Goals For beginner Traders

With all the information out there it can be hard to filter through and decide where to start. Setting goals can help, but often novice traders set the wrong type of goals when they decide to start trading. With this is in mind, as a novice trader your initial goals should help you to eventually make money, but making money should not be your goal. Instead, opt to make your initial goals about process and emulating traits of professional traders. By plunging into the market and expecting to make a certain amount of money, the goal becomes almost impossible to reach over the long-term. These types of goals require that the trader actually know the capabilities of the trading plan they are employing.

One must know the potential and pitfalls of the strategy they are employing. Based on the method being used, it may be impossible to reach a dollar or percentage goal, but it still could be valid and provide a good return; therefore, the trader must either abandon the strategy or deviate from it in an attempt to find more yields. For many traders this becomes an endless cycle of abandoning strategy after strategy or never being able to adhere to a plan. Greenhorn traders must not only become knowledgeable about the markets, but also about themselves. Focus on the process and attempt to perfect that, and results happen on their own. Attempting to achieve results without perfecting the process the markets will likely continually take your money.

Most businesses take quite a bit of time before profits come, and many, many more businesses fail completely. Trading is no different. Results will not come instantly, and if they do it is likely due to luck. Without understanding how the markets truly work and developing a winning process, the results are based on chance, not skill. In order to build a winning process for trading the markets, try using these three goals. Focus on mastering these areas from the very beginning, and positive results are more likely to ensue.

Have a Plan

The plan should include how trades will be entered, exited (profits and losses) and how money will be managed. The plan should be very detailed, outlining the markets that will be traded, risk parameters, if filters will be used on trade signals, what constitutes a trade and exit signal, position size and what market environments will be traded. Therefore, the goal here is to create a complete plan for trading the markets before making another trade.

What not to Trade

Beginners will push to achieve that goal even when opportunities are not present. The market does not present statistically probable trading opportunities at all times. In the markets this can erode profits that came during good trading times. When, and when not, to trade should be covered in detail in the trading plan. Make one of your goals to be as disciplined as possible, only making trades that are outlined in the plan.

Keep it Simple

A complex strategy can be very appealing. Many people believe that because something is complex it is more likely to work than something that is simple. Avoid getting too complicated with your analysis and trading strategies. Avoid the desire to make a winning trading plan more complex, usually this only results in destroying the profitability. If you like the stock market, stick with trading stocks. If you like commodities, then trade Futures. Focus on only one market and a couple of simple strategies when starting out. The goal here is to avoid constant tinkering in order to improve performance, or continually switching markets, strategies or analysis methods. Stick to the plan. If it occasionally needs to be reworked a bit that is fine, but keep the revisions simple.

Common Stocks for Income

The vast majority of these offerings trade on major exchanges and may include features that render them even more advantageous than plain vanilla bonds.

Real estate investment trusts (REITs) are companies that own and operate income-producing properties such as shopping centers, offices and apartments. They pay nearly all of their taxable income to shareholders and consequently offer regular, high-yielding payouts to investors. However, investors should be aware that dividends paid by REITS do not qualify for the reduced tax on dividends.

Master limited partnerships (MLP) are typically resource-related companies in which the advantage resides in the companies' pass-through financial status. All income, gains, losses and taxable events pass through to the unit holder. These shares are not eligible for regular dividend tax treatment.

A business development company (BDC) is essentially a mutual fund that invests exclusively in private companies rather than publicly-traded ones. Investors can therefore participate in the world of private equity without being "accredited" investors, and still enjoy the liquidity of a traditional mutual or closed-end fund.

Closed-end funds are mutual funds with a fixed number of units that trade on the stock market. Many of these are invested in income producing securities like municipal bonds or preferred shares. Investors should be aware that the price at which a closed-end fund trades may be above or below its net asset value (NAV). Tax treatment will vary depending upon the fund's holdings.

