global forex market

As widely expected, the US Federal Open Market Committee (FOMC) decided to taper the size of its monthly asset purchases by another US$10bil. The committee announced that it will now purchase US$55bil in assets each month – US$25bil in mortgage-backed securities (down from US$30bil) and US$30bil in Treasury debt (down from US$35bil) beginning in April.

The committee revamped its forward guidance on interest rates, moving towards more qualitative than quantitative language with the new guidance paragraph dropping the 6.5% unemployment rate threshold. But the FOMC made it clear that the policy itself has not changed. Most on the committee do not expect to begin hiking rates from the current 0% to 0.25% target range until 2015 or even 2016.

News of the third tapering and traders’ interpretation of a more timely return to a rate hike regime for the Fed translated into the US dollar index’s biggest single-day rally in six months and the technical moves were more significant where the monetary policy differences were starkest among the majors.

The Euro levitated by the European Central Bank’s balance sheet reduction and widening interest rates differential – reversed from a multi-year high that was locked at a high of 1.3967 at the early part of the month to a low of 1.3818 at time of writing as market participants turned cautious entering into any strong positions in response to Janet Yellen’s statements.

The Japanese Yen also ended the week on the depreciation bias from 101.63 on Monday to latest 102.30 in response to drop in Nikkei 225 and to Kuroda’s commentary whereby he said much of the yen’s excesses were reduced last year and that gave rise to the growing reticent to boost qualitative easing in Japan sooner than expected.

With the third tapering in place, we saw some loudest protest coming out again from emerging market currencies. In response, the MSCI Emerging Market ETF dropped 2% on heavy volume with Indonesian rupiah falling most, 1.16% against the US dollar, followed by Philippines Peso 0.89% and South Korean won 0.82%.

The feel-good of Jokowi effect on Indonesian markets turned out to be short-lived event and the equity markets fell 3.1%. Meanwhile, Philippines peso fell as the overseas remittances grew 5.9% in January – slowest gains since September and rising inflationary pressures. South Korean won eased as rise in South Korean bond yields was limited compared to US rates and as foreigners sold on KOSPI amid weak housing markets and subdued wage growth.

Malaysian Ringgit down 0.56% against the US dollar for the review period from a low of 3.2783 on Monday to latest 3.2969, attempting to test resistance of 3.3012 of the 50-day moving average. The 1-month non-deliverable forward rallied past 3.3000 along with higher Chinese yuan fixing that rose from 6.1321 to latest 6.1460, which was a relatively sharp increase in the aftermath of widening trading band of Chinese currency last week.

UST market 

US Treasuries sold off across the curve after Crimea’s vote to join Russia passed without major incident. Following the outcome of the FOMC meeting, the curve became steep in the belly and long end of the curve. At the time of writing, the 2, 5 and 10-year yields were 8-17 basis points (bps) higher to settle at 0.42%, 1.70% and 2.77%, respectively.

Malaysia bond market

Local govvies saw heavy trading after the announcement of the reopening 10-year Government Investment Issues. The amount of RM2.5bil was smaller than market expectation and this sparked strong buying momentum especially on the 10-year Malaysian Government Securities (MGS) which garnered RM1.9bil worth of trades during the week. However, the buying momentum was short-lived following the FOMC’s more hawkish outlook leading to the strengthening of the US dollar.

As of Thursday’s close, MGS yields on 3, 5, 7, 10, 15, 20 and 30-year MGS stood at a respective 3.38%, 3.56%, 3.91%, 4.08%, 4.47%, 4.59% and 4.87%. The week saw RM12.1bil worth of trades with a daily average trading volume of RM3bil compared to last week’s daily average volume of RM1.7bil.

Moving to the local private debt securities market, buying interest was seen in the belly to long-end of GG bonds. Total trading volume was at RM1.8bil for the week, averaging at RM519mil daily as compared to last week’s average of RM458mil. Approximately 67% of the trading volume was contributed by the GG/AAA segment and 33% by the AA segment.

In the GG/AAA segment, demand was seen for Khazanah bonds maturing 2018-2024 which saw yields eased 3-8 bps with a collective trading volume of RM105mil. Long-end DanaInfra bonds maturing 2028-2033 also saw some buying interest with RM160mil worth of trades reported done, yields came down 3 bps. Other notable trade includes GovCo ‘02/18 garnered RM360mil worth of trades to close at 3.94%.

Ringgit IRS market

Ringgit interest rate swap (IRS) rates ended the week 1-3 bps higher following higher inflation expectation by the local central bank and the more hawkish FOMC statement. KLIBOR is also expected to be fixed higher over time. In the AA-segment, secondary trades were spread out across industries in small volume. BGSM bonds maturing 2017-2023 traded within previous range with collective trading volume of RM95mil.

What is Bitcoin Mining?

If you've ever wondered where Bitcoin comes from and how it goes into circulation, the answer is that it gets "mined" into existence. Bitcoin mining serves to both add transactions to the block chain and to release new Bitcoin.  The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle.  The first participant who solves the puzzle gets to place the next block on the block chain and claim the rewards.  The rewards incentivize mining and include both the transaction fees (paid to the miner in the form of Bitcoin) as well as the newly released Bitcoin.

Security of the Network

Bitcoin mining is decentralized.  Anyone with an internet connection and the proper hardware can participate.  The security of the Bitcoin network depends on this decentralization since the Bitcoin network makes decisions based on consensus.  If there is disagreement about whether a block should be included in the block chain, the decision is effectively made by a simple majority consensus, that is, if greater than half of the mining power agrees.

