Moving Day
Do you know what time it is? Are you ready for some football? Always an exciting time of year when the NFL kicks off a new season. Playing high school and college football myself has definitely left an imprint on my brain. It seems that at the start of each fall season I can still smell triple sessions in the air. Icy hot and ice-tub limb soaks were a vital ingredient to mend our aching muscles as our bodies got acclimated to the physical pounding it was to endure over the next 3 months.
Well my football days are over as I hung up my cleats years ago for pursuit of a career in the financial markets. Not much different when you think about it as the market can throw some bone-crushing financial shots as well. Glutton for punishment I guess…As we successfully navigated our way through the markets over the years Steph and I have come up with a few tips that we want to share with you. We always keep track of a few things; the time of year, the hot financial news flooding our in-box and the market mood.
When we look at the time of year and turn to the calendar with the start of football season upon us, it means one thing; the 3rd Quarter is 1/2 complete. Back in April we wrote an article about crucial times of the year in regards to your investments and the overall health of the economy (“Punishing the Bears at Tax Time?“). As a reminder we spoke of the first key date being December 31st. Tracking price action from the closing price on the last trading day of the year gives us a sense if things are doing better or worse than the previous year. We call the first quarter of the year (January to March) “Testing the Waters”. Man, how we yearn to see the heights of the stock market after the first 3 months of the year.
The second key date we spoke of was tax day (April 15th). Since many Americans are procrastinators by nature, they tend to invest last minute in their retirement portfolios on April 15th to take advantage of tax incentives. We call price action in the second quarter (April to June) “The Set-Up”. This is the most important quarter of the year in my opinion because if we see follow through in the direction of the first 3 months (i.e the stock market was going up) we most likely would be sitting pretty. Things were looking great through April but all of a sudden we got into the summer months and saw the “Flash Crash” as the Dow Jones Industrial Average dropped more than 1000 points inside 5 minutes. Yikes!! All the gains of the year wiped clean in a blink. As price action now waffles above and below break-even on the year it leaves me thinking about what can happen the rest of the year.
We call the 3rd Quarter “Moving Day” and its time for a move. We have pessimistic financial news flooding our airwaves lately and its hard to dismiss the negative thoughts. Eight months into the year and the SP 500 went from up near 10% at its height in April to now being down nearly -3% YTD in August. The EUR/USD was down more than 20% during the first 5 months of the year as the US dollar surged only to see half of those losses erased over the last 3 months as the fed continues to broadcast global instability and bad employment data here at home. With interest rates locked nearly as low as they can go the Fed now concerns itself with a double dip recession. After already playing all-in on the lower interest rate hand Bernanke and company now consider buying back treasuries as their next weapon to stave off the negative news.
The pessimistic views out there are sure to bring some wild swings as we approach one of the most volatile months of the year (October). With all of this in mind it brings me to my reality meter or market mood (Yearly High plus Yearly Low)/2 = 50% to give me confidence in direction. If prices are above 50% I am bullish. If price action is below 50% I am bearish. Looking at the entire picture (time of year, the financial news and the market mood) after the wild swings subside we will most likely be right at equilibrium (50% of the yearly range). The 2nd Quarter “Set-up” pushed us back to the mid-point on the year and its likely that’s where we will finish. 1111 is 50% YTD for the SP500 futures and 13228 is 50% YTD on the EUR/USD spot. I am a day trader at heart and adjust daily but if I were to predict where price action will take us over the 4th Quarter (“The Finish”), come December 31st, 2010 it seems a finish at mid-field is likely.
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Trading Commodity Futures and Foreign Currency (Forex) contracts may not be suitable for all investors. You may lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your FCM. The material on this website is intended for educational purposes only.
© 2010 RDS Trader, LLC. Have a specific topic you want to read an article on, email us your requests! info@rdstrader.com
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR ON YOUR WEBSITE? You can, as long as you do not alter the article in anyway and include a credit that reads: Financial Experts and Mentors Mike and Stephanie Radkay publish RDS Trader E-newsletter. If you are ready to ‘Take back your power, Invest with confidence and Protect your assets’ get your free tips now at www.rdstrader.com
Flipping the Bird
Did you ever read something in a book and it seemed to make sense when you read it, but you didn’t truly understand the lesson until you lived it? Sometimes it happens in reverse where you lived the lesson first and later find it in a book. With a shrug of confidence you say under your breath “Been There”, “Done That”.
