Starting Small

Here's a cool little app I found, I have to admit I haven't used it yet, but its getting great reviews around the net... its called "Acorns" and its a neat little way to start off small like say just depositing a couple dollars at a time to buy small micro share purchases.

I guess the idea is to get people into the regiment of saving ... Like say you DON'T go out at lunch and spend $4 on a coffee you can put it in here, or if instead of paying full price for something you put the difference between the sale price and normal retail price in here and you can start building a little share fund. Once you get into the swing of things it's amazing how fast spare change can become something worthwhile

For me it would be spending less at the pub could go a long way into building a little share fund hehe!

app.acornsau.com.au/invite/

MARKETS AT RECORD HIGHS

Over the last week or so, we've seen both US and UK markets recover from their lows after the "Brexit" crash to be at record highs just a couple of weeks later (even the Aus index is the highest it had been for a fair while as well)

Obviously I don't have a crystal ball and lets face it, some strange stuff has been going on in the markets these last couple of years... So I will re-iterate that you guys have to make your own decisions and live with them... but lets look at what has been going on for the last week or so

I've been looking at the data in my own trading platform and it indicates that 86% have shorted the FTSE and 88% shorting the WALL st Index with the SP500 telling a similar story at 81% . This may vary a little from broker to broker or where ever you get your information but it seems consistantly to be pointing to down trend and to be honest I've never really seen the markets shoot up from this point. It may not `"crash" but generally speaking it will correct within days.

From a purely 'graphical' point of view if you look at the SP500 / FTSE / ASX indexes, it looks set to drop (If past cycles are anything to go buy) but more importantly, what has changed in the world to drive the stock market up so fast? Not much really.... a seven or eight day winning streak is rarely backed up by further gains if you look at the index as a whole anyway here's a couple of articles from diffferent view points.... I guess all you can do is read and make your own decision!

http://www.straitstimes.com/business/companies-markets/anatomy-of-a-stock-market-crash

http://www.forbes.com/sites/sarahsu/2016/07/13/chinas-stock-market-crash-one-year-later/#41d45e9a23c5

INVESTING.com

Here's a cool site I've been reading lately.... good site, and now that bloombergs.com doesn't seem to be working as well (it seems to keep jamming up on me) .... this is a great source of news.

http://www.investing.com

Some useful tools like live charts and economic calendars ,,, if you already have a trading platform these should be on your platform but the general news is quite useful too

Market Bounces Back!

Well, this is interesting the market has bounced back to where it was right before the "brexit" vote rocked the world markets a week ago! I guess its a lesson to everyone out there to just take it easy and invest well within yourselves and hopefully you'll be able to ride out these ups and downs.

Next few months could be interesting with Australian election results due in today and more importantly US election results and interest rate decisions... I'm not sure when the US will raise interest rates (that's the million dollar question) but once they start that process I'm forseeing another long period of market slumps and a possible continuation of the GFC. I don't htink the market will go much higher as the US indexes are at almost record highs and Australia could go a little higher but I really can't see it going that much higher. (possibly 5500)

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

CAPITALISING ON YOUR SUCCESS

Ok, things are starting to go good and you're making money consistently, everything is looking good.... What to do now?


SEPERATE YOUR MONEY

Diversify your money maybe put a set amount from your earnings into another place  like pay off debts, especially if you have mortgage - maybe start another account (IG markets lets you have multiple accounts) and maybe trade something different like gold or an FX using the same strategies....

MINIMISE YOUR RISK

If you started (like I advised) on 1 x ASX200 contract on $2000 and you want to increase your earnings you can play 2 x ASX200 on each trade. I like to see my risk reduce each time I up the bet so maybe i wouldn't start trading on 2 contracts until I hit $5000  (and hopefully have taken back my initial investment in payments)  and 3x contracts till I hit $9000 this means that If I was to get to an account balance of $9000 I'm probably making $150 per day (thats my average anyway) on trading 3 x contracts and this is where I find it becomes a very real and valuable addition to my income. $3000 per contract would give me an approximate trading range of 450-500 points  which gives me a greater safety range than trading one contract per $2000 (which would give a 300-350 point range) the further along things progress  I would maybe to to 4 x contracts on $16000 and 5 x contracts on say $25000 which would give you  saftey margin of 650 points (approx) which is a fair trading range and will allow you to sleep at night without constant fear of being sold off in the event of a sudden dip or whatnot.

