What's New?

This newsletter is separate from the Trading Diary and will be published every two to four weeks, as the need arises. It is an extension of the What's New page, updating readers regarding new developments on:

the Incredible Charts Pro charting application;
the Trading Guide; and
the website in general.

Incredible Charts Pro

Since the introduction of the new Securities Toolbar, Advanced Options and Project Defaults towards the end of last year, we have been rather silent. Some members may have been relieved, as the spate of new updates can sometimes be overwhelming. Our team have been working on a major project: rebuilding the server configuration to increase redundancy (so that if one piece of hardware fails the chain isn't broken) and speed up data delivery.

The first benefit will be the addition of intra-day updates for US and UK exchanges, and the introduction of currencies.

Our To Do list has grown embarrassingly long (Fibonacci levels has been on the list for ages). On completion of the server configuration we will be able to focus on developing new indicators and stock screens.

What it Takes to Become a Trader

We regularly receive emails, such as the one below, from new members:

Hi, I am looking to start trading....... Recently my wife received a package in the mail for a u beaut star trading computer system which comes with a really u beaut price. She seems very keen to do something about this so I want to gather some information so that we can make an informed decision.
I was wondering if you can give me an idea of a realistic time frame that it would take to be able to trade using your system and what would be involved. This other system seems to easy and to good to be true. They state 7-20 minutes a day.
Look forward to hearing from you.

Regards
Joe

(translation: u beaut' is a colloquialism for "beautiful" or "you beauty")

This prompted me to start a new section on the website.

Finding the Right Trading Course

If you had to enrol on a one-week trading course, you may learn some good basic trading skills. An advanced course may teach you a new technique, or new insights into the market. However, on their own, they are not the key to a career as a successful trader. If you over-estimate what the course can do for you, you are likely to do yourself harm.

A Cricket Analogy

To those readers not familiar with the game, a cricket ball is delivered at similar speeds to a baseball (up to 160 km/hour). There are two subtle differences: the bat is slightly broader; and the batsman stands on the plate.....

If you had to enrol on a week's batting course, involving 3 to 4 hours of batting practice each day, you may learn some good basic batting skills, but it is not necessarily the key to a successful career as a professional batsman. Over-estimate what the course will do for you and you are likely to end up with a serious injury.

In a cricket match you may be fortunate enough to face a few overs of gentle leg spin - even dispatching a few balls to the boundary. Everything seems to go right. But all good things come to an end.

In cricket, as in the market, changes can happen very suddenly. A new bowler is brought on. The ball moves a lot faster. You can't make up your mind quickly enough. Misjudge and you get hit. Surprise, surprise - it hurts. This is not the safe environment of the training ground. Indecision creeps in. You start doubting your own decisions. You can't apply the techniques that you learned. Your batting plan begins to unravel. Every time that you get on the front foot, the ball whistles past your chin - close enough to smell the leather. You take another hit. You forget your plan and concentrate on survival. After a few awkward fends in the interest of self-preservation you fail to protect your stumps.

Stumps shattered, you head back to the pavilion, totally cowed and fortunate not be carried off on a stretcher.

Sometimes everything just seems to go right in the market. Every trade is a success and you can't resist telling your mates how well you are doing. For their own good you just want them to know how easy it is to make money (and how clever you are). All good things come to an end. The market changes. It seems harder to find good trades. You are frequently stopped out of your positions. You incur a string of small losses. And sure-fire winners struggle to make new gains. The pressure starts to build.

This is no longer the safe safe environment of the training course. Indecision creeps in. You start doubting your own decisions. The techniques that you learned don't seem to work any more. Your trading plan begins to unravel. You start changing your trading rules, looking for confirmation from additional indicators. They all give conflicting signals. You forget your plan and concentrate on survival.....

Many trading courses fail to prepare you for what you will face in the market place. They present you with a trading plan and some fine examples of where the plan works, explain the basic concepts and send you off to make your first million. If it was that easy do you think they would be selling training courses? They fail to prepare you for the times when the plan does not work. They fail to prepare you for the pressure and uncertainty that you will face when the market goes against you. They fail to teach you about professional traders who lure the naive into chasing prices higher or selling a stock lower. No trading course will compensate for a lack of experience. There are no short-cuts.

Read about The Magic Formula and A Systematic Approach.

Becoming an Expert Trader

Scientists have conducted extensive research into what it takes to achieve mastery in a particular discipline. Karl Anders Ericsson and his colleagues studied top performers in a wide variety of fields and identified a specific type of practice, which they call deliberate practice, that is required to achieve excellence (Ericsson and Charness, 1994).

Read the entire article, including Know the Basics, Traps & Pitfalls, Know Thyself and Attitude v. Ability, - click here.

Investing

Active Traders

For the more pragmatic readers, who combine technical and fundamental analysis, we have set up the Dividend Valuation model on a new server. If any readers are unable to use the Dividend Value Calculator, please advise Support.

The Dividend valuation approach is explained in the following article:

Warren Buffett v. Dividends

The difference between Warren Buffett and the man in the street is that he buys the whole company and not just a few shares! If he doesn't buy the whole company he buys sufficient to get a seat on the board. He has control (or at least influence) over the dividend policy of the company, and can distribute the entire earnings of the company if he so chooses; so his view of Free Cash Flow is different to yours and mine...............

To read the entire article - click here.

Trading Guide

Commodity Channel Index

We have noticed an increase in interest in the Commodity Channel Index. In response to requests, we explain how the index is constructed at: Commodity Channel Index - Construction.

Economy

The Impact of Inflation

Almost everyone believes that inflation is harmful. Price rises outstrip wage increases and do serious harm to retirees on fixed incomes. Inflation erodes our ability to assess investment performance and to measure how well we are doing. It pushes us into higher tax brackets, distorts investment decisions and increases business risk. The costs of removing inflation may be overstated and the benefits, in the opinion of some economists, would far outweigh the costs.

To read the full article by Rebecca Hellerstein (Federal Reserve Bank of Boston) - click here.

Regards,
Colin Twiggs

Prudent, cautious self-control is wisdom's root.

~ Robert Burns

Back Issues

Access the Trading Updates Archives.

Software Updates

Read the Software Updates "What's New" !

Latest Test Version - Incredible Charts Pro Software

Top of Page