Financial and business risk is inevitable because there is danger in everything you do, including - doing nothing - and above.
There is market risk - the risk that adverse market movements will cause you to lose money.
There is opportunity cost risk - the risk that you let a great opportunity pass you by.
There is interest rate risk - the risk that you will try to be by investing for income only to see interest rates much higher "conservative" while locked in at a much lower rate.
There is inflation risk - the risk that your investments will lose value over time due to the loss of purchasing power.
There are things - the risk that you will lose money in a company.
So choose your poison. Choose the type of risk you because you can not avoid preferred.
To make money, you have to be a little worried. Because if you do not worry, you're not risking enough. Adventure is part of what makes life worth living. So do not be afraid to take risks. In fact, if you want to get rich taking calculated risks is essential.
Do not invest in a way that makes you feel comfortable. If you play a meaningful commitment you are going to be worried. Someone said that concern is the hot sauce and cake of life. Once you get used to it, you can actually enjoy. If you do not at least a little worried, you're probably not risking enough.
Of course, playing a meaningful commitment does not mean you should ignore reckless and sound money management principles. It simply means that it is difficult to be a successful investor if you are making small bets to sleep better at night. You have to risk enough to be meaningful, but you also need to keep if you want to stay in the game your capital.
And not to diversify - the kind of diversification that is recommended by many financial planners say to put a little money here and a little there, and a little something else, until you spread out all over the place. You may not have much to lose, but you're not going to be a successful investor, either. More than diversification also means that it is difficult to get rich. In bonds, CDs and other fixed-income investments
Conventional wisdom says to put all your eggs in one basket. But my experience is that really successful people do the opposite - they put all their eggs in one basket and watch that basket like a hawk.
So to achieve financial freedom to take risks. Make it meaningful - meaningful enough that you might have a little worried. But you will live life to the fullest. And, who knows, you may end up being very successful.
And, above all, enjoy the journey.
Copyright 2005
Friday, 30 May 2014
Thursday, 15 May 2014
The Commitments of Traders Report - How To Profit From Legal Inside Information
The commitments of Traders Report (COT) is a weekly government report, which is very valuable to know what the "smart money" is doing in various futures markets. There is a report for each futures market. Although COT reports are there for years, the average investor not only do not know how to use it, but do not even know it exists.
How the COT report
Here's what happens - the government, in particular the Commodity Futures Trading Commission (CFTC), requires all those contracts above a certain limit to report to their positions in the possession of a number of futures. For example, the limit for the S & P futures are currently 1,000 contracts. So only need to register. The really big players But they keep 70% to 90% of all outstanding contracts.
The report was released on Friday (except holidays) based on data from the previous Tuesday. So that the information is released three days after the fact. That's OK, because it's time enough valuable.
The column headings at the top of the report will be labeled NON-COMMERCIAL, COMMERCIAL, and NONREPORTABLE POSITIONS.
When an account is reported to the CFTC as holding positions above the specified reporting level number of contracts, the CFTC determines whether the account is a commercial hedger or large speculator.
Commercial - The CFTC classifies a futures account that the reporting level as a "commercial" if that account holder files a statement of the Commission says that it is commercially involved in activities covered by the use of futures markets requirements. They are the ones we are most interested in. For example, the commercial traders of S & P futures are the largest institutional players such as banks, pension funds, mutual funds, hedge funds and trading arms of Wall Street firms.
Noncommercial - These are classified as non-commercial "big speculators." They do not concern themselves with the resources as a part of doing business. An example of a large speculative bill would be a great resource pool (a fund) that trades futures for speculative profit. Managed futures accounts have become the billions of dollars and if they meet the reporting levels, their positions would be reported to the CFTC for monitoring.
Nonreportable positions - all traders, speculative and commercial, which are smaller than the reporting level positions are considered to be the "small speculation." In other words, they are all participating in the futures -. "Little boys" the proverbial
The three players
To know how to use the COT data is important to have a look at the three types of players that focus of the report to take - the commercial trader, the great speculator, and the small speculator. We want to know what each of them drives.
Commercial traders dominate the market. That fact is not really a surprise to anyone given the nature of those commercials are to be. For example, in the S & P futures market they are banks, pension funds, mutual funds, Wall Street brokerage houses and the like. They have large research departments and have inside information that is simply not available to the average investor in a timely manner.
