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| September 2008 | Page 1 of 1 | |
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Unsafe Investments and the Scammers
Publish On 10-09-2008 , 03:34
How often do you here about someone getting taken by a scam, be it in property or the share market? All too often I would think. Pick up any newspaper in any country and invariably you will find some article of the investor who lost it all. Trust me when I say that I hear it weekly from different clients who ring to chat about the latest investment they have found. Fortunately we save a few from some financial pain by doing simple but thorough checks for them.
So what makes us fall victim to such scams?
Well that is so easily answered in one word it is not funny - GREED. Now please don't get upset by my blatant honesty but lets put our cards on the table here. Why do we invest in anything? For a return on our investment of course and it seems that the higher the touted return the more vulnerable people become. It is like they are blinded by these returns that they blank out any or all of the warning signs. Of course there are many credible investments out there, some with excellent high yield returns, but before you commit check, check, check.
Nothing wrong with greed, provided it is calculated.
I am known to offend some people with these articles I write from time to time but it is not my intention to do so. What I do expect though is that at some point people will read these articles and think "Well next time I will do more due diligence before allocating my hard earned money into any investment." Greed is a fine emotion if it is under control, this means that we do not hurt those around us, lose judgment, become irrational or desperate over any investment regardless of the potential return.
Check the credibility of the person you are trusting with your money.
Whoever you are going to invest with do your due diligence. This is done by so few that it absolutely scares me. Talk to industry professionals and make sure you check with your relevant authority which in Australia is the Australian Securities and Investment Commission (ASIC).
And one last thing, look for the obvious signs that you are dealing with someone of questionable character ie: not licensed within the relative legislation, wants to transfer your funds "offshore" for safe keeping, wants the funds held in their name and not your own or a registered funds, drives a slick car and wants to show off the trappings of wealth, pushes you to invest or my favourite invalidated returns.
Remember many talk the talk but not many walk the walk. Choose wisely as you have worked hard for your money.
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The One Thing That Stops Traders Being Profitable
Publish On 05-09-2008 , 11:44
When I got started in trading there was one thing that I didn't consider, not even for a minute. And it was an aspect of trading that impacted very significantly upon my success.
That one thing: emotions.
Working hard for your money only to see it trickle away on a computer screen is kind of weird. You know you are losing it but never really know you have until you try to get it back from your broker!
The Phrase I Don't Like
There is one phrase in the share market game that personally I cannot stand. That phrase is "paper losses" or "unrealised losses." From time to time you will hear people say that losses do not exist until you sell your shares and realise that loss.
But a loss is a loss no matter how you look at it.
To be successful in any financial instrument is to adopt a certain mentality. The mentality you need to adopt at all times is........... "Should I need that money can I get it access to all of it now?"
The reason I speak of this is to highlight once again the emotional roller coaster of it all. I for one believe it must have been a broker that invented the words paper loss or unrealised loss!
Keep You Coming Back For More
Why would one say that? To keep you coming back for more.
Please don't get me wrong, I have a lot of friends and colleagues that are brokers and fine ones at that. Again, I am just pointing reference to the emotional side of trading.
Long, Hard Road To Profitability
Now let me tell you it was a long and hard road to get to the stage where I was confident that I could sustain myself for the long term, emotionally and profitably. Not for a minute did I think it would fail but more to the point, When Would It Succeed.
I have been a private trader for many years now and like a lot of readers got started simply by trading shares and looking for a small amount of extra income.
As your confidence builds and you learn to manage your emotions, you will realise that the daily decisions you make will become clearer. The end result of this for many of you will be to see your bank balance grow!
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Do you trade Futures, Options or CFDs? Take a look at Managed Discretionary Accounts (MDAs)
Publish On 16-09-2008 , 07:35
If you are currently trading futures, options or CFDs you should consider adding a professionally managed account to your portfolio. Managed Discretionary Accounts or MDAs are accounts that are managed by an ASIC registered Managed Discretionary Account (MDA) operator. The MDA operator does the actual trading for these accounts and in return receives some combination of a management fee, a performance fee (percentage of the profits), and/or a share of the commissions.
To better understand why you should consider MDAs, it is helpful to review some common reasons why people lose money trading futures, options and CFDs:
- Unable to devote enough time to trading
- Seriously under capitalised
- Lack of money management techniques
- Poor trading discipline
- Trading for the action and not to make money
- Over trading
- Fight the market instead of going with it
- Make trades to satisfy margin calls
By using MDAs we can attempt to eliminate the reasons that the average trader loses. CDM Pacific operates a MDA trading futures and options on global commodity markets. As noted in the Chicago Board of Trade's Guide to Managed Futures, managed futures, by their very nature, are a diversified investment opportunity. The CBOT guide states that benefits of managed futures within a well-balanced portfolio include:
- Opportunity for reduced portfolio volatility risk
- Potential for enhanced portfolio returns
- Ability to profit in any economic environment
- Opportunity to participate easily in global markets
Disadvantages of managed futures:
- No participation in trading decisions
- Management fees and administrative costs
- Incentive (performance) fees
- Potential trading losses
The main concern of most investors will probably be turning over the trading decisions to another person, if you are able to do this, a professionally managed MDA maybe an alternative investment worth considering. Furthermore MDAs can be used by most entities including company, trusts, self managed supers, partnerships and of course individuals.
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Non Directional Trading
Publish On 30-09-2008 , 18:41
Most trading systems require a certain degree of bias to predict the market trend or direction in order to make money from the market. If you have been trading long enough you will know that this is very difficult no matter how good you are or how complex your software is. Predicting where the market will trend is a difficult task for many of us. On the other hand predicting where the market will not go is a far easier task. Non Directional Trading is about making money predicting where the market will not go. Ask yourself the question “which is easier?”
To predict where the market will go or to predict where the market won't go?
As non directional traders we employ a strategy that is robust enough to allow us to make solid returns whether the market moves up, down or sideways after the position has been initiated. Our strategy will carry a directional bias the longer we hold it, this is due to the time decay element of the trade. However if the entry is timed well, capitalising on inflated Implied Volatility and disparities in option pricing, the trade will ultimately pay off regardless of the direction. Can we get the direction wrong and still make a profit, most definitely.
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