I view trading on 1 x contract on $2000 bit of a risk and in the last 2 months there's been two events where I would have been sold out. But unfortunately we all have to start somewhere, some start on less than but at the end of the day $2000 is not a lot of money but once you get past $5000 and then $9000 this is serious money to most people and its a good idea to minimise the risk (even though by now its not really your money your playing with) its a valuable lump sum and and even more invaluable tool to make a regular income out of NOT something to be taken lightly. It is better to have this amount coming in regularly Ideally i want to have this coming in as an income for the rest of my life, the actual dollar amount for me is not as important than the security of having something come in like clockwork every day or week but thats just me, you may make more money by upping your bets and taking a risk but you may also get sold out and have to start all over again

I'm now trading over $3000 per contract and it is this that managed to get me through the turbulence of the last couple of months hopefully soon i'll be trading on $4000 or more and believe me its much better for your heart and sleeping patterns :)

SAFTEY RULES ON LEVERAGED TRADING

SAFETY RULES ON LEVERAGED TRADING

Here are some "Mental Health" and "Safety" ideas I have learned from the last 5-6 years playing on CFD markets. Read them, they are important and will quite probably save you heaps of grief and stress



Here's some safety rules and general advice for anyone using CFDs:

Don't use borrowed money to play on a Margin or CFD Platform - The events of huge market swings have become all to common now and there is no point loosing money and still having to pay off a loan

Only play with money that you can afford to loose - And chances are you WILL loose initially. I did, everyone I know who plays on the CFD platforms has lost their money on the first few ventures into this world. The trading environment is tricky right now, it has been for a couple of years and shows no sign of easing up. It takes a while before people have grasp the real concepts of highly leveraged trading instruments and how badly they can be affected by leveraged markets

CFD trading and to a lesser extent Margin lending is stressful - If you don't have the head for it better to find out now than after you've invested a large lump sum into it. You WILL have sleepless nights - it will pre-occupy many of your thoughts and take up a lot of your waking hours. Be warned. CFD trading is a much different head space to just a slow buy and hold strategy and is not for everyone. It is risky and if you are naturally adverse to risk this is NOT for you 

Take out winnings regularly. Eventually you will start to make money, I take out 50% of what I earn on an almost daily basis so if a huge market swing comes along and wipes out my trading fund I can say to myself at least I had that income coming in , and hopefully I have made back my initial investement (which for me usually takes a 2-3 months) 

Keep an Emergency Fund  Put a little aside to start trading again from scratch in the event of a market swing going against you and wiping out your trading fund. then you can start again and keep the cash flow coming in. 

DIVERSIFY - if you find that you're making a lot of money dump it back in a non leveraged portfolio or use it to pay down loans mortgages etc.... use some common sense,,,, don't go spending it all on hookers and crack!

TIMING IS EVERYTHING

Ok, we've reached a situation where Gold is at its lowest point in 5 years... (Dec 3, 2015)

UPDATE: Ok, I made a prediction a couple of days ago that gold will go up, as it took a beating and was poised to go up. 2 days later it went up by $30.00 per ounce (approx) which means I made a nice little bit of extra cash and did it quick. I don't usually trade gold so now I'll get out (runs off down the pub) and withdraw my recommendation. I still think Gold will go up in the long term from where it is now, but for my interests and strategies I'd rather sit on on the sidelines for a while and wait till it cops another hammering and make a decision then.

Do you think it will go up or down? (I think it will recover from here in the short term, but thats just my opinion) so what do we do? If you DO think it will go up consider buying some gold, or the shares that have taken an almighty beating because of the gold price drop, if you have access to the australian markets BHP, Newcrest Mining NCM and Fortescue Mining FMG have taken some huge hits.

Also Oil, and Iron Ore, Silver and many minerals have copped what we Australians' call a 'flogging' . Here's some home work for you, check out the share prices companies that mine/distribute/resell oil, gold, ore etc... and look at how they are doing in the sense of where they are for the year, last few months and last few years.