If an individual person or organization has control of greater than half of the Bitcoin network's mining power, then they have the power to corrupt the block chain.  The concept of someone controlling more than half of the mining power and using it to corrupt the block chain is known as a "51% attack".  How costly such an attack would be to carry out depends largely on how much mining power is involved in the Bitcoin network.  Thus the security of the Bitcoin network depends in part on how much mining power is employed.

The amount of mining power that gets used in the network depends directly on the incentives miners have, that is, the block reward and transaction fees.

Block Reward

The amount of new bitcoin released with each mined block is called the block reward.  The block reward is halved every 210,000 blocks, or roughly every four years.  The block reward started at 50 bitcoin in 2009, and is now 25 bitcoin in 2014.  This diminishing block reward will result in a total release of bitcoin that approaches 21 million. According to current Bitcoin protocol, 21 million is the cap and no more will be mined after that number has been attained.

As of today, block rewards provide the vast majority of the incentive for miners.  At the time of writing, for the previous 24 hours, transaction fees represented 0.3% of mining revenue.

Transaction Fees

As the block reward diminishes over time, eventually approaching zero, the miners will be less incentivized to mine bitcoin for the block reward.  This could be a major security problem for Bitcoin, unless the incentives provided by the block reward are replaced by transaction fees.

Transaction fees are some amount of Bitcoin that are included in a transaction as a reward for the miner who mines the block in which the transaction is included.  Transaction fees are voluntary on the part of the person sending a transaction.  Whether or not a transaction is included in a block by a miner is also voluntary.  Thus, users sending transactions can use transaction fees to incentive miners to verify their transactions.  The version of the Bitcoin client released by the core development team, which can be used to send transactions, has fee minimum rules by default.

Mining Difficulty

How hard is it to mine Bitcoins?  Well, that depends on how much effort is being put into mining across the network.  Following the protocol laid out in the software, the Bitcoin network automatically adjusts the difficulty of the mining every 2016 blocks, or roughly every two weeks.  It adjusts itself with the aim of keeping the rate of block discovery constant.  Thus if more computational power is employed in mining, then the difficulty will adjust upwards to make mining harder.  And if computational power is taken off of the network, the opposite happens.  The difficulty adjusts downward to make mining easier.

The higher the difficulty level, the less profitable mining is for miners.  Thus, the more people mining, the less profitable mining is for each participant.  The total payout depends on the price of Bitcoin, the block reward, and the size of the transaction fees, but the more people mining, the smaller the slice of that pie each person gets.

Mining Hardware

Anyone with access to the internet and suitable hardware can participate in mining.  In the earliest days of Bitcoin, mining was done with CPUs from normal desktop computers.  Graphics cards, or graphics processing units (GPUs), are more effective at mining than CPUs and as Bitcoin gained popularity, GPUs became dominant.  Eventually, hardware known as an ASIC (which stands for Application-Specific Integrated Circuit) was designed specifically for mining Bitcoin.  The first ones were released in 2013 and have been improved upon since, with more efficient designs coming to market.  Today, mining is so competitive, it can only be done profitably with the latest ASICs.  When using CPUs, GPUs, or even the older ASICs, the cost of energy consumption is greater than the revenue generated.

As ASICs are advanced and more participants enter the mining space, the difficulty has shot up exponentially.  A lot of this activity has been incentivized by the large price increase Bitcoin experienced in 2013 and speculation that the price may rise further.  There is also political power within the Bitcoin ecosystem that comes with controlling mining power, since that mining power essentially gives you a vote in whether to accept changes to the protocol.

There are many companies which make mining hardware.  Some of the more prominent ones are Bitfury, HashFast, KnCMiner and Butterfly Labs.  Companies such as MegaBigPower, CloudHashing, and CEX.io also allow customers to lease hosted mining hardware.

Mining Pools

Mining rewards are paid to the miner who discovers a solution to the puzzle first, and the probability that a participant will be the one to discover the solution is equal to the portion of the total mining power on the network.  Participants with a small percentage of the mining power stand a very small chance of discovering the next block on their own.  For instance, a mining card that one could purchase for a couple thousand dollars would represent less than 0.001% of the network's mining power.  With such a small chance at finding the next block, it could be a long time before that miner finds a block, and the difficulty going up makes things even worse.  The miner may never recoup their investment.  The answer to this problem is mining pools.  Mining pools are operated by third parties and coordinate groups of miners.  By working together in a pool and sharing the payouts amongst participants, miners can get a steady flow of bitcoin starting the day they activate their miner.

Electricity Costs

The main operational costs for miners are the hardware and the electricity cost, both for running the miners but also for providing adequate cooling and ventilation.  Some major mining operations have been purposely located near cheap electricity.  The largest mining operation in North America, run by MegaBigPower, is located on by the Columbia River in Washington State, where hydroelectric power is plentiful and electricity prices are the lowest in the nation. And CloudHashing runs a large mining operation in Iceland, where electricity generated from hydroelectric and geothermal power sources is also renewable and cheap, and where the cold northern climate helps provide cooling.

Regulation

Earlier this year, the IRS issued tax guidance regarding Bitcoin and said that income from mining could constitute self-employment income and be subjected to tax.  FinCEN, the Financial Crimes Enforcement Network, is a bureau of the U.S. Treasury that collects and analyzes data on financial transactions with the aim of fighting financial crimes, especially money laundering and terrorist financing.  FinCEN has issued guidance saying that bitcoin miners are not considered Money Transmitters under the Bank Secrecy Act and recently clarified that providers of cloud mining services are also not considered Money Transmitters.