Index exchange-traded funds are instruments that seek to mirror the performance of a single market index. Therefore, these ETFs allow an investor to buy or sell shares in a widely quoted government or corporate bond index. There are also ETFs that mirror several municipal bond and junk bond indexes. Fees are generally very low on ETFs, and annual taxable capital gains are minimal.

Preferred stocks are traditionally structured as perpetual preferreds, which means that they have no stated maturity date. However, companies have started issuing redeemable preferred shares that have a specific lifespan. Most preferred dividends receive favorable tax treatment, except those issued by REITs, and are senior to the company's common shares.

Exchange-traded debt securities (ETDS) are "bonds" that trade like preferred shares, meaning that they have all the features of bonds, but are available for purchase on the major exchanges. They usually have par values of $25 instead of $1000, and pay interest, not dividends. ETDSs are therefore not eligible for favorable dividend tax treatment. Investors should be aware that most are callable after five years.

Convertible preferreds are unique, as they are convertible into the issuer's underlying common stock. They have the advantage of a higher dividend payout and the potential for capital gains should the underlying common shares appreciate. The higher yields also cushion any downside in the common shares. Dividends from most convertible preferreds are eligible for the lower tax rate.

Mandatory convertibles are like convertible preferreds, except that they have a fixed conversion date and are convertible into the issuer's common stock at variable rates - depending upon where the common shares trade at the time of conversion. Mandatory’s generally compensate better than regular preferreds, but are not eligible for favorable dividend tax treatment.

Trust preferred securities are an ingenious way for companies to raise funds under more favorable tax terms. They are essentially debentures with proceeds that are paid out to investors in the form of preferred share dividends. Investors should be aware that debentures are usually at the low end of the credit spectrum, and payouts may be deferred until the redemption date of the security. Third party trust preferreds (TPTP) are repackaged preferred share and debt issues which are distributed by Wall Street's major brokerages. Distributions are usually paid semi-annually. Investors should be aware that these securities are usually callable after five years, and are not eligible for the 15% dividend tax rate.

For income investors who require safe, fixed distributions for a predetermined period, the above investments offer an alternative to bonds. As these trusts trade on major exchanges, they also offer transparent and stable pricing.

6 Investing Guidelines

You are the most important component of your investing success. If you can unemotionally approach the market and adhere to your trading guidelines, then you stand a much better chance of being successful than if you let your emotions take control. To help you become your own best investing asset, we'll help you set reasonable expectations for your investing returns and understand your psychological biases.

1. Protect your investment capital

Have you ever wondered what the secret of successful investing really is? It is proper money management and diversification. The secret lies in the small, simple things that have the biggest impact on the end result. Proper money management and diversification can help you protect your capital so that you can achieve the most consistent gains.

2. Analyzing from the top down

Did you know that every stock belongs to an industry group? A critical step in the investing process is monitoring the movement of institutional money flow into or out of these groups. If a group is out of favor, it indicates that institutional money is flowing out of those stocks.

3. Conduct a thorough fundamental analysis

Whether you find stocks through a search or in the newspaper, or if you prefer to invest in a company with which you're familiar. By doing a quick fundamental analysis, you can confidently reduce or limit the amount of emotion that influences investment decisions: either a stock passes or it doesn't. Fundamentals tell you the good, the bad, and the ugly to help reduce risk. Good corporate fundamentals provide a great foundation on which stock prices are built.

4. Search for additional strong stocks

Now that you have performed top-down and fundamental analysis, you know what type of stock to look for. The next step is to search for other opportunities to complement your portfolio. Knowing how to look for these opportunities puts you in control of your investing. By using stock filtering tools on yahoo finance or finviz can aid you in this selection process. Make sure that the stocks selected pass all the previous tests.

5. Conduct a thorough technical analysis

After you have compiled a list of fundamentally solid stocks, you can monitor them for the opportune time to buy and sell according to technical indicators. Technical analysis is useful in forecasting a stock price's potential direction-allowing you to better time your entry and exit points.

