Trade volume in

Before going into the

No Load Mutual Funds: Investment Hype vs. Investment Help

With the internet such a huge part of our daily lives, many investors have access to a wide range of instant investment information.

Whether you’re into stocks, bonds, mutual funds, futures or options, there are tons of electronic investment newsletters offering to turn your small stake into a giant fortune. All you need to do is subscribe and watch your portfolio soar.

Yeah, right!

As a practicing investment advisor specializing in no load mutual funds, I have received my share of e-mails from disillusioned subscribers wanting to know how to better evaluate newsletter services.

While there are no absolutes, I can give you a few pointers that might help you make a better decision:

1. Stay away from the most obvious hype. Ads promising to turn your $10,000 into $1 million in 2 years by buying this incredible stock or hot commodity are not promoting investing — they are selling gambling. Follow the "If it sounds too good to be true, it usually is" rule.

2. Most mutual fund newsletters won’t make those outlandish claims, but some of them are still pushing the truth as far as they can. So try to get a free issue or two to examine. If you can't get a sample, check if they have a trial period? How about a money back guarantee? If not, pay with your credit card. These days you’re pretty well protected by this payment method even if the newsletter doesn't offer a satisfaction guarantee.

3. Consider the editor as well as the disclaimer notes. Is he or she only publishing a newsletter? Or is he also an investment advisor with a practice?

Why would that last point matter? I may be biased, but I believe that you get far better advice from a writer who also is in the trenches every day investing their own as well as their clients’ portfolios. They would have far better insights as to what works and what doesn’t than someone who has the theory down but no practical experience.

4. Look at the investment recommendations. Are they suggesting you buy into a certain orientation such as mid cap, small cap or large value? Or are they picking specific investments based on a variety of technical indicators?

In my no-load mutual fund practice I use specific recommendations, even for my free newsletter subscribers. They are first based on my trend tracking indicator giving us the green light and secondarily on the selection of mutual funds based on momentum analysis.

The more specific the recommendations, the better, because that allows you to follow along either just on paper (which you should do at first) or with your actual portfolio.

5. Are they recommending when to sell a mutual fund either because of gains or to limit your losses? This to me is the most important issue. If there is no plan in place for getting out, how will you ever know when to sell? This has been the greatest downfall of most publishers (and investors!) since the bear market of 2000 — not selling even if market conditions dictate it would be in your best interest to do so.

The advice of most newsletter services can make you money in bull markets. However, with the continuation of the bear market still a distinct possibility; be sure to look at any newsletter's investment advice record since 2000.

For many people investing is an emotional issue. The pendulum swings between fear of loss and greed for greater returns. If a complete methodology for buying and selling is offered in a newsletter, such as one I advocate, be sure that it fits your emotional make up.

There is no sense in following an investment approach, which may have merits, if it means sleepless nights for you. You won’t stick with it for the long term — and long-term investing is essential for making your portfolio grow and prosper.

So, the bottom line is to look for a newsletter that: • does not promise the moon, • has a track record through up and down markets, and • recommends an approach that not only is compatible for your investment style but also has an exit strategy so you can capitalize on your gains -- in the bank, not only on paper.

Following these guidelines may not make you rich, but it will help you avoid some bad advice.

Ulli Niemann is an investment advisor and has written about methodical approaches to investing for over 10 years. He avoided the bear market of 2000 and has helped countless people make better investment decisions. Subscribe to his free newsletter: www.successful-investment.com

Can You Pass This Options Online Trading Cost Test - Most People Fail

There are two types of stops that you will use constantly as a trader, protective stops and trailing stops.



There are two types of stops that you will use constantly as a trader, protective stops and trailing stops. When looking at your options online trading cost, generally, positions start out with protective stops to guard your investment, and move to trailing stops when the trade becomes profitable. But the best way to familiarize yourself with stops, and how to set them is to consider them being used in a trade.