They also dominate because of their enormous size. They are so big that they actually become the market. So that commercial traders are the ones we are most interested, we want to try to determine what they do and shadowing. History has shown that the commercial operators in most futures markets, for that matter as a great part of the time. And when they are wrong, they are rarely wrong for very long. They will eventually end up on the right side of the market, whether it is on the upward or downward.
The large speculators tend to trend followers. After the market has established a trend up or down, they will go the direction of the trend. It is interesting to know what they are doing in the market, but it should not be critical to your decision.
The small speculators are usually on the wrong side of the market. In fact, it is estimated that 90% of small traders lose money in the futures markets. They tend to serve as "cannon fodder" for the large commercial traders. After all, the "smart money" to someone on the other side of their profession to take it. The small speculator is usually willing to accept that role. Consider the Harlem Globetrotters vs. the Washington Generals. The commercials are the Globetrotters. The small speculators are the generals - the scapegoats who are bound to lose.
The commercial traders to follow ones. They are the smart money. When they have an extremely long or short position in relation to their positions in the past, it is a reliable indicator of market direction.
How the COT report
Here's what happens - the government, in particular the Commodity Futures Trading Commission (CFTC), requires all those contracts above a certain limit to report to their positions in the possession of a number of futures. For example, the limit for the S & P futures are currently 1,000 contracts. So only need to register. The really big players But they keep 70% to 90% of all outstanding contracts.
The report was released on Friday (except holidays) based on data from the previous Tuesday. So that the information is released three days after the fact. That's OK, because it's time enough valuable.
The column headings at the top of the report will be labeled NON-COMMERCIAL, COMMERCIAL, and NONREPORTABLE POSITIONS.
When an account is reported to the CFTC as holding positions above the specified reporting level number of contracts, the CFTC determines whether the account is a commercial hedger or large speculator.
Commercial - The CFTC classifies a futures account that the reporting level as a "commercial" if that account holder files a statement of the Commission says that it is commercially involved in activities covered by the use of futures markets requirements. They are the ones we are most interested in. For example, the commercial traders of S & P futures are the largest institutional players such as banks, pension funds, mutual funds, hedge funds and trading arms of Wall Street firms.
Noncommercial - These are classified as non-commercial "big speculators." They do not concern themselves with the resources as a part of doing business. An example of a large speculative bill would be a great resource pool (a fund) that trades futures for speculative profit. Managed futures accounts have become the billions of dollars and if they meet the reporting levels, their positions would be reported to the CFTC for monitoring.
Nonreportable positions - all traders, speculative and commercial, which are smaller than the reporting level positions are considered to be the "small speculation." In other words, they are all participating in the futures -. "Little boys" the proverbial
The three players
To know how to use the COT data is important to have a look at the three types of players that focus of the report to take - the commercial trader, the great speculator, and the small speculator. We want to know what each of them drives.
Commercial traders dominate the market. That fact is not really a surprise to anyone given the nature of those commercials are to be. For example, in the S & P futures market they are banks, pension funds, mutual funds, Wall Street brokerage houses and the like. They have large research departments and have inside information that is simply not available to the average investor in a timely manner.
They also dominate because of their enormous size. They are so big that they actually become the market. So that commercial traders are the ones we are most interested, we want to try to determine what they do and shadowing. History has shown that the commercial operators in most futures markets, for that matter as a great part of the time. And when they are wrong, they are rarely wrong for very long. They will eventually end up on the right side of the market, whether it is on the upward or downward.
The large speculators tend to trend followers. After the market has established a trend up or down, they will go the direction of the trend. It is interesting to know what they are doing in the market, but it should not be critical to your decision.
The small speculators are usually on the wrong side of the market. In fact, it is estimated that 90% of small traders lose money in the futures markets. They tend to serve as "cannon fodder" for the large commercial traders. After all, the "smart money" to someone on the other side of their profession to take it. The small speculator is usually willing to accept that role. Consider the Harlem Globetrotters vs. the Washington Generals. The commercials are the Globetrotters. The small speculators are the generals - the scapegoats who are bound to lose.
The commercial traders to follow ones. They are the smart money. When they have an extremely long or short position in relation to their positions in the past, it is a reliable indicator of market direction.
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