Tuesday, October 2, 2007

Currency Traders Secret Weapon - Support & Resistance

Do you know why only five percent of all currency traders are successful? Do they know something that we don't? The truth is that successful forex traders use the same technical indicators that you and I use. The difference lies in accurately interpreting these indicators. A common indicator used by forex traders is support and resistance. Let us see how support and resistance are used in forex trading.

Support and Resistance is the foundation of most of the top trading systems. Support and resistance levels represent pauses in the trend when investors reconsider all information. The idea of support and resistance is vital to understanding and interpreting the forex market. Support and resistance are basically price bands where the price will probably stop falling or rising respectively. Support and resistance are created because price has memory. Support and resistance are by far the most important forex trading technical indicator you will ever find, and the best forex trading option if you want to be on the right side of the market.

Support and resistance are like a floor and ceiling, with prices contained between them. Support like resistance is rarely a precise price; it is more often a relatively contained price range, frequently in the vicinity of past technical patterns. Support and resistance levels on bar and candlestick charts are a major component in the study of technical analysis. Support and resistance come in all varieties and strengths. The length of time that a support or resistance level exists helps to determine the strength or weakness of that level. When a level of support or resistance is penetrated, price tends to thrust forward sharply as the crowd notices the breakout and jumps in to buy or sell. When a level is penetrated but does not attract a crowd of buyers or sellers, it often falls back below the previous support or resistance.


Support is defined as a price level below which it is supposedly difficult for a currency pair or market to fall. Additionally it is a price level at which a currency pair or other security stops falling at least temporarily, hence the name. Support represents the level at which buying pressure is strong enough to absorb and overcome selling pressure. Support defines that level where buyers are strong enough to keep price from falling further. Support lines turn into resistance and resistance lines turn into support.


Resistance is the opposite of support and represents a price level or area over the market where selling pressure overcomes buying pressure and a price advance is turned back. Resistance defines that level where sellers are too strong to allow prices to raise further. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

So we have learned that: Understanding the concept and significance of support and resistance is important for profitable forex trading. One aspect of its unique quality is that support and resistance is defined as an area or a zone not a single price level. One of the basic precepts of support and resistance is that once a support level is violated it becomes a likely new resistance level and when a resistance level is penetrated it becomes a new support level.

Start practice trading using support and resistance on a demo account right away. Go out there and continue to research this indicator as well as other technical indicators. Once you master interpreting forex technical indicators profits will surely follow.

Have you ever desired the income and freedom of being a home based forex trader? Visit the author's (Kenneth Aikens) website for more powerful forex trading information: forex training - forex trading

U.S. Utilities Quietly Worry about Uranium Supply

According to Fridays Nuclear Market Review (NMR), many market participants were left stunned by the recent record jump in the weekly spot uranium price. The market has increasingly diverged between those who have U3O8 and those without. Utilities with existing supply contracts are heaving a sigh of relief, NMR editor Treva Klingbiel wrote. And those trying to find uranium in todays climate are forced to face the reality of a sellers market, she said.

Is there pity for one market participant, who is now scrambling for very near term delivery of nearly 500 thousand pounds U3O8? Probably not. This buyer must compete with 7 others hoping to secure about 3.2 million pounds of U3O8 equivalent.

NMR reports, Sellers remain reluctant to sell significant quantities today. By waiting longer, sellers expect to get a higher price for the material they hold. After the previous weeks astonishing price jump, the spot uranium market was exceptionally quiet, according to Klingbiel. The spot uranium price indicator remained unchanged at US$113/pound. TradeTech posts changes in the weekly spot uranium price on the consulting services website, at www.uranium.info

Utility Pricing Climate

Utilities remain skeptical about the long-term pricing of uranium. This weekends Barron article, about the crisis nuclear utilities face, quotes Exelon Corps (EXC) Tom Malone and Entergys (ETR) Frank Rives. Both believe uranium pricing should settle down. Malone quoted a long-term uranium price of $40/pound. Utilities accustomed to lower pricing levels and wishing for uraniums return to a more advantageous price level for themselves, may be waiting for more than a few years. In conversations we had with TradeTechs Gene Clark, equilibrium might not take place until 2017.

We provided TradeTechs Uranium Price Forecast through 2008 in Chapter Two of our soon-to-be-released Uranium Outlook publication. Going out further, uranium production should not reach 230 million pounds U3O8 until about 2017. And there are many disturbing developments in numerous areas, which could substantially lower this production forecast. Foremost are the difficulties BHP Billiton (BHP) may have in transforming Olympic Dam into an open pit uranium mine.

Some utilities are again taking the wait-and-see attitude about higher uranium costs. This strategy has backfired over the past year because a number of countries planned to increase or add civilian nuclear power programs. Now the Arab Gulf States want nuclear energy, adding to the number of countries seeking to obtain uranium. Everybodys going for nuclear programs, Jordans King Abdullah II told an Israeli newspaper.

Against the advice of some experts, we included a special section in our publication, Investing in the Great Uranium Bull Market, predicting a rise of civilian nuclear energy in the Middle East. Turkey plans three nuclear reactors, hoping to start construction later this year on the first one. After Russian President Putin visited Saudi Arabia in February, offering nuclear aid, will U.S. utilities now also be forced to compete for Kazakh uranium against the Arab Gulf States? It appears global deals are being arranged on a country-to-country basis, and U.S. utilities are coming up short.

Environmentalists: Nuclear Friend or Foe?

