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15 Common Investing Pitfalls
By Hari Wibowo

We touched briefly about common investing pitfalls here. Here is a more comprehensive list. Some of it may happen to the more experienced investors as well. This serves as a guide for Novice Investors:

Investing with debt. You should not invest when you still owe a lot of money in your credit card. Credit card interest can run to as high as 20% while in the long run, investing in the market indices can give a 10.1 % return historically.

Not Starting Now. By now, you should have known that compounding works its magic in longer time frame. The sooner you start, the longer time you let compounding do its magic and the larger your savings will be at retirement age.

Investing based on stock tips. Stock tips are just that, tips. It is supposed to help you invest but not giving you a shortcut. Doing your own due diligence is an absolute must even when you get stock tips from the so-called professional.

Investing for the short-term. The easy access of internet makes it cheaper for small investors to buy stocks online. However, short-term trading is not going to work, no matter how small your commission is. It is extremely hard to predict short-term movement of stocks. Traders come and go and those that stay seldom beat the market in the long run. Furthermore, what do you prefer? Spending a few hours each week and making a 14% return on your investment? Or spending 8 hours a day where the odd of beating the market is slim?  I would prefer to spend just a few hours a week, of course.

Buying stocks because the price is ‘low’. Yeah. That’s right. It is tempting for a lot of people. They figure, if a $ 1 stock can rises a few cents, they will make 20 or even 50 % of their investments !! Sure, you can. But the reverse holds true as well. With a few cents of movement, you can lose 20 or even 50% of your investment !

Investing in sectors you have no clue of. Biotechnology and RFID sounds cool. However, unless you are really really familiar with it, there is no reason to invest in it. You may know how Voice Over IP works, but do you know how does the company make money? If you don’t, then you should stay away from it. There are hundreds of other companies that are easier to understand than how gene works.

Checking your stock price often. You read today’s newspapers and you go straight to the stock price section. You arrive at the office and the first thing you do is going to Yahoo! Finance website. You went home and the first thing you do is turn on CNBC and check your stock price. Get the idea here? While you may check your stock quote anytime you want, but your time may be best served by doing other things. Finding the next best investment opportunity is one such thing.

Paying Too Much Attention to Past Result. A stock just drop 20% in a week and you figure, hey it is cheap. It has a P/E (Price over Earning) ratio of 7 ! Isn’t that cheap? Err…it depends. If you were talking about forward P/E, then of course the stock is cheap. But if you were talking about trailing P/E while your analysis shows that this company will never turn a profit ever again, then the stock is not cheap. An example would be looking at a type-writer company during 1980s.

Lack of Diversification. Investing in one single stock can make you rich. Imagine if you have put all your money on Yahoo! in 1997. It can also break you. What if you have bought into Enron stock instead? I believe your most important investing goal is capital preservation, not capital appreciation. Once you have picked a solid company, capital appreciation will follow.

Over diversification. Contrary to lack of diversification, Over diversification will give your portfolio a mediocre return. Furthermore, having 500 different stocks on your portfolio will cost a significant amount of commission. The ideal portfolio in my opinion should consist of between 7 to 15 different stocks.

Ignoring Insider’s Activity. Insiders are generally people with ownership of a company and who know the inside working of a company. While insider selling may not be negative signs, a spike in this insider selling may spell trouble. Insider buying on the other hand signals a vote of confidence for the company.

Buying Stocks On Margin. While using margin can enhance your return in a rising market environment, the reverse occurs when your stock price drops. As always, the most important goal of an investor is capital preservation, not chasing the highest return.

The Desire to Be Fully Invested. While having all your portfolio fully invested is a good thing, sometimes keeping cash is a better thing. I would prefer my money to earn a 0% return rather than buying a stock that lost 50% in value. Therefore, if you cannot find a good stock to invest, keep the cash.