I wanted to share with you a lesson that I learned trading the 30 Year Bonds early in my career about price action only to later read about it. Often times I laugh and joke about this lesson with my colleagues as we call we call it “Flipping the Bird” but officially it is called a “Head and Shoulders” pattern. Reliving the moment during my first experience I remember the pit noise roared to life as everybody starting bidding or trying to buy turning prices sharply higher. I happened to already be long (bought) the market. Man, What a rush!! Up $200, Up $500, Up $1000 all in the matter of moments. I started to feel the greed consume me. Up $1500 and still letting it ride…Awesome!! and then all of a sudden some news hit and all the bids dried up and the whole pit now started selling the prices down. At first I was saying under my breath, What’s wrong with you guys?!! Up $1000 and didn’t believe the new direction..First mistake…. Up only $500 and now I tried to sell with the sellers….Second mistake….Break Even $0….I said to myself, the market owes me $1500….Third mistake…Final tally, I puked down $1000 as prices continued to nose dive.
The funny part is this all happened within a 2 minute stretch. The feeling I had in my gut was the market just #%^@’d me or as we now laughingly call the “Head and Shoulders” pattern “Flipping the Bird”. The real lesson learned in fast market conditions was that when you decide to get out, don’t join the crowd and try selling where everybody else is selling (equivalent to a resting sell limit order) as there isn’t time to hesitate. Sell a price where somebody wants to buy it (equivalent to a sell market order) even if it is one you don’t like. Get in front of the crowd to exit the position!!
Head and Shoulder chart patterns generally signify a reversal and help confirm the shift when it appears in uptrends or downtrends as the example shows. Draw your trend line from the beginning neckline to the ending neckline. As prices break this key neckline a move to test the extremes of the starting point of this pattern and beyond is likely.
I don’t want anyone to lose money, but when the “Flipping the Bird” pattern develops, it will teach you so much about price behavior. Think of this pattern as a hand and, to me, it looks like the market is giving you the “finger”. You will begin to understand when you get involved in the direction of the break-out in the head portion, that you initially feel like a champ and retirement is around the corner. If you discover a sharp reversal in direction, a substantial loss could occur if you hold on hesitating in disbelief.
Remember the next time when prices shift violently in the opposite direction, don’t hesitate to act and realize the new direction in price is likely to take over and control the action for some time to come.
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Trading Commodity Futures and Foreign Currency (Forex) contracts may not be suitable for all investors. You may lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your FCM. The material on this website is intended for educational purposes only.
© 2010 RDS Trader, LLC. Have a specific topic you want to read an article on, email us your requests! info@rdstrader.com
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR ON YOUR WEBSITE? You can, as long as you do not alter the article in anyway and include a credit that reads: Financial Experts and Mentors Mike and Stephanie Radkay publish RDS Trader E-newsletter. If you are ready to ‘Take back your power, Invest with confidence and Protect your assets’ get your free tips now at www.rdstrader.com
Check Your Smoke Detector
Did you ever sit down to trade and realize the market price isn’t where you want it but you enter anyway without waiting for your spot? How about this one: you sit at your desk, scan the charts and see that if you sat down 5 minutes earlier you would have been able to take advantage of an awesome opportunity. I’m sure you understand the words floating in my head just thinking about it ( #%@$ me). Here is another: you know the trade is going to hit and realize that it may take an hour to get there but you can’t wait because you promised your family or friends that you were going meet them. Is the smoke starting to come out of your head thinking about all of those missed opportunities? I know a handful of traders over my 20 year career that can’t even step away from the market for a few minutes. They often joked they were going to put a catheter in just so they could relieve themselves without having to walk away from their computers. Sorry for the over-share but knowing some of those guys personally, I’m not sure they were kidding. 
A career in trading isn’t like most 9 to 5 jobs where you go to work, complete your daily tasks and pick-up your paycheck. This 24-6 trader job is more like a fireman or a policeman but without the promise of a salary. You can also end a trading day down money, which makes things a little tense at times. Needless to say your internal thermometer boils when the market isn’t in the right spot during your trading hours as you need to sleep and rest sometimes. With this notion swirling in your head and the clock ticking, it oftentimes leads to haphazard or random trades that leave you screaming and wondering in hindsight why you did them.
Those that step into this arena need to realize that we are “on call” like the policeman or the fireman and need to conserve our mental and financial energy so we can spring to action effectively and efficiently when the time is right. Most traders hear me and seem to understand this when I first say it, but when the dollars start flying around, all bets are off. Everybody gets so revved up they begin to start fires by not waiting for their entry spots and force trades due to impatience. The fear is that you might miss something big. Sound familiar? To avoid inactivity and waiting around most traders start shooting off their gun blindly (i.e trade at will) just to see if they can finally hit something. The problem is when prices do finally hit the original area of interest (and it always does), you can’t participate because you are either out of bullets or sit dejected and out of mental energy to compete due to the earlier damage done to your account.
