Forex trading explained

If anyone is interested in Forex trading and wants to know how the following article from Marketclub.com explains how easy it could get.

The foreign exchange market is the biggest market in the world by far. It is traded all around the world, six days a week, twenty-four hours per day.

So today we're going to look at the Euro (EUR) against the US Dollar (USD). Here are some Market Club signals that were generated by their "Trade Triangle" technology.

This new 7-minute video explains some basics of using the trade triangle technology. It is available with no strings attached.

It is very important when you are trading in any market to be very, very, disciplined. You must also have a game plan and understand the rules of the game. If you get into forex trading just on a whim, you're going to be burned... that's almost a definite. If you approach the forex markets with respect and a game plan, you can do extraordinarily well.

The triangles have worked very well lately with the markets.

2008 invesment post-mortem and tips from investment gurus

Writing up some lessons learned in the brutal 2008 investment year. The DOW lost more than 30%, the NASDAQ and S&P also in the similar or more extreme ranges.
Like most of the crowd my investments performed no much better. What are the lessons learnt and some tips from investing experts which I could have applied for my 2008 investments.
1. Buy and hold might not work all the time. I mean it can if your investment horizon is beyond the bear market zone.
2. Book your losses and help your 2008 tax returns. Once can claim up to $3000 in one tax year provided the same or similar investment is not bought within 30 days. This is the wash sale rule. A strategy suggested by a blogger and the comments there in suggest to sell the fund/stock and then buy back after 30 days . Caveat is one might lose potential gain within the 30 days lost. Other choice is to buy another investment in next 30 days.
3. Investor Business Daily(IBD) suggested cutting losses greater than 8%. Lesson learned: An 8% loss takes 10% gain to make it even. This strategy would have saved me a lot in 2008.
4. Invest in certain cyclical companies - eg. Walmart during downturn. Keep a small goal for return and book profits and cut losses. I do not hold Walmart at this time.
5. Being long in bear markets is risky. If shares are bought then buy and hold will not be a good strategy.
6. Even if I would have followed the 200 day EMA then the long term entry or exit points would have established.
7. Look out for strong sectors and stocks within these sectors (Cramer & IBD).
8. "The stock market is always looking 6-12 months down the link. Present losses are already taken into account". I partially agree with this. The market direction is set this way but day to day dips could be caused due to real time news.
9. Investor Business Daily states never average down. I am not sure if I completely agree with this. Average down with a single company stock could be bad but with a fund might not not so bad.
10. And finally do a post analysis of your buys and sells (IBD) and note them on the stock charts. As Cramer puts it put 1 hr per week per stock.


Can you share your 2008 investment thoughts?

I Bonds or I Savings bonds vs. Certificates of Deposits

The other day I was wondering about long term investments , something with a horizon of 5-10 years and I came across I bonds or I saving bonds.
thanks to a friend who introduced to me these safe government protected investments.

According to ibonds.info "Bonds have a one year minimum hold time in which the bond can not be redeemed. Additionally, bonds are subject to a 3 month interest penalty if the bond is redeemed within 5 years of the issue date. Similar to other US Treasury Bonds, I Bonds continue to earn interest for 30 years. After that time, the matured bond is worth the face value plus the interest collected over that time."

The most logical comparison that arrives at one's mind is between a CD and an I-bond. How does an I bond differ from
a 5 year CD.
1. CD's rates are fixed for the entire duration of the term. I bonds are inflation protected and have 2 parts , one called the fixed rate which stays the same for the entire duration
of the bond and a variable value which is tied to the inflation core index
2. One can withdraw money from a CD even before one year with an associated penalty ofcourse but atleast its an option.
3. With most banks money withdrawn from a CD before maturity is subject to three to six months of interest. Money withdrawn
from an I bond after 1 year is subject to similar but not neccessarily same terms.
4. Current rate for an Ibond is 5.64 % which ofcourse can and will change in the next five years. CD has constant rates of maturity
5. CD is protected by FDIC values whereas Ibonds are backed by the government.
6. According to ibonds.info "The federal tax can even be waived if the bond is redeemed to pay for education costs." This definitely not the case with CDs.

