What Do Successful Traders Have in Common?

Those professional traders who are successful do have certain characteristics in common. One such trader, nicknamed Big A, has pinpointed 5 charactristics:

1. You will find all successful traders had a mentor. That’s a reason for adopting a mentor who has proven success. If you can find an honest successful trader who will teach his system, as it is and as it made him successful, then you will succeed faster than by using trial and error in your trading.

2. Successful traders remain emotionally detached. Ask yourself, if you make a trade, can you forget about it until your planned exit strategy is met? As BIG A admits, it can be great fun to see your tading account soar upwards in a few days, but paying too close an attention can be dangerous. Be disciplined, and his after market trading plan will eliminate 99% of emotion.

3. A successful trader will not try to make things happen, rather trade with what is happening. If you try to force the market and enter too early because “you know it’s going to go up” you will get hurt. One key to success is to follow rather than try to lead. Stick to your system at all times; it is a system that you should not tweak as you go along and try to make things happen. Impulsive, trigger happy mouse clicking should be done on a demo account, not live with your money. Just don’t think when you get lucky a few times that it’s ok to “make things happen”. That is the whole reason for using a system and milking the slight edge it gives you.

4. Preparation is essential for every successful trade; an unprepared trade is a gamble. It is key to have a plan for your trading activities, and stick to it absolutely. You must know how to easily and speedily plan every single live trade you make. For example, in BIG A’s system, you only need to trade each night for 5-10 minutes after learning the system.

5. Those traders who succeed usually have an expectation of being rich. Can you visualize wealth as a part of your normal life? Successful traders can. Try not to limit yourself. Wealth and prosperity cannot be manifested on the outside if it does not exist within. If not, your account may suffer as it reaches new heights due to a feeling you do not deserve riches. It is important to learn how to think and overcome any hidden physiological obstacles that are hindering you from success. Your mentor can assist you with something like that.

Big A actually has his own ETF trend trading course, in which he teaches his own system of day trading for exchange-traded funds.

The Basics of ETF Trading

Basics of ETF Trading

In the investing world, exchange traded funds (ETFs) are the latest and greatest. Although they’ve been available for more than 10 years, it wasn’t until recently that the popularity of ETFs took off.

ETFs trade on the stock exchange as if they were stock. Generally in the past they have tracked a particular index such as the Dow Jones Industrial Average or the NASDAQ-100. Recently, however, they are putting together ETFs that have a characteristic in common: they invest in a region or sector of the market, or have a certain market capitalization.

Exchange traded funds have many advantages over mutual funds. They can have a low cost of obtaining since you are paying a commission just like when you purchase individual stocks. If you use a discount brokerage, you can buy for very little money. The ongoing maintenance fees for an ETF are also minimal compared to actively managed mutual funds, and in some cases lower than index mutual funds.

Because ETFs trade like stock they have liquidity. With a simple phone call you can buy or sell. ETF exchange traded funds are priced every 15 seconds and trade continually throughout the day. This is different from mutual funds that are only bought and sold at the end of the trading day. Since the exchange traded fund will be kept in a brokerage, it can be traded easily.

Tracking an index means less selling within the fund. This is a fund that is very tax efficient. It is rare that an ETF declares a capital gain distribution. This means you determine when the taxes will be paid on the gain by choosing when you will sell.

Index and managed funds keep some of their assets that are investable in cash. This is used to pay someone who is selling their fund. Since ETFs trade like individual stocks on the open market there is no need to retain a portion in cash.

There is no room for style drift in an ETF. In an actively managed mutual fund, the fund can say it is a large cap fund, but may chase performance by investing in small or mid caps at times. Exchange traded funds are required to keep a 99% correlation with the index or collection of stocks that it represents.

Regarding ETF trading strategies, because ETFs trade like individual stocks you have the additional features of stock. Exchange traded funds can be sold on margin or short. They can have limit, buy and stop loss orders for buying and selling. Put and call options can be purchased and sold using ETFs.

There are of course disadvantages to ETFs as well. They are not ideal for dollar cost averaging. If you have to pay a $10.00 fee each month when you make that $50 or $100 investment it can be difficult to make up that fee.

With the popularity of ETFs, you have to be careful as to what the fund is using as its foundation of stocks. Sometimes it can be such a narrow focus that you really are not achieving diversification.

Because trading can be easy, you can get sucked into risky strategies. If you take part in market timing or short term trading, it can result in big losses. Buying and selling ETF puts and calls, or buying on margin, is speculating and is riskier than buying and holding.

Exchange traded funds are the right choice under certain circumstances. You can use a broad index ETF as a core holding. This can be complemented with ETFs that are targeted to provide weighting in a sector, region or type of market capitalization. As always, be smart and invest slowly.

Is Trend Following The Right Strategy for You?

The technique of trend following goes against the old Wall St.  Philosophy of buy low and sell high.  It takes advantage of the market whether the present trend is up or down.  Traders using the trend following strategy begin trading after a trend is established.  Other traders attempt to foretell what the market will do, trend followers wait for the market to do it.  The dimensions of the trading account and the volatility of the issue are the primary determining factors in how much to invest. 

Click here to see a trend following strategy that generated 48% return last year.

Most trend followers invest in sophisticated software that can be programmed to exit if the trend changes suddenly.  Then the traders keep waiting and see if the trend reasserts itself before reinvesting.  This is about following the already established pattern of certain stocks. 

The single most vital indicator for a trend follower is cost.  He may take other factors into account, but price is the ruling factor.  The timing of the trade is the second significant factor, while it is less important than the amount of the trade.  Before the trader buys, he’s got an exit plan ready knowing when he’ll sell whether the trade is rewarding or not.  The software allows for a stop loss to be set when the loss reaches the maximum acceptable amount. 

Before entering a trade, most trend disciples will test it on their software so they can evaluate the probable risks and gains.  The software is programmed with numerous factors relating to the particular trade.  The trader then decides if he should make the trade under consideration. 

One issue with trend following is the impact that unforeseen events can have on the market.  Political upheavals, natural disasters and other events can effect the market in both positive and negative ways.  When Hurricane Katrina cause large damage to grease rigs and pipelines in New Orleans, the cost of oil and gas skyrocketed in the expectation of dearths.  Although no severe shortages happened, speculators and trend followers, in both the exchange and the commodities market, kept the cost of oil raised for months after the event.   

By definition, all stock exchange investing is speculative.  Following trends is a selected system for utilising swings and roundabouts in the market and using them to your own advantage.  Unlike hot stocks, which involve holding stocks for extremely brief periods, hours or days, trend following involves keeping stock for longer periods, though the basic principle is reasonably similar.  In trend following one might hold the stock for a week or a month depending on the trend. 

I you do not have a plan and the right data when you enter the market, you will almost certainly lose money.  Learn all you can and employ trend following together with other proven methodologies and you will make the most of your investment greenbacks.

Learn how you can apply trend following to ETFs and generate great returns with low volatility.