The Bottom Line

Bitcoin mining is the means by which new Bitcoin is brought into circulation, the total of which is to be capped at 21 million BTC. Miners are in an arms race to deploy the latest bitcoin mining chips and often choose to locate near cheap electricity. As more computing power is used in mining, the difficulty of the puzzles increases, keeping profitability in check.

Investing Money While In College

Investing Money can be very hard to do, if you are not equipped with the right information, and the right tools. There are many ways that you can invest your money! Some of those that may be simple to do is simply putting your money into the savings account and watching it grow. Most people already have savings accounts that earn about a 1-3% interest rate. You can invest into real estate but chances are that you don't have enough capital because you are a college student. Many students work part time while they are in college. If you are smart then you would go to school during the day, work at night, and invest your money into a place where that money will build into a nice amount of income all on its own. 

So how can you find a good place to invest this money? Well you can invest your money into a business, real estate, stocks, bonds, commodities, options, network marketing companies, and many more. I found that while I was in college I was bombarded with many ways to invest my money by building a business. While this vehicle to make money is very easy to do, most students just don't have the time that it takes to make a business successful. So I found that a great way to investing money while in college is with the foreign exchange.

Well what is the forex, and how can I get started? Well the forex is simply buying one countries currency vs. another countries currency simultaneously. Why the forex for college students? Because it is very low start up costs to get involved with, but it has an unlimited potential to increase your cash flow. You can start an account with as low as $250. Now for most college students, this is simply 2 weeks working at their part time job. With the forex you can earn an extra $5 to $50 a day when you first get started! If you don't understand the forex yet, then you don't want to miss out on this great opportunity. The forex market is a 1.5 trillion dollar industry every day! This is the largest market in the world! All you have to do is learn what you need to know as far as the basics, and find just one strategy that will be profitable for whichever type of trader you are.

The forex is traded in currency pairs such as GBP/USD. This is the British Pound vs. the United States Dollar. The great thing with forex is that you can profit from a currency, whether it is going up or down. The only thing is that you need to be going the right direction. If you think a currency will head upwards, then you would buy the currency pair. If you think the currency pair would go down, then you would sell the currency pair. It is just that simple!

So how can I make money from the forex, well I can't possibly put it all in this article, but what I can tell you is that by the use of leverage you can make a lot of money. Leverage means using a small portion of your money to control a larger amount of money. Even if your leverage is only 2:1 or 200:1! What does this mean; well if you use $100 with 2:1 leverage you can control $200. With the forex you can use $100 to control $20,000. Now which one do you think is better, to control $200 or $20,000. It doesn't take a genius to figure this out! Well now that you know a little bit about the forex and the power of leverage, you can start investing money while in college. Check out this website to learn more, about how to get more of this great information for free!

The Secret To Profitable Trading

What is the key to trading that will turn even average forex systems into winners every time?This is nothing magical or secret and you have probably heard it all before, but it is the most important part forex trading.

In fact it is so important that if you only understand and apply this one thing correctly, you will be successful in the currency markets.

A very wealthy trader once said that he can flip a coin to enter the market, and he still will have trading success.

It is all because of his risk management strategy.A good risk management strategy can be the difference between succeeding as a trader and losing all your money as 90% of all traders do.

Even if only 50% of your trades are a profitable trade you should still make money.It does not matter if you rely on forex forecasts,auto forex trading or the best system trading, if you do not know what you are doing on the risk management side you will never join profitable traders.

It is all about getting the odds on your side.If your risk management strategy is correct you will cut your losses and let your winners ride.This is a very difficult practise for most traders.You tend to hope the loss will turn around and do not take the loss.On the flipside you are only to glad to make a small profit and take the profit much too soon.

Here are the Golden Money Management Rules you should stick to if you want to ever profit trading:·

• Always use a stop loss. Trading without a stop loss are either for the very brave or very stupid, and I tend to favour the last one. Do not place your stop loss at any level. Your stop loss should be at a logical point where you know your trade is wrong if price violates that level. The best places are normally just above resistance levels or below support levels. 

• You should never risk more than 2% of your entire account on any one trade. This means that if you have a couple of losses in a row you can still trade afterwards. If you see your stop loss is too far away, and you will be risking more than 2% on the trade then pass on it. If you want to gamble then go to the casino!

When doing your forex analysis, your risk reward ratio should be 2 to 1 or greater. This means that if your stop loss is 20 pips then your profit margin should be 40 pips or more. By doing this a traders profit is maximized, while keeping losses to a minimum.·

By all means-if your account is not at least $10 000 then open a mini forex account. Mini accounts gives you far more options in controlling risk than a regular account. Trading a regular forex trading account with 100:1 leverage with a small balance is trading suicide-one mistake and your trading live is over!

If you practise this rules you will be successful as a trader. Feel to start trading now? Let's start your trading with GCM now which is awards MOST INNOVATIVE FOREX RESEARCH Western Europe 2013.

 Click here for more information.

Beware of Those Hot Stock Picks

Many people define the best penny stocks by how much they cost per share. It is not reliable to pick a penny stock based on this method. There are much better criteria for analyzing such high risk stocks. Even if you do find the greatest stock pick in the world there is still risk involved. So don't ever think that any stock is a sure thing. Learn a bit about the stock market first and understand fluctuations. Then understand that those fluctuations are amplified ten fold or more with penny stocks. No joke.

