Unfortunately, that learning curve can be a steep one, and expensive. With that in mind, I looked over a program to trade equities that is specifically designed for beginners. As you may know, most stock indexes are composites of a basket of equities trading on either the NYSE or the NASDAQ exchanges. These indexes are traded in a variety of methods ranging from Options to Futures Contracts, and usually originate on the Chicago Mercantile Exchange or the CBOT. The nice thing about stock indexes is there is great transparency in trading these issues. The markets are well regulated, liquid, and orderly.

Many novice traders purchase trading robots or exotic trading systems that may cost as much as $10,000 a year, and might gave limited success. I do not recommend purchasing bots or high priced systems to start. I also recommend that all traders “paper trade” on demo account until they are proficient in a single market. I do not recommend trying to trade multiple markets in the learning stage of trading, as each market has a distinct personality and demeanor. Learn to trade one market proficiently, then you might choose to move on to others. Several trade set-ups repeat themselves on a regular basis in the market. This can be attributed, theoretically, to a number of factors.

1. Technical traders trade in tight parameters and use similar indicators. Thus, support and resistance may become self-fulfilling trading patterns.

2. Some behavior economists believe the human response to a given set of trading stimulus is a constant, thus the repetitive set ups for profit.

3. Wave theorists believe the market moves in distinct and predictable patterns based upon the actual chart formations. Whatever the reason, if a novice could learn just one of these consistently profitable trade set-ups, he could be quite adept at trading the markets.

stock and futures trading trade revealed

German trader Karl Dittman has identified one of these patterns with great success and accuracy and has published his work and received a very receptive response, from experienced and inexperienced traders alike. His book, Stock Index Secret Trade would allow the greenest trader to be very profitable over a long period of time. The single trade he uses, is very easy to spot, often overlooked, and is consistent winner. Any novice would profit greatly using this simple but effective system

The initial phase of most bull markets is usually based in speculation, though.  So you might argue that we are entering a new bull market, except this run up is actually quite extraordinary when compared with initial phases of past bull markets.  To be sure, we are nearly twice as high, in percentage, as any other initial bull market phase.

And then there is the extraordinarily low volume.  Have you noticed that a good deal of the trading, nearly half, has been concentrated in the financial stocks?  Yep, the very nebulous of the onset of the recession is now the focal point for high stakes speculation.  And why not?  If the government is committed to these five or six banks to the point that they are “too big to fail” how could buying and selling them be a losing proposition?   It hasn’t, either.  Most of the ultra large banking stocks have posted some decent profit numbers.  Then again, if you give me 80 billion dollars I would like to think I could make a decent profit.  It always brings to mind something my father, who was not prone to besmirch anyone, once told me, “your banker is not your friend.”   Smart guy, pops.

The conspiracy theorists are having a field day with this rally, as they are utterly, without a doubt, convinced the government is heavily involved in propping the market up to restore public confidence.  Sure would take a lot of money, though, to prop up all the exchanges simultaneously.   I have my doubts about the conspiracy theorists, though, because excessive speculation is also a trademark for a bear market rally.

A bear market rally?  I don’t see how this market can continue to rise on the sketchy tidbits of good news and the massive amounts of bad news being released of late.  Oddly enough, the blue chips are performing at about half the rate of return as the small caps,, and that disparity in stock appreciation is a real concern for this trader.  Unless we see some radical turn in employment and corporate earnings, along with some real volume from investors and not speculators, I suspect this rally is unsustainable.  Then again, the stock price is the “decider” (to coin a phrase from our last president) and the stock prices have had a great run.   Picking market tops and troughs is among the most unscientific and least understood aspects of investing.

But it does appear we have gotten ahead of ourselves in this rally whether it is a bull market or bear market rally.  AIG, Fannie and Freddie have all tripled their value in this current month, and none of the three is in anywhere near financially sound.  Then again, there is the notion they are “too big to let fall”…oh yea, I already mentioned that, didn’t I?

So this market worries me some, and makes me feel like the ground beneath my feet is very slippery.  Then again, not everyone falls down on slippery ground, but some do fall, and this rally has defied gravity so far.   Gravity is a finite variable, and not good to play around with, if you know what I mean.

First and foremost, trading emini contracts does not necessarily make sense.  By that, it is difficult, if not impossible to apply common sense to analyzing a chart.   The markets are ruled, to a certain degree, by randomness and this variable makes accurate predictions based upon common sense nearly impossible.  For example, in times of higher inflation or, at least, the perceived potential for higher inflation, hard assets like real estate and metals ought to rise in price.  Yet the correlation between these two variable is not necessarily valid, and there are countless examples of sharp divergences in what common sense ought to hold as true.

Often times, a very negative report on employment in our country puts one in the mindset that the market ought to react negatively on the market.  After all, less people working equate to less money available for the public to spend on goods and services.  Nope, time after time the market chooses to ignore bad news and continue along its merry way. It can be very frustrating.

So we can rule out an investment style based on what “ought” to happen and accept that there is some degree of randomness, or chaos, that exists in the market.  Though I would not forward the notion that the market is completely chaotic or completely random.  No, there is something there, some information to be mined.

On the other hand you could listen to the news media or listen to your good friend Earl (or any other good friend, you pick a name) and base your investments upon hearsay and anecdotal advice.  Hmmm…even at face value a rational person will stray from this investment style.  The news media is rife with churned news and conjecture and your buddy Earl probably isn’t the Holy Grail of investing, even though he may believe he truly is enlightened.

You might also decide to purchase an “out of the box” system of trading for thousands of dollars and the purveyor of that system will think quite highly of you.  Unfortunately the success rate on these systems is suspect and the methodology is proprietary.  You are not going to learn much with this approach, just trade when certain indicators say it’s time.  I can’t recommend this approach either.

