Peter Thiel: Going from Zero to One

perspective on investing before the go big.

What are the factors to know the vast scale of success

on investing start ups?

#DecodingInvesting

Profit Taking Friday!

protect your gains. 

have you secured your profits? 

#fridaygains

The Ultimate Trading Business Checklist: 10 Things You Must Know

You want to trade from home, because it is a simple way to make money. You do not want to run a business, because it is complicated.

The bad news is that successful traders conduct their trading activities like a business. This is because businesses make money, and hobbies don’t. To make money, having a business mind-set is essential. Hence, traders cannot avoid running a business.

The good news is that a trading business is easier to manage than other businesses. (I’m referring to the long/short trading business, and not the import/export type.)

We’ve condensed what every trader needs to know into the 10 items listed below. To become a professional trader, work your way down this list.

DEFINING YOUR TRADING FIELD

Trading is our industry. But what’s your sub-industry?

This is the first question a trader has to answer. This is because it defines the playing field for your trading business.

1. DECIDE ON YOUR TRADING MARKET.

What market will your trading business deal in?

The common options are:

• Individual Stocks – publicly traded ownership of companies
• Stock Indices – a performance measure of a basket of stocks
• Commodities – foodstuff, metals, fuels, etc
• Forex – the exchange rate between two currencies

Research the market that interests you. Make sure that you understand it works.

For a start, answer these questions:

• Which fundamental forces drive the market? (Even technical traders need a basic understanding of the market’s fundamentals.)
• What are the active trading hours of the market?
• What are some popular examples of your chosen market? (For e.g. S&P 500, NASDAQ 100, and DOW 30 are popular stock indices.)

2. CHOOSE YOUR TRADING INSTRUMENT.

After deciding on your trading market, you need to choose a financial instrument to express your market views.

Here are your options:

• Direct (Spot)
• Options
• Futures
• Contract-For-Difference (CFD)
• Spread-Betting

SPOT TRADING

You can trade stocks and forex directly (in the spot market). Some stock indices might be tradeable as exchange-traded funds (ETFs).

DERIVATIVES TRADING

The other four instruments – options, futures, CFDs, and spread-betting – are derivatives. This means they derive their market worth from the value of underlying assets.

For instance, a call option on AAPL appreciates in value when the underlying AAPL stock rises. Another example is a futures contract on crude oil (CL). Its value falls when the price of crude oil falls.

Why do we trade derivatives?

First, it is impractical or impossible to trade the underlying market.

Buying physical commodities is impractical and unnecessary for speculators. A stock index is just a number that reflects the performance of a basket of assets. It is not possible to buy or sell a number. Hence, futures is often used to speculate on commodities and stock indices.

Next, derivatives offer leverage. Derivatives allow traders to control the underlying asset with a small amount. Leverage allows an efficient use of your trading capital. However, leverage amplifies both gains and losses, and you must exercise caution.

Before you trade with any financial instrument, make sure you know the following.

• What does the instrument represent? (For e.g. a call option is a right to buy)
• What are its basic jargon? (For e,g. futures are traded in contracts and spot forex in lots.)
• Which organization regulates its trading? (For e.g. the NFA and CFTC regulate the futures trading industry in the US.)

3. PICK UP A TRADING STRATEGY

Your trading strategy is the centerpiece of your trading business. In fact, it is the key to sustaining it. It must tie in with every aspect of your trading business.

First, choose a trading strategy that makes sense to you.

Then, select a time-frame that you can trade realistically. Do you have time for day trading strategies? Or should you focus on swing trading?

Need some ideas? Take a look at our reviews of trading setups.

Finally, work out what you need to trade the strategy practically.

• If you want to use options strategies like straddles/strangles, you need an options broker.
• If you plan to day trade, you will need a discount broker to cut your trading costs.
• If you need a custom indicator to trade, choose a platform that allows custom coding.

As you can see, your trading strategy has wide implications on other aspects of your trading business.

SETTING UP YOUR TRADING INFRASTRUCTURE

Your trading infrastructure must support the execution of your trading strategy. This is why you must decide on your trading strategy first.

4. SET UP YOUR TRADING COMPUTER.

A computer is essential for analyzing and trading the markets. It is the workhorse for your trading business. You don’t need a supercomputer from NASA, but you do need a reliable machine.

When setting up your trading computer, consider the following.