There are quite a few companies out there selling services offering advice on penny stocks. The number one out there is Mr. Peter Leeds. Think about this for a second. How did he become number one? Is he stock market savvy? Does he really know what he is talking about? Yes and no. The point I one to make here is that of course his picks are good picks. Think about it, he is so well known now that tons of people follow his picks and jump on them at a moments notice. This of course causes a demand and price surge in any stock he recommends as penny stocks take relatively little activity to react in a positive direction. So it always looks as if he has a flawless record of stock pick recommendations and his service subscriptions continue to sell like hot cakes.

Here at Best Penny Stocks and Picks we track hundreds of penny stocks and make judgments based on sound analysis and then email this out to a select group of individuals every morning before the stock market opens. We do not profit from out services except to charge for advertising and promotion. We have relatively few clients in comparison who range from very savvy to completely uneducated concerning stocks. The common thread among all is they don't just jump on every recommendation we make. That's completely fine with us and we advocate such investment behavior.

There is nothing wrong with sitting and watching to see what would have happened to your money IF you had invested in any particular stock. We have recommended all along that you take your time and get to know the stock market and have even recommended using practice trade accounts. These are accounts that use fake money to trade with using real stocks. It really helps you get a feel for the market and see what you are comfortable with. 

Its OK to follow other peoples recommendations if you yourself don't have the time to do the research. You just have to make sure you have been following a reputable service and not someone just trying to make a quick buck. Penny stocks seem to be alluring to all the bad guys on the internet. Its not uncommon to come across an email or website purporting to be just the source of information you've been looking for. Just take you time and be cautious until you get a feel for whats legit and whats not.

How to Use Options Trading Rolling Strategy

An options trading rolling strategy is a strategy where you move your strike point to a new strike point during the month. Rolling basically means moving. In the world of options trading, this movement happens when you move positions from one strike point to another. That can either happen when you move points vertically (within the same month) or horizontally (to another month) or both.

You see, in order to maximize returns, investors should use the covered call strategy every month for a long time. That requires that the investor move, or roll, the strike position when the option expires. That is where the term "rolling" comes from. 

Part of options trading rolling strategy also involves knowing when to avoid rolling, though. Occasionally an investor may decide not to roll the strike position. The purpose of that is to allow the capital to appreciate more. That is a rare scenario, however, because, if the call option is exercised when share becomes in the money, it could be called away.

As an option's expiration approaches, there can be either one of two outcomes. Either the short option could be out-of-the-money or in-the-money. If the option is out-of the-money, it is worthless. The investor simply sells the next month's call, after letting the option expire. If, on the other hand, the option ends up in-the-money, in order to keep the stock all the investor needs to do is sell the next month's call after buying the short option back. Even though that sort of trade consists of two trades, buying and selling, it is considered one trade. It is also known as a spread. If you want to roll out your covered call or buy-write, you need to utilize such a spread. That way, you can buy back the short option and keep your stock.

Your second month option would be sold short. Thus, your covered call strategy would be re-initiated. The remaining positions are the short calls and long stock. You have to buy back the option that you are short at the beginning of the month. You would not have a choice for your front month option. However, you would have the choice to sell near term or with a farther expiration date for the next month option.

As you can see, rolling can be a bit complicated. However, you may find it well worth it, in the long run. The trick is to be careful to make the most informed decisions possible. Remember to never risk more than you can afford to lose either. After all, it is not an exact science.

So, now that you understand the options trading rolling strategy better, you may want to consider it. There is something to be said for using options trading rolling strategy to improve your earning potential, after all.

Tips to Increase Profit Potential

1. Cut Back Trading Frequency

Most traders simply trade too much and you need to remember you don't get rewarded for the amount you trade - just how many trades you get right and the profit they produce. The high odds big trades only come around a few times a month so look for them and trade them. 

For example, I know traders who trade less than 10 times a year yet make 100% + annual profits and you can to. 

Forget short term trading like forex scalping or day trading and hit the high odds trades only - the big trends that last for weeks or months. Look at any forex chart and you will see them, so lock into them and trade them. 

2. Hit High Odds Trades Hard 

When you have a high odds trade - hit it hard in terms of money you are prepared to risk. You hear a lot about risking 2% per trade but for a retail trader this is ridiculous. If you invest $1,000, that's 20 bucks and your risk is so small, your going to get stopped out by random volatility. If you have a high odds trade risk up to 20%. 

This is not being rash. If you have a high odds trade your confident in then you need to take a meaningful risk to make a worthwhile profit. 

3. Don't Dilute the Above!

Only run high odds trades and forget about diversifying. Diversification is supposed to reduce risk and maybe it does - but one fact is clear, it will dilute your profit potential at the same time. 

Why when you have a great high odds trade do you want to dilute and reduce its profit potential? 

Many people diversify so much, they never make anything! So don't bother spreading trades around, hit the high odds trades, risk as much as you can afford and focus on it. 

Many traders try so hard to reduce risk they actually create it and ensure they will never make any decent gains. 

Trading is all about taking risk but this is not being rash, it's about taking calculated risks, at the right time and knowing when to bet, how to bet and what stake to risk. 

Your not trading forex to make 10 or 20%, you can do that with less risk elsewhere! 