Investing without knowing technical analysis.  We believe in investing for the long haul. However, it does not mean that we blindly buy any stocks that look undervalued. Supposed a stock A is undervalued at $15. If technical analysis predicts a steeper fall, would you still buy it? Of course not. We would rather buy the stock A at a lower price if all else remains equal.

Unrealistic Investing Goals.  You heard somewhere that TravelZoo (TZOO) rises 20 fold in 2004. That’s right. 2000% in a year. So, you figure, if you can pick 9-10 stocks and one of them rises 20 fold, then 50% annual return for your portfolio is a conservative goal. Well, not really. Think about this. Let’s say you start investing early with $ 1000 investment. If you can maintain 50% annual return for the next 35 years, your $ 1000 will grow to $ 1.46 Billion. Sure, you can have a good winning streak of 50% return for several years. But the odd is, you won’t achieve that for 35 years in a row.

You can view Hari’s other commentary at http://www.noviceinvesting.com. Yep, it is free. No string attached.

Article Source: http://EzineArticles.com/?expert=Hari_Wibowo

Stock Trading Basics
By Mark Crisp

One axiom of technical analysis suggests that while prices may fall of their own weight, only volume can drive prices higher over time. The spring
advance of CACI International, an information systems and high technology
“solutions” company out of Virginia, is one of the best examples of this
phenomenon I’ve seen in this spring rally.

CACI was moving in a tight consolidation from mid-February into late March
when the first significant high volume day occurred on March 27th. The
uptick in on-balance volume (overlaid on the volume chart) supports the
heavy buying, as does the bullish candlestick. Even though CACI continued to
trade in a very tight range for another three weeks, the heavy volume day on
March 27th was a tip-off that buyers were interested in seeing this stock go
up–moreso than sellers were looking to get out of their positions. From the
beginning of the year until the first big up moves in late April, CACI has
advanced from about 22.5 to 28. While this 24% increase is a more than
reasonable return, the rising on-balance volume strongly suggested that
holders of the stock believed there was more to come.

In most cases, given a market with a neutral or mildly bullish bias, the
only thing that would keep a stock like CACI down (outside of a catastrophic
event) would be the determination of holders to sell, which is not reflected
in the rising on-balance volume, nor in the tightness of the
consolidation–particularly between late February and early April.

As good as the returns from CACI were from January to late April, the
advance from late April to late May was nothing short of spectacular, In
about 30 days, CACI climbed over 53%, largely on the backs of heavy buying
on May 9th and 10th, as well as on the 22nd, 23rd, and 24th. Unlike many
high-volume, high percentage moves, CACI’s advance had almost no gaps. In
fact, each advance was supported by a significant support area of at least
two weeks. Nearest support currently is at 36.5 as the stock trades in the
low 40s.

The importance of these small support areas is that the advance is more
likely to be sustainable if there are areas to which CACI can retreat. The
pair of two to three week support areas here can function as places where
selling can occur without overly disrupting any renewed advance. This is in
contrast to what are commonly called “V” advances in which stocks that have
declined rocket upwards without pause, often reaping brief, but fleeting
gains. Advances that come with both heavy volume and short-term support
“platforms” are much more likely to provide reasonable entry points than
those without.

MSTS picked up CACI last week. Already it is showing a nice profit.

Mark Crisp

The Momentum Stock Trader

http://www.stressfreetrading.com

Article Source: http://EzineArticles.com/?expert=Mark_Crisp

Tips for Investing
By Jeff Lakie

Many people want to take advantage of the opportunity to invest as a way to supplement their income, but few people have the knowledge or the time to monitor stocks and they are reluctant to pay the high fees associated with full-service brokers.

As well, most people know that a diversified portfolio is the best-performing portfolio, but few people have the huge capital it takes to properly diversify a portfolio made up only of stocks.

One option for those people is to purchase mutual funds.

A mutual fund is a pool of money from a number of investors and it is given to a mutual fund manager to go out and buy a good selection of diversified, well-performing investments.

