More on the Financial Crisis: If you want to Understand what is going on, read this.

By trader7757, 12 July, 2010, 1 Comment

In effect, it’s a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better.

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The Current Debt Crisis: How Did It Happen

By trader7757, 9 July, 2010, 2 Comments

I usually don’t write articles about current events, but this particular article is about a current event that has its origins nearly 30 years ago. The tremendous debt load that most countries are currently burdened with are not something that has its origins in the last decade. This fact may surprise people, as national debt has only been coming to the forefront since the most recent credit crisis. But a careful analysis, and an honest analysis, will show that this unprecedented borrowing spree has been going on for more than 30 years and we are now only beginning to reap the consequences of a poorly managed economy.

I think it’s important to understand that I have no blame to place on any individual, as most borrowing has been approved by Congress and whatever President was currently in charge. To be frank, there is enough blame to go around and both parties have been equally complacent in failing to halt our runaway debt problem. So there will be no politics in this discussion, just simple facts that are well documented and may help readers understand the cause and current effects of our credit situation.

From the onset, I would not predict we are doomed to failure. We are, and always have been, a resilient country with vast human and natural resources. The United States has also shown a remarkable ability to adapt to a variety of conditions which have on several occasions threatened the bedrock of our democracy. So I think it’s important to understand that there are remedies to our current situation and I believe we will implement the proper laws and regulation to bring our country into a more manageable debt situation.

Many individuals believe that our recent budget deficits are a product of the last two or three administrations, but the fact of the matter is surprising; our major budget deficits began under Pres. Reagan and at the time, it created a massive stir. In England, Margaret Thatcher was in the process of drastically reducing public spending, and in the United States the Congress and Pres. Reagan were amassing massive debt, primarily spending money in the defense sector. Economists at the time were sharply divided in this approach, as the freshwater economic sector favored increased borrowing and spending, and the salt water economic sector felt strongly that an increasing debt load would be detrimental to our country. In the end, Reagan’s budget director, David Stockman, resigned in protest when the Republican Party would not bring deficits under control.

Of course, Congress and a variety of presidential administrations have continued to exacerbate our burgeoning debt load. The problems we are experiencing, are simple; we have too much debt, and lack the resources (at the present time) to service our debt levels. This phenomena is occurring at both the national and state levels. Many states are currently underfunding or borrowing from vested civil service pension funds to cover the shortfalls in our current system. The unfortunate fact is that you can’t make debt go away. On the other hand, many citizens are loathe to sacrifice the government provided services on which they depend. So our debt has continued to grow at an alarming rate.

In the last two years, our country has attempted to remediate the effect of a very deep depression by infusing economy with 8 trillion, or more, depending on which numbers you care to quote and hastened the level increase in our debt.

While there are no specific individuals to pin the blame for this crisis upon, the burgeoning debt load our country has accumulated will be an Achilles’ heel for many years to come. I think it is important to know that our current crisis is not the result of any single action, though Wall Street in recent years did help exacerbate an already tenuous position, but our problems have been accumulating for an extended period of time. Of course, from a political standpoint both parties are happy pointing the fingers at each other for this mess, history will show that both parties showed equal levels of incompetence in dealing with the United States budgetary concerns. The facts show unequivocally that our borrowing has increased exponentially in the last years and shows no sign of abating, despite the rhetoric and politicians and political pundits espouse. The truth is a simple one; this particular budget crisis is the work of Congress and presidents who targeted programs for funding that were beyond their means we had to pay for them.

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Three Core Attributes of a Quality Day Trading System

By trader7757, 1 July, 2010, 1 Comment

There are a staggering number of day trading systems on the market today, and they range from fully automatic systems to exotic systems based upon astrology. The day trading systems which lie between these two extremes are the ones of interest to the average trader. For a novice trader, choosing a system is complex and difficult because it is tenuous to ascertain which system will actually work in which system is nearly hype. Most good systems, though, are comprised of some time-tested core components that differentiate them from the less than effective systems.

Throughout my career as an institutional trader I have learn to day trade several different systems that are effective and profitable. These time-tested systems usually contain three important characteristics which are worth noting. All contain some emphasis on price action or price movement. Nothing is more basic or essential to a system than what the price movement of the traded equity is doing, and the manner in which price is behaving. Price action analysis is among the oldest disciplines in trading systems, and its importance has not lessened over the years. As a matter of fact, there are systems based solely upon price action. Any discussion of price action methodology would require a discussion the size of a small book, as there are many interpretations of the relationship between price movement and the market prediction. Like all things in trading, some price action analysis is quite effective and other analysis is not as effective. It will take some investigation and research for the average trader to determine which price action methodology best suits the trading style he or she intends to employ.

