The New Year is a great time to sit down and evaluate trading goals and objectives for the coming year.  It doesn’t matter whether we are trading Stocks, ETFs, or Forex, it is important to look at what has worked for us and maybe what hasn’t worked so well, and then incorporate those ideas into our trading plan for the 2013.

Even if we have a good trading plan, like anything important in life, we should set aside time periodically to evaluate that plan and refine it with our current and future goals in mind.  To evaluate our trading plan, we first must have a trading plan to evaluate, It is a little like reviewing your Will or whether you have enough Life insurance for your individual circumstances.  It is very difficult to evaluate something that is more concept than reality.  So if you don’t have a written trading plan, now is the time to get one now and make sure it is in writing.  I have heard it said: “A goal not written is only a wish.”  A Trading Plan not written down is only a dream, and dreams are good, but it is very difficult to execute a dream.

When thinking of a written trading plan for yourself, you should consider something akin to a personal trading Mission Statement. A Business would have a difficult time succeeding in the marketplace without clear goals and plans for the future including some details.  We as individual trader’s need to look at our trading activities more as a business or trading enterprise with clearly stated goals and resolutions and objectives. This written trading plan should be like a written trading constitution which defines our trading plan.

When we think of trading plans, sometimes we think our trading rules are our plan and therefore don’t need anything more comprehensive.  However, I am convinced and believe completely that we can have the best system available or the best trading rules, or the best indicators for our setups or our entries and exits, but without CONSISTANT application of that system or those rules we will have a difficult time being successful.   A system is NOT a trading plan it is only part of a trading plan.

We need to start to think of ourselves at a trading business not just a trader.  And a trading business would include an overall look at our trading goals and objective, our trading routine, our trading capital etc. Also, in our trading business we should be keeping appropriate records or a trade journal. In other words, I am speaking of what and why, not just the how.

And there is no time like the present to get going.  Sit down over a couple of “self-evaluation” sessions and ask yourself some tough questions about your trading and how you think you can become a better more consistent trader and be prepared to write down some honest answers to those questions.  When you identify areas where you can improve include them into your specific action plans as part of your 2013 Trading Plan and be prepared to review these periodically, say monthly or quarterly.

One last recommendation; share your plan with a trading friend or partner.  This will help to you become more accountable and give you more incentive to make the changes you would like to make and stick to those changes.  Just like other new year’s resolutions, if you involve others in your goals, you will find that you may have more support to improve your trading.

Trader’s Challenge:  Sit down and write out a personal trading plan including; a trading mission statement, your trading goals, and your trading routine. Then share it with a trading friend or mentor.

Yesterday I showed you two longer term forex charts for the Euro and the GBP. I want to continue with a few more charts so you can see first hand what kind of momentum we’ll be working with to start the year.

AUDUSD

The AUDUSD is a bit more in consolidation and where we might look for some shorter term trades as the price moves between support and resistance.  This is also where we will be looking for a break out either above the resistance or below the support area.  On a break out we will look to trade in that direction as the new momentum is likely to continue moving the price for some time.

USDCAD

The USDCAD is really looking like it wants to break out as the converging of the support and resistance lines are becoming tighter and tighter.  On a break out of these two area look for a nice continuation move either higher or lower.  This type of pattern is nice to trade because it is simple to know when to look for entering into a position.

USDJPY

The USDJPY is a difficult one to trade right now as the momentum has been so strong to the upside.  After a big move like we have seen it is usual to see some type of pull back into the trend.  This will be one that we should look for a trade after the pair moves back down.  This may be several days or weeks before this happens so keep an eye out for this move.  Also, you may consider going to a shorter time frame in order to take advantage of this strong bullish momentum.

USDCHF

This pair is also forming a bit of a long term wedge as the support and resistance lines are converging on each other.  This tightening pattern is where we can also look for a breakout but is also good to look for a bounce down off of the resistance area where it is currently hitting.  Look to short this as it begins to move down from this point.  Should a break out occur, look to trade in the direction of the move.

In the end we want to be able to see the trends and support/resistance areas on the longer term charts in order to determine how and when we should be trading.  Take some time to do the same analysis on the weekly charts to see how they confirm the daily charts.  The goal is to find good places to enter the trade by using trends and support and resistance in our evaluation of the charts.

The year 2012 is now gone and 2013 is in full swing and with this we find it is a good time to take a look at the longer term trends on the daily charts of the various pairs.  Normally, I would not spend a lot of time looking at this time period but at the beginning of a new year I like to see where the “big” momentum is pushing the pairs I am trading.  So with that today I want to look at the 6 major currency pairs and where this momentum is heading.  This will not only give us a long term perspective of what might happen this upcoming year, but it can also give us insight into how we might approach the shorter term charts.

