Are you a Trader or an Investor ?

2015-10-06 16_02_54-photo share market investor - Google SearchOne thing that determines what strategies you need in the market, is whether you are a Trader or an Investor. They both have a goal of making money, but the means at which they approach things is completely different.

An investor should consider his long term goals and structuring investments to achieve those goals. An Investor could be using fundamental information to determine the current value compared to the target value the analysts have on the asset. They may be buying on the way down, in the hope that proper value will return to the asset creating a capital gain. Owning a good quality company which has been under performing is often the goal.  As an investor its important to look at asset allocation for diversification.

A trader will have a set of rules or triggers that cause him to act in the market. This may be very simple (like the crossing of a moving average) or very complicated with multiple rules and conditions. A trader will primarily be using Technical indicators to make decisions on the market.

As a Trader, your rules will determine the duration of your trades – with more aggressive rules, trades will be shorter in duration with faster entries and exits. With more conservative rules, entries and exits will be slower resulting in longer trade duration’s.

More aggressive conditions will trade more often, looking for smaller moves to take advantage of. More conservative conditions will trade less and require more evidence to enter (so will be slower). Its important to think that the speed of entry must match the speed of exit. Entering fast and not taking profit will lead to frustration, as will entering slowly and exiting fast. So entry and exit rules must be reasonably balanced. Think of a golf swing, a short back swing has a short follow through – a big back swing has a big follow through.

Traders and investors may also use different products to increase returns – options, warrants, CFD’s or futures increase gearing into investments as margin loans. As a rule of thumb, higher geared products are generally more suited towards traders than investors.

So which is right – that really depends on your mindset, your discipline, your confidence and your availability of information. Both traders and investors can be active in the market using very different strategies.

Whichever you are, make sure the strategies you use fit in with your goals.

Happy trading/investing 🙂

Week in Review

 

xjo31may

This week in the market saw only small sideways movements dropping 57 points over the 5 day period. Those reading last weeks technicals will notice that we are sitting on the low 4900’s decision point. We could see one of 2 things from the XJO this week – either the prices will fall through the 4900 level and head down towards the 4700 level or it could bounce off this support and head back towards the 5150 level. Either way, we may be in for a wild week. Continue reading “Week in Review”

Week in Review

xjo-17may

Another week trading within a very small range, we see the XJO trading sideways holding ground around the important 5200ish level.

Over the next week, look for small falls on the XJO down towards the rising trend line, this opinion is based on both the CCI and MACD which are just about to cross to the downside, we should see the market retesting the current trend at around the 5100 level.

This level is important as it will show how strong the overall market is, should the XJO bounce off the rising trend line, we could easily see the market rising towards the 5500 level within a few months. Failure at 5100 will see us fall quickly back towards the 4900 level.

A Shift from Financials Technically

The financial sector has led the charge over the last few months. In the last 2 weeks we have seen a noticeable drop off in strength, partly because of the dividend pressures in May. Nonetheless the MACD has signalled a move to the short side, with the CCI about to do the same. Notice the chart moving towards a triangle shape with the centre being support at the 5700ish level. Continue reading “Week in Review”

Options Writing on your portfolio

One of the things I love about options is that there is nearly a strategy for every market condition.

Rather than using the same strategy accross all conditions which may give you questionable results, tailer made strategies can be used to take advantage of current conditions. One strategy that has been adding a lot of value to shares inside an existing portfolio is Covered Written Calls.

Below is an image showing trades taken on an actual account over the last few months, prices noted are per share in cents. Each trade places cash back into the trading account, when the trade is taken. Brokerage is not considered in this diagram.

Now there is risk with any strategy, understanding how to manage that risk is the secret to being profiatble with any strategy.

So if your leaning towards the risk averse end and you would like to add some value to your return, you do have a few choices.

If you would like some examples or a couple of strategies that may suit your style, please give me a call on 0402 855 800 or shoot me an email to steve.soars@gmail.com