Tuesday, September 18, 2007

Forex Trading - Tips For Dealing With Leverage For Big Gains

Forex trading is lucrative because you can use leverage and most brokers will allow you to leverage your deposit by 200:1, while it can make you big money it can also see you wiped out quickly.

So how do you use leverage to seek big gains, while at the same time avoiding big losses?

Lets take a look.

Risk per Trade

Most traders simply think their risk per trade is their expected return their stop protection but this is rubbish. This is simply a mental guess and what may look on paper like a good risk to reward trade is not.

The fact is traders make calculations that lull them into a false sense of security.

When trading FX start by looking at the volatility of the market and how to deal with it.

Placing Stops

For example there is absolutely no point in placing a stop close when it's within normal volatility for the currency.

Who does this?

Day traders are prime culprits.

They think that if they place a stop just outside the daily range it gives them a good chance of winning, in fact the reverse is true as volatility can and does take prices anywhere in a day, the risk of them losing is guaranteed over the longer term.

If you are trading you need to have a stop behind a key resistance or support level and if possible on stop close only basis. Daily volatility often carries trades through support and resistance takes out stops and then closes below the level.

Trailing stops

Never be tempted to move them up to quickly to lock in profits.

You need to understand the volatility of the market and keep stops back - way outside of short term normal market pullbacks. Accept that if you are trend following, that you will have to give a big, chunk of your gains back the market when the trend ends.

This wont matter if your trend following you cant predict the end of a trend and if you got 70% of every major trend you would make a lot of money.

Cut Your Trading Down

You dont get rewarded for how often you trade you get rewarded for making money.

The really good trades only come around a few times a year in each currency, so be very selective and when you see these trends - risk as much as you can.

I know traders who make 100% or more on an annulized basis and they trade around six to ten times a year! They do so well becuase they are only interested in the big high odds trades and these only occur ocassionally.

The fact is most traders, trade low odds opportunties to often and lose - dont fall into this trap.

Leverage can make you a Lot of money but it needs to be handled wisely.

Accept that you have to take calculated risks, trade only when the time is right, follow the trend until it reverses and dont try and predict when it might end - let the market tell you that.

If you do the above you can use leverage to your advantage.


On all aspects of becoming a profitable trader including features, downloads and some critical FREE Trader PDF's and more FREE Forex Education visit our website at http://www.net-planet.org/index.html

It's A Bullish Signal When A Company Buys Back It's Own Shares!

Dear Fellow-Investor.

Shareholders and investors of two blue-chip companies were treated to good news on Monday July 9, 2007, that carries potentially bullish long-term consequences.

First, Johnson & Johnson announced the repurchase of up to $10 billion of its common stock. Then ConocoPhillips announced the repurchase of a $15 billion share buyback programme, representing an increase of $13 billion above the $2 billion that remained in a previous buyback program.

But why is a buyback programme a positive sign for investors? Why would a repurchase carry such bullish potential? One explanation is in terms of simple supply and demand: Repurchases reduce the supply of a company's outstanding stock, which should increase the price of those shares that remain.

Another explanation is that companies that repurchase their shares are so confident about their future prospects that they are willing to commit corporate resources to buying them. This is worth paying attention to, since a company's executives and Board of Directors have access to insider information that the rest of us do not.

Like such, repurchase programs are analogous to corporate insiders purchasing their companies' shares for their own accounts. Both signal confidence in the company's future prospects which again is a bullish signal.

In a nutshell:
When a company reduces the amount of shares outstanding by declaring a stock buy back program, each of the shares becomes more valuable and represents a greater percentage of equity in the company.

So when putting together your portfolio, you could seek out strong and solid companies that engage in these sorts of pro-shareholder practices and hold on to them as long as the fundamentals remain sound.

One of the best examples is the Washington Post, which at one time was only $5 to $10 a share. It has traded as high as $650 already. That what I call long-term value!

But be aware! Even though buy backs can be huge sources of long-term profit for investors, they are actually harmful if a company pays more for its stock than it is worth. In an overpriced market, it would be foolish for management to purchase equity at all, even in itself.

Instead, the company should put the money into assets that can be easily converted back into cash. This way, when the market swung the other way and is trading below its true value, shares of the company can be bought back up at a discount, ensuring current shareholders receive maximum benefit. Remember, even the best investment in the world isn't a good investment if you pay too much for it.

Yours in Successful Trading

Ricky Schmidt


Why You Need A Penny Stock List

Why do you need to compile a penny stocks list, and how should you go about doing it? The answers to those two questions will give you the understanding you need to level the penny stocks trading field enough to give you a chance at success. A penny stocks list which is the result of your careful due diligence will help you focus on the stocks most likely to appreciate short term, and thats what youre after.