EURUSD

In the above chart of the EURUSD you can see that the overall movement has been to the upside while currently we are sitting near the area of support.  This situation is ideal for taking a long trade as the trend is helping the price move up and the buying pressure at support is favorable for the price moving higher.  In the next few weeks consider this as a bullish alignment for trading.

GBPUSD

The GBPUSD has a very similar pattern to the EURUSD but just a little bit wider.  This will show as a bit more volatility so make sure you use appropriate stops and target to take these wider movements into consideration.  This is also in a bullish alignment so look for opportunities to go long on a bounce up off of support. I’ll have more long term trades for you soon, so stay tuned.

Hi everybody, I want to take a few minutes to talk to you today about the latest news on the fiscal cliff. Or as I like to call it: The latest in the Washington Soap Opera.

Ok, so a fiscal cliff deal was just approved in Washington and  I’ll discuss what that means to you as an investor, but before we do, I just want to revisit a few of the points I’ve made in the past that still hold true now more than ever.

First is the fact that your financial future is at risk, and that the post World War II era of investing, meaning principally buy and hold a diversified portfolio, is obsolete. So if you’re still in that mode with your IRA or 401k or your cash accounts, I believe that your financial future is at risk, that’s what I mean when I say that.

Now, why do I say that post World War II era of investing, buy and hold investing, is obsolete? It’s because — and here are the underlying causes of that — it’s because the developed countries, principally the United States, Europe and Japan, and others, are essentially broke, and they’re broke because they all have incurred massive debt that they can never pay back. It’s just a simple case of arithmetic, simple arithmetic. It’s a case of simple arithmetic.

Because of that, central banks are essentially printing money, led by the United States Federal Reserve, as well as to a certain extent, as well as to a lesser extent the ECB in Europe. They are printing money, and they’re doing that to prop up the massive debt of their respective governments.

This has the effect of debasing all of the currencies, not just the U.S. dollar, not just the Euro, but also the Japanese Yen. Also the Swiss Franc, also the British Pound.

It all falls under the heading of what I call the currencies are all on the race to oblivion. It’s just a matter of which one gets there first now.

So, when you consider the massive debts of the governments of the developed countries, the debasement of the currencies on a scale that has never occurred since World War II, it’s a complete game changer. So what would serve you well as an investor up until about the late 1990’s, it no longer does.

So we’re in an all new financial environment, and we will be for several years. You need three things for a flourishing economy. First, sound economic policy. Second, a strong currency. Third, a safe environment with minimal but effective regulation. Those are the three things that a government should provide, and as we’ve said before, none of those three are being provided by the leading governments in the world.

Great. So what do we do? Well, stay tuned, I’ll be back next week with some more tips for you to not only survive this “Washington Soap Opera” but I’ll give you ways to profit from it. Till then, ignore the hype in the media. Take control of your own financial destiny. Stop looking at long term buy and hold investing and learn to become a trader. Till next time… Good Trading.

Now I’ve been talking to you quite a bit lately about trading ETFs. About how they are much like mutual funds, but trade just like stocks, and how they can be a great way for a buy and hold investor to “dip his feet” into the world of trading. And with the economy the way it is right now, EVERYONE should be dipping their feet into trading, if not jumping in 100%!

Now there are literally thousands of ETFs out there. They can be based on anything. Indexes, collections of certain types and sizes of corporations. Tech. Banking… the list goes on and one. Today however, I’d like to just touch on the idea of adding a few energy based ETFs to your trading portfolio. With all of the turmoil with the fiscal cliff and the major breakdowns that Europe has been experiencing for years now, it’s safe to say the world economy is in the dumps. Things are obviously bad, and I believe they’re about to get worse. When times are bad, and there’s a lot of volitility, I like to start adding some asset based ETFs. Asset based meaning they’re based on a real asset. Assets like Pharmaceuticals, food, fertilizer,  gold, silver, platinum, paladium… and especially energy based ETFs. Oil and Natural Gas ETFs have been particularly interesting lately.

Natural Gas for example has peaked in 2008, and since then has been pretty, well, not very exciting.

Natural gas prices have fallen about 80% since then and the commodity remained under pressure as new supplies of the key fuel were continuously brought online, making the historic oversupply situation even more of an issue

As the New Year is upon us, often we look for thing we can improve or change, I live by the age old adage; if it isn’t broken, don’t fix it. However, if you have a portfolio that is underperforming or just sitting in mutual funds not doing very well it may well be a time to make a change.  Taking more control of your portfolio by investing in ETF securities may be a great place to start.

While Exchange Traded Funds are not new (they have actually been around for about 20 years,) they’re certainly getting a lot of attention lately.  This is due to the ability for an individual investor to easily combine index investing with the convenience of the individual stock ownership, is a formula hard to resist. ETF’s are a collection of shares that follow a particular index, industry, or commodity, like a traditional mutual fund does, however, that is where the similarity ends.

