Be prepared with these three markets

Posted on by The INO.com Team

Friday, June 20, 2008

FR: Adam Hewison, President INO.com

RE: 3 Markets that will change everything

Dear blog reader,

Every once in a while there comes a time in the market when you get to see some amazing trading opportunities.

I believe this could be one of those times.

In this special private video I analyze in detail the upcoming major moves in three major markets. This just maybe the most important video I have ever made on these three markets and I want you to see it.

Watch this video.

Every success in the markets and in life,

Adam Hewison
Co-Creator, MarketClub.com

Back Testing for Better Trading Results

Posted on by The INO.com Team

In today's guest blog post I asked Ingela Troha to talk about something that has plagued me, and millions of traders each and every year...it's back testing! Please read the full article, and put the info to good use!

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Back Testing can be a dirty word for traders who are too impatient to test their trading plan. Just the thought of it feels like an inconvenience, and a delay of getting into the live markets. Also many are confused about what the process involves, or completely unaware of how valuable it is to the bottom line of their results.

The benefits of back testing are extensive; years of experience can be gained over a shorter time frame (sometimes within hours) which further develops the traders intuition as the get to know their trading plan intimately; there is also the advantage of using your trading system through various market conditions and not just the current market type; plus testing new indicators and tweaking old ones; or creating a trading plan tailored to your own personal style.

The back testing process involves taking what criteria you have within your trading plan and applying it over at least 4 years of data – pick a period including all movements; bull, bear and sideways conditions. Your trading criteria must be well defined and not open to subjectivity – if it is get rid of it and find a new indictor. Trading rules should be very clear, for example: “Enter 1 daily close above the XX Day Simple Moving Average, with a Stop Loss 25 points away…” and so on. Trading criteria must be so precise that if you were to give the information to 10 different people they would come back with the same results. If there is too much room for interpretation within your rules, you will find it hard to repeat your successes
and avoid losing trades.

Once you have applied your trading criteria over a historical period, carefully noting each trade, you will be able to reflect on each position you took and identify a number of things; you may be able to minimize the risk of each trade by moving your stop loss closer or minimize the probability of being unnecessarily stopped out by having it even further away. For example, if over the 4 year period you made a total of 100 trades where 60 were winning and 40 were losing, you could analyze all the losing trades and see if any of those could have been eliminated or minimized. You could bring in an extra rule or indicator that would have avoided the placement of those losing trades, (however, remember that a new indicator could also have subsequently not allowed you to enter some of the most profitable trades so these need to be tested for viability).

The scenarios that you can back test are endless, and the process may at the time feel quite daunting or monotonous but it is actually deepening your feel for the market by training your eye to look for market movements and patterns that repeat…setting you up as an agile trader to effectively stalk the live markets.

Back testing of course cannot replicate the emotions you will feel that fuel the live markets, but it will add to your profit margin in more ways than one. Happy back testing…

Ingela Troha

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Ingela Troha is a professional trader with over 14 years experience
within the financial services industry – www.unearthedfinancial.com.au

Trading Successfully in a downward trending market

Posted on by The INO.com Team

Today our guest blog posting will cover something that's been on our minds for the past few months...a Bear market! I'm often asked, "what can I do?" There isn't enough time in the day to help someone who asks me questions like that to be honest. If you don't have a place to start, or a strategy in place you're already behind and destine for failure. So read the article below from WallStreetSurvivor and set up your plan.

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Making money in a down market may seem impossible, but there are proven strategies that allow you to profit and seize opportunities that are available in almost any Down, or Bear, market.

When there is turbulence in the stock market, and there appears to be widespread pessimism about stocks, should you simply throw in the towel, sell all your holdings and wait for the market to turn bullish again? The answer is NO! The key is to turn these bumps into plateaus of opportunities. There are several proven strategies to turn market losses into your gains.

Here are three:

* Shorting Stocks
* Buying Bear Market ETF's
* Buying Defensive Stocks

Shorting Stocks

So... Shorting is a way to make a profit from a stock falling in price when the market is bearish.
In 'short', it's a bet that a certain stock will fall.

If a stock looks like it will start losing value, then you can bet against it and make money as its price drops. When you short, you are actually borrowing the shares from your broker with the intention of selling them in the future. So basically, it's a loan of the shares. But the price you sell them at is all profit.

Let's look at an example. If stock ABC is trading at $30 and you expect it to go down, you would 'short' sell it. This means if your broker has loaned you money to buy ABC at $30/share and it falls to $25/share, you make a profit $5/share. That is, you sold the stock for $30/share, and you only paid $25/share for it, even though you sold it before you paid for it. Shorting stocks allows you to make money on a stock when it falls in value.

