Month: September 2017

Have You Made A Bad Investment?

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If you are concerned about saving money or making money for the future, or both, then you definitely need to consider making an investment in different stocks, mutual funds, and the like to create a well rounded portfolio that will provide you with returns that benefit you and your investment. There are so many benefits of making an investment in a mutual fund or funds and just a few of them are full time management, access to money, diverse investments, and services.

When you invest in mutual funds you are investing in not only funds but full time management of your funds by knowledgeable brokers. These managers you will take care of all of your investments from buying, selling and trading so all you have to do is sit back and watch your investment grow because the mutual fund mangers handle all of the work for you. Also, your mutual fund manager will make the best possible investments for you because the mutual fund companies are always working with analysts to get the most up to date information on companies and the investment world.

When you invest in mutual funds you will also be able to access your money quickly and easily if you need to. In most cases individuals make an investment for a long period of time, however sometimes emergencies develop where you need money quickly. In these instances you will be able to sell all or most of your shares for the market price and get the money immediately. That is good to know.

Also, when you invest in mutual funds your money will be invested in a wide variety of investments which would be nearly impossible for you to do on your own. The reason it is good to have your money invested in hundreds of different of investments is that the ups and downs of the market do not affect you as much and also your risk of loss decreases. So, investing in mutual funds is really a good option for people who want to make the most of their investment and the return on their money.

In addition to all of these benefits, when you use a mutual fund company to make your investments for you then you will also receive additional services. In general, these benefits include automatic reinvestment, transfer of funds electronically, and other services as well.

If you have investments that are not performing as you would like or are considering making some investments, then go ahead and look into investing in mutual funds. You will be amazed at the ease of investing in mutual funds and the potential growth you will see on your investments. However, make sure you use a credible mutual fund company to make your investments for you.

The Profit Room

Emotion In Investing

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Humans are all emotional being. We do not always make decisions rationally. Emotion is part of us as investors. Investors might feel better towards stocks at certain point or they might feel that owning stocks are risky and avoid it at all cost.

Investors may also feel attached towards a specific company and continue owning the stock without regards to its fundamental. For example, you might like Google’s search engine so much that you decide to buy the stock  without doing any research. You figure that Google’s search engine is so much better that buying the stock will give you profit, right? Wrong. Now, I am not here to bash Google as an investment, but analyzing an investment goes beyond the products and companies. Most investors can identify good companies and products. It is quite easy. You know that a Mercedes is a better car than a Ford or a Civic.

The next question is how much should you pay for a Mercedes or a Civic? This requires us to put aside our emotion for a second and think clearly. Sure, you’d like to have a Mercedes in your life. It is luxurious and have a lot more fancy features than a Civic has. But, that does not mean you should overpay for it. It works similar with stock investing.

Google is a good search engine, probably the best that is ever produced so far. Sure, you probably pay more for Google than other generic search engines. But, please don’t over pay. You invest in Google to profit from it not because you like its products.

So, how do we eliminate emotion from our investing decision? We can’t eliminate it completely but there are certainly tools that might help. One is to calculate the fair value of a common stock that you are investing in. Fair value of an investment is dependent upon the streams of profit generated by it. In the long run, if company A earns more than company B, then company A will be valued more than company B.

For a company that is growing such as Google, you can incorporate its growth and calculate the fair value with growth. This is a fundamental approach to long term investing.

Emotion is hard to ignore. We are not immune to that. But following your emotion will cost you a lot of money. Just watch those investors who buy the peak of a stock. Don’t follow the herd and keep your focus on the fair value of your stock. You will do really really well.

The Profit Room

 

Five Forex Trading Tips You MUST Know

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Jumping into Forex trading with both feet? Here are five must-know tips on Forex trading and mini Forex to help you stay afloat in the Foreign Exchange currency market.

Know your Forex trading market.
Educate yourself about the currencies that you trade. The more you know about the country whose currency you’re trading in the Forex market, the more accurately you’ll be able to predict which way the money will move.

Pick a Forex trading system – and stick with it.
Savvy Forex traders will tell you that system is everything. Forex trading by system lets you automate your trades based on history, following the traditional peaks and valleys. Set up a system and live with it to make the most of your Forex trading.