TRADING STYLE

Day traders need faster machines as each incoming price tick is important to them. Furthermore, quick execution is crucial. On the other hand, swing traders can do with a basic computer setup.

For back-testing of trading systems, a high performance computer will save time.

TRADING PLATFORM REQUIREMENTS

Always check the minimum requirements of your trading platform. Make sure that your trading computer can handle its load.

BUDGET

Balance your trading needs with your budget. Consider your trading needs and decide if you really need that costly gaming computer.

5. CHOOSE YOUR TRADING BROKER.

You need to place your trades through a broker. For a trading business, your broker is a critical link to the markets.

When choosing a broker, you must consider its:

• Trading costs (commissions) and fees
• Technical reliability
• Financial stability

Google for the review of any broker. Very likely, you will find more dissatisfied traders than happy ones. The reality is that no broker is perfect, and traders love to complain about their brokers. That does not mean that you should switch your broker constantly. Conduct your due diligence, and always think twice before changing brokers.

For more information on how to choose your trading broker, refer to this in-depth guide.

Your broker might fail. Make a plan for that too.

6. SET UP YOUR TRADING PLATFORM.

A trading platform is basically an order entry software. You enter your buy and sell orders through it.

It is either a desktop software, mobile app, or a web application. Some trading platforms have integrated charting functions and other analysis tools.

Trading platforms differ in the type of order entries they support. Your trading style and strategy will dictate what you need.

These are some useful order entry functions.

• One-click order entry (essential for day traders)
• Bracket orders (great for placing concurrent stop-loss and target-limit orders)
• Chart trading
• Auto-trail stop-loss orders
• Auto-reverse

The trading platform is the control station for your trading business. Choose one that supports your trading strategy. Then, familiarize yourself with its functions.

(Note that your trading platform must integrate with your broker’s technology. Hence, your choice of broker constrains your trading platform options.)

RISK MANAGEMENT

A successful trader is a great risk manager. Pay attention to this section if you want your trading career to last.

7. SIZE YOUR TRADING POSITION.

Position sizing is critical to a trader. Trade too small, and you get a poor return on investment. Trade too big and, you risk blowing up your account.

There are three golden rules of position sizing.

• Start small.
• Scale up slowly.
• Have a system. Learn more about position sizing models here.

8. MASTER YOUR EMOTIONS.

Your fear and greed will cause you to pray and hope. Your flaring emotions form the main stumbling block to consistent trading results.

The first step to mastering your emotions is to become aware of them. Start a journal to record how you feel before, during, and after taking each trade.

Then, use these resources to improve your trading psychology.

• TSR Trading Psychology Articles
• Dr. Brett Steenbarger’s Articles
• High Performance Trading: 35 Practical Strategies and Techniques to Enhance Your Trading Psychology and Performance
• The Psychology of Trading: Tools and Techniques for Minding the Markets

9. WRITE YOUR TRADING PLAN.

Every business has a plan. For an individual trader without a supervisor, a plan for your trading business is essential. Many traders have plans in their mind. But having them on paper does help with give it a structure. And a structured plan reduces risk.

A trading plan should include everything we have discussed above.

More importantly, a trading plan should focus on reducing risk. Include rules to ensure your trading edge, avoid over-trading, prevent technical failures, and prevent account blow-ups.

REGULATORY

10. KNOW YOUR TAXES.

Nobody likes to pay taxes. But this is a good problem as only profitable traders get to pay taxes.

Taxes for a trader is tricky. It depends on your trading style, markets, and tax jurisdiction. Hence, it is difficult to find specific advice.

To get the basics, start with these.

• Tax Guide for Traders (Fairmark)
• Tax Implications of Trading (Tradeking)
• Guide to Investor Tax (Fool.com)

When in doubt, consult a tax professional or your local tax authority.

THE TRADING BUSINESS CHECKLIST – LOOKING FORWARD

This checklist offers a skeleton for your trading business. It is up to you to build it up into a profitable and sustainable venture.

As you gain experience, you will see the interplay among different aspects. You must plan and accept trade-offs within your trading business. For instance, choosing a more expensive broker that offers the trading platform you prefer.

Do not treat your trading business setup as a one-off project. Ultimately, your trading business must evolve over time to keep its edge. 

The importance of having a checklist is a guide to know if its applicable to us.

What would you like to include on our checklist?   

