G’day Traders,

Today is the second day of Intelligent Trading and I believe it is the best training we have ever run – by far. Yesterday we went through almost the entire Advanced content – thanks to the quality of the attendees. It made it easier that we customised the session to what they wanted.

Today is really exciting. We went through some amazing exit strategies for Options this morning as we have some of our top Option traders here. It’s a pretty special group of 14. We are now spending the rest of the day designing advanced strategies and looking at the advantages / disadvantages for each. My aim is for everyone to learn how to design a strategy and then, in groups, design strategies so everyone leaves with three strategies (a Forex / Commodities, Options and Stocks / ETFs).

On the markets the S&P500 could not consolidate above the 1100 level and fell. This means that many trends at the end of last week may have reversed and we saw a movement out of risky assets (stocks and commodity currencies) and into safer assets (i.e. JPY and Bonds).

How I see it now is that last week investors seemed to exit positions before the holiday. Now they may be getting back in and this could set the trend especially as some of the fear seems to have trickled out of the market with last week’s rally.

Take new signals only. Keep an eye on your risk. Hopefully it trends.

Stocks / ETFs – I am not doing anything longer term right now. Sticking to what I have.

Options - I think now is fine to look for Options on either side. Just be conservative with your selections.

Information for Beginners – IF you are placing your first trades starting from today’s signals then you must be happy with your paper trading. You need to stick to the rules that you tested, but if it’s Forex please start with only 1 of the JPY pairs, 1 of the Commodity currency pairs (AUD, CAD or NZD) and then 1 EUR pair depending on the best signals. You may choose GBP/JPY, USD/CAD and USD/CHF – whatever. Just the first (and then best signals).

Information for Intermediate – Follow your rules and be ready for trends.

Information for Advanced – Look for confirmation in the bond markets for financial Commodities / Forex.

Scott Goold

Head of Lifestyle R&D

ETFs bring diversification to your holdings

As stocks continue to trade in a sideways pattern around the world, it is easy to be tempted to seek out one or two top performers and let the rest of the market go hang. Unfortunately, while this might give you some short differentiation from the market norms, it puts all your eggs in one basket. Even young market advisors just starting out will tell you that’s a bad idea.

To be a long term winner in the stock markets and exchanges, you need to have a well diversified portfolio. You can’t do this with a handful of stocks making up the bulk of your investments.

ETFs offer you the chance to take advantage of the safety and the returns offered by diversification. With just a few thousand dollars invested, you can own a representation of an entire stock market exchange or a complete listing of a key sector. This lowers your individual stock risk by spreading your portfolio into every corner of the market in proportion, giving you the safety you need to survive the current economic climate.

Detractors of ETF investing choices will point out that a well managed fund will also be well diversified. This is true; I’ll not contest it.

What I will contest is the assumption that managed funds deserve to be included in the well managed category. Unless you’ve done outstanding research to be absolutely sure you know and trust the person – not the brand, the actual person – who is managing your money, you should have no confidence in the quality or breadth of the diversification in your managed holdings.

Managed funds give you the illusion of good diversification. Dig into their prospectuses and you may find that you are heavily invested in just a handful of major market players and absolutely absent from key sectors you’d like to own. This is why when it comes to diversification, only ETFs can deliver the real deal every time.

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Trader Term of the Day – Volatility

A measure of a stock’s tendency to move up and down in price, based on its daily price history over the latest 12 months.