This past week, Jim Marston, the Texas director of climate initiatives for Environmental Defense told the Living on Earth environmental show, We have come to the conclusion that the threat of global warming is so severe and the time for action is so short that we have to look at all low carbon options again including nuclear. His comments were broadcast on more than 300 public radio stations in all fifty states across the U.S. The shows theme was entitled, TXU Turns Nuclear.

Does this mean environmentalists are switching to nuclear energy? No. Some still cling to atavistic attitudes. One environmentalist interviewed compared a switch to nuclear on par with giving up cigarette smoking and taking up crack.

But, environmentalists influenced TXUs business model, eliminating the construction of eight new coal-fired power plants. According to the shows news reporter, Environmental groups opposed to the utility's plan for new coal plants launched a fierce legislative and legal campaign. That drove down the price of the company's stock, and made TXU a tempting takeover target. And taken over it was, but the company also negotiated with environmentalists by offering renewables, energy efficiency incentives and mandatory caps on greenhouse gases.

TXU spokesman Tom Klekner was also interviewed on this radio show. He pointed out that TXUs power reserve margins were below the minimum of acceptable levels. The spokesman insisted five new nuclear plants were needed. After TXU was taken over, the company announced plans to build the two largest nuclear reactors in the U.S.

Across the country, in New Jersey, state environmentalists are arguing about the NRCs plans to grant a twenty-year license extension to Exelon Corps Oyster Creek Salem 1 and 2 plants. They are demanding the state revise its nuclear emphasis on the Corzine Administration Energy Master Plan. The plan calls for obtaining twenty-year extensions on all of the states nuclear power plants. As one alternative, they suggested building more windmills off the Jersey shore by 2020. A wind farm currently operates in often-breezy Atlantic City, where casinos are also located.

Oyster Creek is the countrys nuclear plant still in service, according to the U.S. Energy Information Administration. Nuclear energy generates about one-half of the states electricity. More than 25,000 million kilowatt hours are generated each year through New Jerseys four nuclear reactors. It is likely environmentalists will do little more than argue about nuclear as New Jersey also has plans to use more coal.

The news media climate about nuclear has rapidly changed over the past five years. Hardly a significant news item was a transformer fire about 40 miles north of New York City at Entergys Indian Point 3 reactor. The reactor could be offline for about two weeks, and the NRC plans on tightening their plant inspections. This was the fourth unplanned shutdown since July.

Another step back for Entergy could be a Sunday deadline to pass NRC muster on their emergency siren warning systems. Only 31 of 150 sirens in three counties failed the test, but thats not good enough for the NRC. The regulatory agency demands a 90-percent success rate. While the utility can request another 75-day extension, NRC spokesman Neil Sheehan announced approval would not be automatic.

These evidences confirm what we have suspected for some time. Regulatory agencies, not the environmental movement, have stepped in to prevent a Three-Mile Island repeat. Over the past thirty years, regulation of nuclear power has evolved above the level of Homer Simpson satire. Engineering developments and safeguards are steeped in sufficient layers of protective bureaucracy to avoid another serious nuclear accident. Science has replaced rhetoric when bringing about changes in the nuclear industry.

With this in mind, environmentalists could better serve the citizenry by focusing their attention on coal-fired power plants, which reportedly exude more radioactivity than nuclear plants. Yes, coal beds commonly have uranium in their composition. No nuclear safeguards have yet been applied to burning coal. Perhaps environmentalists should chase this ball of yarn if they are indeed sincere about carbon emissions, global warming and abrupt climate change.

Next month, the number of U.S. nuclear reactors should increase by one to 104. The dormant Unit 1 reactor at Browns Ferry in Alabama will get its final inspection. TVA (TVE) hopes to restart the reactor in May. The nuclear unit has not been operational for more than two decades. The nuclear renaissance is alive and well in the U.S., not just overseas.

Australian and Canadian Uranium Stock Indexes Set Record Highs

Matthew Smith of TheInvestar reports his Australian uranium stock index closed at an all-time high this past week. The Canadian uranium stock index closed a few points below its record high set earlier in the week.

Smith observed AREVAs developments in Australia. In an email, he wrote, With AREVA being so active right now in Australia this tells us:

They think the 'Three Mines Policy' will be overturned at the end of the month.

There is a higher risk for the Athabascan mines than Cameco (CCJ) is letting on. Therefore, AREVA (whose subsidiary is an owner, through joint ventures, of many of the mines there) is diversifying and spreading their risk over many future deposits and mines.

They see increased demand in a large way down the road. AREVA would not be buying if they could not justify this. The larger miners are generally very conservative. American and Australian deposits are where the big boys will go first when buying. Then, they will gradually gravitate to the more speculative plays in Athabasca and elsewhere.

COPYRIGHT 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.

Julie Icke and James Finch co-authored this article. James Finch contributes to StockInterview.com and other publications. His focus on the uranium mining and nuclear fuel sector resulted in the widely popular Investing in the Great Uranium Bull Market, which is now available on http://www.stockinterview.com and on http://www.amazon.com

Money Management

Money Management deals with the question of how much risk a decision maker should take in situations where uncertainty is present. More precisely the percentage or the part of the decision maker's wealth should be put into risk in order to maximize the decision maker's utility function.

Money management also evaluates the reward of a trade and resolves the most functional use of investment money. It declares the number of shares to purchase and how much money to place at risk. It is the distinction between an outstanding trading performance and pitiful performance. It will make the difference between making money and going broke.

