Do Your Trading System Include Sound Money Management?

By Maclin Vestor

How to manage money when buying stocks, futures, or options -- what you must know before you buy.

Many people have a very crucial problem, they take on more risk than they can. It really doesn't matter if you're very young, if you take risk to the extreme and continue down that path, you will by mathematical law in all probability lose money.

Lets say you had an almost sure investment that was 85% likely to succeed. When it succeeded you double your money. You put all your money on it. The problem is, when the investment fails, you lose everything. Now it is just a fact that you will eventually lose everything if you continue to invest everything. You only need one trade and you are wiped out completely. Now, even if you invested 90% of your money on an investment that would win 80% of the time, you still are taking on too much risk to win in the long run. If you lose once, you will need a 1000% return just to get back to even. That simply will not happen forever, and even if it did, the large loss would limit your potential for gain so much, that you'd be better off not taking on the maximum risk.

Now, your risk of losing everything can never be completely 100% eliminated, even with conservative strategies. If you flip enough coins, eventually you'll get a very rare event such as 100 heads in a row. However, you'll also get 100 tails in a row. The idea is that you have a strategy that yields you more when you win, and/or wins more than it loses. in this case there will be several losses in a row, but there will also be several wins in a row. If you manage your money properly, you will still have enough money if you get several losses in a row, to be able to more than make up for it when you get several wins in a row. If you are forced to limit the amount of capital after so many losses, that you cannot invest with the same amount after the losses, you may be unable to win enough to make up for those losses. The idea is to keep your investments small enough to limit the chances of that happening. Although almost nothing is a sure thing, by using proper money management, you tip the odds in your favor.

Even if you have a profitable method, if you do not manage your risk, your profitable method becomes unprofitable. It's not usually the investment vehicle, it's the investor that ultimately determines how quickly you fail, and ultimately whether you are able to succeed. Under the same context, it's not usually the type of car, but the driver that determines whether you cause an accident. In order to protect yourself, you must keep your positions at a manageable level, and make sure to keep yourself limited by these rules that will limit your risk of ruin and keep the odds in your favor so you can stay in the game.

So how exactly does one manage money in a trading system? You need to determine probability of a move taking place. If you buy OTM option, the stock will have to move larger for success to occur. Of course if it does, the reward will be greater. There are probability curves based on a random walk theory that will assist you in determining the probability of a move taking place, until you know any better, use these. However, you also should use your own records of your system Determine both your risk/reward (your average % win divided by your average percentage losses, and in addition figure out your likelihood of success. When you do this, you can use what's known as the Kelly Criterion By using the formula as follows Kelly % = W - [(1 - W) / R] Kelly % = The maximum percentage of your capital you should invest per position. W = Winning probability R = Win/loss ratio

A trading system that contains good money management rules will not only outperform one without, but it will also help protect your capital, and keep you in the game. - 23217

About the Author:

Maclin Vestor teaches about various automated trading systems and teaches you to find a stock market trading system that works for you.

Basic Strategies For First Time Investors

By Piper Marchon

How you buy stocks has changed an awful lot in the last decade. You used to have to have a broker and call him or her up to make a trade. Most everything was done over the phone or in person and that included opening the account and discussing your investment needs with the broker. If you were new to investing, having to do those things could have been quite intimidating.

Todays investor never has to have any contact with a real person if they dont want to. The computer and Internet has allowed the stock market game to change drastically and people can do everything themselves by just pushing a few buttons. Some may argue that buying and selling stock has become too easy because it allows people to have a gambling mentality. Day trading was an offshoot of this as people learned how to buy and sell back stocks within minutes, something they would have never done in years past with the old system.

If you are a beginner investor and want to get involved in buying stock, where can you go to get more information? Of course the Internet has an abundance of it but your best bet might be to go to the library and check out a book on the stock market. There are many good stock market investment books that have been written that can be used as a guide to get started. You should be able to find some of these solid investment guides in most libraries.

