Thursday, September 6, 2007
Of all the important skills in trading, survival is number one. For unless we make it through the inevitable bad times, we won't be around to capitalize on the good. I've laid out some trading account guidelines that specify the account size required to conduct various commodity futures and option trading activities. Stick within these guidelines and you will have an edge on most of the commodity trading public.
The most important factor to success in commodity futures trading is our ability to survive the bad times. The second most important factor is our ability to identify and then take low risk, high probability commodity trades. Conquer these two and you are well on our way to trading success.
Yes, taking low risk, high probability commodity trade recommendations isn't enough. It's up to you to take the next step and follow the account survival guidelines discussed here. By surviving, you will be ready and able to participate in the favorable commodity trades that eventually come along, like buses in the night.
The commodity markets always change from trending to choppy and back again. There will be tough markets. You can count on this. We need to have several methods to cope with this uncertainty. We can never be sure of each individual trade’s outcome, so we need to put probability on our side to prepare for a losing string of trades.
One way is to have more chips at the table than our competition. A way to simulate this is by trading small – breaking our account equity into ten to twenty parts (or more) and never risking more than 7.5% maximum on any one trade or idea. Many professionals with large accounts risk even less, like well under 5% a trade.
The problem with this plan is when we are dealing with smaller accounts. When the commodity trading account is under $20,000, to comply with 5% to 7.5% risk can mean taking on very small positions. Some commodity traders tend to get restless for bigger action and start breaking the rules. For example, with a $10,000 account, we should look to risk no more than $1,000 on each trade. (10%) Even this figure is too high.
If we risk less, like, 5% ($500), then the bad times are more survivable. The thing to remember is you can do all the in and out trading you want. You can grant options, spread options, hedge, buy dips, sell rallies day trade, etc - do whatever suits you. Just keep the risk for each trade down below 10% and preferably at 5% and you increase your chances of success markedly over the reckless plunger.
Next we will talk about actual account sizes and suggested activity.
Part Two of Six Parts - Next
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. View his market forecast TimeLine Trading charts and get his complete free 44+ lesson, "Thomas Commodity Trading Course." http://www.thomascapitalmanagement.com/commodity/welcome.htm Main site: http://www.ThomasCapitalManagement.com
Why Debt Consolidation May Be Your Best Solution to Debt Right Now
If you've got a lot of debt that you are struggling to manage, you have probably heard the term debt consolidation. Debt consolidation is an interesting approach to managing debt that differs from things like debt settlement or bankruptcy. For the right people (those who can qualify and who think they can work with this radical approach), debt consolidation can be the first step to financial freedom. But there is one other thing most people don't tell you about debt consolidation. Done correctly, debt consolidation will actually improve your credit score.
Debt consolidation is not the same thing as debt settlement, debt management, or bankruptcy. Debt consolidation actually sounds counter-intuitive. To consolidate your debts, you roll all of your debts together and then take out a giant loan to pay off the individual debts. In a sense, you exchange many smaller debts for one colossal debt.
So how does that help? It helps if you happen to have a lot of debts at higher interest rates that you can consolidate or re-package in a loan at a lower interest rate. For instance, if you take a bunch of credit card debts at rates of 16% to 20% and beyond and consolidate them in a loan for 10%, that translates into paying less every month.
Even better (for debt-free thinking) you can pay the same amount you were already used to paying but because interest rates are lower, you're knocking out more of the principal with each payment. Bottom line: your debt gets paid faster.
If you own a home, you can refinance your home and possibly re-package those debts at a very favorable, mortgage-type single-digit interest rate.
Debt consolidation is not for everyone. Not everyone can qualify; if your credit has already had a black eye or two, it may not be possible for you to take out a new loan, particularly such a substantial one. Debt consolidation is easier if you own a house, but that's not required. However, there are people who will simply not be able to swing it.
But if you can consolidate your debt and you're considering that versus other financial options, you need to know that most debt settlement plans and certainly bankruptcy will leave a bad mark on your credit report.
Debt consolidation can help it.
Here's how. Your credit score is a moving target, a constantly changing number, which is calculated by three large organizations in the U.S: Experian, EquiFax, and TransUnion. All of these companies have a formula for your credit score and each formula is a little bit different. However, they all arrive at a number (your score) based on a variety of factors.
One factor is how well you pay off the debt you have. This score is very heavily weighted, making up about a third of your overall score. It looks at whether you pay your debt on time or late and if you make payments or flake out.
If you consolidate your debt you take out one new loan and then pay off a bunch of smaller loans. This hits your credit score favorably: you have paid off some loans�.probably earlier than required. That's a good thing.
Consolidated debt simplifies paperwork and will eventually save you time. Instead of having to receive and write checks for a dozen or more bills a month, you have fewer debts (although it's much bigger). This reduces the likelihood of late payments or missed bills. That also can help your credit score.
Another important factor weighed in your credit score is how much credit you have available to you versus how much you are currently using. Being maxed out everywhere is bad for your credit score. If you have credit but aren't inclined to use every bit extended to you, that helps your score.
