Market functions like fire. A trader should be properly equipped with modern tools before entering into market arena. In all probabilities, a trader not possessing proper skill set to play with the fire will burn his fingers. The market will throw him out of the arena, after squeezing him mercilessly.

On the other hand, if a trader sharpens his skill-sets to fight the battle, he can tame the fire and use it to his advantage. Trading with proper strategies, not only results into wealth creation for the trader, but also helps the market to grow on sustained basis.

In absence of successful trading skills, there is widespread value erosion for most of the participants, which results into more number of people deserting the market after operating for few months, which damages the market sustenance in the long run.

Hence, in order to ensure their own long term survival, the markets are duty-bound to impart knowledge among participants, caution them against possible pitfalls and help them mature in their trading skills.

However, in order to sustain the pace of growth in the years to come, it is important to introspect the nature of trades usually done by the traders, to identify deficiencies in such strategies leading to loss of capital and to suggest possible solutions to such matters.

Each underlying commodity has a different type of volatility. Volatility can be defined as the range within which the price of a commodity generally moves during a given period of time.
When we say average volatility, we should not consider the extreme volatility exhibited by different commodities at certain points of time due to certain special events.

The difference in volatility in different commodities is a function of:
• Historical price behavior.
• Liquidity of the commodity - volatility tends to be lower if a commodity is high liquid and impact cost of putting in a position is lower while it would be higher if the liquidity is low.
So these were some of the points which will help us in our trading.

I hope there suggestions are gonna useful for us in long run

Carry Trade

Amid nerves over subprime mortgage derivatives, another threat to the financial system has been overlooked: the carry trade. This is where investors borrow in currencies with low interest rates – mostly the yen and the Swiss franc – and invest the money, often supplemented with leverage, in assets priced in higher-yielding currencies.

A major symptom of the global credit bubble, the carry trade has spilled over into debt, equities and real estate. The New Zealand dollar (a popular carry-trade destination) is now about 20%-25% overvalued against the US dollar, while the yen is about 30% under-valued. As exchange rates ultimately converge “sharply” with fair values, losses for leveraged speculators on their currency positions could reach about $550bn, as the trade is worth around $1.5trn globally, reckoned. Other markets would be affected by the fallout.

So lets see how it works out

Experimenting with the trades

While reading a book I came cross a saying “The more experiments you make the better for life is after-all an experiment”. When we need something, we think of doing it. For example, when we are hungry, then we will come to know that cooking is the only solution. So we learn cooking. So, proved is the saying that “Necessity is the mother of invention”.

After learning the things from our necessity, we want to try to do the same thing in different ways. Like, we prepare chicken curry with normal ingredients. But when we are turned off eating the same food, we want to try differently, then that turns out to be an experiment. We try adding more pepper, sometimes less ginger etc etc and then when the result is out on the table, we taste it. If fortunately its delicious we will be in seventh heaven else we learn from our experiment that so and so ingredients don’t work well for this curry.

So that was the case with kitchen skills, why not concentrate on our trading skills and groom them?

Sometimes fluctuations make our trading day boring and depressing. We lose enthusiasm in a particular stock on which we are trading. So, don’t be afraid of experimenting things. When there are fluctuations in the stock market and when your feelings are irked then try experimenting trades. One thing is for sure…….”For Experimenting, Trading is the best place”.

5 tips for experimenting

1. We have to observe carefully the position of the stocks?

2. Analyze which stock is continuously decreasing and which stock is increasing?

3. If you are trying on being higher side. Why not try on being lower side?

4. Reduce the stop loss limit

5. Have patience.

I hope experiment never goes in vain. In some way or the other it is always useful. So do experiment buddies.

Record your Trading Transactions!!

From past many days I was playing Badminton and I was unable to take up some of the shots. And then always my opponent used to win the series at the end of the day. So I was disappointed and thought for the reason behind my failure. Then I came to know that I should review my every game and every shot to check on any drawbacks I have in my game playing, then I can correct the mistake by not repeating it again. And then one fine day I was also a winner. So that was the case with my game which is to improve my health. But I do also play a game called Trading which is for monetary gains.

