Making Money from Share Trading and Investing Through Using Stop Losses

By Sam McNeill

Even the best trading techniques struggle to deliver a success rate of more than 70%. Therefore even using some of the best trading techniques we will still end up with two or three losing trades out of every ten. For these losing trades we must keep our losses really really small. To do this we use a stop loss. This is a pre-determined price that we use as the trigger to sell out of a losing trade.

Every trade can only have one of five possible outcomes:

A large profit.

A large profit.

Breakeven.

A large loss.

Breakeven.

That's it. Five possible outcomes, no more, no less. If you could eliminate one of these five outcomes, which one would you choose? That's right - the large loss. If you eliminate the large loss you are only left with the other four possible outcomes. If our small losses, breakeven trades and small profits even out over a period of time you will only be left with the occasional large profit, a rather pleasing outcome.

We use the Stop Loss to eliminate any large losses because it is clearly a very sensible thing to do.

We use a Stop Loss Rule. The stop loss rule has three parts to it:

1. Always have your Stop Loss in place for every single trade that you do.

2. Your Stop Loss price is set at the level where your loss will be 2% of total trading capital.

3. When your Stop Loss price is hit then you must sell. No waiting one more day hoping that your trade turns into an "overnight success".

For those who may be new to share trading the most difficult part of this rule is part 3. You must sell when your stop loss price is hit. It's the most difficult part of the rule because it brings into play your emotions. Despite the huge emotional drag not to sell - you must sell. When your stop loss price is hit then you sell, no scond guessing. Following this simple and straight forward rule protects your hard earned cash. - 23217

About the Author:

Learn more about share trading education. Stop by the Just Shares site where you can find out all about how to trade shares and what it can do for you.

Investors Await Confidence Boost

By Jennifer McClelland

The United States is entering a much needed economic recovery. The worst of the recession is over. Unfortunately, the economic frame of mind deteriorated last week as investors started to doubt whether the current rally was premature. They were also warned about British government debt which raised concerns regarding how much capital the U.S. government owes, assorted with the longstanding worry that we are borrowing entirely too much money from China and additional nations.

As stocks rallied, starting in early March, investors were capable to discover signs of optimism in news that showed a still stressed financial system. As the recovery is falling, investors are relatively nervous going into this trading week, which will see through to two reports on April home sales and the most recent appraisal of consumer confidence. Merge that in addition to a possible June 1 Chapter 11 bankruptcy filing by General Motors, and you have investors all over the country ?sitting on pins and needles?.

What is frightening investors presently is the total of jobless figures that are still going up. What investors don't comprehend is that there are two forms of economic indicators: leading and lagging. Leading indicators are economic actions that forecast an growing moving financial system. Falling behind indicators are financial events that act in response unhurriedly to economic changes, consequently leaving no foretelling value. Jobless figures are a lagging indicator due to the fact that jobs are not created by most businesses until resources are obtained or accounted for that hold up them.

Out of work numbers are not going to go up until all the leading indicators, that are incredibly robust right now, show themselves in the way of rock-solid economic revival. Economic revival can and will not occur speedily since a robust revival occurs gradually as a sturdy foundation is formed under each stage. The economy will dither a little with each perk up followed by a petite turn down as that sluggish rally has solidarity produced underneath it. You are also certain to see a few more struggling businesses, especially in the financial market, hit Chapter 7 insolvency, shut down, and be purchased by stronger businesses. At which time that happens, there is nowhere to go but up because there are fewer frail companies to hold back and deteriorate the revival.

Major leading indicators squeezed out a gain last week. The Dow Jones industrial average increased 0.1 %, at the same time as the Standard & Poor?s 500 index finished the week up 0.47 %. The primary examination of capacity to erect on these gains occurs Tuesday, when the Conference Board releases its May consumer confidence index which should provide some insight into consumers? readiness to expend. Ron Weiner, head and chief executive of RDM Financial in Westport, Conn., says that at the same time as any encouraging information about consumers is appreciated, the market is probably to have just a short-range rising advance. ?We want the shopper to be out there, we need them to spend,? Weiner said. ?For the majority, however, we don?t observe consumers going to pull us out of this economy because they are also paying down debt at the same time.? Investors are also concerned about trade by reason of the Commerce Department?s unsatisfactory retail sales information for April, which took the market by surprise May 13 and sent stocks plummeting.

Analysts say further stabilization in the lodging business is necessary for a upturn to occur. A government report is also due this week on U.S. home prices during the first quarter of 2009. The housing data could be a big force in shaping investors? attitudes. A housing rally is vital to helping increase consumer confidence and to let banks to set aside some reservations regarding eroding asset principles. - 23217

About the Author:

Learn more about economic indicators and get some Investing Advice while you're there.

Forex Trading Courses - Where To Go

By Arnold Waterborn

There are large number of courses on forex markets. The task of tracing out a trading courses which comprises all of the necessary components is daunting. The operation in the forex markets can succeed only if the chosen forex trading course includes itself all the vital elements.

The elite forex trading systems will use simple technical indicators to make your trading more efficient. There is a lot of data and a plethora of ways to break it down. Overanalysis and a clutter of technical indicators will slow you down. Keep it simple and straight forward.

Courses that use a combination of a few of these simple indicators can reveal the most rewarding trades. You do not need more than 3 or 4 technical indicators to be a great trader. When faced with a system with too many indicators, be cautious, these systems are usually quite ineffective.