Practice makes perfect – but it’s not the real world.
Practice Forex trading accounts are great for learning how a particular trading account works – but they’re not the real world. Many experienced traders recommend starting off with a mini Forex account to minimize your losses while you get acclimated.

Keep your eye on the margin.
Margin trading is a great way to lose a lot of money quickly. Stay away from Forex margin trading until you’re sure you know what you’re doing.

The only win that counts in Forex trading is the bottom line.
In Forex trading, the bottom line is how much money you made at the end of the day. Don’t count won or lost trades – only dollars and cents.

The Profit Room

Not Limiting Your Losses

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If you know the pitfalls of trading, you can easily avoid them. Small mistakes are inevitable, such as entering the wrong stock symbol or incorrectly setting a buy level. But these are forgivable, and, with luck, even profitable. What you have to avoid, however, are the mistakes due to bad judgment rather than simple errors. These are the “deadly” mistakes which ruin entire trading careers instead of just one or two trades. To avoid these pitfalls, you have to watch yourself closely and stay diligent.

Think of trading mistakes like driving a car on icy roads: if you know that driving on ice is dangerous, you can avoid traveling in a sleet storm. But if you don’t know about the dangers of ice, you might drive as if there were no threat, only realizing your mistake once you’re already off the road.

Traders often fail to limit their losses in search of a big win. Of course, the only way you can make a fortune with trading is to actually stay in the game, and it’s hard to stay in the game when you’ve already lost all of your money. The problem is that people often feel like any loss is a failure, and so they don’t incorporate a strategy for “safe” losses. They may feel like “planning” for a loss is planning to fail when, in fact, it’s planning to keep themselves in the game.

Losses are a part of our business. The key to trading success is to limit your losses. Too many traders give a trade way too much “room,” and they take big hits, which can shrink an account down by 20%, 30%, and sometimes even 40%. You have to put a system into place which will ensure that you set small losses to avoid emptying your account.

There’s a huge difference between losing big on a regular basis and losing small in a controlled trading plan. You already know that you should keep your losses small; the key is to keep them smaller that your average wins. Even if your winning percentage is only 50%, you’ll still be profiting if you set yourself up correctly. For example, if you have a weekly strategy that gets you $300 for every win but only takes $200 for every loss, a tie of a win and a loss will still get you a $100 profit for that week.

The real key is to set a weekly goal and to be sure that you set a loss limit for each trade. So let’s say your goal is $300 each week, and you want to be sure that you lose no more than $200 per trade. If your first two trades of the week were losses, then you’re down $400. But all you need is three more wins through the rest of the week to make your profit. Once you meet your goal, stop trading, otherwise, you may end up with further losses, putting you behind schedule and gouging into your account funds, which will simply set you back further.

The basic rule: always know when to exit a trade. Set a loss limit and stick to it. But also set short-term goals, and stop when you’ve reached those goals. Don’t ever gamble. Remember that looking for small gains over the long term is a much more reliable and consistent strategy which will help you avoid losing too much too quickly.

The Profit Room’s Team

 

Day Trading or Investing for the Long Haul?

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Among those who buy and sell stocks there is an ongoing debate about whether the most profitable approach to stock market trading is short or long term investment. And the two sides rarely reach agreement, because one side is rather conservative in its approach, whereas the other has a more radical and freewheeling attitude. Day traders are usually considered the mavericks of the trading world, and they are known for taking gambler’s risks and making huge profits in short amounts of time – sometimes buying and selling the same stock several times in a single day. Those who prefer to buy and hold their stocks follow a more risk-averse path, and cite historical trends to back up their claim that their method is actually more reliable and is the real shortcut to wealth.

Most investors can enjoy the best of both worlds, by setting aside some of their money for day trades, and the balance of it for longer-term investment. Because day trading tends to be more volatile, and can result in quick profits or fast losses, most of us would be advised to put only as much of our investment capital as we can comfortably afford to lose, into this kind of trading strategy. That way, even if you encounter a worse case scenario, it will not adversely impact your overall financial situation.

There are pros and cons to both styles of investing. Those who do day trades enjoy the fact that they can get in and out of the market quickly, and make money without waiting for the results. But any kind of stock market investment strategy requires research into the companies you decide to invest in, and research can take time to do. If you are buying and selling so fast that you don’t have time to do adequate background analysis, day trading may not be a prudent approach.