Let's dive into a few more facts about shorting and risks associated with shorting. To start with, borrowing shares means margin and while you short-sold a stock, if the company announces a dividend, you would have to reimburse the owner for the dividend. Meanwhile, your downside risk is equivalent to how high the stock may rise after you short-sold which is potentially unlimited downside risk.

Another way to look at a bear market if you're not a big fan of shorting is...

Bear Market ETFs

An alternative to shorting stocks or indexes is to buy Bear Market Exchange Traded Funds (ETFs)

Bear Market ETFs are designed in a way that when major indexes go down, these ETFs gain value that matches the drop in the index. Moreover, a type of ETF called Ultra Short ETFs allow you to multiply your gains (or losses) by investing in leveraged ETFs. What that means is for a 2:1 leveraged Ultra Short ETF, if the underlying index goes down by 4%, your ETF would go up by 8%. For example, the Ultra Short ETF - Short Ultra Financials (AMEX: SKF) has a 2:1 leveraged relation with the underlying Dow Jones U.S. Financials index (INDEX: DJUSFN). Beginning in November 2007, if you would have bought SKF, with a 10% loss in the index value; you would have gained 20%. Not bad, huh?

In summary, with Bear Market ETFs, you could still reap the benefits of shorting in a down market, without worrying about margin or the unlimited risk associated with shorting a stock. Additionally, Ultra Short ETFs provide an interesting alternative to multiply your gains or to hedge a downturn by investing in leveraged securities.

More Bear Market ETFs:

* UltraShort Consumer Goods (AMEX: SZK)
* UltraShort Health Care (AMEX: RXD)
* UltraShort Oil & Gas (AMEX: DUG)
* UltraShort Real Estate (AMEX: SRS)
* UltraShort Semiconductors (AMEX: SSG)
* UltraShort Utilities (AMEX: SDP)

Bear Market Index ETF's:

* UltraShort Nasdaq (AMEX: QID) is designed to profit when the Nasdaq index of technology stocks goes down.
* UltraShort S&P 500 ProShares (AMEX: SDS) is designed to profit when the S&P 500 index goes down.
* UltraShort Dow30 ProShares (AMEX: DXD) is designed to profit when the Dow Jones Industrial Index goes down.

Defensive Stock Picks

Seema Garg, Program Manager at Wall Street Survivor

Looking for more ways to profit in a Down market? Here are six industries to BUY in a Bear market that could make you money while others may be selling:

Wall Street Survivor

http://www.wallstreetsurvivor.com/Public/Learn/DefensiveStockPicks.aspx

Now this would get my undivided attention!

Posted on by The INO.com Team

Imagine you're in your favorite restaurant enjoying a nice dinner. All of a sudden a beautiful young lady jumps up on the table and starts dancing even though there is no music.

Would that get your attention?

I know it would get my attention, not because it was a beautiful lady, but because it is out of the realm of normalcy for this restaurant to have anyone dancing on their tables.

The point I am making is this... sometimes markets act a little out of the ordinary despite what everyone is saying and thinking about them. When this happens you need to pay close attention to that market.

Why? Because that market maybe getting ready to do something totally contrary to prevailing sentiment.

For the first time in 20 months we have received a signal that many would consider out of the ordinary and going against popular sentiment.

I have prepared a short video that I would like to share with you today.

Here's the video link.

Let me know how you enjoy the video and if you found it helpful. You can reply back to

su*****@in*.com











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Thanks for reading this e-mail and every success in the markets and in life,

Adam Hewison
President, INO.com

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Traders Toolbox: Trading tools for today's markets

Posted on by The INO.com Team

To some, technical analysis is a mystical method used by individuals to look into the future. Much of the glamour comes from the use of technical analysis as a predictive tool. While predictions can invigorate in a manner such as taking a joy ride, the end result will often feel like a ride gone bad. Although less exciting, the better use of technical tools can be likened to the tools a doctor uses to diagnose the condition of a patient. Similarly, a technical analyst applies his tools to determine the present condition of the market. Once a diagnosis has been made, a trader has a guide on how to approach a market. The understanding and application of tools is an important step in the development of an analyst or a trader. Properly used, various technical tools allow the drawing together of pieces of evidence to determine the market's present condition. While no one can guarantee the correct analysis of a market, the more evidence you gather, the better your odds. Once the evidence is gathered, diagnosing a market often ends up in a process much like jury deliberation. Each piece of evidence is considered; some will be accepted as valid, others may be suspect. Often one or two pieces of evidence prove to be the key in making a final determination. Once an analysis is made, based on the preponderance of evidence, a trader is ready to plan a course of action. TOOLS OF THE TRADE: The purpose of the series is to expose the reader to various analytical tools and to allow an insight into their applications. Hopefully the reader will have a better understanding of why a final diagnosis of a market's conditions has been reached.