The vital feature if any forex training course should not be that it is cent percent mechanical. If Market interpretation is not allowed by any trading system than it is meant as mechanical. The agility of any complete course is its capability to provide a larger picture and judgment is allowed for taking up a trading decisions. A signal to buy may be given by a mechanical system but at the same time a machine cannot give a whole picture. To say simply, a forex trading system which does not facilitate to use good judgment need to be abhorred.

A good forex trading method should rely only on simple indicators by identify a trending forex pair and then applying these in your trade, making it profitable by reducing your risk.

Lastly, the best systems will help you find a definitive plan that will keep you grounded in the market. Having a plan that you can stick to will help keep you from falling into the emotional trap. If you stick to some good rules and follow a good plan you should see consistent results.

Clarity, simplicity and objectivity should dwell upon your trading rules during its implementation along with provisions for judgment and interpretation.

If you keep all this in mind when you are searching for that one great forex trading course, you will increase your chance of profit greatly. Gather as much information as you can, look through the courses carefully, and make sure you make a very well educated choice. Good luck in all your trading ventures! - 23217

About the Author:

You can find out more by going to Best Forex Trading System

Find an Online Options Broker, Planning Your Options Trading Strategy

By William Davies

If you want to trade forex options on world markets you may consider an online options broker and will want to look at various factors to help you decide which firm offers the best service. Among the considerations will be what, if any, is their exposure to credit default swaps, mortgage derivatives and other such leveraged instruments. Is the online broker a specialist in options or do they cover other areas such as bonds, stocks and futures?

When you ask what sort of trade volumes they handle on a daily basis, this will give you a good picture of the size of the operation. Does the broker do a half a million, a million or more contracts daily? Then a prospective trader needs to check out the margin system used by the online options broker. Do they operate in real time, including the use of automatic limits, or does the broker contact the trader at the end of the trading day? And given that options are highly leveraged, what are the minimum balances you have to maintain?

Make sure you find out exactly what type of option contracts the broker provides on their online trading platforms. With some contracts you can exit the option at any time within the expiry period, while others are set up so that you hold them to expiry or settlement. Look to see if the online options broker can offer discounts which would help you to reduce your trading costs, and find out when they would do this. It may be that a trader would have to open a special or premier account or have a higher maintenance margin to get this benefit.

It is possible for the options trader to gain exposure to different markets in the global options universe. You could approach a plain vanilla options broker who will enable you to enter markets with deeper liquidity and the contract is broadly a standard, uncomplicated vehicle most likely traded through the main clearinghouse system. If you are more adventurous you could use an exotic options broker and trade the niche sector of smaller, less liquid traded currencies.

When you are deciding which online options broker to select, it is worth checking out the quality and effectiveness of the educational program and support available to clients. As a trader starting out you will find things easier if the firm offers a range of seminar and videos covering the basics of options trading. Find out if the videos offered are designed to let you see the effect of decisions you take in the mock scenario on your trading capital. As well as the educational angle, does the broker give you a report service, newsletters and trade alerts?

An important area of the package will be the type and ease of use of the trading software. See if you can understand how it works and that it has a version suitable for new traders as well as professionals. You will want to see how straightforward it is to follow your trades on the platform and take decisive action if necessary. Find out if the online options broker can get a better price per contract than its competitors.

In managing your options trading you will want access to technology which lets you analyse price and risk in real time. Also look to see if the broker platform provides statistics on interest rates, volatility and other key variables to help you decide which options to trade at a given moment. After doing all your due diligence on choosing an online options broker, remember that when you trade in options and other derivatives, there is a chance of significant loss of capital. - 23217

About the Author:

The author, William Davies, contributes articles for a website on Commodities Trading, offering an informational resource for those wishing to learn more about commodities, futures and options. Find an appropriate online options broker for your trading style.

Rectangles - Long Trading Strategy with CFDs

By Jeff Cartridge

The rectangle can be traded very successfully on the long side entering the trade as the stock breaks out to the upside. The pattern forms when the two boundary lines that contain the price movement are parallel. The bottom line and the top line are both near to horizontal. Sometimes these may be called a channel or a consolidation, but the most famous version of this pattern was a variation by Nicolas Darvas, published in his book ?How I Made $2 million in the Stock Market?.

Rectangles, Unpredictable But Profitable

Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.

Refine Your Entries

When you look at the performance of a rectangle the pattern works better when the market is rising. Trading rectangles when the market is in an up trend or consolidating improves your trading results. If the sector and the stock are consolidating or rising this also improves the performance of the pattern.

The location of a breakout from a rectangle is unimportant. If it breaks out early in the pattern it will produce similiar results as if it breaks out later. Patterns that have a length of between 10 days ? 35 days produce better returns.

Volume is important with rectangles ensure that the volume is supportive of the breakout with the volume as the share rises more than volume as the share falls. Avoid patterns that have lower highs prior to the breakout or the last turning point is formed by a single outside candle.

Rectangles Can Be Very Profitable

Following a series of simple rules to determine which rectangle to trade can improve results dramatically. By applying these filters rectangles are profitable on a stunning 71% of the trades and return an average of 1.89% per trade in 13 days. This is a very predictable pattern to trade.

Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23217

About the Author:

Jeff Cartridge is a private trader and created the website LearnCFDs.com Trading Chart Patterns - All The Insider Tricks