After having done some research and learning a little about stock market basics, you might want to pick a stock and buy it. There is no education quite like the real thing and buying a stock will help you get your feet wet and see what it is all about. After buying your stock you can then do some more learning in preparation for your next purchase.

Although the market is down right now and it is usually best to buy stocks when they are low, you still might not want to jump in just yet. The economy is worse off than at any time in recent memory and it could be headed back down even further. In this kind of a bear market, things are so bad that all stocks will go down even if they are of companies that are doing well. It might be best to hold on and wait things out a little while until the picture becomes clearer and things start to turn around in earnest. It is best to be cautious in this kind of a bear market, especially if you are a beginner. - 23217

About the Author:

Would you like to learn how to buy stock for beginners? If so, please visit my website Stock Market For Beginners.

Investing In Tax Liens - Overview

By Steve Jonas

The tax portion of the term typically refers to unpaid property taxes. The dictionary definition of lien is:

"The legal claim of one person upon the property of another person to secure the payment of a debt or the satisfaction of an obligation."

Tax lien uses an individuals property as collateral to ensure the settlement of a tax-related debt owed to another person or entity. While initially that debt is owed to the government that imposes the taxes, after a set amount of time these government agencies will auction unpaid debts to recoup their own expenses more quickly, opening an opportunity for savvy investors.

Tax liens are a result of the federal government and are not only 100% statutory, yet the concerns of the investors are protected by each state that they buy it from. To their benefit, State governments will then be the one responsible for the entire tax lien process.

Also, buying tax lien certificates is completely safe and open because the investors are actually true to their words and do pay the required taxes imposed. These certificates can be bought at tax sales where a county or municipal official is conducting it.

Once the lien has been transferred from the government to the investor, the investor is entitled to collect the stated interest that is set by the government. This interest can range from 8% to 25% per year.

The property owner will have a set period of time to pay the new total (taxes, interest, and other related fees). If the property owner fails to pay within the arranged time frame, the lien now gives the investor the right to foreclose on the property.

Tax lien investing is a high yielding investment. Tax lien certificates are an attractive investment because you don't need thousands of dollars to start and you don't have to pay any brokerage fees.

Tax lien certificate is an investment that requires your attention and time. If it happens that you have made good purchases and have research the properties that are attached to the tax liens, then you would most likely be happier to acquire a property through foreclosure. However, the list of properties that you will usually have before the sale from the tax office is minimal only, in which it would only tell less about the property. Most often than not, you'll only acquire the tax ID, amount owed and owner of record.

The first thing that you have to do is look up the assessment information on the property and find the address. Physically looking at the property is best so youll be sure that the assessment information is up to date. Make sure that the property is worth considerably more than the amount thats owed for back taxes. Keep in mind that you may have to pay the taxes on this property throughout the redemption period (if it doesnt redeem) before you can foreclose on it or apply for a deed.

Foreclosing on tax lien properties guarantees you a profit that is several times your initial investment. - 23217

About the Author:

Steve Jonas is an expert in tax liens. For more information on tax liens visit theNational Association of Tax Lien Investors

Triangle Formations In Forex Trading (Part II)

By Ahmad Hassam

The crowd psychology behind the descending triangles is that every time the currency price goes down to a certain level that forms the support there are buyers who want to hold that level stubbornly for their own reasons. Buyers thus push the price up each time the support level is tested. Spotting a descending triangle in a downtrend signals the downside breakout of the support level.

Thus when the price bounces off the support level, the bears take the opportunity to short again. Sellers are quite anxious to sell as they feel that the currency price should fall over time. This causes a domino effect. Prices go down even lower. Thus fulfilling a sustained downside breakout!

As with an ascending triangle, bulls and bears face a skirmish with both camps not feeling confident of the next market move. Spotting a descending triangle should allow you to be prepared for a downside breakout from the support level especially if it is a down trend.

Prices tend to break in the middle or the final third part of the triangle formation. Many of those long positions which have been placed above that level soon get stopped out when the support level is broken.