There are countless pitfalls to successful trading, and they all contribute to the 90% failure rate I mentioned at the beginning of the post.

So what do you do?

Learn to trade.  Isn’t that a crazy sounding idea, but the problem lies in the proliferation of hundreds of different styles of trading.  Some are very successful, some are less than successful.  You need to become a student of trading, and read, practice and paper trade.  You need unbiased advice, you need fundamental advice that will help you accept or reject certain tenants of a given trading systems.  For example, I scalp trade and never hold a trade overnight.   This system suits my personality and trading philosophy.

You need to develop a trading philosophy to integrate into your trading…if you are simply going to scan charts looking for “good trades” you will quickly find yourself in the 90% group.  You must have, in your own mind, a sound understanding or interpretation of the way the market actually works, then integrate that philosophy into your trading style.  There is a difference between trading philosophy and trading style, though the two go hand-in-hand.  Trading philosophy entails a broad view of the functioning of the markets you trade, trading style is the implementation of your broad view of the manner in which the market functions.

Never stop learning and always be open to new ideas, lifetime students become very successful traders.   As always, Good luck in your trading.

And I was not disappointed, the robot executed trades with the precision and the accuracy of a seasoned trader. I tried to figure out the exact methodology the program was using (which is proprietary) but could not put my finger on it’s entry and exits, though support and resistance were key components of the programs algorithm. I can tell you it works with an accuracy that surprised me, and I am going to buy the darn thing myself.

I am not forex trader, but the program trade with stops and limits and does all the things a good trade should practice. So why not cash in on some easier money. The product integrates with a number of brokerages to automate the trading, and this arrangement seemed to work seamlessly. All in all, I was much surprised, considering I was expecting to pan the program.

Get more info here:

“Like Brad, I’m not too happy with the policy justifications we’re getting from the administration. It’s perfectly clear that the stimulus was too small; I think they know that too. But they’ve made a political judgment that (a) they can’t push another round through and (b) the thing to do right now is defend the policy they already have.”

I am an avid reader of Krugman, and even though I tend toward Republican leanings, I have found the Republican fiscal policy of late, well, let’s just say it is misguided.  Of course, the drum beatings from the likes of Hannity and Limbaugh (the de-facto leader of the Republican part, God help us) are that Obama is spending the country into oblivion.

And we have spent a lot of money, not much of which has really made its way into the economy yet.  I am not sure who to blame for that, but the general consensus is that the second half of this year this money should trickle into the economy.  Even Nouriel Roubini, who is not known for his cheery prognostications, was more upbeat in his Friday postings that usual.  So the Republican party finds itself in a difficult position here, trying to use the old methods (think: tax cuts) to remedy a situation that is entirely different from other situations where this strategy worked.  And who really benefits from tax cuts?  Ummm…I think you know the answer.

Krugman stated in the early discussions on the Obama stimulus package that he felt the amount of the package was too small to do the job, and he has consistently maintained that position.  Now he laments that the political environment is not conducive to upping the ante on future stimulus packages and we find ourselves mired in a longer recession than we care to endure.

Sometimes economics is just plain at odds with society, and sometimes economics is just plain “in left field with no mitt.”   But on this one, I think I will side with Krugman, he had it right from the start.

… “Tighter lending standards and the lack of cheap financing for these borrowers continue to be key issues,” the New York- based [JPMorgan Chase & Co. analysts] wrote [in a June 12 report], referring to “jumbo” mortgages. That’s after so-called interest-only and option adjustable-rate loans were a “major driver” of soaring values, they said.
…
“Currently, we have national home prices bottoming in 2011,” they said. “However, prices for more expensive homes may not bottom out until 2012, and ultimately result in peak-to- trough declines in excess of 60 percent (compared to 40 percent nationally).”

“California is probably worse than other states, but higher-priced homes in general are going to be a problem,” Sim said in a telephone interview today.

Hmmm…This article was referenced on the Calculated Risk blog today.  (by the way, Calculated Risk is one of othe finest blogs of its kind)

Again, it references trends I think I have been discussing for the last couple of days.  I hate to be a stick in the mud, but do you think the market has anticipated a turn-around in the economy prematurely?

If so, I would expect another thud down the road here.  On the other hand, maybe the optimism is for real.  I just don’t see it.  With the current unemployment picture, where will the spending for this recovery originate?  I would think any recovery would need some encouraging jobless numbers to be authentic.  There has been some talk of a “jobless” recovery, but they don’t have the formula for an economic system prospering without healthy employment in any of the economics texts I have read.

But the world has not ended yet, and there are tentative signs some sort of recovery is developing, though I think it is premature to embrace any sort of “green shoots” view of our economy.  I think it is safe to say that things have stabilized some, and leave it at that.  The folks at CNBC are upbeat and gushing good news, as usual, and the market has recovered a significant amount of ground from the bloodbath of late last year and earlier this year.

But therein lies the rub, economists are a bi-polar bunch(at best) and have stratified in their predictions of either dire consequences in the economy or a view that envisions a healthy but gradual recovery is under way.  Since the eventual outcome probably lies somewhere between these two choices, ones finds himself scratching his head.

Are we in for a raft of hyperinflation?

In a perfect constellation of horrible circumstances, it is possible.  But my gut feeling is we will get some inflation and the Fed will begin the process of raising rates to combat the problem.  It is a ticklish paradigm, though, as it requires perfect timing, something the Fed has never been adept at pulling off…not that anyone can know until “after the fact” whether a rate adjustment is properly timed, and hindsight is always 20/20.