Money management gives practical advice among others for gamblingwagering money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money or material goods and for stock tradingbuying or selling stock shares.

Money management is also associated with risk management. It is considered definitely crucial to successful trading on an ongoing basis. Many traders look at it as the single most vital element of trading. Indeed, deficient money management is one major cause of bankruptcy among unseasoned traders. There is little doubt that adopting proper money management will lead to more traders being able to attain success, or to avoid devastating failures.

Some traders wrongly perceive that they are managing their money by having money management stops. These stops enable the trader to get out of an event where they lost an inevitable amount of money. However, such kind of stop does not announce the quantity, so it really has nothing to do with money management.

Controlling risk by proclaiming the amount of loss if you are stopped out is not identical to directing risk through a money management model that determines the extent of your problem.

There are many money management strategies that are available. Some are probably more suited to your style of trading than others.

Having said that, there exist two basic systems for money management that we need to be take interest in. These systems were derived from the gambling theory.

The first trading system is the Antimartingale System. It denotes an increase in risk every time one wins and marks a decrease in risk when losing. This system is found to be functional and is often used as basis for most of the money management systems.

The second is the Martingale System. This strategy aggrandizes money at risk during a losing streak. Following a loss, the value of money increments on the next trade. The assumption indicates that one eventually wins after a series of losses.

One of the focuses and main ideas behind money management is to safeguard and maintain a healthy capital so as to enable a person to live to trade another day. Before ever undertaking a trade, the first thing you should consider is the amount of money being risked. The next pondering would involve the extent of loss that one is able to accept and correct. One of the most common mistakes new day traders make is that of putting all of their capital on one or two stocks.

Copyright 2007 Ismael D. Tabije

Unlock the secrets of successful executives and professionals. http://www.BestManagementArticles.com -- the article directory with thousands of free articles in business and management--tips, advices, strategies and solutions for your success. Specialized articles in the field of Money Management may also be accessed at: http://money-management.bestmanagementarticles.com/

Do you Have the Burning Desire to Lose Weight or Reach any Goal?

NOTE: This article is one of the component parts of the 9-step WTA3 program contained in the ebook titled "The Action Path -Your Key to Success!" due out in 2005 at http://www.your-key-to-success.com/index_actionpath.html.

- Do you have a Burning Desire? -

Do you have a burning desire to lose weight and reduce your body fat to 10%?
Do you have a burning desire to get a flat, well-toned midsection?
Do you have a burning desire to increase your net worth to $500,000?
Do you have a burning desire to improve your personal relationships?
Do you have a burning desire to start a business next year?
Do you have a burning desire to reduce your credit card debt?

The key phrase is "Do you have a burning desire to...". We all have hopes, dreams, wants and wishes. Do you have a 'Burning Desire' to make the right choices on a daily basis and take positive action steps toward your goals?

Let's start with a common goal of reducing body fat or losing weight. While losing weight is a more common goal, reducing body fat to your body's optimum level is the better route to take. For this illustration, imagine you had a personal goal of losing 10 lbs in 30 days. Because you're smart, you know that losing weight can be accomplished by taking in fewer calories than you burn. This is a law of nature and makes logical sense. Even though we are aware of this basic principle, losing weight continues to be a difficult goal for many people to accomplish. Now the question; do you really have a 'Burning Desire' to lose 10 lbs in 30 days? If you're like many, your answer is "...yes, I have a desire to lose weight..." but in reality you don't have a 'Burning Desire'.

Another source for creating your own 'Burning Desire' is a program from Tony Robbins titled, Get the Edge! You can see a product review of his program at http://www.your-key-to-success.com/product_gettheedge.html.

To further illustrate our day-to-day choices and the difference between a desire and a 'Burning Desire' let's pretend that you are two days into your diet and you're at your favorite hamburger restaurant for your usual lunch. What are you going to choose from the menu? What choice are you going to make?

Will it be the usual double cheeseburger, large fries and a soft drink?

Will it be a double cheeseburger, small fries and a small soft drink?
Will it be a single burger, no small fries and a diet soft drink?
Will it be a burger (no bun), small salad (light dressing) and water?
Will you leave your favorite hamburger restaurant and find a different place to eat?

Most will order the usual lunch or might only cut down slightly. You might even justify it by convincing yourself that later in the day you'll eat less, you'll exercise more at the gym or you need all this food because you are 'starving'. By choosing to order the usual lunch, you've made a choice to take action towards your goal of losing weight. Let me repeat in a slightly different way. By selecting the usual lunch, you have made a (wrong) choice to take (a negative) action towards your goal of losing weight. Every minute of every day you have the power, potential and intellect to make good choices that will help direct you to take positive actions towards meeting your goals. Will you succumb to a need for immediate gratification or can you delay it for a short period with your eye on the prize, of a larger, more gratifying long-term goal.

Was choosing the usual lunch the right choice for you to meet your goal of losing weight? It probably wasn't the best choice, but only you can make the decision to make the right choice. Your decision to eat a high calorie lunch was probably based on a short-term craving and the need for immediate gratification. After the meal, you've met your short-term craving but you've moved farther away from your long-term goal of losing 10 lbs. You need to be aware that your day-to-day choices are often based on a superficial need to satisfy your immediate gratification. When short-term wins over long-term, it shows that your immediate gratification cravings have registered more votes in your brain. Your objective it to move the pendulum; make your long-term goals register more votes so you will automatically start taking more consistent and positive action steps. You need to create a 'Burning Desire' to make long-term win over short-term.