There are several advantages ETF’s have over Mutual Funds for stock investors, because of the fundamental difference that ETF’s trade like individual exchange traded stocks.

The Differences vs. Mutual Funds:

1. When a new investor buys shares in a mutual fund, he or she pays the end of day NAV (net asset value).  Since ETF’s are traded on the exchange,  they act just like any individual stock issue, and can be purchased any time at the current price during the market hours.

1. When an investor purchases shares in ETS’s, unlike mutual funds, they may use pending limit orders, stop loss orders, and take profit limit orders just like stock trading.  Also with ETF’s, you may go long or short, just like stocks.

1. With exchange traded funds an investor can also buy or sell any and number of shares that, she would like, even down to one share, if desired.    This is a real advantage for the investor with a small portfolio, as many mutual fund, have much higher minimum requirements.

1. For investors with experience trading options, you can trade puts and calls on many ETF’s just like any other optionable stock.

1. The management fees are generally smaller in the ETF world, as they just need to pick the basket of shares that follow their sector or specialty, and are much less likely to have highly paid fund managers (expensive stock picking gurus.)

These are the major differences between the two kinds of funds in a nutshell.   So, with ETF investing you can take more control of you investing decisions, take advantage of more active trading methods and stop paying the mutual fund managers to lose your money for you.

Well, we have come to the end of another year and we want to take a look back at what we have seen happen to gold and silver ETFs over the last 21 months.  Gold and silver have been quite the topic among many investors this year and many traders have turned to using it as a means of investing.  Gold and silver have been fairly range bound this year and seems to be moved quite a bit by the news.

Silver:

This chart below shows how the price movement has been ranging between the upper level 38 and a lower level of 26.  In the end we were basically trading where we were last year at this same time.  Currently silver is sitting near the 30 dollar area.

Gold:

Gold also has been trading in a similar range and is sitting where we were this last year.  The range for gold has basically been between 1800 at the upper range and 1500 at the lower range.  Currently we are ending the year in the mid 1,600’s.

As a word of caution, especially with gold and silver, it seems that many people have been talking about how everyone needs to buy it as a place of safety.  The problem with following other peoples advice is that it is often times late.  This does not mean that you should not invest in gold or silver, just that you need to make sure you  are buying it at the correct times and not just whenever some says to.  You need to take a look at where gold is sitting and whether or not it meets your criteria for entering into it as a trade.  Just buying to be buying can be a bad thing.  For example, if you were to buy gold or silver at their upper ranges you would be down this  year, but if you would have bought at the lower range you would be up this year.

Take some time to review your rules for entering into gold or silver so when the opportunities arise this upcoming year you are ready to take advantage of the movements.  Don’t listen to anyone except yourself when it comes to buying and

Staying nimble in the markets is one of the standard stock trading basics. Due to the speed that information moves today, the transmittal of both good and bad information makes it imperative as investors or traders that we are ready for almost anything at any time.  We need to be able to position ourselves in the best possible way so that we do not get hurt when unexpected information is presented but also so that we can take advantage of it when it does occur.

This is a great thing to say and to believe but it is also not always the easiest thing for many people to do but what can we can do is plan for or position ourselves properly for the information that that we do know will come out.  There is so much that happens around us that we cannot control, which is largely government and market based, we need to concentrate on what we can control which of course is largely how we react to all of it.  Regardless of what our often times dysfunctional government actually does we need to prepare ourselves and be ready for the most likely outcomes of their decisions.  We cannot control our tax rates but we can be diligent in our tax planning.  We cannot control how the markets will react to the resolution of our economic challenges but we can position our investments and our trades so that we do not get hurt by whatever decision is made.   We cannot control interest rates or inflation or the budget deficit but we can be proactive in making sure that we are in enough of an offensive position so that when a decision is made we can take advantage of market moves that will occur.

All markets go up and all markets go down but they rarely go straight up or straight down for any great length of time.  I believe that knowing what the outcomes of the economic situations will be that are at hand at any given time is less important than the simple knowledge that there are decisions that are imminent.  We don’t need to know what the decisions will be we just need to know that the markets will move when the decisions are made so we can position ourselves ahead of time to take advantage of whatever moves occur.  We know that investors and traders are very emotional and we also know that the information that we currently have is already baked into the pricing of the markets so whatever decision is made in Washington will very likely result in a correction of some type.  We do not know if the correction will be up or down nor do we know the severity of the correction and we don’t necessarily need to know any of this we just need to know that a correction is likely.  By knowing this we can put ourselves in the best possible position to take advantage of the coming move.  The fiscal cliff issue is or was just the issue of the day, there have been, there are now and there is likely to be constant issues that come up on a regular basis that will be the new issue of the day.  We don’t have to be prognosticators we just need to have good planning to counteract the market moves so we do not get hurt and possibly so we can be aggressive and take advantage of the moves that occur.