If this sounds like you, there is a simple solution to your problem and a piece of technology that you probably already have but don’t even realize you have it. On the platform we use it is called a “Call Level Alert”. Watch the quick 99 second video to see how it works (http://www.rdstrader.com/home/faq-call-alerts.php). This technology allows you to pre-set an alarm, auto e-mail, text, or execute a trade for you without you having to be there 24-7. You can also auto-set a profit parameter attached with a stop-loss to your trade called an “OCO” or One Cancels Other for peace of mind, if you can’t wait around. Watch the quick 80 second video to see how this order type works (http://www.rdstrader.com/home/faq-existing-positions.php).
Some of you reading this may think I am talking about a black box or robot technology that runs 24-7 without you having to be there. This is only partly true. In my opinion you need to have a balance of human intervention with today’s unforgiving and sometimes inhuman technology. When the markets turn, robot technology doesn’t know how to think for itself and shut-down as the trading strategy breaks-down. Also robot technology builds lazy habits as things out of sight are often out of mind and we become comfortable with things running on auto-pilot. We soon forget what to do when the trend shifts by fumbling for the password or scrambling for the misplaced phone number to call when the smoke detector goes off.
To avoid panic we build a daily ritual of checking on the functionality of our computer equipment, receive updates on market volatility moment to moment and balance it with our personal risk tolerance as conditions change. Keeping our finger on the pulse of our electronic marketplace has been vital to our success. We hope that after watching the “Call Level Alert” and “OCO” video link above it will give you some peace of mind when you are away from your desk. To give you further peace of mind we would like to offer our 12 personal pre-trade checklist:
1. Balance personal risk vs. market volatility.
2. Have a strategy.
3. Know the strength and mood of your teammates and your opponents. When you are long, your teammates are the buyers and your opponents are the sellers. When you are short, your teammates are the sellers and your opponents are the buyers.
4. Know where you are getting out, before you get in.
5. Review the economic calendar before you start to trade.
6. Don’t play in a market, just to play. Make sure your parameters are there for entry. Execute when it’s there! Patience when it is not!
7. Have a news feed or market news channel running in case a geopolitical event hits.
8. Is your workspace distraction free?
9. Is something outside of trading bothering you or providing stress and anxiety, when you sit down to trade? (Don’t trade today!!).
10. Is your computer and internet working (have phone numbers or back up plans in place should these fail)??
11. Is your Execution Platform and charts working (download the software on your mobile phone for back-up)??
12. Always have enough in your account to trade tomorrow!
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Trading Commodity Futures and Foreign Currency (Forex) contracts may not be suitable for all investors. You may lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your FCM. The material on this website is intended for educational purposes only.
© 2010 RDS Trader, LLC. Have a specific topic you want to read an article on, email us your requests! info@rdstrader.com
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR ON YOUR WEBSITE? You can, as long as you do not alter the article in anyway and include a credit that reads: Financial Experts and Mentors Mike and Stephanie Radkay publish RDS Trader E-newsletter. If you are ready to ‘Take back your power, Invest with confidence and Protect your assets’ get your free tips now at www.rdstrader.com
Stopped Out!!
“Stopped Out’ ”
BY Michael Radkay
If you are going to trade the financial markets it is not only imperative that you are properly capitalized, but also that you don’t just randomly enter the trade because you just heard a hot tip. Your initial entry spot become vital. If you go long near session highs or get short near session lows you may be forced to exit due to normal ebb and flow of price action which made you breach your own personal risk parameters. And, of course, just as you were forced to cover the idea, the market turns back in the direction you intended. Pretty frustrating!
We have posted a video that will teach you to identify where the idea is wrong and wait for a suitable price that balances your risk to help minimize your loss should the idea go bad and maximize your profit potential when the idea hits.
Click on the link to view our “Stopped Out” video
You cant win, if you don’t try!!
Sneak a Peek: 1st Hr. Extension
The ability to have your trading mentor in your office giving you insightful comments on live market action while offering timely answers to your questions on the spot can be an invaluable asset. We thought we would offer you a glimpse into our Yahoo! Messenger Text Chat (1st Hr. Extension) from 6/24/10 to help you feel the power of having somebody on your side helping you real-time. One of the clients I was texting with had some revelations about his performance and how he could improve upon it based on some of my experienced insights that day. Read through the comments and take a look at the chart snapshot (chart snapshot with notes: http://www.rdstrader.com/062410_eurjpy.BMP) as the market unfolded for visual details on the action.
