Spot and Trade Institutional Money Moves

Algorithmic Trading with Human Interaction for:

Day Traders, Swing Traders, Long-Term Investors

Thursday, March 24, 2011

Are Investments in Options or Stocks more Risky?

A typical situation for people who once put their name in a subscriber list, and now are identified as potential investors:

A call from a broker, mostly from a firm that I never heard about, and has the best program on earth, certainly making you rich in a short time and you just have to open an account.

Let u go through a short stereotypical outline of the phone conversation:

How are your stock market investments going?
Excellent (my answer)
The typical standard question of a phone sales person: What are you investing in?
Futures and Options – my answer.
The standard reply: Oh, you are taking on higher risks.
All broker telephone sales people are trained to say this sentence.
It is almost funny. When I reply: I don’t think so. That immediately separates pros from phone solicitors:
“Of course you do?”

Such ignorance usually brings those phone calls to a friendly end: “I do not spend time for that.”
Now let us bring means, background and facts into this case: Taking the telephone sales talk out, where the person on the other side is trained to play with our emotions of fear and excitement, we come to the following facts:

When I buy 100 shares of a stock with a value of $120/share, that moves about 1-2% a day, we want to calculate the risk or exit point, if the trade does not go our way. Capital preservation is a key essential for successful financial market investment. If prices break through a major support line or short term momentum line, this should define our maximum loss and exit point to the downside.
In our case, we assume support being 4% away from our point of entry. Then we know that we are risking: $480 on a $12,000 investment.

To control 100 shares one needs to buy 1 Call Option Contract, for: $1.20 x 100 = $120.

We now control for the duration of the call option contract the same amount of shares: 100 and what is the risk involved?
The maximum we can lose: $120.

Making things equal, we are going to risk the same $480 and buy 4 call option contracts.

With the same amount of risk, we are now controlling 400 shares for the duration of the options contract.

Talking about risk, always involves the worst case:

Overnight news make the stock drop to $90 at the next day open and we want to get out:
Stock holder loss: $3,000
Option holder Loss: $420 (there will still be some time value in the option).

But actually, the broker does not want us to do so many trades, we shall rather sit tight and wait until the share is going up again, but the next day prices drop: $79/share: $4,100 loss for the stock holder.

What will be the answer when we call your broker and ask what is going on:

“Hold on to it, it is gone get BETTER.”
Yes right, now the share has to climb 51% to get us back to break even.

We want people to take their financial freedom into their own hands and teach them techniques of how to invest in the markets, making money in all directions and rather having a buy and sell, than a buy and hold strategy.
With a buy and sell strategy we always have a target and at the target we either take the entire position off, or pull the stop tight, to not allow realized profits to slip away.

Let us assume we wanted the share price to go to $125 in the next 5 days and cash out. What would be the results:

Stock holder: Selling 100 shares at $ 125, gaining $500 - which equals a 4.2% return on capital.
Option Holder: Selling 4 option contracts - but what will be the value of the option?

To calculate the result of the future option value, we need to understand the impact of the option influencing parameters, that are made out of: The relation an option moves with the stock, time decay and volatility change. It all sounds more complicated than it is. We provide you with a model where you can do the calculation in seconds on the trading platform or on our member section of the website.

In our case the simulator lets the option price increase by $1.96. Calculating $0.02 slippage, we come to a value increase of the option of: $1.94 x 400 Shares controlled = $776, or 61% return on capital.

Based on those results, the option investor gained 55% more profit and in total risked about $400. While the risk of the shareholder can be substantial on defined amount of gains.

So finally, who is taking more risk: the option investor or the share holder?
Now that you know the answer, it is up to you to learn the mechanics to be able to apply such investment strategies. To be a successful financial market investor, skills and market details need to be learned and this is what NeverLossTrading is successfully teaching. We believe in hedging and leveraging any market investment: from Mutual Funds, Stocks to Options and Futures. You will leave our workshop fully setup to follow the NeverLossTrading concept.
Take your financial freedom into your own hands:
“If you do not care about your own money, nobody else will.”
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Monday, March 21, 2011

Is Technical or Fundamental Trading The Way to Make Money In the Stock Market?

Years ago when I learned trading, fundamental analysis was a big thing. It was impressive what all those people knew and how it was clear to them and the general public that certain shares had to rise and others had to drop.

Did it work out?

NO, of course not: In Reality the general public never would have known about those stocks unless the fundamental trade had already been made by Institutional Investors and people went in, buying when those who initiated the price move were selling.

Basically we proclaim: The fundamental analysis accessible to a private investor is worthless.

Institutional Investors have lined up cohorts of highly qualified stock market analysts in addition, they have their connections and relations, where a private investor can never reach.

So what do we do?

The answer is easy: We rely on the fundamental analysis of the “smart money.”

When institutional investors start buying into a share, our scanners and technical analysis tools indicate that program buying or selling is going on and we enter in the direction of the move, copying the action of the big money.