#StartTheWeekRight

#MondaysBeLike 

Source: Galen Woods

6 Factors That Influence Exchange Rates

These are could influence in exchange rates although 

trade what you see not what you think.  

You can only trade what the market gives you. 

What would you like to add? 

You can also find more infographics at Visualistan

Japanese Candlestick Charts Explained

A Japanese candlestick chart is a form of bar-chart used to plot price movements of a derivative, security, or currency over time.

Candlestick charts are believed to have been developed in the 18thcentury by Munehisa Homma, Japanese rice trader in the futures market.

In Homma’s book “The Fountain of Gold – The Three Monkey Record of Money”, which he wrote in 1755, he claims that the psychological aspect of the market crucial to trading success and that traders’ emotions can significantly influence on rice prices. In his book, he observes that this fact can be used to position oneself against the market when all are bearish, because at that specific time there is a likelihood that prices will rise (and vice versa).

Candlesticks are composed of the Real Body, which is black or white and represents the area between the open and the close, and an upper and a lower shadow (“wick” or “tail”) which illustrate price excursions above and below the real body.

The wick illustrates the highest and lowest traded prices of a security during the represented timeframe. The body shows the opening and closing trade prices. If the security closed higher than it opened, the body is white or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is black, with the opening price at the top and the closing price at the bottom.

Modern candlestick charts often replace the black or white of the candlestick body with colors such as red (for a lower closing) and blue or green (for a higher closing). In some East Asian countries such as Taiwan, China, Japan, and South Korea, the coloring scheme is reversed (red for higher closing, and green/blue for a lower closing).

A candlestick portrays the battle between Bulls (buyers) and Bears (sellers) over a given period of time.

In general, the longer the body is, the buying or selling pressure is more extreme.  The longer the white candlestick is the close is further above the open. This suggests that buyers were aggressive and prices increased significantly from the opening price to the closing price.

On the other hand, short candlestick body shows less price movement and represents price consolidation. The longer the black candlestick is the close is further below the open. This suggests that sellers were aggressive and prices decreased significantly from the opening price to the closing price.

Marubozu candlesticks are candlesticks that do not have upper or lower shadows and the high and low are exactly the open or close. The name is derived from “close-cropped” or “close-cut” in Japanese. A White Marubozu indicates that buyers controlled the price action from the first trade to the last trade and is considered bullish. A Black Marubozu indicates that sellers controlled the price action from the first trade to the last trade and is considered bearish.

The upper and lower candlesticks shadows provide information about the trading session high and low.

The upper wick indicates the session high and the lower wick indicates the session low. Candlesticks with short wicks indicate that most of the trading action was close to near the open and close. Candlesticks with long wicks show that prices extended well beyond the open and close.

Candlesticks with a long upper wick and short lower wick indicate that buyers dominated during the session, and bid prices higher. However afterwards sellers forced prices down, and the weak close created a long upper shadow. On the other hand, candlesticks with long lower wicks and short upper wicks indicate that sellers dominated during the session and drove prices lower. However, buyers later bid prices higher close to the end of the session and the strong close created a long lower wick.

Spinning Tops are candlesticks that have small bodies with upper and lower shadows that are longer than the length of the body. Spinning tops signal market uncertainty. The small Real Body shows little movement from open to close, and the long shadows indicate that both bulls and bears were active during the session.

Doji Candlesticks are formed when a security’s open and close are virtually equal. Doji represents a sense of uncertainty or tug of war between buyers and sellers. Prices move above and below the opening level during the trading session, however close at or close to the opening level. This results in a standoff between bulls and bears.

Candlesticks do not show the sequence of events between the open and close.  The high and the low are plotted, however candlesticks and bar charts do not show us which came first. 

Written by: Trading Growth

It will be easier to read the charts,

what would you like to add on this?

Paul Tudor Jones II: Why we need to Rethink Capitalism

would you explore rethinking capitalism?

Why You Need A Forex Trading Journal

Journaling?!?

Isn’t that only for silly high school girls who write about their silly crushes on silly high school boys?

Heck ya!

Ok, not really… high school girls keep DIARIES.

Forex traders keep trading JOURNALS.

Two entirely different things! Get it right! Geez!

Keeping a trading journal is actually a crucial task in any performance or goal-oriented endeavor. The key is to have some way to measure, track, and stay focused on improving your performance.