6/24/10 – 1st Hr. Extension updates (all times are Pacific),
6:50:08 AM workrds: Good Morning!! Today’s remaining reports:
EIA Natural Gas Report 7:30 AM PT
3-Month Bill Announcement 8:00 AM PT
6-Month Bill Announcement 8:00 AM PT
52-Week Bill Announcement 8:00 AM PT
7-Yr Note Auction 10:00 AM PT
Fed Balance Sheet 1:30 PM PT
Money Supply 1:30 PM PT,
6:52:38 AM workrds:
usdjpy 2level pullback for a short play 8958
eurjpy 2level pullback for a short play 11019
audusd 2level pullback for a short play 8710 whichever gets hit first is what I would trade…trading them all are like-minded in direction today so adjust your risk in case the idea goes bad …it would mean wrong on 1 the likelihood that you are wrong on all three or being right would translate in being likely that you are right on all three,
6:57:58 AM workrds: markets finding resistance around the 1L to 1.5 pullbacks area and moving back on mom. side…objective area would be a test of session lows,
7:06:14 AM client: a 2-level pullback is still referencing the session low, not the most recent low 15 minutes ago, correct? Still getting used to this…,
7:09:52 AM workrds: I still reference from session low…use your knowledge of flips in trend to adjust but yes it is based from session low in this case,
7:14:59 AM workrds: price action coming up short of re-test of session lows,
7:16:47 AM workrds: still trying though…c’mon market ,
7:27:06 AM workrds: eurjpy testing 11019,
7:37:30 AM workrds: let’s go eurjpy!!,
7:37:54 AM client: yeah – fire up!!,
7:46:05 AM workrds: hopefully we get the flip in next 15min. and get some acceleration as prices pulling off recent rally…looking for test of last troubled spot down and hopefully to session low,
7:57:59 AM workrds: pulling back a bit after 1L down move from recent top,
8:24:17 AM workrds: fyi: the tails on the candles will help you (the longer they are the more idea you had that prices didn’t like the low…from last comment I saw price action begin to bounce at 1L during previous candle…prices went back down to 1L and now we are seeing the reversal back up…possibly help your timing a bit,
8:29:16 AM workrds: careful on move back to 11019 on eurjpy…last top was 27ish which was above session mom line a bit…making a run back at it,
8:54:05 AM workrds: had a feeling about that eurjpy…that’s why I laid off it,
8:56:52 AM workrds: looking for resistance at 8710 for audusd and 8958 usdjpy,
9:01:21 AM client: Just couldn’t pull that god dam trigger…..and lost!,
9:02:01 AM client: what gave u that bad feeling about it? what indications were there?,
9:04:07 AM workrds: first time hit near here was 6:15a then again when it brushed up above it 7:30a (1st test of it) and recently 2nd test of it…1st time to/second time thru,
** 9:07:45 AM client: ok, thanks…..must put that into my bible of trading rules. thanks also for ur earlier comments on candle tails…appreciated,
**9:12:10 AM client: would the same thinking not apply to the aussie right now? reference time at 8683 was 6.15am…..1st time to it was 7.15am…..so was it 2nd time through at 8.45am and beyond?,
**9:12:26 AM workrds: it’s in my bible and doctorate dissertation from the “trading school of hard knocks” ,
9:13:32 AM workrds: at the 1L move yes…don’t trust it so looking for a run to the next level higher before I am interested…,
9:13:40 AM client: ,
9:17:47 AM client: then it looks like this rule applies to any level, as it happened on level 2 for the eurjpy and level 1 so far for the audusd, correct?,
9:19:24 AM workrds: yes,
9:27:06 AM workrds: usdjpy back on the move to mom. side…still stalling at 1L area…others are finding resistance at their recent tops as well,
9:27:06 AM client: when do u think u’ll have a link to r 1-1 recording?
9:28:21 AM workrds: think it’s in there… www.rdstrader.com/xxxxxxx …let me know if it works,
9:31:24 AM client: k…..I’ll check it later,
9:31:50 AM workrds: based on our last couple of comments…note that the other reason that I was losing trust in eurjpy because it touched above session mid as well…audusd and usdjpy still on mom. side during that whole move and tests in their respective windows,
9:39:33 AM client: I noticed that alright at the time…had my finger on the exit button as it went over the mid-point line and still couldn’t pull it. my internal voice was tricking me into believing that it might turn at the red line. gotta work and control that psychology. thinking of shorting eurjpy now, but fearful because mid-point line still underneath,
9:40:33 AM workrds: should be a bit skeptical on re-entry but it is a sell or do nothing choice,
9:55:14 AM workrds: markets still hanging on proper side of mom. line usdjpy 8958 and audusd 8710…talk to you tomorrow
You can’t win, if you don’t play!!
© 2010 RDS Trader, LLC. Have a specific topic you want to read an article on, email us your requests! info@rdstrader.com
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR ON YOUR WEBSITE? You can, as long as you do not alter the article in anyway and include a credit that reads: Financial Experts and Mentors Mike and Stephanie Radkay publish RDS Trader E-newsletter. If you are ready to ‘Take back your power, Invest with confidence and Protect your assets’ get your free tips now at www.rdstrader.com
Can You Still Afford New Underwear?