6. Manage your portfolio

Investors looking for great stocks and watching for buy and sell opportunities, must manage that information effectively. The more stocks you're able to track effectively, the more opportunities you have to find good investments. Stocks in the same industry generally move in the same direction. If the group is strong, it's an indication that institutional money is flowing strongly into the group, causing most stocks to rise. The best-performing stocks in the group generally make the strongest moves, but even lower-quality stocks in a strong group will typically rise with the rest of the group. Industry group research allows you to better focus your attention on the very best market sectors and to make sure that a stock you are considering is in an up trending industry.

Inflation and Investments

When it comes to inflation, the question on many investors' minds is: "How will inflation affect my investments?" This is an especially important issue for people living on a fixed income, such as retirees. Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. The value of a dollar does not stay constant when there is inflation. The value of a dollar is observed in terms of purchasing power, which is a tangible good that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 1% annually, then theoretically a $1 pack of gum will cost $1.01 in a year. After inflation, your dollar can't buy the same goods it could beforehand.

There are several variations on inflation:

Deflation is when the general level of prices is falling. This is the opposite of inflation.

Hyperinflation is unusually rapid inflation. In extreme cases, this can lead to the breakdown of a nation's monetary system. One of the most notable examples of hyperinflation occurred in Germany in 1923, when prices rose over 2,000% in a month!

Stagflation is the combination of high unemployment and economic stagnation with inflation. This happened in industrialized countries during the 1970s, when a bad economy was combined with OPEC raising oil prices.

Economists debate the causes of inflation, there is no one cause that's universally agreed upon, but at least two theories are generally accepted: Demand-Pull Inflation, which can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies. Cost-Push Inflation – Is when companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.

The impact of inflation on your portfolio depends on the type of securities you hold. If you invest only in stocks, worrying about inflation shouldn't keep you up at night. Over the long run, a company's revenue and earnings should increase at the same pace as inflation. A problem with stocks and inflation is that a company's returns tend to be overstated. In times of high inflation, a company may look like it's prospering, when really inflation is the reason behind the growth.

Fixed-income investors are hurt the worst by inflation. Suppose that a year ago you invested $10,000 in a Treasury bill with a 10% yield. Now that you are about to collect the $11,000 owed to you, is your $1000 (10%) return real? NO! Assuming inflation was positive for the year, your purchasing power has fallen and so has your real return. We have to take into account the chunk inflation has taken out of your return. If inflation was 2%, then your return is really 8%.

Inflation-Indexed Bonds

There are securities that offer investors the guarantee that returns will not be eaten up by inflation. Treasury inflation-protected securities (TIPS), are a special type of Treasury note or bond. TIPS are like any other Treasury, except that the principal and coupon payments are tied to the CPI and increase to compensate for any inflation. Because these securities are so safe, they offer an extremely low rate of return. For most investors, inflation-indexed securities simply don't make sense.

How to Invest In Private Equity

Private equity is capital made available to private companies or investors. The funds raised might be used to develop new products and technologies, expand working capital, make acquisitions or strengthen a company's balance sheet. Institutional investors and wealthy individuals are often attracted to private-equity investments. This includes large university endowments, pension plans and family offices. Their money goes into pools that represent a source of funding for early-stage, high-risk ventures and plays a major role in the economy. Often, the funds will go into new companies believed to have significant growth possibilities in industries such as: telecommunications, software, healthcare and biotechnology. Private-equity firms try to add value to the companies they buy, with the goal of making them even more profitable.

Private equity investing is not easily accessible for the average investor. Most private-equity firms typically look for investors who are willing to commit as much as $25 million. Although some firms have dropped their minimums to $250,000, this is still out of reach for most people, but there are ways the average investor can dip their toe into the private equity waters.

Fund of Funds

A fund of funds holds the shares of many private partnerships that invest in private equities. It provides a way for firms to increase cost effectiveness and thereby reduce their minimum investment requirement. This can also mean greater diversification, since a fund of funds might invest in hundreds of companies representing many different phases of venture capital and industry sectors. A fund of funds has the potential to offer less risk than you might experience with an individual private-equity investment due to its diversification. The disadvantage is that there is an additional layer of fees paid to the fund of funds manager. Minimum investments can be in the $100,000 to $250,000 range.