Your out to make 50 - 100% or more and the above is really common sense and if you try it, you will reduce your risk, turbo charge your gains and enjoy currency trading success.

3 Advanced Strategies For Making Money in the Stock Market

You are a veteran at trading stocks and you've been doing it for awhile. With your current expertise, you want to progress even further and start playing with the big boys in the market. It's time to learn about advanced stock market strategies to bring your skills to the next level. You want a whole new world of trading experiences and we're going to discuss them below.

Advanced traders use sophisticated trading strategies to achieve their financial goals. Techniques such as considering IPOs, selling short and margin trading are employed by the big boys to explore a different dimension of potential profits.

1. Considering IPOs

Referred to as IPOs, the letters represent the words initial public offerings. IPOs mark the formal transition of a specific company from a privately owned firm to a publicly held firm. Every incorporated business issues its own stock. The original stock in an incorporated business is initially offered to a few stockholders. A company can sell stock to the public to raise capital without getting into debt.

There are two basic ways to profit from IPOs. The first way to make money is to watch and wait. Consider whether a stock is fairly priced and if you think so, buy it. The second way to profit from IPOs is to buy stocks early in the hope they will quickly and significantly increase in value so you can sell them for a fast profit.

2. Selling Short

Selling short is an advanced technique used by sophisticated stock investors. Short sellers are on the lookout for the best stock to sell. The stock sold by short sellers is not owned by them as they believe the value will rapidly decline in the near future. When the price plummets, the short sellers can purchase the stock at a lower price to pocket profits and return the shares to their owners.

Selling short is a risky venture for adventurous investors. If prices soar instead of drop, you wind up losing money. Wise investors already know it's speculative whether a stock will fall in value. The potential for loss with short selling is greater than the potential to gain.

3. Margin Trading

With margin accounts, you are allowed to borrow money to purchase stock. By using borrowed money, you increase the amount of stock you can purchase. The money may be supplied by a stockbroker.

For example, you purchase stock for $2,000. If you did not use margin trading, you would need to pay this total sum of money for the stock. With a margin trade, the broker lends you half the amount. In this example, the broker would lend you $1,000 and you would come up with the other $1,000.

If your investment yields a profit of $10 per stock, the profit is based on the number of stocks you purchased for a total $2,000. You are then obligated to pay the broker back. If you did not take advantage of margin trading, you would only be able to earn profits on the number of stocks you could afford at $1,000.

Bigger Profits Mean Bigger Risks

If you want to earn major profits, you have to be willing to take big risks. The larger your profits, the greater the risk involved. You need to be both adventurous and patient to survive and profit from advanced stock market strategies. That being said, DO NOT attempt anything above without first consulting with your financial advisor.

Understanding bond fund types

It's important to understand the difference between government, corporate, high-yield and municipal bond funds.

U.S. government bond funds

These funds invest primarily in bonds issued by the U.S. Treasury or federal government agencies, which means you don't have to worry about credit risk. But because of their higher level of safety, their yields and total returns tend to be slightly lower than those of other bond funds.

That's not to say government bonds funds don't fluctuate - they do, right along with interest rates. If you can't tolerate swings of more than a few percentage points, stick to short-term government bond funds.

If moderate fluctuations so don't cause you to break out in a cold sweat, then you can pick up a bit more yield with intermediate government bond funds. If you plan on holding on for several years and can handle broader swings, long-term government bond funds will provide even more yield.

Corporate bond funds

Funds in this category buy the bonds issued by corporations that may range from well-known household names to obscure widget makers most of us have never heard of.

When researching corporate bonds funds, consider the credit quality of the individual bonds they hold (most hold highly rated bonds, AAA to A minus or A3, but some take more risk by adding small doses of high-yielding junk bonds.) Also consider the average maturity of the bonds - the longer the average maturity, the greater the volatility.

High-yield bond funds

Putting the euphemism aside, these are junk bond funds. They invest in debt of fledgling or small firms whose staying power is untested as well as in the bonds of large, well-known companies in weakened financial condition.

The potential for these companies to default on their interest payments is much greater than on higher quality bonds, but since these funds usually hold more than 100 issues, a default here and there won't capsize the fund.

There is more risk, however, and for that, you get higher yields - from 3 to as much as 10 percentage points more than safer bond funds. These funds tend to shine when the economy is on a roll, and suffer when the economy is fading (increasing the chance of default).

Who should buy them: Investors who want to boost their income and total returns and can tolerate losses of 10% or so during periods of economic turbulence.

Municipal bond funds

Tax-exempt bond funds - also known as muni bond funds - invest in the bonds issued by cities, states, and other local government entities. As a result, they generate dividends that are free from federal income taxes.

The income from muni bond funds that invest only in the issues of a single state is also exempt from state and local taxes for resident shareholders. Once you factor in the tax benefits, muni funds often offer better yields than government and corporate funds.

Trading Tips

How will you trade? Fundamental traders base their trades on information external to the market.  In other words, thing like; weather, strength of the dollar, cattle-on-feed reports, slaughter count, political events, etc.  Technical traders base their trades on information internal to the market.  Things like; chart patterns including trend lines, channels, waves, double tops and bottoms, etc.  Also considered are stochastic, moving averages and the like.  I'm not sure who makes the most money (that has been debated forever), but I think it is difficult to be 100% one or the other now days.  There are others who do quite well using Astrology, Numerology, and just plain "gut feel".  In any case... Choose your weapon, the battle is about to begin.