Don't forget to check out the other examples, such as increasing your net worth, outlined in other chapters of this book. You can also check out a product review of Burn the Fat, Feed the Muscle at http://www.your-key-to-success.com/product_burnthefatfeedthemuscle.html.

Stop reading and take your first positive action step to create a 'Burning Desire'. You can apply this technique to any goal. To make this exercise easier, use the form in the appendix section of this book.

  • List at least 6 reasons why you want to attain a weight loss goal (or any other goal). List both the positive reasons (I want to look good for the Caribbean vacation) and the negative reasons (I can't fit into my pants). Positive reasons are "What will I get if I attain this goal". Negative reasons are "What will happen if I don't attain this goal".

  • Next to each reason you listed above, write a short, visual description of that reason. It's important that you visualize your reasons. If one of your reasons is "...I can't fit into these pants...", describe this visualization as a picture with your stomach hanging over the edge of your belt or waistband. Make sure you complete this visualization description for each reason. As you go through this visualization process you may start thinking of more reasons - go ahead jot them down on your list.

  • Take 10-15 minutes and read your 6 (or more) reasons along with your visualization descriptions. Which one or two reasons trigger the most emotionally energized response?

  • Take the top 1,2 or 3 emotionally energized reasons, write them down on a business card size piece of paper and place them in your wallet, purse, desk and/or car. For the next 3-5 days, take out this card and read the reasons and the visualization description out loud.

  • By the end of the 3-5 days, if you still get emotionally energized and excited; congratulations, you now have created your own 'Burning Desire'.

What if this didn't work and you're not emotionally excited - what if you didn't create a 'Burning Desire'. Your current goal has reverted back to a wish, a want, a dream or a hope. At this stage you have a few options. First, you should go back to step #1 and try this exercise again. Often during the first attempts, you may not have put enough time or energy into the process. Right now is the time to change for the better - take a positive action step and give it another chance. Second, if you've tried this exercise or other techniques and still can't seem to create a 'Burning Desire', than you may need to pick another goal, abandon the goal or change the goal. Changing the goal is not giving up; changing the goal is often one of the best ways to get yourself re-energized, motivated and excited about moving forward.

By taking these 5 steps to create a 'Burning Desire' for each one of your goals (large or small), you will make your goals much more attainable, you will start to consistently meet more of your goals and you will have more fun along the path to success. This technique can be used in other areas of your life such as your business (career), your personal finances and your relationships. Other chapters in this book will provide the details on how to use this technique to succeed with more of your personal goals.

Author's Personal Note: I have successfully used this technique in the area of weight loss and have lost 10 lbs (in 45 days), reduced my body fat by 3% and dropped from a 35-inch waist to a 32-inch waist. What was my 'Burning Desire'? I had about seven of them, but two created the most passion and drive.

First, was when my youngest son commented about how big my stomach was getting and that I looked out of shape. This comment was my negative reason that drove me to make a change. If I didn't attain this goal, I would continue to hear these comments . Second, I had a closet full of size 32 pants and was ready to go out a buy more tight-fitting 34 size pants. Since I personally don't like (despise) spending money on clothes, I created a visualization of all the money I would save by not having to buy another 3-4 pairs of pants. If I did attain this goal, I would have another $150 to do what I love most - invest.

My personal visualization for the first reason was a flat stomach instead of the love handles and no 'fat' comments from my son. My visualization for the second reason was seeing $150 invested in 3 shares of a blue chip stock on my portfolio statement, instead of pants hanging in my closet. While my personal visualizations might not get you motivated, these visualizations created enough push, motivation and drive for me to change my dietary habits and eat right (not necessarily less) and exercise more often. Remember, each of you will have your own personal visualizations that will get you to take action.

It was the first time in my 40+ years that I've ever wanted to lose weight and while it was difficult to make these dietary and exercise changes; I sacrificed my short-term immediate gratification needs for the benefit and success of my long-term weight loss goal. Not only did I receive gratification from meeting my weight loss goal, but I received even more gratification by knowing that I could make the appropriate day-to-day choices to minimize my short-term immediate gratification needs to meet a long-term, more gratifying goal. It was worth the efforts. Other personal success stories can be found throughout this book.

It's time for You to take Action!

What are you going to do right now to take one positive action step towards meeting one of your personal goals? To get the momentum moving in your favor, you need to take immediate action. After reading this article, take the next 30 minutes to complete this 5-step process for one of your goals? You don't have 30 minutes, take 5 minutes to start the process. The key is to take Action. You owe it to yourself to be successful and one key component for making your personal goals attainable, is to create your own personal 'Burning Desire'. Start it now!

About The Author

For more information about this ebook, "The Action Path - Your Key to Success!", by Mike Matthews, please visit http://www.your-key-to-success.com/index_actionpath.html. Your-Key-to-Success.com provides a resource for articles, products and services to help you get motivated to take action and succeed with your goals in the areas of your personal finance, your business and your physical fitness. Remember - Dreams will determine what you want in life, Actions will determine what you get in life. Sign-up for our free newsletter at http://www.your-key-to-success.com/index_newsletter.html.


Forex Mentors, Gurus, Advisors Should You Buy Advice?

There are plenty of people on the Internet keen to sell you advice and be your forex mentor or guru but most of the advice sold is not worth the money.