In my opinion there are some bargains going begging. Go have a look!!!

This is the gold chart from today , covering 2007-2015 where it finished on around 1050 per ounce. In all honesty it could go lower but I don't think the downside risk is much bigger than the upside gain, but thats a choice for each individual investor, i'll be taking a short term position on gold ;)

Ha Ha Donald Trump!

WHY DO SHARES MOVE UP AND DOWN IN VALUE?

Basically it comes down to supply and demand.

If more people want a particular share than already own it, it will drive the market price of that share up if people don't want it and more people are motivated to sell it it will drive the price down.

There are a lot of reasons why people may want to hold or sell off a particular commodity these may include:

Company performance a good or poor performance at reporting time or any time news or data is released can move the price of a share around, especially around the time of dividend payouts and announcements

An extraordinary event like a disaster - like a mining collapse, senior  management being indicted for fraud... or takeover bid,

Market sentiment - which can include random fear or optimism for a range of reasons, like threat of war, fear or expectations of interest rates moving up and down, or even a reaction to fears like the Greek and Chinese issues of late, environmental disasters and lots more.

Institutional trading- while the average investor probably isn't going to move the price of a share around by simply buying or selling if a hedge fund or bank decides to offload or buy a bunch of shares for whatever reason it may have nothing to do with the performance of the company itself this can move the price around in a big way

Triggered Selling - this is a hard one to gauge but a sharp movement in price of any commodity share or index may trigger off a bunch of sell or buy orders that people have previously put in the market and move the price of that commodity around as well.  Since much trading is done online and executed by computers this can really come into play in what I call 'flash crashes'

COPING WITH MARKET VOLATILITY

Holy crap the markets have been volatile of late! At the time of writing this my chosen index the ASX200 has taken a huge beating over the last couple of weeks. Peaking at 5410 in late October to dropping like a ton of bricks to 4976 a couple of weeks later ... Then rallying for 5 days and making 300 of those points back and then flailing around around like a dying fish for the next week. That equates to a range of 434 points from top to bottom, It also equates to a few headaches for me and a LOT of beers consumed to help calm the nerves. What is going on? Who the hell knows? Bloombergs doesn't .... no other stock site I subscribe to has any idea whats going on...... and quite frankly neither do I. Unfortunately fear is ruling the market as I write this and how the f--k do we cope with these trading conditions? Here's my thoughts, ideas and practices on the matter:

My trading strategy (with the amount of money I had in there at the time)  really only allowed me to trade with a range of 350 points. Obviously this creates a problem and means I would have gotten sold out if I had not employed a range of strategies to counteract this fall.

TOP OF THE MARKET:
Looking at the graph at the peak, you'll notice the huge gains the market made on the right before the drop began. I felt this was unusually high. Lets say I was trading 3 x lots of ASX200 with each position I took out, but i had a feeling that high was an artifical high and stripped my trades back to 1 x position for the first few trades , then up to 2 x positions and the 3 x positions so that if/when the markets fell over I would not be trailing losses on x2 or x3  positions all the way down to the bottom of the market. This provided some very useful padding

SELL POSITIONS:
I took out sell positions against my buys so I was making money on market fluctuations in both directions my idea was to take out 1 sell every 20 points apart at the top of the market and 1 buy 20 points apart and later 2 x buys  when the market dropped a little this meant I was making money a little faster and added to my trading fund a little faster and gave me yet more padding to ride the wave down. This works well in normal market conditions and serves to help buffer your trading fund with a little extra cash in case  a big sell off occurs, but realistically it does  it NOT prepare you for a really big sell off, but it is still useful.