Fundamental trading means more than just reading the Investor's Business Daily. As a fundamental trader you must become familiar with all the factors involving your trades. If you are trading grains, you should be on the mailing list of the Department of Agriculture and several other sources. You should receive reports from all agencies and companies that will publish information such as visible supply, acreage planted, weather reports, cattle on feed and hog reports, etc. This is only an example, and you should carry it through with each "family" of commodities you trade. You must work to be informed, you can't expect to win if your not properly armed.

As a chartist, when you find a pattern, be sure it is what you think. When you have worked with charting, and believe you see an important formation (head-and-shoulders, wedge, double-top, etc.) be sure you compare it to past patterns of the same formation.  You must see if the pattern conforms to other such formations in the charts of the commodity you are trading.  If it does, see how often the price responded predictably to that formation.  If you are right, you can come up with a VERY relative calculation of the percentage of chance the pattern will work this time.

By the time you hear the news, it's too late! You've decided to be a "fundamental" trader, and begin your research.  Make sure it is true research and not just tips and hear-say.  You have to count on the many reports, informational sheets and articles you gather from every source that has anything to do with your chosen commodities, but you must not be influenced by tips, rumors and "word-on-the-street".  This information is usually old news, and is already "in" the market.  Through your sources you are trying to be the one who gleans that "new" data before anyone else.  That is what will make you successful as a fundamental trader.  Remember, all good luck starts with hard work.

There's more to a chart than lines and patterns.  Now you've gotten to the point of recognizing certain chart patterns.  You can identify trend lines, gaps and head-and-shoulders.  These are patterns that are not too difficult to trade, but what about an ascending or descending triangle, or declining or rising wedge?  These formations require a great deal more analysis than just seeing the formation.  These and other more advanced formations require a study of other factors such as the volume of trading, the volatility of the market and the time period it took the pattern to form.  there are other factors to consider also, so don't get into the more advanced patterns until you have experience and have reviewed past occurrences of these formations.

Try trading opening gaps.  If you have the heart for excitement and the capital to back it up, try this VERY RISKY strategy.   Some of the more volatile commodities will either gap higher or lower on the open.   Combine this with the old adage that "gaps will fill", and you have a shot at some quick profits (or losses).  Check your history first to be sure that the futures you've chosen does this on a fairly regular basis (T Bonds used to be good for this).  Then if the price gaps higher on the open, give it a while to settle in.   Now if the price hasn't continued running up, you may want to short the market in hopes it will come back down and fill the gap it left.  Don't short it until it is coming off its high for the second or third time, then you must have a tremendous amount of discipline.  You MUST place your stop a few ticks above the high, in an attempt to limit your loss if the price does decide to move higher.  You must also determine that if the price does fill the gap, the reward you reap will be at a good ratio to the risk you were willing to take.  When the gap is filled... GET OUT!  You have accomplished your goal.  This is, as I said, a dangerous strategy, but it works particularly well if the gap was created by a rumor before the market opened.

Lock your profits or lose nothing with free (almost) options.  Follow me closely now... Using the Treasury Bonds as an example: Assume you enter a long position in the March '99 TBond futures @ 123-00.   Now if you sell (write) the 124-00 call option for 25/64 ($390.62), and buy the 123-00 put option for 35/64 ($546.70), you have set yourself up with a defined profit and loss situation.  If the price goes up, you have limited your profit to a total of $843.92 (the difference between the $1,000 for the move from 123-00 to 124-00 on the futures, less the $156.08 you had to pay for the higher priced put option).  You will, of course, have to subtract out your commissions too.   Remember... you cannot make more than $843.92, but the good part is you cannot lose more than the $156.08 difference you paid for the option (plus your commissions of course).  Not a bad trade if you are interested in generating income.  This can also be done on the short side of the market, by buying the call at-the-money, and selling the put 1-00 lower.  If you want to take a bit more risk, you can try to "leg" into the position, and if done right, you can get into a position where you can make a profit or lose nothing.  It does take practice so be careful.   (The above example was done using the actual prices of the March TBond futures and option prices on 2-12-99).

If you're trading multiple contracts, be sure to scale off profits.  If you are trading more than one contract and your position moves into profits, begin to liquidate to ensure some profits.  It would be a shame to stay with all your contracts if the market moves against you.  It never hurts to take profits with some of your winning contracts, then use a trailing stop to maximize the profits on the remaining positions.

Never say "Or Better" when you are placing a limit order... it's an insult!.  When some representatives and customers place a limit order they have a tendency to say "Or Better".  Think about it, it is an insult.  If the broker on the floor is working for you, he or she will try their best to get you a good price.  If you tell them to "buy at 5.25 Or Better", it sounds like you don't trust them.  If you don't like your fills, then change brokers, but if you constantly use "OB" on tickets, there is no doubt you will get the worst possible fills from the person you just told you do not trust.

Find a couple of trading "buddies".  Sure misery loves company, but so does victory.  Even though you may have the "killer" system, find a couple of friends that have their own systems.   When your system gives you a signal, ask your buddies what they think.  Don't let it completely influence your trade, but it can give you some perspective that may be important.  This may seem to fly-in-the-face of an earlier tip about not listening to what others say, but not really.  If you have a system that works, and you don't listen to the whims and fancies of all other people (and especially the financial news papers), you can gain some support from others that are as committed as you to this job of futures trading.