Trading is not difficult, but it’s risky. The chance of losing money is more than the chances of winning it. So I used to bet all the time and 90% of the time I used to end up losing some good money. This has led to depression and disappointment and I started to look back on the trades I made, and starting analyzing as what has brought to lose money so critically.

Then came the reason:

I never used to record and review my trades. Every successful trader records his trades and if he loses the trade, he learns from his mistake and will never repeat it.

So first important point is: Analyze your Mistake and Never repeat it. We as human beings with faulty memories simply forget many of the circumstances surrounding our best and worst trades and as a result we will learn very little from them. So recording our trades is the utmost important point.

Think and perform

By and large the gap between what we think we do and what we actually do is very embarrassing. We think that we will complete this exercise today within 10 minutes, but actually when we are doing the chance of doing the work in the stipulated time always is less. We complete it by taking more than 10 minutes. And this is called human-mind. And trading is not an exemption. In trading too, what we think and what we actually perform during trading always differs. And thus causes embarrassment.

Maintaining a trading Diary

Maintain a diary to record all your trades both successful and unsuccessful. So that there would be no chance that you could lose the trade, provided you don’t repeat the same mistake.

Here is a list of three key issues that should be covered in every trade dairy:

1. What did you trade and why?

2. Where is your stop loss limit and why?

3. Did the trade work out as planned?

The above guide is very handy for beginners too and I think this would lessen our losses in our trades to a large extent.

What are hedge funds?

These funds, like mutual funds, collect money from investors, and use the proceeds to buy stocks and bonds.

Unlike mutual funds, however, hedge funds typically take long and short positions in assets to lower portfolio risk arising from broad market movements. How?

A hedge fund may take long positions in certain stocks and short positions in certain other stocks such that their portfolio beta is close to zero. A beta close to zero means that the portfolio will remain relatively unchanged due to the broad market movement. Such a portfolio will primarily change if the stocks move more than the broad market.

Consider, for instance, Hero Honda and Bajaj Auto. The hedge fund may buy Bajaj Auto and short Hero Honda, such that the portfolio beta is close to zero. Suppose Bajaj Auto moves up by 10 per cent, and Hero Honda and the broad market move up by 7 per cent. The fund's net gain is 3 per cent. This is because Bajaj Auto outperformed the market, precisely what the hedge fund was betting on when it constructed the portfolio.

In short, hedge funds generate security-specific returns, and attempt to lower market risk. Notice that a mutual fund would have gained 10 per cent if it had invested in Reliance.

To improve their security-specific returns, hedge funds leverage their portfolio. The fund may collect, say, Rs 100 crore from investors, borrow Rs 50 crore, and invest Rs 150 crore.

In the above instance, an un-leveraged fund may have gained only 3 per cent of Rs 100 crore. But a hedge fund that has borrowed Rs 50 crore will gain 3 per cent on Rs 150 crore less interest cost on Rs 50 crore.

So hedge funds are always profitable.

Why do stock prices fluctuate?

This is a daunting question indeed; let me explain using an example. If a company called Rock Mobiles is very famous for mobiles and it attracts lots of customers

. Now, since this is a competitive world, everybody wants a mobile to get connected to people, so the value of the shares of the mobile company will be always in demand and therefore, attracting lot of people towards its shares. So the demand should match the supply. In order to match the supply, the company will increase the price. So the share value of that company increases. So here the market fluctuates from downward trend to upward trend. But when there is another competitor say Blow Mobiles available in the market and selling the best quality mobiles and the price of the mobiles are cheaper than the price of the Rock Mobiles, then the share value of Rock Mobiles will obviously come down. And the rival company’s shares will go up. So, now the flow in the stock market will be declining at one end and booming at another end.