How much convincing does it take for you to try something new? Do you “Google” the idea and research and test and tweak until you are blue in the face before you pull the trigger? Do you ask 500 of your closest friends if they’ve experienced “it”? Or, do you dive in without hesitation? Good for you if that’s the case. I personally don’t like to make mistakes if I can help it, but I understand making mistakes is where the growth and the goodies lie, so I accept the fact that mistakes happen. I also listen to others when they are kind enough to share their pain so I don’t fall into the same situation. Some like to make their own mistakes even if they know the pain is a-comin!
So maybe you are wondering what this has to do with investing. Since we can never really know for sure where the market is headed we “need” to get involved in investments where we have the highest percentage chance of success. We definitely don’t want to make mistakes with our money again. Notice how I said “need”? Yes, we need to get involved in the markets because our 401Ks and our savings accounts are just not going to cut it in the long run. Agreed? We need to take on some risk.
But, we all have different risk tolerance levels and each market has it’s own speed and movement which, for us investors, translates into risk. The media makes a big impact on our decisions which I find quite interesting because they are always looking at the big picture. That’s okay, but where does our tolerance lie? Doesn’t it pain you when you look at your investment statements and you can’t find your money? Your broker tells you, “Don’t worry, you are in this for the long haul.” Depending on your age how much long haul do you have to give it? Do you really have the patience to wait? It takes so long to make up the capital when you lose. What if you could take on similar risk and have the opportunity to make money a little faster? I ask again, “Do you really have the patience to hold on for so long?” Most don’t. Maybe you should look at the smaller picture because maybe that’s were your patience and tolerance lies.
Many investors pulled their money out of the markets in 2008/2009 and still haven’t gotten back in. You can bet when they get back in, they are going to make the same gosh darn mistakes. Painful! So, what do we do about this, you ask? Well, as we always say, “It’s time to take on some of that risk yourself, but with responsibility and clear thoughts that make sense to you.” So, we head over to the trusty RDS Risk Calculator to help make sense of it all.
When we enter our account value into the Risk Calculator it gives us an idea of how much money we should be willing to risk each day and on each trade (in percentage terms). We personally don’t like to lose more than 5% of our account each day. If it feels like even that is too much you can minimize the calculator percentage parameters. Once these parameters are set in place they are not meant to be broken! YOU MUST FOLLOW YOUR RISK PLAN DAY AFTER DAY! If you are able (and some are not) to abide by these parameters, you will give yourself the gift and the opportunity to come back and trade day after day. Everyone says they would never break their rules, but inevitably you will, and the one time you break the rules we hope it doesn’t cost you your lifeline.
Risk parameters are key in every investment decision. You plan what you are willing to risk and how much pain you are willing to take, if any. The RDS Risk Calculator covers 25 Futures and Forex markets and taking into consideration daily volatility, you can compare your risk parameters with each market to determine if you are properly capitalized for the market you are trading or are considering trading. Oftentimes clients come to us and say they want to trade the E-Mini S&P’s (who doesn’t, right?). When we go through the Risk Calculator with them they quickly come to realize how undercapitalized they would be with what they thought was completely appropriate. This reminds me of the first time we went to buy a home. We met with a mortgage broker and he told us how much we could borrow. We had no idea we had so much buying power. Then the truth buster came in the form of my father when he said, “Look at your bills. You know what you can afford right now. Compare that to what the monthly bill would be if you borrowed that much money for your new home. Could you still buy underwear?” So of course, we changed brokers and took on only what we could handle. Sound familiar?
Take the time to see if your investments resonate with you and your personal risk tolerance. We are not all the same and just because “society says” this is the way we do it….buyer beware. Trust your gut and your accounts will show it!
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Trading Commodity Futures and Foreign Currency (Forex) contracts may not be suitable for all investors. You may lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your FCM. The material on this website is intended for educational purposes only.
© 2010 RDS Trader, LLC.
Adapters Survive and Thrive
I am finishing up reading the book, “Think and Grow Rich” by Napoleon Hill. A friend of mine asked me to join her book club, so why not? The last chapter addresses the six basic fears: fear of poverty, criticism, ill health, loss of love of someone, old age and death. I read about the first two so far and was struck by a strong thought when I read about the fear of criticism. We are all born with it, Hill says, and we have a highly developed form of it. You may disagree, but many have capitalized on this fear and made a pretty penny doing so. Hill talks about the “astute manufacturers of clothing”. They know everyone fears criticism so they capitalize on this by updating clothing each year which forces everyone to shop more and spend more so the manufacturers can make more money. Same goes with automobiles and all other material goods. So, I got to thinking. How does everyone in our industry capitalize on this?
