INTERESTING TIMES !!!

WOW! What a day we've had on the global markets today, the day England decided they want to leave the Eurozone!

In my personal opinion (not that it means anything) I think England have voted the right way. I thought it was more a foregone conclusion they would leave but the final vote ended up being pretty close.

• The GBP / USD copped an absolute hammering down 12% at one point - I don't tend to trade currencies as I don't really understand them so it didn't affect me in any direct way.
• My favourate index the ASX200 at one point was down almost 4% but luckily I had positions hedged to go down so I actually made a bit of money while everyone else was panicking!
• Most global indexes suffered similarly too

What has me puzzled is that most of the so called 'experts' tipped the Poms to stay in the Eurozone.... I can't see why myself but it goes to show that even the experts can mess it up from time to time, and to be fair these are some strange times we are trading through.  I thought it would be a landslide decision and in the end it was fairly close

 I guess as traders the only thing we can do to ride these things and I can assure you there will be plenty more of them as the US elections looms and then at somepoint the US will have to start raising interest rates is play well within your means expect this stuff to happen at any given point. I trade both ways (long and short) so this actually meant that I had the best day I've had all year :) 

IMPORTANT DATES

Once you have been trading a while you will notice there will be some times of increased Volatility. In Australia this can be employment numbers, Reserve Bank meetings, reporting season and ex-dividend dates of larger companies. Of course there are many more but these seem to be the main ones that cause market fluctuation here in Australia.

As I write this America is about to start it reporting season (the general consensus is that it won't be crash hot) so we have to think what kind of reaction this will have on both the American markets and the Global markets as a whole

Have the markets already factored in the figures anticipated? In this case, they are expecting the figures to be a little down so I'd say Yes.

What if the figures are better or worse than the anticipated figures? This is bound to throw around the markets if the figures come back different to what was anticipated. Will it be vastly different or moderately different?

Where are  the  markets sitting now? If the markets are abnormally high or low this could also have a bearing on the markets. In this case it seems the US markets are a little on the high side, my stock trading platform says 74% of people anticipate the price to drop (I would agree with this) I would suggest with an over bought market any uncertainty may result in a downward trend

While it will be hard to predict these things exactly ... and in current market conditions sometimes its hard to pick it at all.... I guess all you can do is weigh up the variables you can identify and see what you think will logically happen.

For this example remember it is now 11th April 2016 

I'm thinking with the general market cautiousness and fear sentiments that have caused some large market swings this year, and a generally overbought US market all it will take is a couple of bad profit statements and it could cause a bear-ish market for the duration of the reporting season or worse still a crash. In this case I'd take a punt of an at least moderate drop in the US market over the next few weeks, but any strategy I'd take would keep in mind the reasonable probability of a crash (say 10% or more downturn in the markets) and trade accordingly.

Now here's the clincher, even if you have no vested interest in the US markets it still affects market indices world wide. We all know the saying when America sneezes xxx country catches a cold.. I trade on the Australian Index and I'd also wager we'd take a hit along with any downturn in the American Market (even though we've already taken a fair hit over the last few weeks) 

The main point I'm trying to make is that you always need to be thinking about what could happen in different scenarios and have a game plan to match. Its hard to map these scenarios in your head but a good idea is to see what is coming up on your economic calendar and at least run a few scenarios through your head

IQ OPTIONS

I know I said I'd do this a while ago, but I finally had some time to get to get in some serious practice with the binary markets.

I chose IQ option because they have a low buy in $10 (USD) and let you place bets as low as $1 a position. First time I deposited money I lost nearly all my bets and chewed up my $10 pretty fast. Admittedly I was still learning how to use the site and get a feel for these things. Second time however I started to get a little better and while I wasn't winning I was starting to hold my own and find a groove.  Still lost my money but this time I lasted a lot longer.

Third time I was definatley winning more than I was loosing and started to accumulate a balance.... my $10 went to $50 across the span of a week or so, so I decided to withdraw my original $10 deposit. I have to say after the horror stories I've been seeing on the internet I was dubious as to wether I'd get my $10 back, but yes ... it showed up on my credit card a few days later.

Now I'm starting to think there maybe something to this.. you do not have your entire capital at risk espeically if you are only betting 1-2% of your capital at any given time. I have been playing around with the 'turbo' options which have expiry times of less than a minute and a half and finding myself most successful with this particular option but they extend out to much longer up to a day or week. depending on how long you are prepared to sit in front of the computer you could increase / loose your balance pretty fast. I have had a few fairly intense sessions on this and usually seem to come out ahead


This is the site I have been using. It is fairly straight forward and easy to use in my opinion
http://www.iqoption.com


This is a precursory article I wrote last year including a basic rundown on what binary options are:
http://howtotradeshare.blogspot.com.au/2015/10/binary-options.html

TECHNICAL ANALYSIS 101

Just something I found while surfing the net...

HEDGING YOUR POSITIONS (holding buys and sells)

How are we all doing in this turbulent time for traders? I will be honest and say I am not making a lot of money (but I have been making some) and it's times like this that I can honestly say I am feeling frustrated, worried and confused about where the market would go from here. As I write this Wall st is looking down the barrell of 300 point drop and its still 7 hours until the markets open.