Unless you have reversal signals in the form of technicals or turn around of the market sentiment, you should always assume the continuation of the prevailing trend. It tends to give off even more bearish vibes than if it is formed during an uptrend if the descending triangle is formed during an existing downtrend.

However, a descending triangle should not be considered to be the final word on impending downside breakout. With that said, prices also sometimes breakout from above the descending triangle successfully in a burst of bullish momentum.

Symmetrical Triangles: There are no horizontal lines in symmetrical triangles. This differentiates it from the ascending and the descending triangles. A symmetrical triangle consists of two converging trendlines that join a series of lower highs and higher lows. A symmetrical triangle has some resemblance to a wedge pattern.

As they are willing to accept less and less of the price over time, the lower highs reflect the mildly bearish conviction of the sellers. When buyers of the currency pair are willing to pay a bit more to get a piece of action, the higher lows are formed.

There is no way to predict the future breakout direction until one of the symmetrical triangle lines is penetrated. A symmetrical triangle tends to be less reliable as compared to an ascending or descending triangle. Breakouts usually occur in the middle or the final third of the triangle as with the other sloping triangles.

You should always consider other pieces of information so that you can better pinpoint a higher probability trade set up when trading triangle breakouts. Decreased volatility can also be detected with the exponential moving averages and the Bollinger bands besides the triangle formation. - 23217

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Know These Forex Charts. Learn Forex Trading!

Groundbreaking Planning Ruling Launches Joao Pessoa, Brazil onto World Stage

By Leslie Richards

Following protracted negotiations the Ministerio Publico Federal (MPF) has granted Brazils North Eastern state of Paraba permission to construct a major new conference centre in the state capital, Joao Pessoa. The centre will be located in Cabo Branco, Joao Pessoas number one residential district. This is a tranquil area with a spectacular beach, great restaurants and bars and is a prime investment location.

The development will cost in excess of $50 million, with works due to commence at the end of September. The Infrastructure Secretary, Francisco Sarmento, has stated that the State of Paraba has agreed all of the terms required by the MPF and the Federal environmental agency.

The land upon which the convention centre is to be constructed is part of a large master-planned area with proposals for at least six large resort hotel schemes. The land had been the subject of legal arguments for the last 20-years, stopping any development.

The State and Federal authorities had, until now, been unable to reach agreement regarding the protection and replanting of native vegetation, safeguarding of the beaches and investment into regularizing the water supplies for the area. However, now agreement has been reached it is widely expected that planning permissions will be granted and development commenced rapidly.

This approval is expected to bring a boom in tourism to the area with the construction of many new hotels and resorts to accommodate the burgeoning number of visitors attending new cultural events and conferences. The knock-on effect will of course be a surge in real estate values, which is good news for the canny investors who already have Joao Pessoa on their radar.

The state of Paraba contains one of Brazil's hidden gems. Joo Pessoa is a great investment alternative to Brazils high density, high-rise developments in larger cities. Joo Pessoa is the gateway to Europe and home to the eastern-most point of the Americas, Ponta do Seixas.

It is widely recognized to be Brazils safest city and also its greenest. In fact it is the second-greenest city in the world. It offers an array of high quality restaurants, cheerful bars and a number of shopping malls.

The city has a very rich and varied cultural programme that is actively backed by the local council. The wide range of activities covers just about every area of the arts, from literary gatherings and art exhibitions to large-scale classical and popular music festivals.

North East Brazil in general is receiving a lot of interest from the international investor market but the place on everyones lips right now is Joao Pessoa. Economic expansion and migration from the southern cities are fuelling the domestic market, ensuring a steady stream of buyers for new and resale properties and developers are struggling to keep up with demand. Couple this with the boom in tourism, a near-perfect climate and a year-round rental market and international investors can do little better than to invest in this exciting market right now. - 23217

About the Author:

Leslie Richards wrote this article and is a land consultant to Brazil Land Invest. There is a massive demand in North East Brazil for Affordable Housing and we advise you to visit our site Brazil Land Invest for more facts on this exciting area..