If you are a believer in the Y2K problem.. better take action now.  I don't think anyone can say for sure whether the 2,000 computer bug will cause no problems, or a major catastrophe.  If you are one who believes the worst, you had better start your plan and begin taking action now.  I am aware of at least four people who have invested tens of thousands of dollars in gold options, and some who plan massive options on the stock indices.  I don't advocate such drastic measures, but then, I've been wrong more times than I care to admit, so make up your own mind (after doing EXTENSIVE research), and be prepared to position your portfolio for whatever it is you believe will happen.

Don't get complacent.  Excellent trends can last for a long time, but NOT forever.  When the trend breaks, don't give back all your profits on the hope that "this is just a temporary pull-back, and the trend will surely resume".  Have your trailing stops in place and never move them further away.  If it is a pull back and you get stopped out, you will have another opportunity to re-enter at a better price later.

How about hedging your mutual fund with a put option?  Many of us are in mutual funds with the hope that some day we may "chuck" it all and retire. Well, if you are like us, you may have a stake in a mutual fund based on the S&P 500 index. If that is the case, and you suspect that when the DOW closes over 10,000, (or wherever), that a much needed correction is on the way, why not buy a put option on the S&P500 index. If the correction does come as you suspect, then your fund may lose some value, but you will have profited with your put option to offset some of that loss. It is a "hedge", which is like insurance. You pay the premium, and it's there if you need it, but you hope you never have to use it.

When you are up to your butt in alligators, it's difficult to remember your initial objective was to drain the swamp!  This is another "stick to your plan" kinda' thing.  Some of the markets have suffered some real insane volatility recently.  Remember, when you and your system (or method) decide on a trade, be sure that you have your stop-loss orders in and stay with your plan.  Don't let rumors or the screams of doom from others alter your resolve to stay with the program that has been successful for you.  If things do "explode", you have your stops in and that's what they're for!

Remain objective and don't get subjective.  This is even another "stick to your plan" kinda' thing.  Lately, from some traders I have heard things like; "well my numbers say I should... but I really believe that the market will....!  When asked about their recent performance, they have to admit that things haven't been going too well.  You must stay with your system.  When you start to "out-guess" the market and your system, you are guilty of the same thing as the tip above, only it is you, yourself that is creating the problem.  You have employed a system because it works... don't try to second guess it. 

Know your competition.  Whether you are a fundamental or technical trader, now days you must know the finer points of both.   Even if you don't believe in trading fundamentally or perhaps technically, in order for you to have an idea what your fellow traders might do in a given situation, you have to understand the way they trade.  This education may even help you hone your own trading program by encouraging you to use a combination of the two main methods.

The fear to make a trade is worse than making a losing trade.  I have spoken with three professional traders lately that have had recent problems with their trading systems.  Two of the three have gotten to the point of refusing to even make a trade because of fear of making a bad trade.   This understandable yet damaging fear can end a trading career.  If you suffer this problem, take a little time off to clear your mind, refine your system and follow it for a few days, then get back in the game and make your trades.

Green is also the color of envy.  Your system has been working fine, and you are generating a nice income from the profits, but you are only generating 4 to 8 percent a month.  You notice that a friend or another trader is talking about making 20 to 70 percent a month on their trades.  You decide to "push" you system to keep up and make all that money you have been missing.... BIG MISTAKE!!  Watch you own system.  As a famous man once said... "watch your pennies and the dollars will take care of themselves".

Then red must be the color of anger.  So you've lost... move on.  Like any other thing in life, if you concentrate on being upset or angry with something, you have no time to focus on the main objective.  In this case it is the preparation of your next trade.  You have no time to waste being elated with a win and you also have no time to waste being angry with a loss.  You are in a very intense business here, and you must keep your mind on preparing for each trade with a clear mind.

Learn from each trade.  Don't just analyze the trade before entering it, analyze it after it is completed too.  Whether you profit or lose on a trade, there is something there to learn.  You must objectively analyze it and see, if a win, is there a way you could have made more, and if a loss, is there some information you overlooked that would have prevented you from making the trade in the first place.  Keep notes of your analysis and refer to them when doing your next-trade research.

If it ain't broke... build another one.  If you are a system trader, you have no doubt experienced a time when your system quit working.  You were then "down" until you had revised the system to once again operate properly in the current market conditions.  In anticipation of such a thing happening again, (and they always do), begin working on you system to "tweak" it to the current conditions and see if you can even make it better.   Don't mess with the profitable system, just make another copy and work on it.   If you stay ahead of the game, you won't be as far behind when the markets change.

Pay attention to the indicators.  Even if you trade technically, you must pay attention to the common and recurring fundamental indicators.  Years ago it was the money supply numbers, then unemployment, then (and now) the Fed and G-7 meetings.  These things will always cause some kind of market reaction.  Make sure you are aware of the times these recurring events take place, and consider them when planning your trade.

You can make money in flat markets.  Don't be afraid of writing options.  If you are convinced that a market will not be moving up or down dramatically in the next month or two, and if you have the ability to understand option writing and the implications of being "assigned", then don't overlook the premium income that can be generated by shorting the calls and puts.  Remember that writing options carries unlimited risk, and there are margin requirements, but also remember that writing options is where the majority of the money is made in option trading.  Be sure you understand them before trying the strategy.

Align yourself with the winners.  Instead of getting angry at the people that seem to make all the money, try to understand what they do right, and emulate their process.  Never close your mind to new opportunity, and whether it's the trader down the street or a local on one of the exchanges, if you can learn their secrets, you may improve your system, or even design a new one for testing and later use.