Most mentors state how long they have been in the trading industry leading someone to think they are the best source for trading. At RDS Trader, we even say “we have over 30 years combined experience”. But anyone who has actually traded or was a broker on the trading floors knows “we are only as good as our last trade or fill.” Who cares about how long we’ve been around? It’s not really how LONG we’ve been around, its how many situations we’ve had to adapt and change to. How flexible have we proven to be? I know, for a fact, great traders are able to adapt to any market condition, they know when to pour it on and when to turn it off. They know even if the markets behave the same exact way for 6 months, they could turn on a dime and change course…and the great traders adapt!
And, what’s even more important is something our coach taught us, “We need to be willing to adapt and change BEFORE the marketplace adapts and changes us. We need to be thinking ahead of the curve.” So when you hear about a trader in this generation who started before the crash of 1987 and is still trading successfully, it’s worth it to take another glance at him/her. He/She must be a great adapter. This is someone who has taken on many changes and has survived. Look at the wars that have occurred during this time, the changes in our Presidencies, the recessions, depressions, tech booms, tech busts to name a few! These changes rock the markets.
But even more importantly, massive change has taken place in the trading industry alone. The whole industry has been taken down by greedy people and the onset of the internet has changed the entire way trading is conducted. Look at the floor trader/broker who has used all of his/her courage to move off the trading floors to the computer screens. It is not easy, no, not at all. I equate pit vs. screen trading to pit trading vs. becoming a dentist. Pit trading and screen trading are two totally different animals, and the pit trader has no clear advantage over anyone else on the screen, in fact, they are at a disadvantage. It is not “done” the way it was done on the floors. No yelling, no screaming, no camaraderie, no reading the markets by the faces on the traders, no real “edge”. So, the few floor traders who have successfully adapted to the computer screens are truly malleable.
I am sure you are also aware of the massive push of Forex (foreign currency trading) which has only been open to the public for about 10 years. Forex is taking the trading world by storm and we were “thinking ahead of the curve” when we added Forex trading and teaching to our arsenal 7 years ago. (okay so we were a little late to the party by 3 years, but back then it was still the “wild west” and not much was regulated). Everyone is jumping on the Forex bandwagon these days, but word to the wise: this is like the tech boom….if you are not able to adapt and understand what you are getting involved in, you will get “caught with your pants down”.
Most importantly, and not just for traders alone, we must all adapt if we want to survive. Today we are living in a global, fast paced, ever changing world and we need to be more proactive with our lives than ever before. You don’t trust everything your doctor says, I know you read about your symptoms on the internet. Hopefully you are getting more proactive about your money today, too? No one cares more about your cash than you do. Right?
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Trading Commodity Futures and Foreign Currency (Forex) contracts may not be suitable for all investors. You may lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your FCM. The material on this website is intended for educational purposes only.
© 2010 RDS Trader, LLC. Have a specific topic you want to read an article on, email us your requests! info@rdstrader.com
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR ON YOUR WEBSITE? You can, as long as you do not alter the article in anyway and include a credit that reads: Financial Experts and Mentors Mike and Stephanie Radkay publish RDS Trader E-newsletter. If you are ready to ‘Take back your power, Invest with confidence and Protect your assets’ get your free tips now at www.rdstrader.com
“1 vs. 100 “
I am not going to put you up against the mob like the TV game show 1 vs. 100 does. This article is for all of you 1 lot traders that only dream about being 100 lot traders and can’t see how you will ever get there. For those of that don’t know what a “lot” is, it is just Forex and Futures lingo that represents the quantity of the investment. It is very much like 1 share of stock vs 100 shares of stock. When price fluctuates your portfolio value will adjust multiplied by the amount of lots (or shares) you own. What if I where to tell you that I could teach you how to become the big trader you desire to be without risking your shirt in the learning phase. Would that interest you? Now I’m not talking about preparing you with a demo account and using fake money. Demo accounts are only good for learning how to use the software and rehearsing a new trading plan. Once that is mastered, you need to get your skin in the game. This article is for all of you investors that can’t seem to get in the game or over the hump.
We all want to be the biggest trader on the street and trade 100 lots at time, but that’s a scary venture for most because 100 lots is roughly worth about $10,000,000 in the professional world of Forex or Futures trading. That’s a lot of cake!! If you were to trade 100 lots in the EURUSD Currency Market at the professional level, you would be exposing your $10M account to about $175,000 of risk/reward in a 24 hour span (just under 2%). This is very reasonable for that kind of money.