There is a huge industry in selling e-books, courses and systems, yet only a few are any good.

Lets find out how to separate the good from the majority that will simply help you lose.

1. The obvious first question to ask

Yet most forex traders dont bother asking this question yet its critical!

If you want to get rid of over 90% of the Forex mentors, gurus and advisors ask this obvious question:

How much money has been made following your advice can I see the real time track record please?

Most sellers of information like to say how successful they are getting them to prove it!

Most will dodge this question or give you a few testimonials (lucky trades or from friends or a hypothetical track record.

A hypothetical track record is done in hindsight KNOWING the price history!

Well anyone can do that thats why you dont see one that loses.

Ask for the real time track record that is all what counts real dollars made in the market.

It amazes me that people buy advice without checking if it has made money.

If there is no track record dont buy the advice.

2. Look for the method to be simple and fully revealed

You should not simply follow a system or signals given to you.

You need to understand the underlying logic it is based upon.


Because if you dont understand it, you wont have confidence in it and will lack the discipline to follow it through inevitable losing periods.

3. Look for a satisfaction guarantee

If you are buying something based upon sales copy you need to be sure that the hype matches the reality when you receive your advice.

Most reputable system or advice sellers will give you one that gives you the comfort that they are prepared to refund you if you are not happy.

Never buy a system unless you get one.


There is some good advice out there and there are some good systems that are sold but theyre in the minority so take your time to seek one out that you understand has good support and above all - make sure it has made real money in the market before parting with your hard earned cash.


On all aspects of becoming a profitable trader including articles, feature, downloads and systems and an exclusive Gann Trading Course visit our website at http://www.net-planet.org/index.html

Forex Price Charts

There are two kinds of Forex traders- the traders who use fundamental analysis and the traders who use technical analysis. I prefer the technical analysis, which ignores fundamental factors. Technical analysis is applied to the price action of the market. By using technical analysis traders can make short-term forecasts, which are very difficult with fundamental analysis, more suitable to making long-term forecasts.

Technical analysts use different technical studies and interpret them to predict market direction or to generate buy and sell signals. By using charts in Forex technical analysis we can predict price movements.

You might think that reading the charts is very difficult, but you must know that FOREX charts, as opposed to charts used for day trading stocks, are easier to interpret and use. The Forex charts are reflection of a countrys economy, which is slower moving and is more stable compared to the future and daily drama of company reports, Wall Street analysts and shareholder demands.

Currency charts have also the tendency to develop strong trends, and although the Forex market is volatile, it is more predictable than other markets. The good thing is that you have only a few currencies to analyze, not tens of thousands of stocks.

The complimentary charting software provided by good brokers is sufficient for predicting currencies pairs movements, but you must learn to read the charts and you must learn how to interpret your technical studies.

As I mentioned the technical analysis in the Forex market is easier than in the other markets, but it still might seem a difficult task for new traders. There are a lot of different resources which are helpful in learning technical analysis. The easiest way is watching videos which explain it, and although the Forex video courses are usually expensive, you can find some cheaper video courses, too.

If you want to learn more about Forex and if you want to get access to high quality FREE Forex Videos go to: http://www.currencytradingmethod.com

The author is a currency trader and an internet marketer. On his website http://www.currencytradingmethod.com he promotes FREE high quality Forex Videos, previously available only to Forex elite, who could afford their high price.

Porter's Five Forces Analysis

If youve ever listened to Warren Buffett talk about investing, youve heard him mention the idea of a companys moat. The moat is a simple way of describing a company's competitive advantages. Company's with a strong competitive advantage have large moats, and therefore higher profit margins. And investors should always be concerned with profit margins.

This article looks at a methodology called the Porters Five Forces Analysis. In his book Competitive Strategy, Harvard professor Michael Porter describes five forces affecting the profitability of companies. These are the five forces he noted:

  1. Intensity of rivalry amongst existing competitors

  2. Threat of entry by new competitors

  3. Pressure from substitute products

  4. Bargaining power of buyers (customers)

  5. Bargaining power of suppliers

These five forces, taken together, give us insight into a company's competitive position, and its profitability.


Rivals are competitors within an industry. Rivalry in the industry can be weak, with few competitors that dont compete very aggressively. Or it can be intense, with many competitors fighting in a cut-throat environment.

Factors affecting the intensity of rivalry are:

  • Number of firms more firms will lead to increased competition.

  • Fixed costs with high fixed costs as a percentage of total cost, companies must sell more products to cover those costs, increasing market competition.

  • Product differentiation Products that are relatively the same will compete based on price. Brand identification can reduce rivalry.

New Entrants

One of the defining characteristics of competitive advantage is the industrys barrier to entry. Industries with high barriers to entry are usually too expensive for new firms to enter. Industries with low barriers to entry, are relatively cheap for new firms to enter.

The threat of new entrants rises as the barrier to entry is reduced in a marketplace. As more firms enter a market, you will see rivalry increase, and profitability will fall (theoretically) to the point where there is no incentive for new firms to enter the industry.

Here are some common barriers to entry:

  • Patents patented technology can be a huge barrier preventing other firms from joining the market.

  • High cost of entry the more it will cost to get started in an industry, the higher the barrier to entry.

  • Brand loyalty when brand loyalty is strong within an industry, it can be difficult and expensive to enter the market with a new product.

Substitute Products

This is probably the most overlooked, and therefore most damaging, element of strategic decision making. Its imperative that business owners (us) not only look at what the companys direct competitors are doing, but what other types of products people could buy instead.