Your penny stocks list will allow you to track the stocks you are watching with ease. Trying to monitor the thousands and thousands of penny stocks each day is simply impossible, and by the time you had looked at even one percent of them the trading day would be over.

Keeping Track Of Your Holdings
Having a penny stocks list will also allow you to have at your fingertips the positions you hold in your penny stock portfolio. Youll know how many shares you have in each company, so that you can track your gains and losses with your brokers online quotes. Youll be able to sell as soon as you are in profit, locking it in. The best time to take profits in the penny stock market is as soon as you have them, and not a minute later.

You can devote a part of you penny stocks list to the stocks which you are considering for later purchase. You can pick up on any significant movements in their prices, and if you see a positive one, try to determine if it likely to continue. If so, you can buy the stock and move it to your monitored list, to sell as soon as you are in profit. Having a penny stock list is the best way to time your entry and exists into different stocks.

You can make you own penny stocks list by researching which financial sectors are doing well, and then looking for penny stock companies in those sectors which may be good companies but are simply lagging behind the bigger players in their industries. Very often the small companies in an industry are the last to benefit economically from a trend, but when they begin to catch up, their stock prices can soar in a very short time.

Separating The Good From The Bad
Youll learn fairly soon that most of those who do well in trading penny stocks rely on their penny stock lists to help them profit. They use the lists to determine which companies have a genuine product or service for which they are trying to build a market, and which ones are simply stock-printing machines touted by unscrupulous stock promoters. A penny stock list will help you separate the best of the penny stock world from the worst.

You can also find more info on Penny Stocks and Top Penny Stocks. Pick-pennystocks.com is a comprehensive resource to get information about Penny Stocks.

Will Spot Uranium Prices Reach $100/pound?

Energy guru Bill Powers focuses on investment opportunities in the Canadian energy sector, mainly independent oil & gas companies and now uranium companies. We talked with him and he thinks uranium could reach $100/pound this decade.

Interviewer: A lot of newsletters cover oil and gas, but you picked uranium, which hardly anyone was covering until recently?

Bill Powers:

I feel the uranium market right now is the worlds most unbalanced commodity market. In a sense, the world, through the nuclear power industry, consumes approximately 172 million pounds of uranium per year, and the world only produces about 92 million pounds of uranium per year. The supply deficit is made up through above-ground inventories, which are being worked down pretty quickly. Those numbers were supplied by Uranium Information Center. A lot of my information comes from the U.S. Department of Energy (DOE) or the Nuclear Regulatory Commission. For example, I discovered from them that the U.S. produced, through the 1980s, about 43.7 million pounds of uranium. And by 2002, the U.S. only produced about 2.34 million pounds of uranium.

Interviewer: Where is uranium being produced in the United States?

Bill Powers: Wyoming. There is also a uranium facility in Nebraska. I think there are two in-situ leach plants in Wyoming and another one in Nebraska. There are a couple of phosphate farmers in Florida who produce uranium. I believe there is a facility in Texas that also produces uranium. For the most part, the uranium industry in New Mexico has just about been wiped out. The very low prices that weve seen, for about twenty years, have pretty much wiped out the entire U.S. uranium industry. To go from over 43 million pounds to less than 2.5 million pounds, it has really only allowed the most productive, highest margin and most efficient mines in the country to continue operating in that environment.

Interviewer: So that makes the U.S. a net importer of uranium?

Bill Powers: Absolutely. According to the DOE, US imports have gone from 3.6 million pounds per year in 1980 to 52.7 million pounds per year in 2002. A lot of it comes from Canada, but a significant amount is coming from the Russians, through a program called HEU (highly enriched uranium): the megatons to megawatts program. Its where the United States Enrichment Corporation, as well as its partner in Russia, took highly enriched uranium and broke it down into lower grade uranium that could be marketed to nuclear power companies throughout North America and around the world. This has been one of the reasons weve had lower prices. All of this uranium has cluttered the market the past few years. And the US Enrichment Corporation has a lot to do with why weve seen low uranium prices here in the States. I had a conversation with them about the fact that since 1998, when they became a public company (after being a company that was owned by the U.S. government), their long-term inventories of uranium had declined. When they became a private corporation, the U.S. government gave them 7,000 tons of enriched uranium and 50 tons of highly enriched uranium. They have been selling about 6 million pounds of uranium into the marketplace every year since 1998. According to my conversation with them, they have about three to four more years of selling. Its because the US Enrichment Corporation wants to get out of the uranium storage business, and they want to be in the processing business.