Investing in companies that provide slow but steady returns is a time-tested approach to the stock market. In fact, most historical evidence supports the idea that if you buy quality stocks and hold them for long periods of time – at least five years or more – you will do very well in the stock market. For that reason, those who are young enough to have time on their side would probably be wise to buy some stocks and sock them away for retirement.

With most investments, it is usually best to diversify to minimize risk and maximize potential gains. One way to accomplish this in the stock market is to employ both strategies, and use a portion of your investment capital for short-term trades, while leaving another portion in long term investments. If one basket of investments doesn’t do well, the other probably will. And if both do well, you will enjoy twice as much success.

At The Profit Room we can help you learn how to day trade and swing trade. So whatever trading strategy decide on contact us.

Short-term vs. Long-term stock investment

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There are many persons that run towards stock investment as a means to make some quick money. This is perhaps however not the best investment option for persons with short term rewards in mind. The best option when thinking of investing in stocks is if you are interested in accumulating funds over a long period of time. One such example is the investment for future needs such as a nest egg for retirement and so on.

In stock investment both short term and long term investments come with risks attached and therefore nothing is truly guaranteed in the stock market. Today could be very good and tomorrow very bad resulting in great gains or great losses as the case may be. However, in terms of long term investment, it is shown according to statistics that there are no 20 year portfolios that have lost on the stock market. The average returns have averaged about 10 percent and these accounts all have a broadly diversified portfolio of stocks.

In the short term the market is very risky. The market will go up and then go down so if you are only thinking of investing for a short period then this is not the best option. If you are nearing retirement age and now beginning to invest in stocks this is not a good option. The best option in these cases as a protection against inflation, rather than stocks, is to invest in stable investments such as bonds and other cash instruments. This offers more security than stocks in the short term.

So how long is considered short term? Many persons are under the misconception that short term means less than a year but this is in fact not so. In terms of stocks short term is considered to be five years or less and some persons will recommend more years rather than the minimum of five years. A good rule is that if you are going to need your funds in the next five years then stay away from stock investment. Another point to note is that unless you are an active trader then short term investments make no sense. If the funds being used are for retirement investment then being an active trader is also not recommended.

The average down time for some markets is a year but this has been seen to last much longer a well so though for a long term investor this downtime may seen to be a lifetime it will pass but if you are a short term investor you will lose a lot depending on the market fluctuations. Stock investment will offer many great opportunities but can be devastating for a short term investor. If you know that the funds you are investing will be required for use in a short time then choose investment options that are more secure and protected. It is true that you may get lucky and make a fortune but it is also true that the risks are high and that you can lose everything.

The Profit Room

Greed And Fear

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Greed and fear are the major players in the stock market. These two emotions are the
driving force behind almost all market participants – Institutional mangers, stockbrokers,
Investors, traders and yourself.

You might be saying to yourself that greed and fear will never get in the way of my trading,
but believe it or not they will be. It is not something to be ashamed of. It is something you
have to admit to, come face to face with, If you are to become a successful stock trader or
investor.

This is why our day trading chat room is helpful. You can see how our moderators deal with this everyday.

What do greed and fear look like in the stock market trading arena?

You have been watching a particular stock for some time now. It has set up perfectly, so you pull the trigger. You bought it at the perfect price and now it is moving higher just as you thought it would.

Now greed steps up to the plate and says to you, this is going to be a rocket ship. So you buy some more shares. Or your stock moves a few points and goes passed the price that you decided to get out. Greed tells you this baby is going higher tomorrow so you hang on.

When stocks make strong moves to the upside greed from all the cumulative market participants joins the move.

Stock prices usually fall faster then they go up, and when this happens, fear now steps up to the plate.

Lets look at the example above, where your stock went through your get out price and you held on because greed was by your side. The next morning the stock price gaps down. Their is heavy selling all morning long. Greed is telling you to hang in there the price will come back. The price keeps going down, now you get a knot in your gut, and your knuckles are turning white. Fear is now by your side, but by now it is to late, your nice profit has turned into a loss.

Everyone goes through this until they have mastered the ugly faces of greed and fear. Master this and you are well on your way to becoming a successful stock trader.

The Profit Room’s premium courses are designed to help you conquer the greed and fear that can result from trading.

Trade Safe!