Let`s say you take a long position in a stock in anticipation of its earnings announcement. It had traded at around $13 for many weeks, but last week it ran up to $16, as the first sign of its earnings run. It then slowly dropped to $14.40 over the course of two days and stabilized there for a day and a half. Today it`s started to slowly move up again, and you think it`ll keep going. You decide to buy, and put in a limit buy order at $14.8 which executes at $14.76. Since it isn`t the strongest company and the market has been flat, you decide to set a reasonably tight protective stop. You don`t want to set it too tightly, though, since the stock isn`t very volatile and the time frame for your trade is about five days. To work this tip effectively and cut your options online trading cost, it`s important to set protective stops below support levels, so you look to see where the stock has support.


There are two support levels: $13, where it traded for weeks, and $14.40, where it stabilized recently. Its resistance level is $16. If the stock moves down from where you bought it, it will almost certainly bounce at $14.40. If the stock then drops below $14.40, you would assume it isn`t ready to move up yet, and you`d be better off stopping out there and buying again later. For this reason, you also determine there`s no reason to let the stock move all the way down to $13.


Therefore, you set a protective stop at $13.75. You don`t want to set it right at $14.40, since the stock will bounce near $14.40 and then either start back up or continue down. For the same reason, you don`t set the stop above $14.40. But $13.75 seems a good place to stop, since no support level is absolute, and the stock could bounce off $14.30, or $14.50, as easily as it could bounce off $14.40. If the stock gets as low as $13.75, though, that would suggest that the stock will actually break through support. The rule is that a clear break of support is dictated by where a stock closes, not by intraday swings.


Let`s say you`ve made a good trade, and the same stock rises to $15.10, stays there for a period of time, dips sharply to $14.43, and then picks up volume and rises rapidly. It breaks through its new resistance at $15 and starts the climb to $16. The market is rallying. Now is the time to start to think about using trailing stops to protect your profit. You`re starting to accumulate a nice one. At $15.50, you`ve made 5%, and if the stock hits $16.24, your profit will be 10%. You decide that the stock should stay above its old resistance of around $15 unless something unexpected occurs. Now that the stock has broken $15, that price will serve as a new support level. Remember, old resistance becomes new support. You move your stop up to $14.85.


The stock could pull back a bit at $16, since that level served as the ceiling before. When the stock nears $16, you can choose to either take profits by selling out directly or by setting a very tight trailing stop, or by increasing the looser stop trigger to 15.30 in anticipation of further upward movement. At $16 the stock will already have moved up almost 25% from its long-time price of $13, and it may not rise through $16 so easily. You decide to set a tight stop once it hits $16 instead of selling out, just to give it a chance. So once it hits $15.70, you move your stop up to $15.20; when it hits $16, you move the stop up to $15.75.


The market`s rally intensifies after great earnings reports from three leading companies, and your stock runs up to $16.73 before it begins to fade. You quickly sell out at $16.68 for a nice 13% profit. If it had pulled back after hitting $16, you would have stopped out at $15.75 with a profit of nearly 7%. You could then have rebought the stock if it dropped even lower and you were still convinced that it would eventually move up again.


This example demonstrates effective ways to use both protective and trailing stops that will help minimize your options online trading cost. Though each trade is unique, putting good stops in place will always perform the critical tasks of protecting your investment and reduce your options online trading cost. This locks in your profit, if you use them properly. Once you`ve mastered the art of setting stops, you will find your profits will greatly exceed your losses, and you will be well on your way to trading success.

BEGINNER'S SAGA: HOW TO USE MECHANICAL TRADING

Trading beginner has plenty of market illusions. Beginner has a somewhat experience, common sense and strong belief in victory. He also read books, instructions, tips and tricks, examined handful of trading programs and believe them in one wrong thing: that anyone could win. Authors of such books are often silent about traders' proverb: 'Market is not creates money. Money is only distributed between players'. One player changes another and only few leaders do make profit.

