Tag: guest blog

What Kind of Investor Are You?

Posted on by The INO.com Team

I found today's author Mr. Moneybags' through his blog BigFatMoneybags.com a little while back. His view on finance isn't necessarily the norm and I thought it was great. Moneybags take on finance adds a bit of humor in an atmosphere that can too often become stressful. Without further delay I present, Mr. Moneybags.

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What kind of investor are you? It’s a simple question really. Although, it is surprising how few people can answer that question due to their lack of investment strategy – these are the same people than end up collecting empty cans off of the sidewalk for spare change. Let’s take a look at the four prominent types of investors: Continue reading "What Kind of Investor Are You?" →

Psychological Financial Fusion and The Dow Jones Transport Index

Posted on by The INO.com Team

Today I asked the team from Psychology of the Call to open our eyes to an index that is often overlooked...or misunderstood as it relates to current or historic trends! I for one really didn't know too much about DJT and how it's been connected to our economic situation. Please enjoy the lesson and be sure and drop by Psychology Of The Call and tell them we sent you!

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The Dow Jones Transportation (DJT) Index is a trusted leading economic indicator followed by wise men. The index was created by Mr. Charles Dow in 1884, a time when railroads were as important as today's internet superhighway, perhaps even more so. The index consisted of 11 stocks of which 9 were railroads, and all aboard have been derailed of late.

The deleveraging and divesting of every asset class in the cosmos has not been kind to the transport industry's equity holders, yet this sudden business shock may work to strengthen their business models as the world begins to dig itself out of this unprecedented trough.

Today's DJT is made up of 20 stocks of which only 4 are railroads: Burlington Northern (BNI), CSX Corp (CSX), Norfolk Southern (NSC), and Union Pacific (UNP). The other 16 stocks are airlines, trucking, and shipping.
http://en.wikipedia.org/wiki/Dow_Jones_Transportation_Average

Interestingly enough, today's talking heads insist on quoting the S&P 500 index as the best leading economic indicator, yet the DJT Index is 68 years its’ senior. That takes us back to just after President James A.. Garfield (R-20th) became the second U.S. President to be assassinated. The unfortunate event enabled Vice President Chester A. Arthur to take power.

Here's a maximum time frame chart that doesn't even go back to its beginning in 1884:

Since corporate financial officers (CFO) are always striving to lower costs, many today would think their jobs have become easier since oil has fallen over $100/barrel, but that can't be further from the truth.

As CFOs experience this lower cost, the global economic slowdown is taking an even bigger toll on sales, share price, earnings per share, and margins. Profit margins at many of these companies are contracting due to desperate attempts to hedge what was a run-away oil market. Some airline CFOs stock piled crude supplies after it broke through $100/barrel, then $90/barrel, and so on. Thus the current price of sub $40/barrel has them miffed as global deleveraging is causing a domino effect of business contraction with the added burden of a higher crude cost supply glut in the short-term, yet not necessarily all are managed the same.

Even though the DJT's are a cyclical bunch, they usually signal an economic recovery before most other sectors since they must deliver raw materials from point A to point B. The raw materials are then utilized by manufacturers before eventually being sold at your Best Buy, WalMart, or Sears. The signals aren't looking too positive from a fundamental aspect of late since GDP and unemployment continue to suffer. The short-term technicals aren't giving us any bullish confirmations either. Notice  the DJT's dragging the S&P lower in this 3 month chart, foreshadowing a lower stock market ahead:

^GSPC = S&P 500
^DJT = Dow Jones Transportation Index

Since the DJT index is a corner stone of market history, forward-thinkers would be wise to follow it and use it in addition to the S&P when setting up pivot points for trades.

The financial sector is still a large weight inside the S&P index, and yet it hasn't dragged the S&P below the DJT in the last 3 months. The index is not signaling a sustained economic recovery anytime soon. The longer-term (5 year) chart reveals fairly solid footing in the 2,600 range, yet forward-thinkers respect the over-shoots that a climactic bottom prints.

While you can invest in thousands of stocks that are not directly part of the DJT, just about every stock you choose will be at the mercy of some transport cost(s). So please give some respect to the Dow Jones Transportation index; it has stood the test of the most powerful judge, Father Time. If you share our optimism in an eventual economic recovery, monitor this index in the next few days, weeks and months; it may help you profit.

Psychology Of The Call

Why Do I Need A Trade Log?

Posted on by The INO.com Team

Today's post is by Alan Martin from Forex Calculator Online. I've known Alan for a while now, and I asked him give me a little insight into what he thinks makes a successful and disciplined trader. He responded with two words "Trade Log!" Be sure to take a look below at Alan's thoughts on the importance of recording your trades.

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Why do I need a trade log?

The Primary function of the Trade log is to save time. It’s a simple and effective tool and I use it every time I trade.

There is never enough emphasis placed on the importance of keeping good records. This is one of the essential ingredients that separates the successful, well disciplined trader from the ex-trader.

Every successful and well disciplined trader keeps a trade journal. Every aspect of each trade is logged. They record the technical data, the history, functionality of each trade, and what made them take that trade. Most importantly, they record how they felt as they went into, during and when they exited the trade.

All this information is essential to track performance, follow strategies, learn from mistakes and work out plans for ongoing improvement. It is an essential ingredient in a profitable trading tool kit.

