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The first step is extremely important for your sanity as a trader. You have to set goals that are appropriate to your financial position and your makeup as a person. You need to answer some basic questions such as:
How much money am I investing?
The total amount you are investing determines how many shares you will buy of each company and how much loss you will be willing take on each trade so it is important to determine the amount. It will vary as you trade so you will need to reassess regularly.
How much time will I invest?
How often do you want to watch the market activity? The Redline System assumes you will watch every day after the trade closes as a minimum.
What level of return will I aim for?
This will change depending on the overall market cycles and your own personal appetite for risk. If you are happy to aim for 10% per year to out grow your mortgage, then you can choose some very solid slow growing companies that are unlikely to catch you out with a sudden drop in share price and your safety level will be high. If you aim for 200% per year, you will have fewer companies to choose from and could easily lose thousands in sudden moves. Then again you may achieve your goal in which case you will do very well. Your goal return will determine which companies you choose to trade and therefore the risk and return levels expected.
We recommend starting with a goal of 20% if you are beginning to trade and then as you succeed, you may reassess. It is always tempting to aim higher but until you can practise managing your trades, it can be dangerous.
Who can I get support and advice from?
At various times you will need others to assist you. You need to determine now where you can turn for help and or advice. Join a forum online for you to interact with others who are trading. If your money is not all your own, we advise educating your partner about the risks and rewards and discussing permission and decision making processes before you start trading. Regular updates and reassessing your position together will help to avoid any problems.
5. How will I stop this from consuming me?
This is an important question for good times and bad. At the end of the day, this is only money and whether you increase your balance or discover trading isn’t for you, it doesn’t change who you are. There is a strange link between success and ego which becomes very prominent when you begin trading because you are taking such responsibility for the outcomes. Be aware of it and discuss it with trusted friends to ensure that you can trade and remain a balanced person.
One excellent way to maintain a balanced view of your money and wealth is to commit to giving a percentage of your profits away. We recommend finding a good organization that you feel confident supporting and giving them 10% of your net profit each year. Most are tax deductible and it will help to remind you that it is only money and that many are not as fortunate as yourself.
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Tags: trading
Posted in Stocks · September 8th, 2010 · Comments (0)
Direct Market Access CFDs or DMA CFDs are one of one of the most transparent different types of CFDs available. DMA CFDs have the advantage of enabling participation in the underlying market of the equity over which the CFD is quoted. DMA CFDs are reasonably new and have only become common in Australia over the last couple of years however, they continue to become popular as traders understand the transparency obtainable by this variety of Contract for difference.
DMA CFDs have major advantages over the more established over-the-counter (OTC) kind in that they allow the trader to take part in the opening and closing phases of the market. Being able to operate in these phases of the market offer major advantages to traders as they can obtain the opening or closing price of the day. Traditional over-the-counter CFDs don’t allow the trader to participate in these phases of the market thus preventing the trader from having the ability to obtain among the best prices of the trading day. Regardless of the disadvantage of not having the ability to participate in the opening and closing phase of the market, over-the-counter CFDs do have the benefit of allowing the trader to buy or sell volumes that may not be accessible in the underlying market during normal trading hours.
DMA CFDs have become common amongst day traders and scalpers. The key reason for their attractiveness is because DMA CFD providers allow CFD trades to flow onto the underlying market in the share on which the CFD is based enabling active traders to take advantage of relatively small price movements. Using DMA CFDs also permits day traders to get set at the opening price at the start of the day and clear their positions during the closing price during the closing match phase.
One of the drawbacks of DMA CFDs is that generally DMA CFD companies don’t offer guaranteed stop loss orders. Guaranteed stop loss orders have the advantage of allowing the trader to manage their downside risk. Slippage often occurs when using stop-loss orders, guaranteed stop-loss orders remove this risk altogether.
It is important to be conscious that before opening a CFD account you ought to bear in mind that when trading DMA CFDs you will required to deposit a larger initial margin amount than the over-the-counter (OTC) type. As well as higher margins many DMA CFD companies will be unable to offer you CFDs over indices and currency contracts due to these contracts being over-the-counter in their very nature.
There are relatively few platforms available that offer DMA CFDs, probably the most popular platforms in the Australian market is webiress. WebIRESS provides the speed and reliability day traders and scalpers need along with a variety of different order types such as trailing stop-loss orders. Another common platform is ProDeal, ProDeal offers all the advantages webIRESS offers with the extra benefit of being able to trade over-the-counter CFDs from the same platform allowing traders to trade CFDs on indices and forex from their DMA CFD account.
It’s important that before making the commitment to begin trading DMA CFDs you understand the risks associated with the product. Like all geared products trading CFDs offers significant rewards on the other hand there’s also risks involved that if not managed right can lead to losses greater than the investors initial deposit.
Before picking a DMA CFD provider you must make sure that you trial their demo platform and study their Product Disclosure Statement which outlines in detail the fees and charges, gives trading examples, and outlines the kinds of CFDs offered together with the risks and benefits of buying and selling CFDs. You ought to make certain that the Contract for difference provider you choose is able to give you the platform and products that fit your trading strategy.
Tags: cfd, cfds, dma cfd, dma cfds, webiress
Posted in Stocks · September 6th, 2010 · Comments (0)