When switching costs (the costs a customer incurs to switch to a new product) are low the threat of substitutes is high. As is the case when dealing with new entrants, companies may aggressively price their products to keep people from switching. When the threat of substitutes is high, profit margins will tend to be low.

Buyer Power

There are two types of buyer power. The first is related to the customers price sensitivity. If each brand of a product is similar to all the others, then the buyer will base the purchase decision mainly on price. This will increase the competitive rivalry, resulting in lower prices, and lower profitability.

The other type of buyer power relates to negotiating power. Larger buyers tend to have more leverage with the firm, and can negotiate lower prices. When there are many small buyers of a product, all other things remaining equal, the company supplying the product will have higher prices and higher margins. Conversely, if a company sells to a few large buyers, those buyers will have significant leverage to negotiate better pricing.

Some factors affecting buyer power are:

  • Size of buyer larger buyers will have more power over suppliers.

  • Number of buyers when there are a small number of buyers, they will tend to have more power over suppliers. The Department of Defense is an example of a single buyer with a lot of power over suppliers.

  • Purchase quantity When a customer purchases a large quantity of a suppliers output, it will exercise more power over the supplier.

Supplier Power

Buyer power looks at the relative power a companys customers has over it. When multiple suppliers are producing a commoditized product, the company will make its purchase decision based mainly on price, which tends to lower costs. On the other hand, if a single supplier is producing something the company has to have, the company will have little leverage to negotiate a better price.

Size plays a factor here as well. If the company is much larger than its suppliers, and purchases in large quantities, then the supplier will have very little power to negotiate. Using Wal-Mart as an example, we find that suppliers have no power because Wal-Mart purchases in such large quantities.

A few factors that determine supplier power include:

  • Supplier concentration The fewer the number of suppliers for a given product, the more power they will have over the company.

  • Switching costs suppliers become more powerful as the cost to change to another supplier increases.

  • Uniqueness of product suppliers that produce products specifically for a company will have more power than commodity suppliers.

Its important to analyze these five forces and their affect on companies we want to invest in. The Porter Five Forces Analysis will give you a good explanation for the profitability of an industry, and the firms within it. If you want to know why a company is able, or unable, to make a decent profit, this is the first analysis you should do.

About The Author

Chris Mallon is the editor and publisher of the Undervalued Weekly, a free personal finance and investment newsletter, published once a week. To sign up for the Undervalued Weekly, send e-mail to underval@hot-response.com, or sign-up through the website at www.dynamicinvestors.net/index7.html; chrismallon@dynamicinvestors.net

Earning Online Residual Income

Making money online is really very simple, and there are plenty of opportunities to do this, even if you have little experience and money. You can spend your time online and earn an income, and the residual check will start to roll in often.

If you already have and online business, affiliate programs may help you generate extra income with very little effort on you part. It is usually free to sign up as an affiliate and all you have to do is place you affiliate link on you website. When people visit your site and click on the affiliate link and purchase something, you make a commission.

In the beginning it will take some time before large amounts of income start rolling in. Driving traffic to your site will take some time and money to advertise and to build your site. It may take some time to make you site search engine friendly, but eventually a stream of residual income will begin.

Keeping your site easy to use and joining several different affiliate programs from reputable businesses can lead long term residual income for the long run. Perhaps the best way to improve your income is to develop several small income streams that can turn into a tidal wave and flood you with residual income from your online business.

One of the best feelings I can imagine is going to the mail box and finding a handful of checks and realizing you are now generating and income from your internet business. Re-investing a portion of this income into your business of into other income opportunities can create larger or additional income streams.

You should always do your due diligence and research the companies you decide to partner with, making sure they are reputable is very important. Your name will soon be branded with the name of that company and their customer service. If someone does not receive great customer service, it wont take long for your reputation and your business to suffer.

It may be advisable to act as and intermediary for your customers when it comes to customer service issues. This may help to keep your online business running and your income from suffering. By being an affiliate, you may have limited impact in resolving a dispute. But, too many complaints by the affiliates can have their program diminished. The companies depend on affiliate referrals to survive and cannot afford to lose the additional sources for customers.

Another way of generating business income online and create a residual income is to join an online store club. They typically provide you with your own storefront and allow you to earn residual income from the sales of their products. Many of them also provide a trading post area to sell you own new or used merchandise.

In my opinion, affiliate marketing is one of the Internet most powerful ways of generating additional income without a lot of experience and without have a lot of income to start with.

David Tupica is a network marketer of 15 years. He spends much of his free time research and testing different ideas and techniques that his partners can use to increase their business'. You can view his latest project at http://www.homebasedwealthbusiness.com

What is EDI?

Have you heard someone mention EDI (Electronic Data Interchange) or eCommerce and wondered what it was? Simply put, eCommerce is the exchange of information about trading goods, services, or money from computer to computer. For example, the purchase of a widget over the internet, paying a bill, tracking an overnight package delivery, or receiving a paycheck electronically.

Now imagine youre a company. You want to do the same transactions, but thousands of time a day. That is where EDI steps in. EDI is an agreed upon message standard that exchanges information from one computer application to another with the minimum of human intervention. And 95% of all eCommerce uses EDI to exchange that information. It can be done with special software via e-mail, across the Internet, or by customized connections. And it goes beyond just purchasing goods and submitting invoices. A company can request information about inventory levels in its suppliers' and customers' warehouses, receive an order status; and send funds electronically along with automatic notification that an invoice was paid. These are just a few of the many types of automated transactions

EDI is not something new. As a matter of fact, it is much older than you might think. Yet to some industries it is only a few years old. And the health industry of the United States had to be mandated by the Federal government before they dared venture into EDI.