You might be saying, “You’re crazy Mike, I don’t have that kind of money.” Keep reading…You can adjust the worth of the 100 lot with a spot Forex account, and make it equivalent to the worth of 1 professional lot. The act of trading a “reduced value 100 lot” will begin to prepare you to think big, get you used to trading 100 lots and at the same time only expose you to $1750 of risk reward over a 24 hour span vs. $175K in the professional scenario. You can train yourself just like a professional 100 lot trader or as Charlie D would say a “BIG DOG” without risking the “BIG DOG” dollars. I had the honor and privilege of watching Charlie D in action, which was subsequently at the start of my career in the 30 Yr. Bond Futures Pit at the CBOT. His acronym was CPD, which I thought stood for the Chicago Police Department before I met him. His booming voice was scarier than the Chicago Police, but he had a heart of gold. He gave back to the business he dominated by educating traders after hours. He was one of the first people to inspire me to give back as an educator as I tasted success. He spoke a lot about how to get started and how your brain handles trading. In the end there is absolutely no difference in the action required to trade 100 professional lots vs 100 micro lots, just difference in $$ and guts. The mere act of doing 100 is getting you to dream big, practice live like a “BIG DOG” and visualize the possibilities.
For some 100 micro lots is still too large in the beginning, so we show you how to adjust the idea all the way down to 100th the size of the micro idea. The exposure would then be watered down to $17.50 of risk/reward over a 24 hour span. All us probably spend $17.50 for lunch so there is something for all risk appetites. At the very least my goal is to get you to trade 2 micro lots rather than 1 by the end of this article. There are three main reasons for me to get you off of the 1 lot mentality and thinking bigger.
The first reason we get involved in this business is to make a ton of money. The sky is the limit!! The words of Les Brown ring in my ears when he says that he would rather “go out” climbing a hill than sliding down a hill. In other words start dreaming big and get climbing. With no guarantees of success on any journey the flip side of the coin is that we know the sky can come crashing down. To hedge ourselves we must move at a pace that is within our grasp and at the same time test our edge and willingness to grow. A 1 lot isn’t going to do it.
The second reason is that the financial market is a very dynamic animal. It ebbs and flows with public sentiment (fear and greed), interest rate movement, geo-political events, natural disasters etc. We can never fully predict what will happen. Three years ago nobody was predicting that Lehman Brothers and Bear Stearns were going to be extinct. Or that Greece and Spain were going to be rated as junk. These things don’t happen everyday, but you need to “expect the unexpected” as we described in one of our recent webinars. This leads me to the third reason to get off of the 1 lot.
The 1 lot is extremely inflexible and very limiting in an unknown environment. You are either all-in or all out. Did you ever get into a trade with a 1 lot and take a small profit, because you where waiting for hours and got frustrated as it came up short of your desired objective. Yeah, and as soon as you took profit, the market raced to its objective, leaving you kicking and screaming. How about this one: you got in with a 1 lot and the market just missed your objective and it turned around and stopped you out for a loss. My teeth are clenching just thinking about it!!
Trading more than 1 lot can give your strategy some much needed flexibility. If you do a minimum of two at a time you can cover one lot when your trade nears it’s objective and stalls for an extended period of time before reaching the finish. When frustration sets in covering half of the idea will lock in some profit and reduce the tension in your body. At the same time if the trade follows through, you still have 1 lot running and more to show in the end. Covering half also hedges your bet, because if your trade turns back and runs the other way to stop the other half out, you break even on the idea.
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Trading Commodity Futures and Foreign Currency (Forex) contracts may not be suitable for all investors. You may lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your FCM. The material on this website is intended for educational purposes only.
© 2010 RDS Trader, LLC. Have a specific topic you want to read an article on, email us your requests! info@rdstrader.com
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR ON YOUR WEBSITE? You can, as long as you do not alter the article in anyway and include a credit that reads: Financial Experts and Mentors Mike and Stephanie Radkay publish RDS Trader E-newsletter. If you are ready to ‘Take back your power, Invest with confidence and Protect your assets’ get your free tips now at www.rdstrader.com
Big vs Small
Punishing the Bears at Tax Time?
Who’s kicking themselves for not getting back into the stock market in 2009? How about the start of 2010? Price action over the first 2 months of this year gave market pessimists the confidence to take a long winter’s nap, but the blood pressure has to be boiling now as market bears are caught mid-yawn. It feels the market is primed for the optimists of the world to finish a race for once.
The first quarter results are in and the second quarter is upon us. Today finds the Dow Jones Industrial Average touching the psychological 11,000 mark and up nearly 7% on the year. The S&P 500 is up 8%, and the NASDAQ up 9%, but topping them all is the Russell 2000, which is up more than 15% year to date. If we are truly coming out of this recession, the small cap stocks generally lead the way. Upcoming start-up businesses are the foundation of our economy’s future and after weathering some cold January and February breezes the small cap index, Russell 2000, is leading the bull-run at tax-time.