When it became painfully obvious that the big sell off was imminent (this is partly gut feeling / experience / news reports showing fear in the market) I took out more sell positions to counteract my buy positions. Not too many more so that if the sell off didn't occur I would be in a lot of trouble but enough that I could profit off the falling markets and keep my own positions secure. I then let the markets sell off that next day and closed off some profitable positions to boost my own cash reserves and hedge the bets in case it did go back up and put profitable sell orders on others in case of a reversal meaning i wouldn't get caught with a bunch of sells at the wrong end of the market in the event of a sudden reversal

Read: HEDGING YOUR BETS FOR MORE INFORMATION ON THIS

IMPORTANT:

With IG markets if you are trading both ways it is of the utmost importance to press the "force trade:" box on the trade screen right before you execute the trade otherwise your trade will cancel out an existing trade and invariably this will result in a  postion being closed at a loss (usually a big loss)  Ring your provider whether you are with IG markets or someone else about this and make sure you know how trading both ways works, IT IS ONE OF THE MOST IMPORTANT THING YOU NEED TO KNOW

Again, this does not mean you will survive a big fall but it does increase the odds of you surviving such a fall. Employing these strategies is how I survived he last fall. I WOULD have been closed out for sure.

I don't think things are going to quieten down anytime soon either.

MY MAIN TRADING STRATEGY

HERES A SIMPLE  EXAMPLE OF MY MAIN TRADING STRATEGY:

IT IS A BASIC RUN DOWN OF HOW I DO THINGS BUT BY NO MEANS MY COMPLETE STRATEGY I WILL BE PUTTING THIS UP HERE IN SECTIONS BIT BY BIT,  AS TIME ALLOWS. IM STARTING TO GET SOME TRAFFIC TO THIS SITE NOW, SO IF YOU WANT THE INFORMATION TO APPEAR FASTER KEEP SHARING THIS SITE AND MAKE ME FEEL WANTED   :P

REMEMER: No strategy on the stock market is bullet proof or guaranteed to make you money. All we can do is stack the odds in our favour and hope it works out (which if you do the right thing it generally does work out well) Again .... Don't bet money you can't afford to loose, Capeesh?

First up: I use the http://www.igmarkets.com appication to trade on. Sign up with them and get yourself familiar with the platform. its fairly easy to use but if you want to use another platform thats up to you, i get nothing out of this and its more important you feel comfortable on what you use. The figures however may change dramatically on other platforms so be careful to take that into account when using this method.


I jump into the market with $2000 of my own money which means YOU have to deposit money in to your account. I generally feel that $2000 is a safe number in normal market conditions but if you're willing to take a punt on less money thats your choice.

I buy positions in the asx200 to go up and / or  down (depending on where the market is at the time) This would be one contract (which at time of writing this uses  around $26 of your equity)  If you can't find this search ASX200 $1 mirco contract in the search section and add it to your watchlist

Lets say for this example and for the purposes of keeping shit simple the market is low on my entry point into the market. I would buy one position to go up.

Then i wait to see what happens. It will either go up or down.

EXAMPLE 1:  IF IT GOES UP: lets say it goes up 10 points ..... I usually close off the position and take my money. In this example we are trading on 1 x ASX200 and each point it goes up makes me $1 so that would be a total of $10 (remember I use Australian money) 

This means if you put in $2000  you would have used $26 equity to buy the position and a small amount of brokerage it it showed a gain of $10 and you sold it then you would be left with $2010 in your account and nothing in your open postions screen. You can choose how much profit you want to take per trade but when trading on one contract I'm usually happy to take anything over $5

Then i would buy the same position back at the current market price and wait again.



EXAMPLE 2:  IF IT GOES DOWN: Don't panic let it ride out ... if it goes down more than 20 points (which will work out to $20 AUD) buy another position.

This will work out to $26 you have spent on the first position and $26 you have spent on the second position and a $20 loss of equity you have sustained on the first position. your account will therefore show $200 minus $56 (equity) and a loss of $20

Then again we sit back and wait.

It will either go up or down and (as in the previous example)  and you either take some profit as shown in example 1,  or wait and buy again if it goes down another 20 points. Then you sit back and wait again. Lets say the markets bounce back a little and your second position showed a gain of 10 points you would sell it and you would be left with your original position showing a loss of around $10 and your total would be $2010 with a loss of $10 with an available to trade balance of $1974 which is $2010- $26 (for the first postion) and $10 loss + $10 which you made on the last trade

YOUR SAFETY MARGIN

Basically if it goes down 20 or more points buy it again if it goes up sell it. This pattern works with a fair range so if you started at a certain point, lets say 5400 on the ASX200 this pattern will allow you to keep the pattern going for 15 or so positions going the wrong way with a range of 350-400 points  so around 5000 points. Basically if the market goes down more than that you stand to loose your money. Generally speaking I find it a safe trading range to start out and of course the more trades you make and the more equity you build up the safety margin increases. This also assumes that you buy them every 20 points apart. Obviously you can't watch the markets 24 hours a day so there will be many postions you buy say 35 or 30 or 40 points apart which will only increase the trading range you have.

