By Ken Long
Trim Tabs is a market research firm that tracks money flows into and out of mutual funds on a regular basis. They make their living providing money flow information to institutional money managers. Periodically they make their reports available to the wider public.
A lot of people pushed the panic button in September. TrimTabs reported $75 billion fled U.S. mutual funds during the month, three times the monthly record set in 2001 for redemptions! About two-thirds of the outflow came from equity funds and the rest from bond funds.
It is an axiom that the mass public will take exactly the wrong actions at market extremes, and so the normal interpretation of this Trim Tab report is that we are getting close to a major bottom in the market in the intermediate timeframe. The month of September's selling action would therefore be classified as panic selling which leaves only seasoned market professionals interested in buying which makes this an excellent entry point for the next leg up in the market.
This kind of statistical observation is not a sufficient reason to begin buying in my opinion. I am never interested in being the first mouse trying to get the cheese. I am more than willing to let someone else establish the turning point, I just want to be the second mouse after the market has already turned and I can see price action moving in my favor.
What this means for me, however, is that I will be looking for framing high quality trades that should move vigorously against the previous trend which was down. A good example of this kind of trade was today's intraday trade in General Motors (GM) which offered several entries at $9.20 with an initial capital preservation stop at $9.02 with a price target of $9.70 which offers slightly more than 3 to 1 reward to risk ratio. It turned out that intraday there were opportunities to exit the trade at $9.80, which shows the power of this kind of short-term trading.
With an initial risk of $.18 if you had risked $180 you could have purchased 1000 shares of General Motors, and cashed a win at $.60 a share for a profit of $600 less the cost of your round-trip trade. If you do the math, you can see why people are professionally interested in short time frame trading.
Recognize that it takes a lot of training, discipline, preparation and systems to make this a profession. Do your own due diligence, as the stock market and trading is inherently risky.
Tuesday, June 23, 2009
Wednesday, June 17, 2009
Forex Long Term Trading Beats Short Term Trading
By Josh Tam
Is it better to trade Forex long term or short term? It all depends on your own personal characteristics as a trader. Let me explain in detail.
Long-Term Forex Trading
Long-term traders are often called Position Traders. They analyze the market as a big picture, and then they open trades when they see that the situation is right, according to their own analysis. Then they may hold on to their positions for days or weeks. Long-term trading is suitable for traders with more patience and are able to wait a longer time to see returns.
Short-Term Forex Trading
Short-term traders can be day-traders or scalpers. Day-traders are traders whose trades last about 1-2 days. Some traders open trades after analysis and then leave them overnight, and the next morning, they check to see whether they hit a profit or loss. Scalpers are traders who aim to win just a small amount of pips in a very short time. Their scalping trades usually do not last very long... from seconds to an hour.
Both Long-Term Trading and Short-Term Trading has their own advantages and disadvantages, but from my own experience and opinion, long-term trading is the better of the two because of several reasons.
1. Long-term trading frees up time. Analysis can be done in maybe a few minutes to a few hours a week, and when a good trading opportunity is identified, you can let it run and spend the rest of your time working your other job or with your family.
2. Long-term trading is less risky. It lets you see the big picture when you zoom out to see the daily or weekly charts. Most of the time, we still lose trades although we forecast the right direction just because of random market movement hitting our stop-losses. But with long-term trading, these random movements are not big enough to reach our stop-losses and will go in our direction eventually - if we are indeed correct and a reversal does not occur.
3. Long-term trading gives you more time to standby. You see, scalpers need to fix their eyes on their screens when they trade, just to watch the market move up and down. They need to identify opportunities and grab them almost immediately. But with long-term trading, you will have hours to make up your mind to trade or not to trade.
From points 1-3 above, it is clear that long-term trading will not make you a zombie-trader. The big disadvantage of long-term Forex trading is the wait. There are still many short-term traders around because they are treating Forex as a job and Forex is their passion. Some of them just cannot wait so long and want to see realized profits fast and so they turn to day-trading or scalping.
Is it better to trade Forex long term or short term? It all depends on your own personal characteristics as a trader. Let me explain in detail.
Long-Term Forex Trading
Long-term traders are often called Position Traders. They analyze the market as a big picture, and then they open trades when they see that the situation is right, according to their own analysis. Then they may hold on to their positions for days or weeks. Long-term trading is suitable for traders with more patience and are able to wait a longer time to see returns.
Short-Term Forex Trading
Short-term traders can be day-traders or scalpers. Day-traders are traders whose trades last about 1-2 days. Some traders open trades after analysis and then leave them overnight, and the next morning, they check to see whether they hit a profit or loss. Scalpers are traders who aim to win just a small amount of pips in a very short time. Their scalping trades usually do not last very long... from seconds to an hour.
Both Long-Term Trading and Short-Term Trading has their own advantages and disadvantages, but from my own experience and opinion, long-term trading is the better of the two because of several reasons.
1. Long-term trading frees up time. Analysis can be done in maybe a few minutes to a few hours a week, and when a good trading opportunity is identified, you can let it run and spend the rest of your time working your other job or with your family.
2. Long-term trading is less risky. It lets you see the big picture when you zoom out to see the daily or weekly charts. Most of the time, we still lose trades although we forecast the right direction just because of random market movement hitting our stop-losses. But with long-term trading, these random movements are not big enough to reach our stop-losses and will go in our direction eventually - if we are indeed correct and a reversal does not occur.
3. Long-term trading gives you more time to standby. You see, scalpers need to fix their eyes on their screens when they trade, just to watch the market move up and down. They need to identify opportunities and grab them almost immediately. But with long-term trading, you will have hours to make up your mind to trade or not to trade.
From points 1-3 above, it is clear that long-term trading will not make you a zombie-trader. The big disadvantage of long-term Forex trading is the wait. There are still many short-term traders around because they are treating Forex as a job and Forex is their passion. Some of them just cannot wait so long and want to see realized profits fast and so they turn to day-trading or scalping.
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