So like wise, everyday in the stock markets, there will be many stocks with increasing prices and others with decreasing prices. Thus, Fluctuation in the stock market is nothing but increasing and decreasing scenario. And on the other hand if there are lots of shares for sale and no one is interested in buying them even though the shares belong to a huge company, then the price will quickly fall, because there are no customers who can buy those shares or who are purely not interested in buying them

Therefore, Fluctuations are inevitable in any market and stock-market is no exception.

Technicalities of Selling

I had a huge property in a small town which was famous when I bought it. But after few years the town’s popularity was the same as it was earlier, but the other places in the city were developing at a rapid speed and were on their success note. So, I thought why not sell my property which is in small town and invest the proceeds of that amount in buying a highly-centered quality flat in the main city. And so I did.

But I also own some shares and investments. And whenever there is bad time running on the board of the markets or whenever I feel that the market conditions are tough, I think of selling it. And like me, many other investors would be thinking. But make sure, that this thought can cause a huge loss in future.

Always Remember!! Never sell your investment for an odd reason.

Never sell your investment because there is some bad quarter running in the markets or a rough year. It would be the worst reasons to sell an investment. Bad quarter is nothing but when there are huge dips in the price of a solid company. Remember! When there is tough time running and the investment is sound, bad quarters are when you should be buying more.

Reacting after the bad quarter is like you are reacting to old information and the damage has already been done.

Technicalities of selling

The first thing to look at when selling an investment is the fees you are going to have to pay. If you use a broker or hold the shares at a high-end brokerage firm, there is nothing stopping you from transferring them to a discount brokerage firm to limit your fees and increase your gains.

Taxes are your next concern. Sales are FIFO or first in first out, unless otherwise stated. For an investor with a stable portfolio, the FIFO method of selling can be disadvantageous from a tax point of view. You always want to sell the shares that you paid the most for and defer realizing the larger capital gains on cheaper shares for as long as you can.

Conclusion:

Selling an investment is like buying one - you have to make sure it is in line with your investing goals. Once you have decided to sell an investment for the right reasons - either to balance your portfolio or free up needed capital - the challenge becomes minimizing fees and taxes. Your fees are best dealt with by finding a good discount brokerage to work through, and your taxes can be kept in check by simultaneously realizing gains and losses as well as specifying shares. Investing is not just about knowing when to sell, but why and how to sell.

In Trading, Losing is always to win

Everything in life is of double fold. Whatever we do, the result will be in two types, either good or bad. The result which reaps in with quality outcome always makes us happy and makes us feel enthusiastic. We will be eager to take up that work again . But if we fail once, then the result thereof, turns out to be negative. In those circumstances, we feel depressed and we will not show the same interest to do that work which we showed earlier. And one such area where these types of feelings arise is trading. Though we loss, but there is some good to learn from that mistake.

The hardest but also most important lesson to learn in trading is how to handle losses gracefully. Most traders will inevitably face a string of losses at some point, so those who can't lose without being thrown off their game won't survive the market. The traders who have realistic win/loss expectations and a trading system they trust have the best chance of prevailing over tough market conditions.

Losing Battles… one important lesson that every trader should remember is always follow a strategy. Strategy is the root cause of success in trading. Don’t ever go against your strategy because it may cost you expensive.

Every trader worth his or her salt knows that trading against the trend is not a good idea. So it seems logical that the best trading systems would be that those who follow the trend: when the trend is going up, take up long trades only, and when it's going down, it's time to go for short. That being said, you'd think that trend-following systems would have the best. Yes, they have the best. Follow the trend you will be successful

Don’t Count on Luck - Trading Tip

In Trading, most of the traders feel, "buying is easy, it's selling that's the hard part." The goal of every market participant is to buy an asset when the price is low and sell it right before the price crumbles. Trying to pick the top of any movement in the financial markets is not easy and luck often plays a bigger role than most traders would like to admit. Lucky trades can be part of trading, but traders shouldn't let good luck go to their heads - a strategy that wishes to stay profitable over the long run cannot depend on luck for its superior results.