There are many different types of mutual funds, so there is something out there for everyone. If you like bonds, for example, you can buy a mutual fund made up just of bonds and its return is probably better than most bonds available on the market today because they use a laddering concept to buy and sell bonds strategically. The income from this fund comes from the interest paid on the bonds. These are called fixed income mutual funds.

If you like stocks, there are many mutual funds available for you to consider, from riskier ones to safer ones to funds that trade primarily in overseas marketplaces. You will likely find a mutual fund that matches your risk tolerance, gives you a good return, and provides you with some diversification. The income from this fund comes from buying it the stocks low and selling them high. These are growth mutual funds.

Some of the consistently best-performing mutual funds are funds that are a combination of fixed income and growth. These are called growth and income mutual funds and they combine bonds, dividend paying stocks, and growth stocks altogether in a diversified fund. The income from this fund comes from a combination of bond interest, dividend payments, and growth-style selling. It is an excellent choice for putting in your portfolio. If you can only afford one mutual fund, this is probably the fund to purchase.

Whether you are trying to avoid the fees of a full-service broker, or are trying to invest wisely with a brief amount of time you have in the week, or are simply trying to diversify your portfolio, a mutual fund is an excellent choice. And a growth and income mutual fund, is usually the best choice.

What’s more, mutual funds are professionally managed, which means you don’t have to spend your day watching stock prices go up and down. The mutual fund manager does that for you. He or she watches the individual stock prices, makes adjustments, and sends you a report on a regular basis.

Jeff Lakie is the founder of Investing Resources a website providing information on Investing

Article Source: http://EzineArticles.com/?expert=Jeff_Lakie

Mutual Funds Tip for More Profits
By Larry Potter

The mutual fund industry has staked its claim to the confidence of investors by establishing a tradition of plain dealing, honest accounting and overall trustworthiness. If there were sharks on Wall Street, they didn’t swim in the mutual fund sea.

That image changed early September, 2003 when the attorney general of New York State announced a $40 million settlement on insider trading charges involving a hedge fund and several mutual funds. Further revelations brought the impact of Wall Street’s recent reforms into question and cast the fund industry in a distinctly negative light.

The initial charges centered around the hedge fund Canary Capital Partners and Bank of America’s Nation Funds and Bank One’s Banc One Funds. Among the alleged improper activities is the charge of “back-dating” the Net Asset Value, or NAV, of shares for select customers at the expense of others.

The pricing of NAV is supposed to take place at the close of every session. An investor who can back-date his shares can take advantage of a news event after the close that will impact the NAV the next day. Buying a technology mutual fund after a big announcement by Intel or Microsoft at 4:15 p.m. means that the customer will benefit from the likely upward move the next morning.

There were other shenanigans, all of which is letting air out of the balloon of trust in the fund companies. Right now the New York AG is still investigating Bank of America and Bank One along with Strong Capital Management and Janus Capital Group, the Vanguard Group and Invesco funds. Illinois regulators are looking into the practices of Samaritan Asset Management Services. The financial regulator in Massachusetts is probing Prudential Securities and associated fund companies. The SEC has sent out letters requesting information to Merrill Lynch, Goldman Sachs and Fidelity Investments.

That covers a big chunk of the mutual fund industry. If you have money in a fund from one of those companies, this is not necessarily the time to bail out. But you should invest with your eyes open.

For ages we’ve questioned the priorities of mutual fund managers, and the whole brokerage business for that matter. Our question: Are they in it for you, the investor, or for themselves and the string-pullers in the boardroom?

Last year we ran a piece on a fund manager who was eased out of his position because he failed to put all of his cash to work in stocks and warned of the pitfalls of the industry’s standard “buy and hold” strategy during a bear market.

We drew three lessons from the story:

First, with a few exceptions mutual funds and the entire brokerage industry are devoted first and foremost to making money for the company. If the customer makes money, too, that’s fine. The buy and hold strategy is the prime reason why millions of investors have lost much of their retirement savings from 2000-2002.