If you consolidate your debt, you immediately pay off a bunch of debts. If those debts are credit cards, for instance, you still have available credit. In fact, you're just increased your available credit by paying off the card. That counts in your favor, too.
Last but not least, the philosophy behind debt consolidation is one of re-organizing or re-structuring debt, not simply trying to walk away from it or get a court to force creditors to write it off. Although it may not be called debt consolidation when businesses do it, large companies frequently have to re-structure debt to operate more efficiently. It is a standard business practice, one that makes good financial sense, and its primary purpose is to be sure that all creditors are paid in full according to the terms of the loan.
In other words, debt consolidation preserves your good name and your integrity. If you consolidate your debt, you credit report does not suffer. In fact, the credit report people may not even really know that you're consolidating debt. As long as you pay off what you owe, how you manage your money is your business.
Most other debt plans immediately go on your credit report. If you've tried to negotiate or settle a debt (work out a plan to pay less), expect that to get reported. Businesses want to warn each other that you might be the kind of person to make charges and try to find a way not to pay according to the terms you agreed to.
Bankruptcy is even worse on your credit report. It can be reported to future creditors for seven to ten years after the event. Many potential lenders won't extend credit to you if you have a recent bankruptcy and even those who will may be very meager and demand exorbitant interest. After all, you're now a "high risk" borrower.
The good news for everyone is that the credit score is a moving target. It changes constantly and no one event, whether it's a late payment or a bankruptcy, will affect your credit score forever. The credit score is also a composite picture of how well you handle money versus how poorly you handle it. If you keep doing the right things with your money, your credit score will get better despite mistakes you've made in the past.
Here are some general rules of thumb for a good credit score: � You must have and use credit. A person who has never taken out a loan or paid off a debt can be the most reliable person in the world but he'll have trouble getting a loan. � However, you should have more credit at your disposal than you actually use. Maxing out is not a good thing. � Pay your bills on time and don't miss payments. � Don't default on a loan, skip out on paying a debt, or go into a program that tries to settle or negotiate your debt. This gets reported. � Avoid bankruptcy, if possible. That may not be possible in some cases, but bankruptcy should be considered a last resort not an optimal choice.
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Need to know more about debt consolidation? Visit http://www.debt-consolidation-diva.com for lots of straight talk about debt consolidation. Debt consolidation is not suitable for everyone and some people won't qualify for it, but for those who do, it can be a great solution for managing overwhelming debt. Judy Kuhns contributes to Debt-Consolidation-Diva and other sites.
Take These Three Easy Steps to Receive Student Aid for College
If you're planning for college, completing and submitting your Free Application for Federal Student Aid (or FAFSA) is the all important first step in finding a way to pay for your college education. Still the top source for college funding, the Federal government pays out more than 80 billion dollars of student aid per year as grants, work-study programs or loans. To get your piece of the pie, you'll want to submit your FAFSA application as early as possible.
The FAFSA application process has an undeserved reputation as a being difficult to understand and hard to complete. This impression may have been fostered in part by third-party fee-for-service providers that have made a business of helping applicants complete the necessary forms. However, the application process is much easier than its reputation and the Federal government has extensive online help to guide you through the three-step process. Also, the government charges no fees of any kind. The FAFSA application is free to all.
You'll want to kick off Step One of the FAFSA application process by applying for and receiving your own personal identification number, or PIN. Your PIN makes it possible to apply for student aid online, a process the government has streamlined and made as easy as possible. You can also use your PIN to sign your FAFSA application online and access and correct information contained in your Student Aid Report, or SAR. The SAR is the report you'll receive once your FAFSA application has been processed. It contains important information about you financial need, which ultimately determines the amount of aid you may receive.
Get your PIN at pin.ed.gov before you move on to Step Two of the application process. In this step, you'll actually complete and file your FAFSA application at FAFSA on the Web, the popular name for the website maintained at fafsa.ed.gov. Filling out your application online at FAFSA on the Web is a good idea because there are detailed instructions for answering each question in the application. The online process also catches any potential mistakes you make and prompts you to correct them. Filing at FAFSA on the Web is also the fastest way to get into and through the Federal application process. Most FAFSA applications are processed within just a few days of their filing date.
In Step Three of the application process, you'll receive your SAR, or Student Aid Report, approximately three to five days after filing your FAFSA application online, or in seven to ten days if you filed by mail. In addition to compiling the information contained in your FAFSA application, the report also determines your financial need, which is calculated by subtracting your Expected Family Contribution, the amount your family is estimated to be able to contribute to funding your college education, from the cost of attending a particular college or university. Once you receive your SAR, review it for any errors and once it's complete, contact the financial aid office at the college or colleges you're considering. The financial aid office will let you know the type and amount of financial aid a particular college is willing to offer.
The three-step FAFSA application process isn't difficult to understand or complete, but it is more involved than can be covered in a brief article like this. Fortunately, the government has prepared a comprehensive 60-page document that fully explains and guides you through the FAFSA process. Called "Funding Education Beyond High School", the document is available in PDF format from studentaid.ed.gov.
Matt Paolini works from home as a distance learner. Visit University of Pheonix or University of Pheonix online degrees for free distance learning info.