Luck can play a role only when the trade is for a short-term. For long run trades, the participant should follow a strategy as how to trade. But if one sticks on to luck for long-run trades, then it is for sure that the person is gonna lose the trade.

Luck can play a great role in the outcome of a trader's most memorable transactions and that the key to being successful, but over the long run it is better never rely on this luck. Basing a trading strategy on time-tested methods that have proven their worth over hundreds of years has lead us to accept the situations that are beyond our control, both good and bad, because over time, strategy is what is going to keep us in the trading game. Selling at the peak is the exception and not the norm. As a result, traders must be willing to stick to their trading strategies.

So in my opinion, don’t count on your luck for long, because the yield may not be that good as it would be if you rely on any strategy.

Tips for Beginners in Trading

Many novice traders may believe that it is very easy to make money, especially when they are trying a broker service using a free practice account.

However, if these traders manage to generate a sudden substantial return, it can lead them to believe that trading is an easy occupation - and one in which revenue can be quickly generated with little work on the part of the trader. For the inexperienced, one good pick can make it seem like market speculation might become the key to success and wealth.

Unfortunately, when these inexperienced speculators overtake this investing state of affairs and decide to start trading live accounts and risking real money on the market, the activity becomes much more complex. In many cases, the days of outstanding day trading performance come to look suddenly and distressingly like old souvenirs - it is an abrupt initiation into the pitiless reality of the financial markets.

Real Life is always based on practice.

When new traders take the leap from their virtual trading accounts to trading with real money, they are entering into the most difficult step of their initiation to trading: trading psychology.

In other words, while it may be very easy to trade when the risk of loss does not exist, when the trader's hard-earned dollars are thrown into the mix, his or her focus and price objective can go out the window. Often, traders using virtual accounts will feel relatively comfortable even when the market moves against the positions they enter. This allows them to keep their focus on their price objective and wait for the market to get moving in the right direction. Because there is little consequence tied to "virtual money", personal emotion does not interfere. Unfortunately, when a trader's actions come to affect the gain or loss of his or her own personal assets, that trader is less likely to behave in such a methodical way.

Emotions Can Rule the Trade:
Emotions can be seen as the trader's worse enemies because they often lead to misjudgement and loss.

Greed
Greed can lead a trader to hold on to a position too long in hopes of a higher price, even as it falls. This emotion has been the main reason behind many trades that have gone from large gains to large losses. To frustrate this emotion, try to take an objective look at the reasoning behind your positions. When one of your positions experiences a large run up, ask yourself whether the reasons behind your initial investment still remain; if not, it may be time to close or reduce the position.

Fear
Fear can prevent a trader from entering trades along with taking them out of positions far too early. If an investor is too concerned with potential loss and the risks that come with an investment, he or she can often be dissuaded from a good opportunity. Also, if a trader is more susceptible to fear, he or she may sell out of an investment far too early based on the fear of losing the gain they have made. In many cases, this can prevent a trader from cashing on a much bigger gain.

Paralyze by Analyzing
Paralyze by analyze is an interesting phenomenon in which traders get so caught up in analyzing everything about a potential investment that they never actually pull the trigger on the trade. In this case, what often happens is that the investor will constantly question all of the little details found in the analysis in an attempt to perfectly analyze a situation. This is a truly unachievable task that can prevent a trader both from making monetary gains and from making experiential gains by getting into the trade.

There are a wide range of other emotions that can rule a trader but the important thing for any market participant is to recognize these emotions.

Recognize Your Emotions
All traders will experience at least one mind trap, but it is the very best traders that learn to recognize, understand and neutralize them. This process forms the foundation of any trader's training. Therefore, if you want to become a (successful) trader, you should first spend some time getting to know yourself and the particular mindtraps you tend to fall into. A skillful trader tends to have a strong desire to master his or her emotions and prevent them from affecting his or her performance.