Next, if you invest in mutual funds, you’re usually better off using index-tracking funds that simply follow the S&P 500, NASDAQ or DOW and are less likely to be manipulated by management.

Finally, take control of your financial destiny by setting up a model portfolio. Closely monitor it, and jump in and out of the market as the trends come and go.

For more FREE trading tips, enter your email address at:

http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=12826

Article Source: http://EzineArticles.com/?expert=Larry_Potter

Stock Options: Limited Loss and Unlimited Profit
By Jon Weaver

Many people believe that the stock market can make you rich one day, but also make you bankrupt the next. Well, how eould you like to know about a method of stock trading that completely saves you from unlimited loss, but still leaves the door open for unlimited profit? That method is buying and selling stock options. How to trade stock options would best be explained using the following example.

Lets say a person who thought that a stock selling in the market at 50 would decline to possibly 30, that person could buy a Put stock option. Not, however, that in buying a stock options, one should have some idea to what extent the stock might move.

In inquiring what a Put stock option would cost, the person might receive a nominal quote of, say, $350 for a Put at the market for 90 days. Most options are negotiated “at the market,” which means at “the current market,” when the option can be obtained by the option-dealer.

Suppose that the stock is selling at 50 and the quoted price of $350 is satisfactory to you. You enter your order: “Buy a 90-day Put on 100 XYZ [the name of the stock] for $350.” If you are trading through your stock-exchange broker, the broker will give your order to an option-dealer who will contact one of their clients who sells options on that stock and will attempt to buy the option for you.

When, after this contact or several others, the dealer has obtained the Put option for you, the dealer reports to the stock-exchange broker who gave him the order, and the broker in turn reports to the customer: “Bought Put 100 XYZ at 50 expires December 30 for $350.” Let us say that the person who bought the Put option, expecting a decline in the stock, was wrong, and that the stock, instead of going to 30 (as expected), advanced to 70 and was selling when his option expired. The person would have lost the $350 that they paid for the Put option.

Bear in mind that the limit of the person’s loss was the cost of the Put option, or $350, no matter how high the stock rose and no matter how wrong the person was, and that the person would draw on the equity in the account to that extent only. Suppose, on the other hand, the person had sold the stock short in the market. The loss would have been 20 points and still no knowledge as to the possible extent of loss until the person covered the short sale. But in the purchase of the Put option the account would read:

Bought Put on XYZ at 50 for 90 days: Loss $350

Remember, too, that no trade has been made in the stock, so no stock-exchange commission has been paid. A regular stock-exchange commission is charged by your broker only if a transfer of stock is made in connection with the option.

On the other hand, suppose the person’s judgment was correct and the stock declined to 30. If the person had instructed the stockbroker to buy 100 shares at 30 and exercise the Put option, the account would look like this:

Sold 100 shares at 50 (through exercise of Put) $5,000

Total Receipts $5,000

Bought 100 shares in market at 30 3,000

Bought Put at 50

Cost 350

Total Cost 3,350

Profit on trade $1,650

The profit then would be almost 500 percent of the cost of the Put contract. The profit is the difference between the cost of the stock plus the cost of the Put option and the proceeds of the Put that was exercised.

In all of these examples showing the use of options, the commission cost has been ignored. But at no time could the loss have been more than the cost of the option - $350 - and any stock-exchange commissions would have been paid out of profit or out of possible recovery of part of the premium which was paid.

For more FREE information and articles on how to correctly buy stock options, when to trade, when to not trade, tips, tricks and advice — visit http://www.UnderstandingStockOptions.com.

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Making Thousands In The New York Stock Exchange - Hidden Ground Breaking Rules
By David Jenyns

Once you have decided to begin trading in the New York Stock Exchange, there is a bewildering variety of information and advice out there that will guarantee to put you on the way to success. A lot of the New York Stock Exchange advice is good, and some of it isn’t. So where do you start this difficult task? Here is a broad outline of what I consider some of the ground rules you need to cover to begin trading successfully in the New York Stock Exchange. As you progress in your trading using the New York Stock Exchange, it makes sense to learn more about specific parts of trading, but everyone needs to start somewhere.