As the old saying goes, “A blunt pencil will always remember 100% more than the sharpest mind."

Record keeping is considered time consuming and non-productive, especially if you’re just beginning and don’t know how to do it. It can be devastating to not track your performance. How are you ever going to know when you are improving?

A few words of wisdom:

The inability to enter a trade demonstrates a trader's lack of discipline. Either it’s a “go” for the trade or it’s a "no go." If a trader’s system has too many poorly defined areas, it should be changed. Trading should be mechanical; either the squares are filled-in, or its no trade. Sounds simple, but egos want to shine and show that their ideas are better than some mechanical system.

Also, many traders may be trading money that they can’t afford to lose. This puts even more pressure on the trader to not be wrong. Once should always say to themselves, "If I lost this... would it affect my lifestyle?" Not only that, a good system establishes a minimum account drawdown limit; it’s like setting a stop-loss on your trading account. If you hit a predetermined drawdown level, trading comes to a stop until real changes are made-either in the system or the trader’s mental/emotional outlook.

But just talking about these things is not enough. Most of us aren’t very good at giving ourselves a valid self-appraisal. What we need to do is establish a report card giving a grade not only to our system, but also no our emotions and mental discipline. A trader needs to establish procedural constraints and then learn how to match feelings and thoughts to the trading process.

Being able to deal with a losing trade is what separates successful traders from ex-traders. As a matter of fact, it has been shown many times that it’s not so much the system, as it is the trader’s ability to maintain the proper mental discipline and emotional understanding. This gives the seasoned trader the ability to take the higher ground. One of the intangible benefits of learning to become a successful trader is the fact that you usually become a much more honest and introspective person. You learn to honestly appraise your performance and probe your weaknesses. You learn to stay humble, focused and accepting of things you can’t control. All of these things do more than make just successful traders; they can make for success in life.

In conclusion, one of the most essential ingredients in a profitable trading tool kit is keeping accurate records of each trade logged in your journal.

Cheers,

Alan Martin

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Alan is the creator of Forex Calculator Online. If you enjoyed this post be sure to visit his site for more from Alan.

How the Panic of 2008 is creating more wealth than ever in the Forex markets.

Posted on by The INO.com Team

With Forex getting millions of hits on our site over the past few days I asked Bill Poulos from ProfitsRun to give us his opinion on the Forex markets. Bill has recently released a number of highly educational Forex videos and has over 30 years trading. Please enjoy the piece and watch his latest videos.

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By now, everyone has been well-schooled by the media on how dire the economic situation is in the USA, as well as globally. A massive credit contraction is in the process of wreaking havoc on one and all. After almost 70 years of non-stop credit expansion, the party appears to be over.  The result is plunging stock markets around the world, a collapse in real estate prices, commodities, and even oil.  Unemployment is moving higher, retail sales are off significantly, and the media has now announced what we already knew months ago - the economy is in a recession.

Now, there is no denying that the situation is very serious and, of course, the government is doing everything they are capable of to stave off the contraction and the consequences of deflation.

So the prevailing mood is one of "doom and gloom" – it's in the air, in the print media, radio, TV – you are programmed to believe that you are a hapless victim that can only hope for the government to save you.

As for us investors and traders – the message is there is little you can do in this environment except wait for our stock portfolios to recover, which may take years.

I strongly disagree with this notion and here's why.

There is at least one market that offers significant profit potential right now, hour by hour, day in and day out.  Whether you are a day trader or an end of day trader.  And it should be no surprise that I am referring to the Forex market.

The Forex markets have always offered great profit opportunities, but these opportunities get even better in times like these.  You see, with all of these economic cross currents and pressures that are working against other investment vehicles, they actually drive even better profit opportunity than normal in the Forex market.

For example, since this past July, the dollar has been in an almost unprecedented rally against other key currencies offering the savvy trader terrific profit opportunities.  The EURUSD pair has fallen by 3500 pips or $35,000 per standard lot, the GBPUSD pair has fallen by 5000 pips or $50,000 per standard lot, and the AUDUSD pair by 3000 pips or $30,000 per standard lot.  So while other more traditional markets are being decimated, the dollar rally has offered great opportunity.  But only for those with eyes to see it and a trading method to take advantage of it.

Make no mistake, there is plenty of risk associated with the Forex markets and for that reason you must have a good trading method to guide your trading that puts risk management first and foremost – because without it, you will lose.  But to better put this into perspective, I often use the analogy of driving a car.  Driving a car without understanding the rules of the road and without experience would be a very dangerous thing to do.  But with the proper training and guidance, as you received when you first learned to drive, you were able to enjoy the benefits of driving by first paying attention to and controlling the risk of driving.  I think of Forex trading in the same way.

Whether you are able to trade a large account or small account, standard lots or minilots, the mechanics of Forex trading are quite straightforward and easy to do, again with the proper guidance.

I believe anyone who wants to ditch the "gloom and doom" scenario and take control of the situation has the opportunity to do so by mastering a good Forex trading method that puts risk management first and in the process go from reliance upon others to becoming an independent trader.

For an in-depth technical look at how to spot profit potential today in the Forex markets, click here for a free, 3-part video training series.

Good Trading,
Bill Poulos

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