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May 26, 2005
This
newsletter is subject to Incredible Charts
Terms of Use.
This newsletter is separate from the Trading Diary and is 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
We are making good progress here, having solved the reported problem with dual
monitors and hope to some news regarding new data shortly.
When this is completed we will be in a position to tackle our lengthy To Do
lists.
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Technical Analysis
Volume Spikes
There are two times where daily volume will highlight unusual trading
activity:
- Volume may spike above the normal range, signaling unusual trading
interest; and
- Volume may also dip below the normal range, indicating a lack of trading
interest.
Both of these signals are important and can forewarn of future price
movement.
To read the entire article - click here.
Trading Psychology
Trading With Emotions
Before you can manage your emotions it helps to understand what causes them. Our brains
and endocrine system are veritable narcotics factories, producing an array of natural
chemicals which act as stimulants, depressants and pain-killers:
- adrenaline prepares the body for fight or flight: your heart starts
pounding, your pupils dilate, you start to sweat and get "butterflies" as
your digestive system switches off;
- endorphins, natural pain-killers many times stronger than morphine, are released by the pituitary gland;
- dopamine, released in the middle area of the brain, is
chiefly responsible for pleasurable sensations;
- anandoline, a canabinoid which stimulates the appetite;
- PEA is a natural stimulant which performs in a similar manner to
amphetamines such as speed;
- melatonin controls our sleeping patterns and stimulates the immune system;
and
- serotonin is believed to play important roles in sexuality, anxiety and
depression.
More than 30 different neurotransmitters have been identified, some very
specialized; some perform a wide range of functions; some work in groups; and
some, such as serotonin, control or moderate the affect of other
neurotransmitters. Lurking below our rational consciousness is a vast array of
mood-altering chemicals, and it is virtually impossible to suppress them. The
more we try to suppress our emotions, the more our performance is likely to
suffer. Consider someone who experiences a fear of heights, stage-fright, or any
other phobia; the more that they focus on fighting against their emotions, the
more paralyzed they become.
It is far more effective to learn to manage our emotions and use them in a
positive way, to enhance rather than inhibit our performance. We need to
recognize our emotions and, having identified them, channel them or use them to
our advantage, rather than attempt to block them.
This page will identify the emotions that you are likely to experience
while trading and requires the reader to reflect on his/her own experiences. A
later page will deal with how to manage
your emotions by anticipating them, avoiding emotional triggers, and channeling
them in a constructive manner.
To read the entire article - click here.
Economy
The Banking System
How Banks Create Money out of Thin Air
Most money in the economy is held in the form of deposits with banks rather
than in the form of notes or coins. If you purchase an asset from me for $1000,
payment is normally effected by reducing your checking account by $1000 and
increasing my account by $1000. The net change in bank deposits is zero.
If one year later, you decide to sell the asset and I purchase it back from
you for $2000, where does the additional money come from? The transaction this
time increases your account by $2000 and reduces my account by the same amount.
The net effect is still zero.
The bank can loan me the extra $1000 simply because there is a
corresponding deposit of $1000 in another account. It does not matter if the
deposit is not with the same bank; the clearing system offsets all transactions
between banks and any temporary shortfall is made up by inter-bank loans.
To read the full article - click here.
Fund Managers.
Investing in Mutual Funds
If you do not have the time or expertise to manage your own investments then
mutual funds may be your only option, but just understand how much it is costing
you:
- up-front (front-end) fees vary between 2% and 8% of your capital
(averaging 4% to 4.5%);
- annual management fees (operating expenses) vary between 1% and 2% of capital;
- other hidden fees may amount to as much as another 2% per year;
- some funds may even have exit (back-end) fees as well.
To read the full article - click here.
Regards,
Colin Twiggs
Your education earns you a living
- your self-education earns you a fortune.
~ Jim Rohn
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