I’d start with defining your portfolio objectives. These objectives will have a great impact on your style of trading in the New York Stock Exchange. Ask yourself a few questions, such as these, to find your objectives.

* Do you want to trade part-time or full-time?

* How much money do you have to work with?

* What annual rate of return do you want?

* Are you creating a trading system using the New York Stock Exchange for cash flow or capital growth?

Once you’ve set your objectives, you should select a certain stocks to trade with in the New York Stock Exchange. It’s a good idea to avoid the tendency to trade any and all stocks. Many traders fall into the trap of thinking that the more stocks they trade on the New York Stock Exchange, the more money they will make. Unfortunately, this is not true. You need to master and learn about the characteristics of certain stocks that you will consistently trade with in the New York Stock Exchange. Did you know that some of the most successful stock traders only trade using certain stocks? This fact is the key to making real money.

With your objectives and the certain stocks picks you have in mind, the time has come to design your trading plan - your set defined rules you’ll use while trading into the New York Stock Exchange. A well-thought-out trading plan defines your approach to trading in the New York Stock Exchange. Also, a properly constructed trading system for entering and exiting the New York Stock Exchange, leaves no room for human judgment. It should be able to respond to any set of circumstances that arise with clear actions.

The importance of this kind of trading plan - your set defined rules for tradng in the New York Stock Exchange, cannot be overstated. Without a consistent set of guiding principles to govern their trading decisions in the New York Stock Exchange, most traders hop from one trade to the next, driven by emotion or hysteria. When you don’t have a plan, you plan to fail.

Try and keep your system simple. Many traders complicate their trading systems with out even trying. They accomplished this by over-optimizing. So many indicators are added to their system that it becomes nearly impossible to trade. Instead, keep your system as simple as possible. This way, it is robust enough to trade across many market conditions.

Once you’ve designed your system follow it perfectly. This requires a great deal of self-disciple, but bear in mind that your will be rewarded with success. Either undisciplined behaviour or ignorance will be punished by the market in the end, coming by way of direct losses or by the loss of profits, you could have made. However, the market is complex, and does not always act as you might expect. There is a principle of random reinforcement that you might encounter. The New York Stock Exchange has a tendency to reward bad behaviour from time to time. This tendency is one of the reasons why it often takes so long to learn how to trade. Keep these principles in mind so that you will not be surprised, but remember there is no point in having a system if you are not going to follow it.

When you are ready to trade, in the New York Stock Exchange, start small. Give your confidence time to grow, and give yourself time learn the intricacies of your system, and your stock picks. There is always a learning curve when you begin trading in the New York Stock Exchange. It makes sense to take the time to learn the ins and outs of the New York Stock Exchange before you start adding more positions.

Now that you’ve started trading, in the New York Stock Exchange, I have one last, crucial piece of advice for you. Follow this rule when you’re trading in the New York Stock Exchange. Despite the fact, everyone knows the old adage of “cut losses short and let profits run”; many traders fail to do this. Have strategies built into your system to ensure that these rules are followed. Adages only become old when they have proven to be effective.

I could go into much more detail on many of these points, but this is only a broad overview of the steps you need to take when you begin trading in the New York Stock Exchange. With commitment, discipline, and careful consideration, soon you will be well on your way to being a successful New York Stock Exchange trader.

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David Jenyns is recognized as the leading expert when it
comes to designing profitable stock trading systems.

Discover the “secret formula” of trading that anyone can use
to consistently generate BIG profits from the market by
downloading your FREE copy of David’s new Ultimate
Stock Trading Systems course.

