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The newsletter other trading professionals demand
Want to know a closely guarded secret that will lead you to a sharemarket fortune? With trading, you can't leave your choices to guess-work. If you do, you will fail. You've got to challenge common assumptions about trading, your mindset, and your progress. Understand this - people generally don't question. They meekly accept their miserable fates. Rarely do they strive to achieve. Rarely do they stand up and shout: "Over here, Success. Pick me! Pick me!" If you're the type of person who can search for answers, back your trading hunches with cold hard facts, test your ideas and develop the skill and tenacity to stick at trading, then a lack of money will never be an issue in your life. The markets will throw money at you. WARNING: Do not ignore this essential advice. If I gave you no other clue about trading this month, other than the advice above, you'll still end up putting dollars in your bank account. Backing up your guesses with cold hard back-testing and fact-seeking is a critical part of your trading success habits.
In this month's newsletter: - Winners Hate Losing
Louise Bedford A couple of weeks ago a friend of mine, Melissa, gave me a great complement about the last newsletter article I wrote. While I was enjoying the nice fuzzy feelings that such a compliment creates, all of a sudden she stole them away by quipping "It must bother you though". (Bother me what?) "Knowing that half of the people who are out there won't make any decent money through trading." I asked what she meant. "Well, here you are, putting your heart and soul into every article you write, fussing over it like it was a newborn baby - when you know full well that the vast majority of traders out there aren't going to make the big bucks in the market. Hell, you're just encouraging 'em in their folly!" I was really annoyed with her, not in the least because she was calling my attention to doubts I had myself. As we went our separate ways that day, I had a long car trip home to consider what she had said. For one thing, anecdotally, it does seem that a lot of people don't end up making bucketloads from trading. In fact, many of the emails I receive from non-newsletter readers sound like they're on the razor's edge between desperation and fear. However, in many ways this is a self-selection process. I am also bombarded every day with emails from people expressing pure joy at how trading has transformed their lives. These are every-day, normal individuals who have the courage to dream big and commit themselves to their own education. Then I chewed over the thought that maybe we are focussing on the wrong thing anyway. Perhaps, as with many things in life, we're too focussed on the outcome and not the process. Let me explain... Recently, while chatting with members of my Mentor Program, we were talking about how much their lives had changed in a remarkably short period of time, and why this was the case. Rather than just talking about the money they were banking, the conversation shifted to the other benefits that trading, and having the support of a group of like-minded buddies can bring. Pretty much, all of the traders were at a 'snap point' just before they started trading effectively. Some had been thrust into a health catastrophe, others had lost a lot of money, and some had experienced a relationship falling apart. Whatever the event, the effect was that those traders ended up taking a good long hard look in the mirror, and making some significant changes to their lives. Sure, they may have sulked initially. Some may have even considered throwing in the towel and settling for mediocrity. However, all of them dug in their heels, and eyed off their challenge like two drooling pit-bulls, circling each other before charging forward to attack. It's What You Focus On So, it occurred to me... maybe the 'average' trader is simply looking at the wrong thing. By concentrating on profits, they're stifling their progress. The sharemarket winners are the ones who got angry enough to make substantial changes. Because I can tell you one thing - if you think the way you've always thought, you'll always end up with the level of wealth you've currently achieved. What about you? Are you hitting your goals that you set for yourself at the beginning of the year? More importantly, if you're not, are you aggravated enough to do something about it? Does falling short really tick you off to the point where you lose sleep? Does it irritate you so much that you're even more fired up than ever to get busy and unravel the secrets of effective trading? This is the absolute key to working out how to trade. Winners detest losing. Sure, they may take a hit or two in the markets - however, they pick themselves up and stretch to hit their very next goal. If you're on track, that's great. If not, get angry, and then get busy. Is Profit the Goal? So, as a trader, is making money the goal? Is that what we should be measuring ourselves by? To this I say an emphatic "No"! If you do, then your self esteem will be forever joined at the hip to your sharemarket profits, and you'll be tossed around like some crazed pin ball by the vagaries of the markets. Our goal should be to be the best trader we can be. We should be aiming to develop and follow our trading plans with complete obedience. We should be developing our minds, and hurling ourselves at our own education. The markets offer a very unfavourable reflection of our inner psyche as we thrash our way to success. I, for one, am apt to throw tantrums when things don't go my own way, closely followed by deep pools of bottomless self-pity. My trading has shown me this, more clearly than any other life experiences, and more succinctly than any psychologist ever could. Generally, when people don't like the reflection the market provides of their inner self - they derail, run away, and stop trading. So, my friend Melissa, with the myopic view that not everyone will end up making money from trading, I do hope you're reading this article because I have a few thoughts just for you. Firstly, you're focussing on the wrong goal. Making money will only occur as a by-product of working on yourself as a trader, and allowing your flaws to be put under the harsh, brightly lit microscope of the markets. And secondly, only the people willing to do the work will be the ones who excel. Yes, it's a tall order. No doubt, there will be struggles involved. But that's why not everyone ends up trading profitably. A lot of them haven't reached that 'snap point'. They haven't experienced enough pain to create the massive changes that they need to make to excel. And, for the record, I don't write these articles for the masses of people out there who haven't incubated through this process. I'm writing for the few traders who have snapped, and stomped their foot in defiance. The ones who refuse to settle for a boring, mediocre life. The ones who are on the brink of fulfilling the goals and dreams that have been stored in their hearts since childhood. I sure hope that describes your own personal situation. If it does, I guarantee you that the years ahead will be immensely satisfying. We are living in a time of opportunity where guts and persistence still pays off and for this, I thank my lucky stars. (There... I'm feeling a little better now. It's kind of cathartic when you finally get something like that off your chest!)