A Disciplined and Organized Approach to Trading in the Stock Market

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A Winning Approach to Trading in the Stock Market
Many traders lose simply out of ignorance. They base their trades on hunches, news, or tips from friends, and do not define specific risk and profit objectives before placing trades. Others have the merit of educating themselves but fall victims of their emotions. They hold on to losing positions hoping they will turn into winners and sell winners by fear of losing a small gain. They over-trade to fulfill a need for action or by fear of missing out.

The consistent winners follow a winning approach:

– They have a strategy to enter and exit trades
– They use good money management
– They take consistent actions, they follow a trading plan
– They keep good records so they can review their actions
– They avoid over-trading
– They have a winning attitude

A strategy to enter and exit trades

You need to a strategy to put the odds in your favor for each trade you take. Your strategy should be as objective as possible and include the following elements:

Entry: conditions required before you can enter a trade – may include technical analysis, fundamental analysis, or both.

Initial stop loss: price at which you will close the entire position if it does not go in your favor. The risk per share is the difference between the entry price and the initial stop.

Initial price objective: price at which you will take some or all profits if the trade goes in your favor.

Trade management: set of rules that dictates your actions while a trade is opened. It may include trailing stops, closing position, etc

For every action you take, the reason should be clearly described in your strategy.

Money management rules to keep losses small

The goal of money management is to ensure your survival by avoiding risks that could take you out of business. Your money management rules should include the following: Maximum amount at risk for each trade. The different between your entry price and your initial stop loss is your risk per share. Your maximum amount at risk for each trade determines the share size.

Maximum amount at risk for all your opened positions.

Maximum daily and weekly amount lost before you stop trading, and avoid trying to trade your way out of a hole after a loosing streaks.

During your learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go broke faster.

Good record keeping
Although the process of gaining experience cannot be rushed, it can be made much more efficient by keeping good records of your actions. Good records will allow you to: Review your actions at the end of each day to make sure you followed you strategy, not your emotions.

Learn from your losses, they cost you money, make sure you get the education in return.

You should also keep a journal of your observations.

A trading plan to keep emotions out of your decisions
During trading hours, emotions will turn smart people into idiots. Therefore you have to avoid having to make decisions during those hours. This requires a detailed trading plan that includes your strategy and your money management rules.
For every action you take during trading hours, the reason should not be greed or fear. The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.
You have to follow the plan without exception. Any valid reason for an exception – for example, correcting an oversight – should become part of the plan.

Over-trading

Sometimes the best thing to do is to do nothing. Not trading on those bad days is key to becoming a consistent winner, in some situations it is very tempting to over-trade:
– If you trade to fulfill a need for action, to relieve boredom
– If you can’t find the proper setup but can’t wait
– If you fear you are missing out on a great trade or on a great market
– If you want to make up for losses (revenge)
– If you trade to feel like you are working instead of sitting around. Trading involves a lot of work other than the actual buying and selling.

You should not trade under the following conditions

1. You are not following my trading plan
2. You have reached your daily or weekly maximum loss
3. You are sick or very tired
4. You are very emotional (upset, pressured to make money, self-esteem destroyed)
5. You are using new tools you are not completely familiar with
6. You need time to work on your trading plan

A winning attitude
Losing traders look for a sure thing, hang on hope, and avoid accepting small losses. Their trading is based on emotions. You must treat trading as a probability game in which you don’t need to know what is going to happen next in order to make money. All you need to know is that the odds are in your favor before you put a trade.
If you believe in your edge, which is you believe that the odds in your favor for each trade you enter, then you should have no expectation other than something will happen.
Your attitude will have a direct influence on your trading results: Take responsibility for all your actions, don’t blame the market or world events.

Trade to trade well and for the love of trading, not to trade often and not for the money. The money will come as a result of trading well.

Don’t be influenced by the opinions of others. Reach your own decisions and follow them.

Never think that taking money from the market is easy and never assume that you know enough.

Have no particular expectation when you place a trade because you know that anything can happen.

Don’t try to guess the future, trading is a game of probabilities.

Use your head and stay calm, don’t get excited or depressed.

Handle trading as a serious intellectual pursuit.

Don’t count how much money you have made or lost while you are in a trade – focus on trading well.

The Profit Room’s Premium Courses can assist you even more on your trading journey.

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