World-class athletes do it to keep track of what helps them to be better, faster, and stronger on the field or court. Scientists do it in the process of finding their next greatest discovery. And forex traders do it to help get them duckets!

What “getting them duckets” means in simple terms is to become disciplined, consistent, and most importantly, profitable.

A disciplined trader is a profitable trader and keeping a trading journal is the first step to building your discipline.

This might sound simple or easy but we assure you that to actually get started can be very difficult. In fact, many forex traders give up after a while and rely on the logs that the forex broker provides.

The logs or transaction history from your forex broker gives information that is, at best, marginally useful as it doesn’t tell you much of WHY you entered and exited the trade.

That information provides NO help to your next trade.

Zero. Zilch. Nein. Nada.

A forex trading journal isn’t just about writing in the prices of your entry and exit and the time you executed the trade. The trading journal is also about refining your methods and mastering your own psychology.

To be even more specific, it is about your individual emotional psychology before, during, and after the trade.

For example, your trading method says to buy USD/JPY.

But your gut feeling tells you that the trade is NOT going to work…

So you remind yourself, “I don’t think this trade is going to work. BUT I have to follow my trading plan so I’ll take it.”

During the middle of your trade, the price comes 3 pips away from your stop loss and you’re thinking, “OMG. This trade isn’t looking so good. I knew it! Why didn’t I listen to myself? I’m such an idiot! I’m about to lose here! I’ll just exit now.”

You then decide to close your trade.

A few moments later the price shoots to your original profit target. Had you stayed in the trade you would have made a gazillion pips.

This is why you should write a trading journal. This is a classic case that probably happens to too many traders.

We fail to stay in the trade, we fail to trade the plan and most importantly, we fail to distance our emotions from our trading!

If you keep trading like that and you don’t keep a trading journal, the balance on your trading account will become a big fat ZERO before you realize what you’re doing wrong. 

tracking our progress,

what do you think?  

Source by: BabyPips

Why do candlestick patterns work? Learn to trade price action

Price action and candlesticks are a powerful trading concept and even research has confirmed that some candlestick patterns have a high predictive value and can produce positive returns. Especially interesting is a research paper by Gaginalp and Laurent in which they showed that the candlestick patterns: Three White Soldiers, Three Black Crows and Three Inside Up have a significant short-term prediction value for the course of price. ¹ Their research showed that those patterns are predictive about 75% of the time for most of their data sets.

Why do candlestick patterns work?

Traders often mistakenly believe that the patterns themselves drive the markets. The first important thing you have to know is that you can’t treat candlesticks like blueprint templates although 99% of all trading websites teach this wrong approach. Only when a trader knows how to “read candlesticks“, he will be able to understand what the patterns tell him about the underlying market dynamics and the behavior of traders.Candlesticks are no magic trading tool, they are just a way of visualizing price movements.

The trader who can follow the path of price and knows how to interpret the thought-process of other financial players can take advantage of this knowledge and use price action to his advantage.

Trading is all about mass psychology and candlesticks are a manifestation of crowd behavior.CLICK TO TWEET

Two proven candlestick patterns

As mentioned earlier, there are a few patterns which seem to have a much greater predictive power and we will now examine two of those patterns to gain a better understanding of how to read the information provided by candlesticks and price action. Afterwards, we will take a look at the most important dynamics that allow you to understand any candlestick pattern.

Three Black Crows. The Three Black Crows pattern is a powerful bearish pattern because it nicely shows the fight between bulls and bears. Each candle opens higher than the previous close, but every time bears take over and push price back down again, making a new low each time. The Three Black Crows pattern shows that, although bulls create a gap up, they don’t have the power to push price higher during active trading hours. Bears are in control. Often, the Three Black Crows pattern is followed by a strong sell-off once the bulls finally give up and stop pushing price higher.The Three White Soldiers is the opposite, bullish, version of the Three Black Crows.

Three Black Crows bearish candlestick pattern

Three Inside Up. The Three Inside Up pattern is an extended version of the well-known Inside bar pattern. The initial bearish candle is followed by a small bullish candle and the whole second candle typically falls into the range of the previous candle. The smaller second candle shows a change in sentiment: the initial bearish price move stopped and markets consolidates. If the smaller second candle has a wick sticking out, it usually is a much stronger indicator for an upcoming shift in direction. The third candle is a larger bullish candle which breaks above the high of the first candle, finally confirming the change in direction. The Three Inside Up pattern is a reversal pattern because it shows the slowly changing sentiment of market participants from bearish to bullish.