Relax.  Stress is a major contributor to losing.  Recently many of these markets have been so choppy that even the best systems have "crashed".  If your system has had this problem, don't be overly concerned.  If it is starting to hurt your equity, take that much needed break from trading and just relax for awhile.  This may be a good time to start working on your system to see if you can get it more in tune to these market conditions.

Don't ignore what the public expects.  When trading fundamentally it is often possible to draw the wrong conclusions from some information.  For example, if crop estimates for soybeans appears very large, you, as a fundamental trader may decide that this is very bearish for the price of soybeans.   It may be, but you had better check to see what the demand will be for the beans as well as for the beanoil and beanmeal.  Even though you are facing an abundant harvest, if the demand is very high, the scenario may actually be bullish...  Check ALL the information pertinent to your contracts when trading fundamentally.

How To Maximize Profits By Investing In The Stock Market

There are 3 things you need to know if you want to maximize how much money you make investing in the stock market:

1)  WHAT stocks to buy  2)  WHEN to buy and 3)  WHEN to sell

You must know all three to make the most money.  If you are missing any one of these, then you cannot maximize your returns.  Or worse, you could even lose money.

Of these three, knowing what to buy is by far the easiest.  There are a lot of good stocks out there that will make you solid returns over time.  For example, in the past four years, ten of the thirty stocks in the Dow Jones Industrial Average have tripled!  That is one-third of the index!  With just a basic understanding of what drives stock prices, an investor can choose more of the stocks that will give this type of return.

The other two — when to buy and sell — that is where most investors get into trouble.  Looking  back, we can see that you could have bought almost any stock in 2009 and have made a profit by 2013.  Many have doubled or tripled.  As long as you didn’t pick some deadbeat penny stock, nearly all stocks have gone up since 2009.  But it would have been terrifying to buy back in 2009 after a horrible drop in stock prices in October 2008.  I was working from home at the time and was thankful I was not in the markets at the time.  I knew that other people, both amateurs and professionals, were experiencing a freakish hell as the stock market crashed.  However, if you know what to look for, you can make a reasonable estimate and buy somewhere near the bottom for a fine profit.

The hardest of the three is knowing when to sell.  Let’s say you have a nice profit in your stocks.  You don’t want to sell too early if stock prices continue to climb.  On the other hand, you don’t want to lose your profits if the market is headed for another bear market that wipes out 25-50% or more of your profits.  There are ways to know that the bull market is likely going to end soon, and signs that it has very likely already ended.  Like I have said before, a little knowledge goes a long way in the stock market.

Top Ten Tips for Successful Online Stock Trading

Here are ten simple rules for online trading success ...

1) Choose Your Trading Style Carefully. Give plenty of thought to what kind of online stock trading you want to do. Would you prefer day trading, where you close out every trade at the end of each day? How about short-term trading where you are in a position several days at a time? Maybe you'd rather be a weekly trader or monthly trader. Though you can always change your mind, it's wise to have a clear idea of the style of stock trading you prefer BEFORE you start. 

2) Match Your Trading Style To Your Lifestyle. Your choice of trading style is especially important from a lifestyle perspective. Day trading usually means you will be at your computer for hours at a time. Longer term online stock trading doesn't require as much attention. As a rule, the shorter the time frame the more intense the trading. 

3) Select A Broker That Matches Your Trading Style. The type of online stock trading you choose to do will determine the type of broker to use. Day traders need high-speed direct access technology. Short-term daily, weekly, and monthly traders can use less sophisticated discount brokers. When it comes to broker fees and other costs, day trading is the most expensive.

4) Use A Low-Risk High-Reward Trading Method. Stock trading involves risk. Most people inflict serious damage to their trading account before they learn how to win consistently. Though it may not seem glamorous, risk management is essential for successful online stock trading. The only way to get the reward is to control the risk. 

5) Make Sure Your Trading Method Works in All Markets.

The stock market doesn't just go up. It goes down too - sometimes for months or years. Use an online stock trading method that takes advantage of both down-markets and up-markets. 

6) Trade The Best Stocks. Superior stock selection takes advanced skills and extensive research. Unless you are extremely skilled with lots of spare time, it's usually best to seek the advice of a professional. Avoid big brokerage firms and mutual funds. Facts show that most of their trading "experts" end up losing money. 

7) Know When To Sell Your Stocks. 

Everyone focuses on what and when to buy stock, yet few ever consider the best time to sell. Paper profits only become real money when you convert them to cash. Don't let your stock gains disappear due to neglect. Plan ahead. Before you get in, always know the specific conditions that will signal when it's time to get out. 

8) Check Your Winning Edge. A "winning edge" consists of the favorable factors that set winners apart from losers. You must have a reliable advantage to consistently make money trading online. Ask yourself - "What factors give me an edge?" Be specific. If you aren't sure, you probably don't have an edge. The only way to know is to analyze your methods and measure your results. 

9) Invest in a good online stock trading education. Surveys show that 9 out of 10 investors believe their chances of winning are "above average" yet more than 80% of them actually lose money. This is simply because they don't have the specific information needed to win. As we say , "If you think education is expensive, try ignorance." 

10) Associate With Successful Online Stock Traders. Online stock trading presents unique challenges. Unlike traditional stock trading, there is no live broker to help you along the way. If chosen carefully, experienced online traders can be among your best trading resources. You may even wind up with a good friend!