Interviewer: How long will it be, do you think, before USEC is going to stop being a factor on the selling price pressure of uranium?

Bill Powers: I would probably say in about three years. For the uranium they are now selling, the cost of the uranium to them was zero. This has really made that company look very profitable. They are selling about $100 million worth of uranium every year, and they intend to do this at no matter what price. This is an extremely bullish scenario right now because uranium prices have touched twenty-year highs, despite the fact that USEC is dumping more than three percent of the worlds uranium consumption onto the market place. When this dries up, we should see markedly higher uranium prices.

Interviewer: How high is high when you say that?

Bill Powers: I would say up to $100 per pound. Before the end of this decade, uranium will probably be $100/pound. The Russians are going to be holding back some of their output from the megatons to megawatts project. Their (the Russian) uranium is going to be needed for internal consumption. Russia has a growing nuclear power industry. They need to have uranium supplies available. Theyre not going to be selling as much as they had in previous years. It appears it is going to be very important to factor in reduced Russian supplies as well as when USEC gets out of the business.

Interviewer: How can a sophisticated investor benefit from uraniums rising price?

Bill Powers: The most leveraged investments are the Canadian juniors. I believe Cameco (NYSE: CCJ) has other businesses out of uranium exploration and production, and it is a very safe way to play uranium. But I think there are far better opportunities out there. One of my favorite companies is Strathmore Minerals (TSX-V: STM; Other OTC: STHJF). I really like their business model of acquiring a great deal of very prospective uranium properties at bargain basement prices. Theyre able to do this because, right now, uranium has gone through a twenty-year depression. The prices for some of these pretty far advanced projects are very cheap. I think they are well leveraged for that. Another safe way to play uranium is Denison Mines (TSX: DEN). They produce about 1.3 million pounds per year. They have properties are in McLean Lake, Saskatchewan, which is part of the Athabasca Basin. What I like about them is they are able to use their cash flow from their existing production to further expand some of their properties. With UEX Corporation (TSX: UEX), Cameco was the shareholder. UEX was founded several years ago with Pioneer Minerals. Both of the companies put in properties. Its look like they are rapidly advancing some of their properties in Athabasca. I believe they have about eleven properties they have an interest in.

Interviewer: What about other energy factors, such as crude oil, and what do you see happening there?

Bill Powers: I would say crude oil is heading much higher. We have reached the worldwide production peak of crude oil, or we are very close to it. This is not very well recognized. As demand continues to rise, and world production starts a downward slope, were heading for much higher crude oil prices. I see much higher prices later this decade, if nothing goes wrong. What I mean by that is the natural market equilibrium price of crude oil should be $50 within the next eighteen months. And probably over $100 by the end of this decade if nothing goes dramatically wrong. That would come from the natural decline of existing reservoirs, limited new discoveries, and increasing demand. However, if a country, such as Saudi Arabia, were to have a regime change..

Interviewer: Are you looking for a regime change in Saudi Arabia?

Bill Powers: Yes, there is a body of evidence that supports this. Terrorist incidents are becoming more violent and closer together in Saudi Arabia. Right now, were seeing those attacks targeted to the oil workers. I believe it will not be too long before those attacks are focused more on the royal family. I believe that will be the next stage in Saudi Arabia. Theres a very good chance, which history supports, is when there are sudden regime changes in oil-exporting countries, oil exports from those countries drop significantly. Regardless of what were to happen, as far as the political situation, a lot of their fields, especially Ghawar, which is the biggest oilfield in the world it produces between 4 and 4.5 million barrels per day there is evidence that this field could decline relatively soon. Saudi-Aramco has been injecting substantial amounts of water into injection wells to push the keep production flat What this has done is it keeps production flat, but its sort of an illusionary fountain of youth. If you keep injecting water, the amount of water you produce, along with the oil, continues to rise. As the water cut continues to increase, the amount of oil produced can fall dramatically. If that were to happen, if Ghawar were to go into a permanent and irreversible decline well, it could happen relatively quickly.

There are other fields in the Middle East, such as Yibal in Oman, where they had a lot of water flooding and horizontal well drilling. Yibal has gone from 250,000 barrels per day in the late 1990s to about 80,000 barrels per day now. If we were to get that type of decline in Ghawar, the world is going to be seeing higher prices just on that. Right now, there is not any excess oil production supply anywhere in the world. A relatively small reduction in availability of supply will lead to an exponentially higher oil price.

COPYRIGHT 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.

James Finch contributes to StockInterview.com and other publications. StockInterviews Investing in the Great Uranium Bull Market has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com