Click Here To Download ==> Stock Trading Systems
http://www.ultimate-trading-systems.com/stocks.htm
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-

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Losses, not Profits, will Stop You from Trading in the Market
By David Jenyns

Should the market turn against you, it is important that you design a system that will produce as much loss as you are prepared to take. This loss, known as drawdown, is the maximum amount by which your trading float will temporarily drop at anytime. Doing this in advance, will help you avoid nasty surprises in the future. This gives you the confidence to continue trading when the good times start once more.

It is very unlikely that you will stop trading if your system is trading profitably. However, if you are in a trading year that takes too big a loss, you are likely to stop trading, even if your system has been tested and shown to make a profit over a longer time period. Therefore, design a system based on the risk you are prepared to take which includes a budget for your drawdown.

So how does one pick the best formula for your drawdown time? I will rephrase this question. How many losses in a row should you allow for?

First, I will use the simple example of tossing a coin. If I tossed a coin and it landed “Heads Up” 10 times in a row, are you surprised? However, if I tossed the coin 800 times, your outlook on the results are different.

Trading uses the same scenario. When testing your trading system over many years, you will find a run of 10 losers or 10 winners in a row. Mathematics provides some answers to the likelihood of this happening.

See the examples given in the table below:

———————————————–
Probability of Losses in a Row
———————————————–
System Win/Loss Ratio 60:40 50:50 40:60
———————————————–
5 losses in a row 1% 3% 8%
6 losses in a row 0.4% 2% 5%
7 losses in a row 0.2% 1% 3%
8 losses in a row 0.1% 0.4% 2%
9 losses in a row 0.03% 0.2% 1%
10 losses in a row 0.01% 0.1% 0.6%
———————————————–

A typical trend following a system has a 50:50 win: loss ratio. That is, half of the trades are winners and half losers. This is not a problem, because winning trades will make a larger profit than losing trades will make a loss.

A 50:50 system has a 1% chance of seeing seven losses in a row. Therefore, most trend following systems should budget between five and nine losses in a row. The good news is that there is the same chance of getting between five and nine winners in a row!

I hope you see the importance of making these decisions before you begin trading. Making the proper decisions before you start is what successful trading is all about.

-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
David Jenyns is recognized as the leading expert when it
comes to designing profitable trading systems.

His most recent course Trading Secrets Revealed is a step-
by-step trading roadmap to having excellent money management.
Learn how *you* can become one of his students.
Click Here ==> http://www.trading-secrets-revealed.com

Receive David’s free trading tips by sending a blank email
to: ==> trading-secrets-revealed.com@getresponse.com
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Little Known Tips To Wipe Out Day Trading Losses Guaranteed
By David Jenyns

Studies have shown that you should never risk more than 2% of your float on any trade. Why 2%? Well, in fact, many day trading professionals will tell you that 2% is too much. They’ll risk 1% or even as little as a quarter of a percent on any trade. Whatever percentage you pick, the idea is to ensure that no one trade is really going to affect your day trading float, positively or negatively.

Many traders don’t appreciate how powerful this rule is. By simply changing the amount of capital you risk in your day trading, you can turn a system from returning 10% to returning a 100% per annum. Now, by increasing risk, and investing more in a trade, you do increase your chance for reward. However, you also end up increasing your draw down as well. You may want to do a bit of testing to understand the importance and the power of changing this one variable. I always recommend that you never exceed a 2% risk. Sometimes it is difficult to understand this simple fact; keeping your losses small will help you be successful in day trading.

Let’s look at an example of the 2% rule in action. If we had a day trading float that was $20,000, using the 2% rule we set our maximum loss to be $400 on any one trade. With this maximum loss, we could have a string of 50 losses in a row before we had no more capital left to trade with. In most day trading systems the chances of getting 50 losses in a row is very, very slim. However, the chances of going broke are even smaller, because when you implement the 2% rule correctly, the calculation is based on the current float size.