I've managed to negotiate an extra special deal. (Picture me doing a happy dance). I have no idea why the organiser agreed to this, but I'm about to give you tickets worth $15.00, completely for free, to the Melbourne Trading and Investing Expo. Wooohooo! Here are the details: Dates: 23 - 24 July 2010 Click on this link to collect them now: http://www.tradingandinvestingexpo.com.au/louise-bedford-offer/ I'll be there, presenting on Friday July 23rd. I'm speaking on 'Candlestick Charting Secrets' at 11.30am - 12.00pm, and then I'll head over to Janene's Educated Investor Bookshop stand at the Speakers' corner. Also, I'll be running a seminar at 1.45pm - 3.15pm called 'What were you thinking? How to use your brain to unlock hidden profits in the sharemarket' (fee: $45.00). I'd love to see you there.
Chris Tate Over the past few weeks much of the chatter from brokers and others on the supply side of trading has been about the collapse of Sonray Securities which has left several thousand investors up the creek. Much of this chatter has been about the evils of CFDs and how they are, if the commentary is to be believed, on the verge of bringing down civilisation as we know it. In truth much of the commentary has been largely self-serving, mostly ill informed and in some cases downright stupid. I want to look at each of the concerns and provide a sensible rebuttal to each.
There are several points that need to be addressed with this argument. Firstly, ASIC's role in looking at market conduct means that it puts out guidelines all the time for all market participants, so this in itself is nothing new. It is a good opening line and does a lot to get attention and perhaps stir the pot a little but it is not a true and accurate view of the role ASIC takes in overseeing markets. For example, take a trip to the ASIC website and you will see a plethora of guidelines and reports on a variety of topics including reviewing the variations to the license of the ASX and SFE. Such reviews are a normal part of business. It does not mean that ASIC will immediately shut down either body. Secondly, the notion of leverage is a misleading one for several reasons. Option, FX and futures trading can and does offer leverage of an equivalent size to CFD trading. Therefore, there is nothing actually new within this. Margin loan accounts can offer similar advantage to CFD trading on some shares due to the higher margin charged by CFD firms on some shares. Leverage itself is not the issue - it is how traders use this leverage that is the problem. As much as regulators try, you cannot outlaw stupidity. There will also be people who are better off with their mums giving them fifty cents play lunch money tied into a hanky and stuck in their pocket. This way they cannot get into too much trouble but it is not the job of the regulator to be everyone's mum. Finally, CFDs are less complex than either options or futures; in fact, it is easier to get a trader to understand CFDs than it is to bring them up to speed with the notion of options trading. For example if you were buying a NAB CFD and you had traded NAB shares before then the transaction is very familiar to you. However, if you were trading NAB call options you will need to become familiar with option pricing, option market dynamics and the lack of an ability to place a stop within domestic option markets. The implication within this argument is that CFDs are too complex and too dangerous for the average investor to master so they should stick to traditional shares where at least they own part of the company and brokers pick up your commission on the way through. As a counterpoint to this, consider that domestic fund managers invest only in traditional equities and many of them are still showing losses of the order of 40% on their funds post the GFC so it is not the instrument that is too blame. It is the end user.
To be honest I do not see any difference between the advertising of CFD providers and that of traditional brokers. All talk about their platforms and all are constrained by the same legislation as to what can and cannot be said in advertisements. With regard to platforms, I would have thought that all domestic brokers would aspire to have easy to use interfaces as this would attract people to use them. However, this is not true. Most of the brokers' platforms are arcane and are no more than slightly tricked up versions of what was floating around dealing desks in the early 1990s. WebIress, which is a popular infrastructure for many brokers, does not seem to have evolved much in a decade. I would also hasten to add that the majority of brokers still refuse to allow the placing of a stop loss position whereas with CFD providers this is a given.