Private-Equity ETF

You can purchase shares of an exchange-traded fund (ETF) that tracks an index of publicly traded companies that invest in private equities. Since you are buying individual shares over the stock exchange, you don't have to worry about minimum investment requirements. However, like a fund of funds, an ETF will add an extra layer of management expenses that you might not encounter with a direct, private-equity investment. Also, depending on your brokerage, each time you buy or sell shares, you might have to pay a brokerage fee.

Special-Purpose Acquisition Companies (SPAC)

You can also invest in publicly traded shell companies that make private-equity investments in undervalued private companies. But they can be risky. The problem is that the SPACs might only invest in one company, which won't provide much diversification. They may also be under pressure to meet an investment deadline as outlined in their IPO statement. This could make them take on an investment without giving it thorough due diligence.

There are several key risks in any type of private-equity investing. As mentioned earlier, the fees of private-equity investments that cater to smaller investors can be higher than you would normally expect with conventional investments, such as mutual funds. This could reduce returns. Additionally, as private-equity investing opens up to more people, the harder it could become for private-equity firms to locate good investment opportunities.

Understanding How to Trade

Describing a trader’s journey is very similar to climbing up a large set of stairs; it takes time to get from the bottom to the top. A great deal of time and energy must be poured into learning how to trade. Often traders try to rush the process and as a result usually end up hurting their accounts.

It is imperative to follow some set of rules in order to keep your emotions in check. A “trader checklist” will help you sort through noise and find only the highest probability trades. It is common to see traders “go on tilt” as they get frustrated or lazy after a string of bad trades. Traders that let their emotions take control of their decision making settle on trading anything they can find, instead of mining through the market searching for only the highest probability trades. Often inexperienced traders find one variable they like and enter into a trade. They soon find out that their rate of success when doing so is extremely low. By forcing a stock to meet a larger set of criteria, the probability of a successful trade greatly increases.

Moreover, it is crucial to have all the professional tools in front of you, just like a doctor having all his surgical tools in front of him when operating. It is common to see novice traders aggressively buy and sell stocks without having a complete trading platform or an understanding of what exactly is in front of them. Sure, there are cases when a trader can make a successful trade while not utilizing all the information available. However, probability is against you. Therefore, the longer you participate in such an action, the likelihood of losses increases.

It is important to use any vital information that is readily available. Some of these include a Level 2 or ECN window, a tape, a limit open book (especially when trading NYSE), charts, and the overall market (SPY/S&P futures) or the sector ETF the stock most highly correlates with, as well as other stocks that are in the same sector that are known to trade similar with it.

Disciplined trading

The Equity Scholar Team

Simple Ideas to Organize Your Finances

With the economy struggling and many Americans adjusting the way they spend, now is a great time to do some financial planning. But with so many things to consider, sometimes it's hard to know where to start. Organizing your finance doesn’t have to be something you dread. Start with a to-do list and work through each step until you’re done. You should feel better knowing what you're spending and saving and what you can expect in the future.

Consider getting your finances in order by completing the BEST to-do list -- budget, estate, savings and taxes:

Budget Analysis

It's important to create and maintain a budget and the New Year is a great time to review your income and expenses. This will be easier if you get in the habit of tracking the money you spend using a paper ledger or with your computer. Remember to account for any debt expenses you may have, such as credit card and loan payments and include changes you anticipate such as a pay raise or a new car payment in the New Year.

Think about ways to maximize your income and minimize expenses. If you need more income, you may decide to work a few extra hours at a part-time job in addition to your current job. Look for ways both large and small to spend less throughout the year. For example, you may be able to save a significant amount of money by bringing your lunch to work instead of eating out.

Estate Planning

Review your beneficiaries for your insurance policies, investments and retirement plans to make sure they are accurate and up to date. Review your will and trust documents to make sure they're accurate, too. If you had any life or family changes, such as a birth, adoption or divorce, you may need to revise your beneficiary designations.