At the end of 2009 we wrote an article “Feeling the Heat in December” and to refresh your memory we spoke of some crucial dates, December 31st (the end of the year) and Tax-Day, April 15th. We are procrastinators by nature and investors tend to pump money into their 401k’s in April to take advantage of tax breaks. The economy’s performance will be scrutinized very closely the remainder of spring and the start of summer. Just like the Masters golf tournament names the holes after something significant to the game, I am summing up the investing year like this: 1st quarter is “Testing the Waters”, 2nd Quarter is the “Set-Up”, 3rd Quarter is “Moving Day” and 4th Quarter is the “Finish”.
After going through “Testing the Waters” the stock market is proving to be resilient as we move into the “Set-Up”. I’ve always felt the second quarter sets the tone for the year, so in order for this rally to have merit, keep a watchful eye on the core tools the Federal Reserve and Chairman Ben Bernanke monitor closely, which is the Employment data and the Employment Cost Index. A bad 3 month stretch of data could leave us saying, “Not Again” and send our “Moving Day” to the outhouse. Barring any geo-political events coupled with solid employment results and stable employment costs this next quarter will add some legs to help send us to the penthouse through “Moving Day”. I say, “Let’s taste success into the ‘Finish’ of 2010″.
You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!
Whatever Happened to Being Proactive?
Do you ever wonder why we wait for a catastrophe to take notice? We make shifts and adjust after the fact, but most times we get warning signs prior to the event. We often times choose to ignore the warning because it isn’t really affecting us at the moment. It’s only a warning and our cultural make-up loves to gamble. I was just reading that police officers were starting to ticket drivers for only going 5 to 10mph over the speed limit. What?!! We all know that there is a 5-10mph cushion on the speed-limit. Well during tough times and lack of government funds, state and local governments are looking for new ways to generate revenue. Don’t say you weren’t warned!!
When you look back on any crisis, I sometimes wonder why we are shocked. Let’s look at the horrific nature of the September 11, 2001 attacks in New York. Now I’m not sure we could have predicted how terrorists would use our own technology against us, but it wasn’t the first time terrorists tried to knock down the Towers. Do you remember 1993 when a car bomb was planted in the parking structure underneath the North Tower? We as a nation ignored the signs, because there wasn’t any widespread destruction. Business as usual the next day. How about the housing collapse and credit crunch in 2007-08? We said, “You’re crazy Mr. Greenspan and Mr. Bernanke” when they spoke of over exuberance in the late 90’s and early 00’s, we again ignored the signs. 158 Year old firms like Lehman Brothers are no longer in existence because they ignored the signs as they kept licking their chops with greed.
I learned a powerful lesson back in 2001 to stop ignoring the signs. The government decided not to issue 30 Year Bonds anymore. 30Year Treasury Bond Futures was my bread and butter and the place where I got my start in the business. I knew this market like the back of my hand because I was basically brought up on it. I was doing quite well in this market, but one day in 2001 some shifts occurred. The U.S. decided to move with the globe and peg the 10Year Note as the new benchmark. This didn’t dry up my market right away because there was so much long term debt out there (I don’t have to tell you how much our government borrows). I did however choose to ignore the shift. Open interest and volume did begin to flood the 10Year Note and in hindsight, I should have moved to where the money went: the 10Year Note. I could have very easily moved back to the 30Year Bonds when the government decided to issue them again.
I mention all of this because I want to encourage you to be a little more proactive in your life. The signs are there whether you see them, hear them, smell them or taste them. They are there. An example of how I learned to adapt in my business is when our “open outcry” markets started to move to the computer in 2002. This time I didn’t ignore the signs. I became one of the first traders to bring my computer in the pit with me. There was some grumblings and mumblings under my colleagues breath at the time, but I knew that this is where the money was going, so I shifted. Electronic trading now controls over 90% of the action.
Steph and I have also adopted Warren Buffett’s mantra, “Be Fearful when others are greedy and greedy when others are fearful.” We bought our first condo in 1997 and sold it in 2001. We bought a home again in late 2001 and sold in 2007. When we moved to California in 2007, we bought a condo in late 2008. We are just marching to the beat of the fear and greed train and enjoying being on the right side.
We know that 40% of Americans are still ignoring the signs of the economy, which basically stripped 50% to 100% of their nest eggs. We also know that the other 60% of Americans have their money stuffed in a mattress and are saying things like, “I never am getting back into the markets again.” Of course tucking your dollars in a mattress will not help you achieve the prosperity that you want. A proactive approach would be to take your money back into your hands as opposed to letting others handle it for you. Our saying goes, “Nobody cares about your money more than you do”. Learn how to invest in products that can help you in good times as well as turbulent times. And, really, quit ignoring the warning signs!
Prosperity is at your fingertips! All you need to do is grab it!