That is true, it is unusual that most (read almost all) brokers, and CFD providers put client's monies into segregated accounts that are secured against such events because they are segregated. However, if this were a traditional broker who did this the result would be the same.
This is a somewhat disingenuous argument that I have seen raised by brokers because it misses the point that when you do an options or futures trade you will most likely be dealing with a counterparty. Market makers are an integral aspect of both options and futures markets. These markets would come to a complete halt without market makers. However, the most disturbing part of this argument is the notion that somehow CFD providers set a different price to the market for a given equity and in some way manipulate that price so that it does not reflect the reality of the market. This is simply nonsense for a variety of reasons. First and foremost is that it would most likely be regarded as a form of market manipulation and would bring ASIC down on you like a ton of bricks. Secondly, it shows a complete misunderstanding of how markets work. If there is a price dislocation between two identical instruments then that price differential can be exploited. For example if I were trading BHP and the market was quoting $37.30/32 and the CFD provider was quoting $37.40/42 then I could buy BHP on the market at $37.32 and sell it at $37.40 and I could do this all day locking in the $0.08 spread. This is known as an arbitrage and arbitrage trades have disappeared with the advent of the high-speed PC based trading. If dislocations in the market are found then they are immediately exploited and they disappear. Think of it in terms of finding a short cut to work. The first day you do it there is nobody else on the road, the second day you do it the road is clogged with others. Your short cut arbitrage has disappeared. Implicit within this argument is an inability to understand that it is the market that sets the price not the CFD provider.
So are single share futures but they are offered almost universally on all other futures exchanges. To offer a statement that something is banned in the US so it is a good reason to be wary of them is to use a style of argument known as a red herring. The basic argument is about the collapse of a broking firm that offered CFDs to retail clients. As I said in my introduction, a lot of this talk is self-serving and in broking circles is known as talking your book. Traditional brokers have cause for concern over the popularity of CFDs - their rise has been both dramatic and all encompassing. In the UK, turnover on CFDs outstrips the turnover on the FTSE. This situation could have been avoided if brokers were more proactive in their approach and embraced such challenging ideas like a decent online platform, research that actually meant something and new-fangled concepts such as stop loss and contingent orders. However, to offer a blanket condemnation of instrument because a broker blows up misses the bigger picture completely. Instruments are not the cause of brokers blowing up. Sonray's problems may have arisen for a number of reasons, which will only become apparent when the liquidators have done their job. However, I can guarantee you that the auditors will not say that they blew up because they offered CFDs as a tool, just as any of the traditional local brokers who have blown up did not do so because they offered share trading to clients. Thus, whilst CFDs continue to be a threat to local brokers it is worth remembering that the world's entire economic system was almost brought down by traditional bankers and brokers.
These traders on their way towards making life changing income. We're really getting into the duck's guts in the programs currently running. I think the participants would agree that this is a hard hitting course that pulls no punches. Over 6 thought-provoking months, the Mentor Program will provide you with the ability to turn your trading around, and give you everything you need to be a superb trader, across every time frame, and with every instrument. Where else in this country can you learn from two full-time traders who actually earn their living trading the markets and have done so for decades? We give you our personal secrets and tricks so that you can achieve a fabulous lifestyle where you call the shots. Many of our traders have told us that there is more information jam-packed into the whole Mentor Program than in a full university degree, all packaged into bite-sized, easy to understand chunks. You'll develop the skills to make money regardless of the market direction, in whatever conditions get thrown at you. Have a look what these new traders have to say about the Mentor Program:
Are you ready to add your story to this group of sharemarket winners? We'll run the Mentor Program again starting in February 2011. This will be the only Mentor Program for 2011, so make sure you don't miss out. Remember to register for Priority Notification about this event, so you'll hear about it before anyone else does. You'll also receive for FREE, Louise's brand new video called "Trade for Your Life and Never Look Back". This video is our gift to you and reveals the secrets used by professional traders to live life on their own terms.
Register for Priority Notification right now.
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There's an old saying - "bite off more than you can chew, and chew like heck". I think this is a great adage to live by. Often, we get weighed down by day-to-day drudge, so it just seems easier to sit on the couch and let life evaporate. Refuse to do this. Make the most of your time. Pursue your passions. It's no accident that you're receiving this newsletter. You can sense that you're in the right place, and that this feels like home. You see a good idea, and you jump on it. You know that you are destined for more in life than you're currently achieving. And we're beside you, every step of the way. Until next month, happy trading!
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