One thing that has saved me is the fact that I had positions hedged on both the up and down so that took much of the impact of the recent falls over the start of the year. One thing I can be sure of is that without those sell positions there is no doubt I would have run out of liquid funds in my account and subsequently been sold out of the market (akin to a margin call) 

Luckily I had a few sell positions .... (well not luckily, I keep them as a matter of principle) to offset any sudden drops in market and over the last 2 weeks it has come in very handy.

HERES AN EXAMPLE OF HOW THIS MIGHT WORK

Lets say you were following my strategy and you had 10 open positions going up, and you felt that the market was a little shaky.... or maybe you felt that the market was just "over bought" and was due for a correction you could take out some sell positions. lets say I took out 5 sell positions this would mean I have 10 going up and 5 going down. Lets say I go to bed at night (Australian time) and the market completely shits the bed and drops 200 points that means i loose $2000 worth of equity on the 10 x buy positions but I gain $1000 on the sell positions. So basically this halves the damage a drop like that can cause... Its a good little insurance plan for when these things happen .... I like to trade with at least a few sells positions offsetting my buy positions so that when a massive slide starts to happen (and lets face it... it seems to be happening every couple of months) i've got a little head start on it.

I can either close off the sell positions now and cash in my $1000 and hope the markets rebound maybe sell off 1 or 2 of those positions and wait till the market looks like its going to bounce back

The longer you've spent in the market the better your sense for these things will be but it does extend your trading range by a long way by hedging positions on both the ups and downs.

DISCLAMER:

If you take out short positions at the bottom of the market it may save save you temporarily but then you have to unwind those positions as the market retraces its losses. If the market drops well below the point where you decided to hedge with sell positions it's much easier but if the market drops to the point where you opened up your sell positions then bounces back this can be rather difficult and leave you with a whole bunch of legacy sell positions that can be expensive to unravel later.

HERE'S AN EXAMPLE OF HOW THIS MIGHT WORK

Lets say you have the market tanks and you take out 10 positions to go down and you get it at the bottom of the market and the market retraces 300 points in the next couple of days you are now carrying a loss of $3000 if you don't unwind those positions before they get out of control, and you either have to throw in more money or get yourself in a bind that you can't get out of,,, but I think it's still worth the risk because if you find yourself in that situation generally speaking you would have been margin called anyway. This won't always save you but it does give you a fighting chance.

Generally speaking if you are going to do this (and it has helped me a few times... and bit me on the butt a few times) be careful ..... it is better to start hedging the bets before you are about to be margin called so you can stagger these things out ... and then close off any sell positions you might need to sell on the way up once you experience this you'll know what I'm talking about...

EXAMPLE 1.0

BASIC EXAMPLES OF HOW A SHARE CAN MOVE #1

Example a fictional company called “ABC” is valued at $10,000,000 (10 mil) and issues 1,000,000 shares at $10 each  that means that if you buy 1 share you own one millionth of the company if you were to buy 10000 shares you would effectively own 1% of the company

Some companies will pay a dividend which is a distribution of profits sometimes payed out to shareholders yearly or more often half yearly. Other companies might not pay out a dividend and choose to re-invest any profits into the company.

lets say ABC does pay out a half yearly dividend to its share holders of $0.40 per share (which is a fairly healthy payout rate) you would get two payments per year equivalent to this so if you owned one share you would get 2 x payments $0.40 or if you owned 10000 shares you would get $4000 twice a year, a total yield of 8% per year

Lets say another fictional company XYZ is valued at a similar amount ($10mil) and floats 500000 shares at $20  each  but lets say each $20 share pays a dividend of $0.60 a share - still a reasonable payout,yielding 6% per year but not as good as ABC.

Based on these facts alone ABC holds a more attractive dividend yield than XYZ  and on the surface would appear to be a more attractive option for investors.

Common sense would say that more people would be interested in buying “ABC” and the rules of supply and demand would take over and push the price of ABC upwards…. lets say over the course of the year it might go to $12 per share, which in the real world would not be out of the question. This equates to a 20% increase on the share price. Its market capitalization would now be $12mil

Would XYZ go up or down? Hard to say. 6% is still a good yearly yield and in market conditions of late will still return more than putting the same amount of money in the bank … real estate hasn’t done much over the last few years so where else are you going to put your hard earned money? XYZ while not as brilliant an investment as ABC is still better than many other options out there so maybe there is still a demand for it?? It might go to $22.00 per share over the course of the same year. This would equate to a 10 percent increase in the share price. Its market capitalization would now be $11mil

So which is the right choice? Well both shares did alright really, they both returned better than any other common investment (bank deposits and most real estate) and realistically any money you make is good, but ABC was definitely the BETTER choice.

Unfortunatley this article on the Australian Financial Review pretty much sums it up for us here in Australia and probably many others around the world.

Hopefully this year things level out a bit and the markets are a bit more predictable....



A DECADE TO WRITE OFF