Beginner is hoping that good analysis and tons of stock knowledge will serve him a good service. He is stay tuned for searching for effective price movement methods for a long, long time. Day by day; he?s keeping spending time and money. Those of beginners who hold the line gets it - there is no common sense Order at the market. The market behaves itself quite like what you think it will; but all the rest is the Pure Chaos. Well, our beginner cannot make effective prognosis. And now he's maturing and he?s not trying to fight this analysis? limitations. He follows the plan and he enters the market only when it is time for follow the plan.

MECHANICAL AND NON-MECHANICAL APPROACHES TO MARKET ANALYSIS

There are two types of approaches on trading strategy selection - either mechanical or subjective. If trader's got a mechanical one he doesn't need to make investment decisions - everything makes everything. MTS is always knows what to do and more important - when to do. The trader is only to follow the market, system signals and to make orders to his brokers.

At the other hand if trader doesn't have clear trading system he is to make subjective decisions. These decisions are impulsive and often made by impression. Often it is not based on analysis - but greed and fear. Human nature is not free from errors and pros are differ from beginners by strict emotional control.

Practice shows that absolute majority of successful traders is using mechanical approach to the trading. Beginners and 'traders just for trade' are inclined to subjective analysis.

Well, what does it mean - 'mechanical trading system'? We're choosing the market, configure system to it, choosing formulas based on historical data, entry points, exit points for profit and loss positions. System is running and there is no need to sit day by day before the monitor hoping to cry: "All got it!" Practice shows that hour by hour 'monitor duty' is good only for starting stages of learning the market and stage of choosing optimal strategy. Once started, system will work autonomously and trader may rest or do something else without worrying about anything.

RISK MANAGEMENT WHEN USING MTS

Using of mechanical trading principles contains certain risks. Important requirement is not to adjust system to current market situation. The longer test period means the more sceneries of price movement does it knows and as result - means more stable trading. Another important requirement - do not wait only profit signals. There are no such a systems. Profit system may generate and loss signals. Pros self-discipline is just like that: to follow his tactics when loss signal comes.

There is only on criterion of good system: optimal risk/yield parameter. If MTS does generate both signals it have to provide statistical advantage - to generate more profit transactions than loss ones. From statistical point of view it means that after the end of trade interval the amount of money exceeds initial value. MTS has statistical advantage if:

(average profit transaction) * (percentage of wins) > (average unprofitable transaction) * (percentage of losses)

But this expression is not accurate enough. It doesn't take in the count expenses - commission, overheads, etc. If expenses are high profitable MTS may become unprofitable one. If transaction commission is $50 than 40 transactions will cost the trader $2000. Such expenses will shrink $20000 account by 10%. Let's correct our expression:

((average profit transaction) * (percentage of wins) - (expenses)) > (average unprofitable transaction) * (percentage of losses)

One of criterions for measuring MTS effectiveness is selection of optimal amount of transactions called reliable pattern. Choice of the reliable pattern is a quite subjective thing. Some traders require only 10 transactions and others require no less than 1000. Well, last ones are too conservative but mathematically right. But if we are allow these price movements are mostly random then we may say that many pattern transactions are quite random at win or loss. That's why we must have many transactions to reduce influence of random factors on total statistics.

At other hand many experienced traders are contending that 30-35 transactions are enough; for seasoned traders 10 are enough. It is all about the trading is the area where art and experience meet the science. We may say only one thing - the more checks do mean better results. Real pros understand that there is no perfect mechanical system ideally suitable for assets of financial market. Art of pros is the choice of the configurable system - which will be called the best after training.

http://www.e-mastertrade.com Mechanical Trading Systems portal, stock and index price forecasting You may subscribe on daily news for free here: http://www.e-mastertrade.com/en/main/services/signup_news.asp

NEWBIE'S ILLUSIONS AND PROFESSIONAL APPROACH