Who uses EDI? And how and where did it all start? What are the benefits? What are the costs? What are the legalities? And why, with all the apparent advantages, do some industries balk at switching to EDI? Well lets start at the beginning to see how it all came about.

Who uses EDI?
About 90% of the fortune 1000 companies currently use EDI. Companies such as American Airlines, BMW, Coca-Cola, Dunkin Donuts, Eastman Kodak, Federal Express, Gordmans, Heinz, InFocus, JCPenney, Kohls, Lowes, Macys, Nike, Openheimer, Prudential Insurance, Queens City Government, Radio Shack, Staples, Texaco, United Airlines, Verizon, Wachovia, and Yokohama Tires to name but a few. EDI is widely used in manufacturing, shipping, warehousing, utilities, pharmaceuticals, construction, petroleum, metals, food processing, banking, insurance, retailing, government, health care, and textiles among other industries.

Any company that buys or sells goods or services can potentially use EDI. Because it supports the entire business cycle, EDI can streamline the relationship that any company has with its customers, distributors, suppliers, and so forth. According to a recent study, the number of companies using EDI is projected to quadruple within the next six years.

History of EDI
The first recorded EDI dates back to the 1850s when the railroads and Western Union used the telegraph to communicate business information. Starting there, Samuel Morse's patented code was the single method used to communicate across the lines.

In 1948 during the Berlin Airlift, thousands of tons of food and consumables were needed to be air freighted. The task of coordinating these consignments (which arrived with differing manifests, languages and numbers of copies) was addressed by devising a standard manifest.

In the late 1950s and early 1960s the rise of computer enabled companies to store and process data electronically, companies needed an expedient method to communicate the data. This method was realized by the widespread use of computer telecommunications. Using telecommunications, companies could transmit data electronically over telephone lines, and have the data input directly into a trading partner's business application. These electronic interchanges improved response time, reduced paperwork, and eliminated the potential for transcription errors. Computer telecommunications, however, only solved part of the problem. Early electronic interchanges were based on proprietary formats agreed between two trading partners. Due to differing document formats, it was difficult for a company to exchange data electronically with many trading partners. What was needed was a standard format for the data being exchanged. In 1968 the United States Transportation Data Coordinating Committee (TDCC) was formed, to coordinate the development of translation rules among four existing sets of industry-specific standards.

In the mid 1970s, it was clear that the TDCC standards were not enough, and work began for national EDI standards. The Electronic Data Interchange Association (EDIA), a non-profit organization set out to serve as an administrator for several different industry groups. Each industry served has a committee to determine new standards, modify existing ones, and pass the information on to the EDIA for publication and distribution. EDIA was asked to develop a set of standards applicable to the grocery industry. The first such standard is The Uniform Communication Standard (UCS) which was applied to an actual transaction by the Quaker Oats Company in 1981.

In 1979 the American National Standards Institute (ANSI) Accredited Standards Committee (ASC) was formed. It included representatives from transportation, government & computer manufacturer industries, The committee's first meeting took place in Rosslyn, Virginia with the goal to create a set of standard data formats based on the TDCC structure that:
- were hardware independent;
- were unambiguous, such that they could be used by all trading partners;
- reduced the labor-intensive tasks of exchanging data (e.g., data re-entry);
- allowed the sender of the data to control the exchange, including knowing if and when the recipient received the transaction.

In 1982, Version 1 of the ANSI ASC certified release of draft X.12 standards was published.

At about the same time, the U.K. Department of Customs and Excise, with the assistance of SITPRO (the British Simplification of Trade Procedures Board), was developing its own standards for documents used in international trade, called Tradacoms. These were later extended by the United Nations Economic Commission for Europe (UNECE) into what became known as the GTDI (General-purpose Trade Data Interchange standards), and were gradually accepted by some 2,000 British exporting organizations.

Problems created by the trans-Atlantic use of two different (and largely incompatible) sets of standardized documents have been addressed by the formation of a United Nations Joint European and North American working party (UN-JEDI), which began the development of the Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT) document translation standards.

Early on, Value Added Networks (VANs) served as an "electronic post office" for buyers and suppliers that needed to exchange data. For example, Company A could send an electronic purchase order to the VAN and Company B could go to the VAN to pick it up. If Company B claimed it did not receive the purchase order, the VAN would serve as a third-party intermediary and would validate whether the purchase order had in fact been picked up or not. That is the type of "value-add" these networks provided.

Despite the benefits, VAN EDI had limited adoption because it was cost-prohibitive for most companies to deploy. Before Internet EDI became available, approximately 80% of the suppliers in any given supply chain were communicating with their customers manually via fax, telephone and snail mail because they could not afford the investment required for VAN EDI. This resulted in inefficiencies throughout the supply chain including: lost or mis-keyed purchase orders, late invoices, out-of- stocks, etc.

With the advent of secure Internet EDI, companies of every size are now able to transact electronically with their trading partners. And VAN services such as "Message Disposition Notifications" (MDNs) are built right into the software products.