Obviously the more money you have in your account the greater your trading range will be. The more of those little trades you close off at a profit builds up equity in your trading stash. I would generally make around $50 per day off trading on contract like this so if you trade for more than a month you might find you have $3000 equity and can track the market down a lot further, increasing your trading to range to around 500 points.

Generally speaking a 400-500 point range will be fairly safe in normal market conditions. However if you get caught up in a market crash you will most likely lose your deposit. But of course, I will show you other ways to safe guard your trading fund in future articles :)

This by no means is my entire strategy but it's the major part of it. It's shit simple and easy and has worked for me for many years now.

I will post more articles soon on:

• How to safeguard your trading fund
• Coping with market volatility
• How to withdraw money
• How to increase your gains
• How to hedge your bets in falling and rising marketts
• What to do in a crash

Stay tuned!

MORE ON MARKET VOLATILITY

Here's a great article on Bloombergs recently about the strange and highly volatile times we have been trading through of late.

http://www.bloomberg.com/news/articles/2015-11-12/five-strange-things-that-have-been-happening-in-financial-markets

Defs worth a read. Like I said before I've been trading a long time and I've never seen the markets swing around so violently and unpredictably. But at least I know I'm not the only one!

KEEP IT SIMPLE - BUY AND HOLD STRATEGIES (Cont...)

Some more info on the "BUY AND HOLD" strategy.

I'm  a big believer in keeping things simple.

Stock markets through history have basically always travelled on an upward trajectory. Historically at a rate of 7-12% per year, depending on what index you're looking at. This sits true for most first world markets (US, UK, Australia, Germany etc...)

Long story short, look at a bunch of shares in your country that sit in the top 50 shares. Most Experts will say that you should spread your purchases over at least 10 companies in a few different asset classes. They'll mostly go up at some point and you'll be bound to make some money off either the share price increase or the dividend payouts. Its not that hard is it?

For more information buy local financial magazines and check out stock market websites for recommendations on what to buy in your country, look at company reports for dividends/earnings/forecasts etc.... you might be able to give your capital gains a good shot in the arm by picking the right shares set to rise

High dividend stocks are usually a winner too.... look at the dividend history of the company you are investing in, consistent high dividend yeilds will usually hold value better in turbulent markets and rise faster in strong markets

Of course there are some exceptions to this rule. What if you bought right before the 2008 GFC? Yes fair call there are some shares which are still lagging and feeling the effects of that doozy as I write this at the tail end of 2015. Even in that worst case scenario you would still be receiving dividend payouts from your investments.

Of course if you were putting in regular contributions to your share fund, anything you bought after that (like say in the latter half of 2008-2010) you would have gotten a lot cheaper than the pre 2008 prices so time would have equalized much of that out anyway.

Not everything you will be a winner, you'll have some purchases that really pay off for you in a big way and some that flounder around doing nothing and some that die a horrible death. But that's really just life isn't it?

In regards to buying and selling ..... just look at the graphs for that particular stock... check it out over the course of a year and and see where it sits in relation to the rest of the year. Is it down ? Buy it. Is it up? Either don't buy it, or if you do own it sell it.

You don't need any huge amounts of financial knowledge to play the markets like this.  I think its a great way to get started and a relaxed way to learn more about the financial world while your building your share portfolio.  Yes there is some risk but if you do the right thing and keep it consistent you'll come out ahead, and usually a long way ahead of someone that just kept their money in the bank.  If you're adverse to risk then really you shouldn't be involved in the markets to begin with or even reading this site. Anything worth achieving will have SOME risk component to it.

Basically find a pattern you feel comfortable with and stick to it.