“The NeverLossTrading System can quickly identify when serious buying and selling is taking place, to participate in buying or selling.”

We know that it takes institutions time to enter their positions, and that stocks can double, triple, or more before the institutional fundamental investment is done and we start buying (or selling) alongside of the “Key Market Investors.”

With NeverLossTrading, people trade what they see on the screen and not what they assume that is coming.
Over the years of trading we developed our own set of indicators, integrating the knowledge and skills of the world best and successful traders, with focus to identify institutional moves. Our indicators are in house developments that measure the market pressure, like a voltage measurement in electrical engineering applied to the decision making signal wave of the financial markets:

• Pressure from the top, pushes prices down.
• Pressure from the bottom, pushes prices up.
• Pressure from both sides and the market will first consolidate but at one point, like an electrical field, break through and move strongly in one direction.
Each of our trade setups has an identified stop and target:
• One of our studies draws a stop line on the graph and allows for no interpretation.
• The target can be set by our trend calculation or trailed with the stop line that moves with the market.

For the private investor, regardless of the trading system they choose, these are the steps and techniques to make money in the financial markets:
• Have a system that allows you to spot key market action.
• Forget news and fundamentals, invest when institutions move in and out of share.
• Always hold yourself protected with stops and accept small losses, aiming for big wins or constant smaller gains.
• Learn techniques to be able to make money in up, down and sideways markets.
• Trade a set of shares that you understand with minim requirements on: Liquidity, Volatility, Daily-Price-Range.
• Apply a trading strategy that allows to leverage and protect your funds.
• Understand market correlations on time of the day, annual season, news related.
• Combine price and volume moves for entry and exit decision.
These are the skills we train and we encourage every new trader to get a solid education prior to risking money in the financial markets.
With the methods we teach, each and any market can be traded: Stocks, Commodities, Treasuries, Currencies and their derivatives like Options and Futures.

We often meet people who tell us:

“But we cannot go short in a retirement account.”

“I have no margin allowance in the custodian account of my children.”

For sure those are the official regulations, but if you possess the trading skills/mechanics of knowing how to initiate a 1:10 leverage to the up- or downside in any account, you will see the financial markets from a different angle.

Take a look at our program: http:\\ and for sure get a solid training and set of skills prior to investing your money in the financial markets.

Friday, March 11, 2011

Is Automatic Trading Software The Way to Make Money in the Stock Market?

Lately I am getting a lot of proposals for Auto-Trader-Software’s. Some of them even state that they work 89% off the time. In respect to the promise, the prices are pretty decent, ranging between $2,500 and $25,000 -  while 80% of the offering is between $2,500 and $5,000. All of those promotions surely have a little disclaimer that states: “Past history is not to be taken as attainable future performance,” and this is understood.

To get a good feeling for the offers received, I called the most expensive provider:  $25,000  on a 40% off promotion and got connected to a knowledgeable person. On my question if he trades the markets every day, his reply was: “I am the employed software developer” and I thanked him for his honest answer.

Let us make a financial appraisal to evaluate the payback for a possible investment into an auto-trading-program.

If we could gain $200/day with such software, in 250 trading days this would amount to: $50,000 of profit. Not a bad price/value relations: The investment would pay itself back in 2 weeks to 6 month and be an ATM after.
Consider compounding interest through reinvesting our profits: with $200 the first day, we make $400 the next, $800 after. This would make us a millionaire in 14 days. After 24 days a billionaire and in a  year after we start, we own the money of the word and the computer program even does the work for us while we are sleeping or being away from the computer, enjoying the good life of being rich.
This is more than anybody could ever ask for, I just wonder why those software programs are so inexpensive and like in real life, if I get something offered well below the real value, I am very suspicious of why that is.
“Why does one work as an employed programmer if he could be a billionaire?”
For everybody who wants to put their automatic trading program to work for them, good luck to you and please send  a card from the billionaires club that you surely join in 6 weeks from now.

We believe that you cannot successfully automate trading. If such would work we would find those programs run by:
Goldman Sachs, JP Morgan, Morgan Stanley, Fidelity, ING, Deutsch Bank, UBS, Barclays, BNP and others who would be able to afford purchasing it, but as a private investor: “Forget about it.”

Everybody who wants to learn to trade various financial markets needs  sound knowledge
of how to trade and why. NeverLossTrading is a primer institute to learn trading in all dimensions, ranging from the psychological aspects to position sizing, trade execution and documentation. We share with you a follower strategy that focuses on the market moves of institutional money and we trade along right with it, copying the actions of the market leaders.  You will learn how to make money applying the right instruments for all market directions: Up, down, sideways.
NeverLossTrading offers you a free trading platform and provides a set of indicators that focus on what just happened, instigate by institutional money and then it is time for us to trade: A wealth of knowledge and experience  that  supports you throughout your life as the a successful Financial Market Investor.
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