Day Trading Forex

So you want to increase your wealth by investing in ASX Shares? Start out on the right foot and you could eventually supplement the income from your job. But make one of a few fatal mistakes and you could see yourself right out of the market, never to trade again.

What do I mean? Let me give you an example: Let’s say you started putting $150 a month into ASX Shares in 1980. That’s around $5 a day. It earns an average of 15% per annum over the years including dividends. If you re-invested all your returns, today it would be worth over one million dollars – $1,038,490 to be exact.

But not everyone makes it that far. In fact, a great deal of people investing in ASX shares lose a portion of their money, get scared out of the market and never invest again. And the sad part is they never discover that million dollars we just spoke about because after all, you’ve got to be in it to win it.

So how can we make sure we don’t make the same mistake trading ASX shares? Your Trading Plan is the answer, and although it can be simple, it is the most powerful tool you will use in the market. If you haven’t got one, you shouldn’t be trading. But where do we start?

Well, one man’s trading plan is another man’s ruin. In other words, we are all different – and we all invest differently. But there are a few solid ground rules that will make your job easier. So having a trading plan should definitely involve the following:

1: Your Rules for Entry and Exit – or in other words, your rules for when you buy a share and when you sell a share. There are many different ways: some people use fundamental reasons like a company’s earnings before interest and tax (EBIT), and others use technical reasons, like a breakout from price consolidation or the crossing of a trend line.

2: Your Money Management Rules – this is where you decide how much of your portfolio you will invest in one share. And also how many positions you will spread your portfolio across. As a guide, between 6 and 12 positions is usually optimum. Any less than 6 and you risk not being diversified enough. Any more than 12 and you risk being unable to out-perform the market (the best portfolios are often slightly focused).

While some people can spend years determining the right trading plan – it doesn’t need to be complicated. With these rules you are well on your way to success in ASX shares.

Learn more about investing in ASX Shares with the free course at www.asxmarketwatch.com . Dave McLachlan also has free research on the Australian Stock Market.

categories: stock market, investing, trading, finance, building wealth

If the stock market is rising and giving you solid gains, chances are it is what’s known as a Bull Market. And it is the dream of most investors to be fully invested when a new bull market has just begun.

At first glance it may seem like a silly thing to try – especially when there are perfectly qualified people like financial planners or stock brokers telling you it is impossible. But what if there was a way to know, with a high probability, that a new bull market was starting?

Ken Fisher, in his book “The Wall Street Waltz”, discovered that unemployment was the key. Why? It’s simple: when the economy and the stock market are riding along nicely and moving upwards as they should, unemployment will never rise too much. This means that people are working, companies are making profits, and both of them are spending this money and stimulating the economy.

But as companies make less profits, employ less people and both spend less, the economy and stock market declines. Most recently, 2008 is a perfect example.

Therefore Ken says, if you are watching the news and unemployment figures have risen by more than 1 percent, then the start to a new bull market might be right around the corner. It won’t pick the exact bottom of the market down to the day, time and value, but a rise of over 1 percent will get you in the ballpark to be ready when the next bull comes along.

There is one more part to this story – cyclical stock market lows, and their subsequent bull markets, haven’t ever happened without a 1 percent rise in the unemployment rate. It happened most notably in 1970, where the stock market had been falling for 2 years. Unemployment rose sharply as 1970 began, and the stock market bottomed out in May.

There is one caveat however – the unemployment rate is not as reliable when it comes to predicting peaks in the market. This is because the stock market actually leads the over economy anyway in that regard. But Ken did find that a major peak in stock markets rarely happened without unemployment falling (jobs up) for two years.

There are many ways you can use this information, but at the very least the next time the market is falling and a bear market is in place, look out for rate of unemployment to rise by over 1 percent. When it does, you will be ready to take advantage of that bull market that’s on its way!

Get your free course on stock market investing, and free research on stock trends at Dave’s site www.asxmarketwatch.com .

That’s right – I’m going to show you what thousands of economists, financial planners and analysts the world over struggle to find: How to know when the economic recession will end, and how to know it in advance.

Times during an economic recession always seem tough, but there comes a time when they come to an end. Imagine if you or your business were ready to take advantage of the new economic times because you saw it coming? Or maybe you could have your resume ready for that new job offer, just as more jobs become available.

“Enough already – how do I tell when the recession will end?” I hear you ask. Let’s find out – it may be simpler than you think.

And your children will probably tell you it is easier to do than a night of homework!

For the answer we look to Ken Fisher in his book “The Wall Street Waltz”. It’s actually where the stock market comes in to play, because the stock market, believe it or not, has a magical way of leading the overall economy. In fact, the stock market will go down well before we ever hear word of a recession, and the stock market will go up long before we get confirmation that the economic recession is over.

Don’t believe it? Let’s look at our most recent example: the 2008 recession. The market started going up in March 2009, and the economic recession was announced over in October 2009 – a lead time of around 5 months. Or perhaps the recession before that – 2001 to 2003. The market started rising in March 2003, and the recession was announced over in July – 4 months later.

Or further: in late 1952 the market topped out. Half way through 1953 the recession was declared. The stock market had done it again!

We can see the same pattern in 1957, 1960, 1967, 1970, 1974, and then in more recent recessions like the early 1990’s and 2002. The average time-frame that the stock market leads the economy by is 6 months. Of course some will be more, and some will be less, but as a general rule 6 months is a good one to go by.

So what does this mean for you? Well, the next time a recession hits (and it will), keep a close eye on the stock market. When it starts to rise, in 6 months time you’ll be ready to take full advantage of a booming economy!

Get your free course on trading and investing, at Dave McLachlan’s site ASXmarketwatch.com. Dave also offers independant stock market research to help people just like you.