So, initially 2% of $20,000 is $400. However, if we experienced a loss first off, our day trading float would now be worth 19,600 dollars. We then calculate 2% of this new value, and set our maximum loss for our next position. 2% of $19,600 dollars would be $392. You can see that each time we experience a loss, our next maximum loss would shrink. As our portfolio increases in size, we’re happy to take on more risk as well.

I thought I’d play around with a few of the figures just to see what would happen if we had a string of six losses in a row. After receiving six losses in a row, our day trading float would have decreased to only $17,717. After six successive losses, we’ve only lost $2,283. Now, that’s managing your risk.

The fact that the loss is such a small component of our day trading float makes it much easier to gain back those losses. In this example, we’ve lost a little bit more than 10%. To gain back that loss and break even, we’ll need to make 11.1%. Now, imagine if we didn’t have good money management in place and we had a draw down of over 50%. If we have a draw down of 50% and we loose it, we need to make 100% return on our remaining capital to break even. You can begin to see the how a larger draw down makes it more difficult to recover from losses.

Novices often risk more than 2%. Even if you’re starting out with a small day trading float, you should practice good money management. You need to position yourself so that you can endure long strings of losses, and maintain your day trading system. When the market does turn around, you’ll be in the market positioned to capitalize on it’s moves. That’s what setting the maximum loss is all about, it keeps you in the market, allowing to you to keep your day trading system going. If you can survive some losses in your day trading, the profits will come.

David Jenyns is recognized as the leading expert when it
comes to designing profitable stock trading systems.

Discover the “secret formula” of trading that anyone can use
to consistently generate BIG profits from the market by
downloading your FREE copy of David’s new Ultimate
Stock Trading Systems course.

Click Here To Download ==> Stock Trading Systems
http://www.ultimate-trading-systems.com/stocks.htm

Article Source: http://EzineArticles.com/?expert=David_Jenyns

Investors - What Separates the Good Traders from the Bad Traders?
By David Jenyns

There are many forms of investing online. While I can give you a list that is a mile long, these are the most common forms of successful investments. Some of the following know how to invest terms are:

1. Option trading

2. Future trading

3. Currency trading

4. Stock trading

5. Future trading

6. Forex trading (or) foreign exchange trading

I want to start this investing online critique out with a story… On a beautiful late spring afternoon, twenty-five years ago, two young men graduated from the same college. These men were very much alike. Both, better than average students, were personable and filled with ambitious dreams for the future.

For the sake of my example, I will set both college graduates off online trading using a day trading plat form. Through a gift, both start with the same online investing investment risk capital, the same daytrading plat form, and the same trading system with precise rules for entry and exits.

Shockingly, there is a difference. After one month, one day-trader went broke / bust, while the other day trader returned a 20% profit.

Have you ever wondered, as I have, what makes this kind of difference in people’s trading? It is not always a native intelligence, talent or dedication. It is not that one person wants success and the other does not.

The difference lies within the psychology of the brain. Your psychological mind set is likely to play a larger role in your trading online career than your chosen technique or any other details associated with your day-to-day practice.

Here are some good examples:

1. One person looks at a glass ½ empty, while the other personality looks at that same cup as ½ full.

2. Someone may look at problems and call them stress, while another individual looks at troubles as challenges.

3. Another one may look at a ship in a storm as an adventurous roller coaster ride, while another human being sees the same situation as a hurricane that has a death call.

I am not the only one to discover this…

In his book, “Trade Your Way to Financial Freedom”, the renowned American psychologist Dr. Van Tharp discusses the role psychology plays in trading success. He divides trading into three Ingredients.

In his pie chart:

– System is 10%

– Money Management Success is 30%, and
– 60% pertains to the psychology of thought and emotion.

Tharp discovered that the trader’s psychology make up of the mind has more to do with his success than anything else does.

However, what exactly is the psychology of the mind?

In short, the psychology of the mind refers to your thinking and emotional actions and responses to any given situation…In trading, fear, greed, vanity, pride, hope, jealousy, denial - all these can affect investment decisions. Although, your aim in the market is to maximize your profit and minimize your risk, thinking and emotions often make this easier said than done.