Benefits of EDI
Consider a very simple non-EDI-based purchase: A buyer decides he needs 365 widgets. He creates a purchase order, prints it out and pops it in the mail. When the supplier gets the order, she types it into her company's computer system. The inventory guy pulls the order and ships out the widgets. Next, the supplier prints out and mails an invoice. It's not hard to imagine that this process could take several days. EDI has the potential to cut massive amounts of time out of the process. Sending documents, such as purchase orders or invoices, electronically takes minutes, not days, and shipments can often go out the day the order comes in.

Moreover, the electronic format does not need to be re-keyed upon arrival. And that is the part of the biggest benefit of EDI. This saves a tremendous amount of labor time, and means that no data entry errors are introduced into your system by your staff. Cycle times are reduced, and data entry backlogs are almost completely eliminated. This allows for very quick order processing. A proper system can easily handle receiving an order and shipping that order with its invoice the same day. Studies indicate that the average reduction in turn around time is about 40% for most business functions like order fulfillment, procurement, manufacturing, logistics and finance.

This often allows a company that first implements EDI to handle far greater volumes without adding personnel and other costs. This means increased sales and increased revenues once the initial investment in EDI is recaptured. These savings come from:
No data entry errors from your operators
No mail time
Reduced labor processing costs and time
Reduced lead times
Reduced order cycle time
Reduced inventory carrying costs
No filing and other processing of paperwork

EDI improves margins by meeting customer demands and consequently strengthening relationships. It also allows time and effort to be focused on other internal priorities.

Studies have shown that processing a purchase order or invoice costs most companies about $5 in paper, postage, handling, direct labor and other such odds and ends of direct costs. With EDI this can be reduced to about 50 cents; sometimes as little as 13 cents, depending on how the EDI document is transmitted. If your direct handling costs are greater, the savings is greater.

Another benefit is the implementation of Just-In-Time (JIT) order process methodology. With Just-in-Time, a company can avoid stock-outs and/or obsolete inventories, reduce lead times on ordering from suppliers and reduce inventory carrying costs. Whether implementing a subset or the whole of JIT process methodology, EDI is what makes Just-In-Time possible and allows it to be feasible. With the proper agreements between trading partners, a manufacturer can determine the current sales of their buyers and their buyers' current inventory levels. Therefore the manufacturer can forecast probable future sales and plan production and their own purchasing accordingly. Obviously there will occasionally be wild fluctuations that will disturb this scenario, but it does help the manufacturer to accurately plan production, and the purchaser to know that their needs will more likely be met by their suppliers.

Just-In-Time helps the manufacturer communicate quickly and inexpensively with their suppliers, who may be using the same forecasting to meet the requirements of their customers.

Disadvantages of EDI
The biggest disadvantage implementing EDI is it reveals inefficient business practices. If a companys business process was inefficient before EDI, they will be multiply with the implementation of EDI. The original purpose of EDI was to save money and time. When used improperly, EDI does neither, and actually wastes both.

Costs of EDI
Prices for EDI applications vary from free (for very simple one-function products) to several thousands of dollars for full-function applications. The final price you pay depends upon several things:

  • The Expected Volume of Electronic Documents. Generally speaking, low cost EDI packages handle only a few documents and trading partners. Midrange EDI packages can be a little more expensive, but handle a much larger volume of EDI. If you anticipate multiple documents or trading partners, a midrange EDI system is a much better choice.

  • The Amplitude of the EDI Translation Software. Some products look like a bargain, but as your EDI needs grow, hidden costs (such as having to purchase new transaction sets) suddenly appear. You may pay more for a program with an integrated mapper, but you'll avoid purchasing overlays and maps in the future.

  • Implementation Time. Some applications are easier to learn and use than others. But as above, the easier to lean the less the software package can handle. The more time you spend in training, the more time it takes to get into production mode. If your time frame is tight, and you are sure the documents you will be using are static, look for a translator that doesn't require training before implementation.
Fees vary from Software Company to Software Company. Ignoring the hidden costs mentioned above, you can expect the following ongoing charges:
  • Maintenance Fees. Most companies charge an annual maintenance fee that is usually a percentage of the translator's list price. This fee should include software updates, standards updates, technical support, and customer service.

  • VAN Charges. If you use a Value Added Network (VAN), you will be billed for transmitting data similar to making a long distance phone call. Some also bill you for connect time. A fast modem helps to lower transmission costs.

  • Mailbox Fee. Most VANs charge a monthly fee for maintaining a mailbox on their network. Some base billing on the document (25 cents per document transmitted). Others charge based upon the number of characters in each document.
EDI can at times take much longer than expected. Remember, you are working with another company and you have no control over their priorities or business practices. Your priority may be to implement a Purchase Order (850) with Wal-mart, but their priority may be implementing the Advance Ship Notice (856). You need to implement a Remittance Advice (820) with Wachovia yet their Remittance Advice specialist is on Maternity leave and her replacement only knows Lockbox (823).

Despite its few disadvantages, EDI has proven to be a powerful backbone that supports todays Electronic Commerce. Companies all over the world utilize EDIs versatility and flexibility to communicate with each other. And with the promise of the Web, which offers much lower connectivity costs, and the lower costs of PCs and simpler software, EDI is opening its doors to smaller companies. Moreover, XML, an open standard for sharing data, is starting to appear as a method of EDI coding standards, which could provide technical clarity across industries and nations around the world.

Christopher Alexander is a lead developer at CE InterWeb Solutions and a Managing Partner at Consolidated Energies.

He has been developing advanced eCommerce applications with EDI since 1997.