The obvious question that comes up is exactly how do we do that?  The answer can vary depending upon what it is that you are trying to accomplish but generally speaking the goal of most traders and investors will be to protect existing assets while giving them the opportunity to grow.  Just to use a random event as an example, we know that any decision regarding the debt ceiling is imminent when this issue is present, we may personally have an opinion of what that outcome will be which is fine but is it a good idea to bet our assets on what our opinion is based on something that is completely out of our control or is it better to position our assets so we can take advantage of whatever the decision is which of course will likely send the markets in a given direction.  I’m certainly not saying that we can get on the right side of market moves all of the time nor am I saying that we can always get in right at the beginning of those moves but I am saying that with a little planning and common sense we can probably get on the right side of many of them.

How to Trade Stocks in Volatile Conditions like Now:

It seems that the last few weeks, one day the market is up and the next day it is down,  reacting to positive or negative news stories generally concerning the looming “fiscal cliff.“ Many traders are feeling the anxiety that comes from the currents ups and downs of the market. This anxiety may even be causing some traders to consider stopping trading until a “better” market comes along or in other words until the market is more “calm”

The first thing to understand and remember is that there is NO such thing as a perfect market! The market isn’t really good or bad, it just IS.  There is nothing we can do to change this. In fact, if the market didn’t go up and down we would not have any ETF trading opportunities. Certainly there are times, like the present, when the market is more uncertain than we would wish for. But, if we allow the market to get into our heads we can really find ourselves overly anxious and even discouraged to trade.  Trader’s who tend to be preoccupied with catching only perfect trades, and never losing on a trade, end up being disappointed with themselves when they fail to meet these goals.

There is no doubt that during times of market uncertainty, these can lead to fear and anxiety over our trading style and methods. However, if we start to question our successful trading methods, you may start to question the sanity of trading altogether, and you may decide that it is better to sit on the sidelines and not trade at all.  During uncertain times like we are in currently, tightening up our stops is a common reaction among newer traders, however more seasoned traders understand that tightening up our stops during more volatile times can be the worst thing we can do.  In fact, doing so can almost guarantee that we will lose on the trade.  The thought is; if we are going to lose anyway, we want to lose less that we would have under normal circumstances.  This kind of defeatist attitude is allowing our fears to overcome logic and will lead to more unsuccessful outcomes.  The only way to absolutely eliminate market risk is to stop trading, however this will also eliminate any opportunity to be successful and make any trading profits as well.

The only real way to reduce our risk is to reduce our EXPOSURE. The best way for a trader to reduce exposure in a volatile market is to reducing position size.  Tightening our stops may reduce our potential exposure, but it also increases our probability of taking a loss.  So if we are going to reduce our exposure by reducing our position size and we normally define our risk as 2% per trade, then we may want to consider reducing our exposure per trade to 1% or even .5% instead.

So, if we are feeling anxious or discouraged because of current market uncertainty, the best thing we can do is NOT to change our methods,  but simply reduce our position size, therefore, reducing our exposure to the volatility.  This will help us control the fear and anxiety that come from trading in times like we are currently experiencing.

First of all, happy holidays to everyone.  This is a good time to review what you are doing and what you need to change going forward.  Remember that this time of the year can be a bit tricky when trading and can be moved by many different things.  Some of the things that are affecting the market currently is the holiday time along with the fiscal cliff talks.  This is why this time of the year is good to review what you are currently doing.

Knowing your rules are critical in becoming successful with your trading.  This means you need to know several important things.

1. Know what you are trading.
2. Know what charts you use.
3. Know when you are entering.
4. Know when you are exiting.
5. Know how much you are trading

Having rules for each of these can keep you on track for trading well.

1. Know what you are trading is important so you don’t have too many things you are looking at. There are many different things you can trade including Gold and Silver, Forex, Futures, and stocks or options.  Trying to trade all types of instruments can make trading difficult.  You should really focus in on trading only a couple of things to keep it simple.
2. Know your charts.  This would include the time frame and whether is it a candlestick or bar charts.  Also which indicators you are using
3. Know your rules for entry.  This means you should know exactly what you are looking for on your chosen chart to actually enter into the trade.  This could be the price action of what you are trading or a specific set of indicators.  This should be written out so you have no question as to whether or not you should buy or sell.
4. Know your exit rules.  Make sure you know exactly when you are getting out of the trade.  This means that you need to know your stop losses and your targets.  Without these you are just trading and hoping the market will make you money.
5. Know your money management rules.  This means you should have a maximum risk amount in mind so you are only risking a specific amount in each trade.  In addition, make sure you know the total amount of risk you want to be trading your overall portfolio.

By knowing your rules and following them you will have all in place to successfully trade in the markets.  Take some time over this holiday time to review what you are doing and to make sure you have your trading rules written out.  Have a happy and safe holiday.