Three Inside Up reversal candlestick pattern

This is what you need to know about price action

There are many dozens of candlestick patterns out there, but we highly discourage you from trying to remember all of them – it won’t make you a better trader. Instead, learn to read price and what the way price moves tells you about what is going on in the markets. The way we explained the thought process behind the Three Black Crows and the Three Inside Up pattern should be applied to all candlestick patterns and price action. Once you understand that it’s not about identifying exact patterns, but about knowing how to read price movements, you can analyze charts in a completely new way.

There are three main components of any candlestick pattern:

1. The sizeAre candles getting larger or smaller? As seen in the example with the Three Inside Up pattern, the candles first become smaller (indicating a shift in sentiment and bears leaving the arena) and then become larger again when the bulls take over. When analyzing price action, always compare the size of the most recent candlesticks to get an idea of what is going on.

2. The wicks (shadows)

Wicks can provide a variety of different information: A wick can show the rejection of a price level like on the Pinbar pattern, but it can also show indecision in the markets like on the Doji pattern when wicks stick out to both sides and a large candle without wicks often indicates greater strength and more conviction.

3. The close

As mentioned earlier, a candle that closes near the high or low and thus does not have wicks, often shows greater strength. Analyzing the close of a candle in combination with the size can provide meaningful insights about the current strength and the balance between bulls and bears. When price is trading into important support and resistance levels, the close also be a very important tell and it can often indicate the likelihood of levels holding or breaking.

You can apply those three concepts to all other candlestick patterns out there and you’ll very quickly realize that the only thing you need to know about candlestick patterns are those three aspects. Here is what we mean by this:

Pinbars: A meaningful pinbar is usually relatively large in comparison to prior price action. The wick should be long and stick out into the opposite direction of the ongoing trend to show the shift in direction. And the close should be very near the top/bottom and only leave one wick to confirm the sentiment change into the new direction.

Doji: A doji signals indecision and, therefore, it is usually smaller than past candlesticks. A doji typically has long wicks to both sides which further illustrates the indecision and the close is very near the middle of the candle. You can see that all three clues (size, close and wicks) point to indecision.

Engulfing: The engulfing pattern shows a reversal and the clues are very obvious. The first candle is usually small and indicates a temporary pause in the ongoing trend. Then, the next candle is typically much larger and the small candle completely falls into the range of the large bar. This shows that the trend pause is over and that markets have changed their mind. The large bar usually has a very strong close near the top/bottom with very small wicks, further confirming the strong trend change (see infographic below).

As you can see, every single candlestick pattern can be dissected easily by analyzing the size, the wick and the close of the candles. Thus, you can stop remembering arbitrary patterns and focus on reading real price.

Two components of price action trading

Besides understanding what a single candlestick pattern tells you, there are two additional concepts that will help you identify high probability price action signals and avoid signals that fail more often. When trading price action, it’s important to be very selective and not jump on any one signal; blueprint-thinking and looking for fixed rules should be avoided.

1. Comparing candlesThis is often a very overlooked aspect of price action trading because most traders just look for blueprint patterns and focus on individual candlesticks. However, if you want to trade price action successfully, you have to set recent price action in relation to what has happened before. A small pinbar after a trend wave with large candles is less meaningful than a larger pinbar after a trend with small candles; an engulfing candle that just barely engulfs the previous one has less predictive power than a candle that engulfs the previous one easily. Always look at your chart as a whole to put things into the right perspective.

2. Location

The concept of location means that you only trade price action signals around high probability price levels. Instead of jumping on every price action signal you see, you can significantly increase your odds by only trading around high impact support and resistance areas or supply and demand levels. Although you need to be more patient, your trading will benefit significantly as well.

And that’s all you really need to know when it comes to understanding candlestick patterns and price action trading. Don’t make it more complicated than it has to be and focus on what is really important. Don’t forget: candlesticks are just a way to visualize price information – it’s a manifestation of crowd behavior in the markets. Candlesticks are typically not meaningful to trade them by themselves, but by combining price action with other trading concepts, you can generate a robust trading methodology.

How to read candlestick patterns?

Source by: Rolf