Savings and Investments

Make sure you have adequate savings or at least a plan to save during the year. This includes a separate emergency fund which should have at least three to six months' worth of living expenses.

Set specific investing goals, such as retirement or college education, and review how much money you'll need to reach each of your goals. Adjust your investment plan or goals if needed to increase your likelihood of success. For example, you may decide to establish an automatic investment plan to invest toward your goals on a regular basis. Or maybe you planned to retire early but find you'll have a greater likelihood of retiring comfortably if you work a few years longer.

Tax Preparation

If you typically owe additional income tax each year or you get a big tax refund (which is essentially money you've loaned to the government throughout the year), you may want to consider adjusting your income tax withholding to have more or less withheld from your paycheck. You can adjust your tax withholding through your employer on IRS Form W-4.

Review the personal exemptions you claim for federal and state taxes to make sure they're accurate and up to date. Also, take advantage of deductions to reduce your taxable income. For example, why not maximize your state tax payments before year-end since state taxes generally are deductible from your taxable income? You can deduct interest on your mortgage payments and you also may be able to deduct charitable donations.

Don't delay in getting your finances organized and getting the peace of mind that comes along with it, it’s easier than you think if you take it step-by-step.

The Equity Scholar Team

7 Reasons Investors Should Trade Options

If you are a typical stock market investor, you adopted a buy and hold philosophy and own stocks or mutual funds. If you are a hand-on investor, you do research and carefully select stocks to own. It's difficult to beat the market, and most professional money managers cannot do it.

Historically, stock market investing has worked out well. But that provides no comfort for those currently invested. The market recently traded at 12-year lows, and even more frightening is the idea that many investors lost half their assets over the past year.

Why did so many people watch their investments shrink in value and do nothing?

That's a difficult question. Investors tend to be long. They own stocks. They don't know how to hedge, or reduce the risk of owning, investments. That's why options are so important. To me, it's a crime that so few stockbrokers help clients to adopt risk-reducing strategies.

Here are 7 great reasons why you should take time to learn how options work:

1.Hedging - Options allow you to reduce the risk of investing in the stock market. Imagine how investors everywhere would feel if they learned that the giant losses they suffered were unnecessary. By using appropriate strategies, those losses could have been trimmed by 50 to 90%.

2.Insurance - You can buy insurance that protects the value of your portfolio - just as you buy insurance to protect the value of your home or car. This insurance is expensive, but there are strategies that allow you to own insurance for little, or no, cost.

3.Income - By selling someone else the right to buy your stock at a predetermined price, you are paid a premium that you can consider to be a special dividend.

4.Leverage - You never have to trade a share of stock, and invest far less money than stockholders.

5.No Need to Always Be Bullish - Options allow you to create positions that prosper when the market moves higher, lower, or trades in a range. Traditional investors only prosper when stocks move higher.

6.Limited risk - You can adopt strategies with limited loss, but with high probability of success. The trade off is that profits are also limited. The limited loss nature of so many option strategies is the single factor that makes them so attractive, in my opinion.

7.Indexing - If you prefer to trade a diversified portfolio rather than individual stocks, the major indexes (e.g., S&P 500, DJIA, Russell 2000, etc) have options you can trade.

The Five Closely Guarded Secrets to Forex

Intraday Forex trading, as with any other online money making means, is draining and push for complete fundamental analysis. Not every trader acquires those features or could make extra days or even hours monitoring indefinitely at the Forex Charts.

Assuming you have a 8-5 Job, and after you come back home after a taxing Friday, the last "activity" you might want to carry out is make up a thorough analysis of an Euro/Dollar market and execute some Buy Limits. There are a handful of strong-willed people who would possibly still drag through that, but it definitely requires much more sleepless nights.