A second characteristic of a good trading system is the utilization some form of indicator or oscillators. In a recent years, indicator and oscillator based systems have gained great popularity. Again, there are trading systems based solely upon oscillator indications. I caution against using systems employing only oscillators, as there are some inherent weaknesses in this methodology. Of utmost importance and evaluating oscillators is the tendency for them to be lagging indicators. Most oscillators receive information from a data feed and apply a specific mathematical formula or analysis to this data. Therefore, by definition, oscillators tend to lag the market and you may find yourself a step behind the action if you rely solely upon oscillator based trade selection. There are a number of oscillators that claim to be leading indicators, but their effectiveness as leading indicators is generally dubious, at best. On the other hand, it is possible to glean a tremendous amount of information from oscillator and indicator analysis and I do not mean to lessen or demean their importance. My point is a simple one, oscillators and indicators are generally lagging indicators and understanding this weakness is essential in employing their use in your trading system.

Finally, I think it is important to have information or a data feed coming directly from whatever underlying security is being traded. For example, I trade primarily the financial index e-mini futures, so I am particularly interested in raw data from the New York Stock Exchange. To accomplish this goal, I generally like to use the NYSE tick. This particular indicator compares advancing and declining issues on the New York Stock Exchange and gets no information or data from the futures exchanges. Using this raw data, I get a bird’s eye view of what is actually occurring on the exchange. I feel this is a distinct advantage in my trading, as the futures traders have not always reacted to the New York Stock Exchange price movement and I am therefore aware of the trends, or lack of trends, that occur in real-time. Oddly enough, when I have introduced this indicator to traders who have relied solely upon oscillators they are often amazed at the added depth of knowledge they acquire when comparing the NYSE tick and their familiar oscillator based indicators. For that reason alone, I believe it is important to employ data that does not come directly from the futures exchanges. Quite simply, data derived directly from the exchange of the underlying security will supply you with information you might not normally be accustomed to using.

As you can see, I like using trading systems that are multifaceted and give me a broad view of market movement. It is my opinion that trading systems that rely upon a single indicator often result in a skewed market viewpoint. Above all, when I day trade I want to develop the fullest understanding of the market movement possible, and I accomplish this by looking at the market from several points of view.

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Beginning Traders Can Learn to Day Trade Effectively

By trader7757, 28 June, 2010, 4 Comments

There is a general feeling among experienced day traders that beginning traders cannot trade profitably for several years. As a trading educator, however, I have found that properly trained beginning day traders can trade effectively from the start. However, the trader must be motivated and well versed in the material presented, and have the self discipline to adhere to the parameters of the trading system being taught. This is, of course, no small task. Just the same, the financial rewards far outweigh the time and effort expended to develop the skills necessary to trade.

In my program, The E-mini Trading Professor System, we have found that beginning day traders can be a profitable within several months of starting our system. It is important that the trader sticks with the rigid guidelines established for proper trade setups and maintain that discipline throughout the course of an average trading session.

Once a beginning trader learns to day trade only with the trend, which is one of the most important aspects of our trading system, trade selection becomes very far easier process than trying countertrend trading techniques. Learning to trade with the trend is no small feat, either. There are many countertrend trades that, at first glance, appear enticing and a sure bet to earn money. Unfortunately, countertrend trades are generally just retracements in a broader trend and must be avoided in order for the beginning trader to profit.

Much of what we teach in day trading centers around the psychological/emotional approach that is necessary to trade successfully. Many trading educators do not devote much time or effort in stressing the importance of psychological/emotional considerations. We consider these issues to be among the most important and toughest skills to master in the day trading process and devote several modules in the course that consider psychological/emotional considerations at length. If you can control your mind, you can control your day trading and make sound, rational decisions about selecting the proper trade set up.

While every day trader may not be ready at two months to trade profitably, many are. It’s important to understand that every beginning day trader assimilates information at a different rate and in a different manner. That being said, some traders are ready to trade earlier than others. On the other hand, I have not found a correlation between how soon a trader is ready to trade and the ultimate success they achieve. Simply said, some traders are ready to trade earlier than others, but once the trading methodology is assimilated there is no appreciable difference in the actual performance. I encourage beginning day traders to take their time and learn the information at a rate they are comfortable. This approach assures the proper retention of the information.

Bottom line; beginning traders can trade profitably sooner than it was once thought. I say this was one caveat though, the traders who have learned the information and practice the most on a demo account are the ones who enjoy the greatest success. Jumping into trading a live account with real money involved is not encouraged; on the contrary, it is far preferable to hone the beginning trader’s skills on a demo account so that they understand, in a real sense, the material presented in the course and can apply it.

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