FOR EXAMPLE - Traders, who cannot control the psychological process of thought and emotion, make the wrong decision - such as the common amateur mistake of holding a losing position in the belief that someday it will become a winner.

Loss aversion is a classic mistake. By nature, humans value a loss. Therefore, you suffer almost twice as much pain losing $1 as you would in gaining $1. Loss aversion compels most traders to hold a losing stock while it plummets downward. This clouded judgment clearly contradicts the trading adage: cut your losses and let your profits run.

Emotional investors hold losing positions because they view paper losses differently from realized losses. An investor also engages in other forms of irrational behavior.

EXAMPLES are attributing success as natural and losses to bad luck.

This is just the tip of the iceberg. When talking about the other devastating effects of trading, if you do not have the psychology of your thought and emotions in the proper prospective the consequences can be devastating.

This is what opens up problems for new traders, and then they lose manage money very quickly in the markets. Most people completely wiped out their finances within the first year of trading. So, as you can see, your thinking and emotions play a big part in determining whether you fail or succeed, but did you know that thought and emotion make up two different spheres pertaining to trading success?

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David Jenyns is recognized as the leading expert when it
comes to designing profitable trading systems.

His most recent course Trading Secrets Revealed is a step-
by-step trading roadmap to having excellent money management.
Learn how *you* can become one of his students.
Click Here ==> http://www.trading-secrets-revealed.com

Receive David’s free trading tips by sending a blank email
to: ==> trading-secrets-revealed.com@getresponse.com
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Insider Trading - Blogging That Might Be Risky Business
By David Jenyns

Web logs are growing at an exponential pace on the internet, with an unpredictable and dramatic rise in new users and new services. A study by Jeffrey Henning recently predicted that there will be a total of 53.4 million blogs by year’s end, with thousands being created weekly. But it’s what these blogs contain that interest traders.

Blogs can cover topics as serious as the war in Iraq or as ridiculous as pictures of things placed on cats, but they are the way people all over the world have begun communicating their thoughts, their feelings, and their day-to-day news. And this day-to-day news, which often includes work-place information, is what is worrying regulators, and corporations.

And while the media digests the landmark Martha Stewart insider trader trial, the spotlight is now turning to blogs – potentially the new hotspot for insider trader. Market commentators are already predicting that certain blogs may be crossing the border between up-to-date news and insider trader, and corporations have started looking carefully at employee blogs.

`What regulators may be scared of is the potential for this new media to leak stock price sensitive news to the market,` Mr. Jenyns explained. `Just think about it, thousands of trading blogs and hundreds of active bloggers from fortune 500 companies making posts every day. These bloggers talk about everything from their private lives to the inner working of the businesses. Sometimes this news is unreleased to the market and can potentially tip traders to buy or sell stocks.`

Insider trading is the buying or selling of stock based on information not available to the public, often caused by a leak. With this danger obviously increased by the availability and popularity of blogs, regulators have begun watching the blog community carefully. However, even in the face of such scrutiny, some trading experts believe financial blogging can benefit the everyday traders.

Jenyns explained, `For the first time in history, there is a level playing field. Brokers and their top clients no longer have the edge. In trading, the edge is all about having breaking news. Now the latest information is available to anyone with internet access, and people are sharing not only their news, but their experiences with the market. With blogs like mine, everyone can have an `edge`.

Can blogs revolutionize stock trading? David Jenyns of SystemTradingBlog.com thinks so.

David Jenyns is recognized as the leading expert when it
comes to designing profitable trading systems.

His most recent course Trading Secrets Revealed is a step-
by-step trading roadmap to having excellent money management.
Learn how *you* can become one of his students.
Click Here ==> http://www.trading-secrets-revealed.com

Article Source: http://EzineArticles.com/?expert=David_Jenyns