If you have hardship to evaluate the market, try consider to pick some forex signals service providers, that are plentifully advertised on the web. And if you are willing to explore, there are scores of great free forex signals that are genuine. In addition, you can also employ paid forex signal services. Normally those subscription fees are similar to one another: majority ask for about 100 dollars monthly, and others want 250 or even more.

These services might prove to be decent and could aid you in many ways, but as with all transactions via on line, traders should pay careful attention to scams! Here's some important points to consider:

1. Examine the time of delivery of your signals. Do they give you sufficient time to set up your trades?

2. Go for those signal providers with Intraday Signals, being Intraday Day Signals usually provides you plenty of time to set things up.

3. Check the Performance Records. I have signed up for a billion of Signal Services, and I can tell you this: Don't take their word for it.

4. When you subsribed, trade in humble lot sizes at the beginning. Ramp it up only when you are assured with the Signals.

5. Do pay close attention to the method your signals provider keeping track of their performance results. does your forex signal provider request you to trade multiple lot sizes?

This is one of the most common deception in Forex Trading that people seldom notice: For instance, you are trading 3 lot sizes each trade, and was given 4 TP targets, at +25 pips, +50 pips, +75 pips  and +100 pips, and only a single SL at 25 pips. And you are told to Scale Out of your profit trades.

Now most Forex Signals Services will only report a tiny loss of 25 pips, but if you hit Target 3 they'd report a winner of +75 pips. So following these 2 results, you've got a profitable trade at 75  pips and a loser at -25 pips, Have you indeed earn +50 pips?

You never did. The unforgiving truth is that, you suffered a loss of 25 pips mutiply by three lots entered, which is 75 pips, while you achieved 25 pips (Profit Target 1) and 50 pips (Profit Target 2) which is 75 pips. In conclusion you only won 0 pips instead of 25 - which is 250% of the real profit. Envisage the kind of gap this simple dishonest calculation can generate over the span of 80 signals!

There are certainly Forex Signals Services Providers that are genuine in their signals, but potential buyers should need to exercise better attention when it comes to picking the great ones.

How to Trade Forex 24 Hours a Day

You need income to live a comfortable life. You need money to supply education to your children. And, you need money to eat. For this reason people work, this is why individuals set up businesses, and this is precisely why people go to great lengths to create money.

One particular excellent money-making career that you should consider is trading in the biggest financial market on earth. Not only is Forex or Foreign Exchange the world's greatest financial industry, it's also by far the most liquid market on the planet that functions Twenty-four hours a day.

With trade exchanges which produces as much as 2 trillion us dollars a day, who wouldn't get attracted to operate within this incredibly liquid market? If you are a regular person having a regular job who is searching for a way to make additional funds, you can look at going into the Forex market and trade.

However, Forex has its pitfalls and individuals who have bought and sold in Forex without the proper knowledge and skill lost considerable amounts of money, and some have experienced great financial losses. Because of this, it is necessary that you have ample know-how and skills if you trade in the Forex market.

Today, there is a software available for one to use that can really allow it to become less complicated for you to trade in the Forex market plus bring in that additional income you need. This particular software is often known as the Forex trading robot.

Ordinarily, Forex trading robots will be accessed from the internet. It is very comparable to employing a Forex broker but rather than a broker being human it will be in a form of software. Because Forex trading robots don't get to sleep, this software can operate At any hour therefore, giving you the advantage of not missing any money making opportunities when the Forex market changes.

Just imagine, it is now doable for you to operate within the Forex market just like an expert. And, you can deal At any hour. With this particular advantage, you will never miss a further potentially money-making day in the Forex market. Additionally, you can even use this while you're at work.

All these are possible with the use of a Forex trading robot. However, before you decide to subscribe to a Forex trading robot, it's important to first determine if the software will surely work to your advantage. You need to determine if the Forex trading robot can definitely trade effectively and efficiently.

It's also wise to consider advanced trading capabilities that the Forex trading robot can offer you.

Below are a few of the characteristics you should consider in a Forex trading robot:

 24 hour a day operation - You need this attribute from a Forex trading robot so you can never miss a money making opportunity.