Last Friday, for various reasons, I wasn’t able to watch the England game against Algeria.
However, it wasn’t long before I realized that I’d been spared an exquisite torture.
Shouting at the TV screen during a footie match is a frustrating pastime – nothing you do in your living room or in the backroom of the pub is going to make them pass the ball any better.
When it comes to shouting at market charts, however, there are a few buttons we can press and a trading psychology we can adopt, which will affect the outcome of our trades.
What fun it would be if we had similar buttons for our remote controls during the World Cup.
Stick to your trading psychology
Having said there are things we can do to affect the outcomes of our trades when the markets misbehave, such activity should be undertaken with great caution.
Fiddling with stop losses, profit targets, or just jumping overboard at the first hint of danger – can undermine rather than re-enforce your trading strategy.
If there are situations in which you will adjust your trade after it has been placed, then those situations should adhere to one of the following criteria:
– The parameters should be known – explicitly – before that trade is placed.
– Any judgements based on technical analysis of trends during the trade should only be applied with the strictest discipline.
“If price fails to reach 453 by 11am, I will close out this trade.”
“If price reaches 10348, I will move my profit target to 10365.”
“If I see significant support building, I will tighten in my stop loss to just below that level.”
“Once my trade has moved into 20 points profit, I will close out half of my position.”
These contingency plans should always be part of the “master plan” rather than a knee-jerk reaction to the bumps and jolts of the markets.
When it comes to spotting trends, traders often cheat themselves and change their plans midway through a trade. It’s easily done – I’ve done it enough times myself.
Take a hard look at your “trade management” behaviour – are you really consistent?
If you don’t feel that you can stick to the rules, there are some ways in which you can help yourself …
Medication for the nervous trader
If you’re unable to control your knee-jerk button pressing while watching your trades, there are a couple of solutions …
The first is an obvious one – don’t watch!
If it pains you too much, then you can opt for a set-and-forget style trading strategy. Automatic stop losses and profit targets can do a very good job of babysitting your trade for you. This means that you can get on with your life, and won’t know about the roller-coaster ride your trade has been on, until you log into your account to check for your profits.
The second solution requires a little more introspection.
If the risks you’re taking with your trades are making you so uncomfortable that watching them is giving you an ulcer – then perhaps those risks are too great.
It may well be that you need to re-evaluate your risk profile, and find one that allows you to trade without busy-body-ing your position!
How to dodge George Osborne’s tax trap
Now, I couldn’t let this week pass without a mention of the budget on Tuesday.
Many of us traders will have breathed a sigh of relief on news that there’s no big Capital Gains Tax hike, in the region of 40 or 50%.
However, we haven’t got away scot-free.
Here’s what Mr Osborne said:
The current 18% level will be raised to 28% from midnight on Tuesday night for high earners.
Basic rate tax payers will continue to pay 18%.
The Annual Exempt Amount for CGT will remain at £10,100 for 2010-2011.
Now, if you’re a basic rate tax payer – be warned.
Your gains will be added to your income when assessing whether you remain in the basic rate of taxpayers.
So, if your income AND gains exceed £43,875, you’ll be liable for the 28%.
This could well catch out a lot of investors – especially those with “lumpy” investments, like second homes or buy-to-let properties.
It also makes those tax-free options like spreadbetting and binary betting look more appealing than ever.
Market Maven gets political
In the spirit of the new Government’s “Big Society” – I thought I’d take today to launch Market Maven’s very own political manifesto – “Big Maven Society”.
And the theory behind this policy: tapping into the knowledge of all you “market mavens” out there.
And the first area I’d like to get your views on is: trading seminars and in-house courses.
People often ask me which ones I rate – and which are a waste of money.
And while I have my opinions, I’m also keenly aware that what I find useful and what others find useful are not always the same thing.
For that reason, I’d like you to get in touch at my usual email address – [email protected] – and let me know:
– which trading seminars you’ve found useful;
– which you haven’t;
– which you’ve found good value for money;
– and the best of the free seminars on offer.
I’m looking forward to hearing what you have to say and comparing your experiences to my own …
In the next seven days …
“I feel like I’m in Guantanamo Bay” came the comment from a passerby as police question anyone who dares raise their eyes from the pavement, while helicopters whir overhead.
Downtown Toronto is not what it was.
Three-metre-high fences have been installed around the convention centre, with an estimated cost of $930 million – not to mention the costs incurred by business that have had to close or had their trading disrupted.
So, we’d better hope that something good comes of the G20 summit this weekend.
The UK, France and Germany are already going it alone on a bank tax – something that isn’t popular over the Atlantic, or with Asian nations.
And Beijing have conceded greater flexibility in Yuan exchange rate – although, in truth, this is more of a political gesture than a genuine attempt to bring their currency to its true value.
President Obama last week got some backs up with his comments about withdrawing fiscal stimulus too soon – a barely concealed dig at Germany, and possibly a warning shot at George Osborne ahead of the budget.
All in all, this talking shop promises to have all the warmth of a welcome home party for the French football team.
In other news, the big numbers out next week include the UK GDP figures on Wednesday morning, and the all-important US non-farm payroll Friday lunchtime.