I bonds rate are weighted more on the CPI or variable rate rather than the fixed part so one should typically not wait till fixed part is higher. Essentially these are inflation protected investments.

Interest accrued on I bonds is on the end of the month, so its advisable to invest towards the end of the month.

Please note that I have not compared I bonds to other available government bonds in this article. CDs are something that naturally occured to me and hence the
comparison.

Is this a safe longterm investment in this recession season?

The January effect: Lets discuss about the 2009 January effect

It is believed that in January, particularly during the first few week(s) has witnessed gains not seen during other months of the year. According to Wikipedia link for the January effect it is said that this may happen due to profit gains taken in the prior
year for tax purposes and investors put their money back in the market for re-investment.
To see if this really worked lets take a look at the past few years return for the NASDAQ index QQQQ.
In Jan 2008 we saw that QQQQ went down few percentage points. 2006, 2007 saw a modest gain , whereas 2005 saw some decline. 2004, 2003, 2001 and 2000 had some gains
whereas 2002 had a loss.


This result was based on the NASDAQ index. One might need to take into consideration other indexs or stocks (NYSE for example) particularly.
AS per this article it is said that small caps have had some
noticeable returns in January.
However one needs to be extremely cautious to trade small caps such many of them are not doing perform very well.


On the contrary if one could wait till January to sell the stocks the losses could be minimized. This is just another view of the same idea.

Other theories behind the January stock rise state that a lot of people might be getting some year end bonuses or some wait till the new year to start afresh. Cash strapped investors are seen selling just before big holidays -eg. Christmas to raise cash for gifts.


We will analyze the market towards the end of January 2009 .

What will happen in 2009? Will it show a January effect or have we seen a December effect already seen we are in the oversold region already? Please share your thoughts.

Order of the rising sun

Slightly away from the topic of finance and business I am dedicating this blog entrt to my father - Ramesh Divekar.

Ramesh Divekar, has been awarded the "Order of the Rising Sun, Gold and Silver Rays" (Class V- Culture) in recognition of his outstanding contribution by His Imperial Excellency the Emperor of Japan .

The Order of the rising sun is the second most prestigious Japanese decoration after the Order of the Chrysanthemum.


You can find more information in the Order of Rising Sun WIKI

The official announcement was done on 3rd November, 2008 in Japan, (The cultural day of Japan ) in Tokyo and he will actually receive the award at the Consulate General of Japan, Mumbai , India on December 4, 2008 at a special function arranged in his honor by the Consul General.

Mr. Ramesh Divekar started his career to the land of the rising sun since the dawn of the 1960s , 1963 to be precise. You can find more information in Wikipedia's link .

Ramesh Divekar is the founder of 3smartmonkeys.com.

India Rising!

Recently a friend of mine forwarded me this video recorded by PBS and termed "India Rising". You can view the video at PBS's website.

The video's main focus is a town Pune, a growing educational town situated 100 miles east of the main metropolitan of Mumbai in Western India.

India's GDP is on its boom in the last few years, recording 9.1% growth in the 2007-08 timeframe according to wikipedia.

The middle class can now afford a lot of commodity items that were taken as granted by rest of the world.

Indians now are shopping in malls for microwaves or refrigerators and also buying condos and driving comfortable automobiles.

To me the above change has already been in place for a few years, but its only recently that its started making news in mainstream America.

Express India's rising food prices article gives the views of President Bush on the same.

What do these economic needs of China and India mean to the rest of the world? There is only so much in the world and one argument is "Should we not share what we have?" Is this the price the rest of the world will have to pay when The World Is Flat?

One positive outcome as depicted in the video is that it encourages innovation by the rise in competition.

Thoughts?

Dollar cost averaging - Another view

Image courtesy:about.com

In my earlier post about dollar cost averaging or long term investing during down markets I had written how it was beneficial to dollar cost average during a bear market.
This morning I was looking at another article on Investor Business Daily's newspaper. They had a small article on dollar cost averaging specifically for down markets or during markets with bearish trend. This article featured under their Myth Buster title titling "Averaging down can be a poison". The author takes an example of Lehman brother's stock and how one would have suffered major losses in such a condition and instead ask to dollar cost average in bullish markets.

My takes on this and comments are slightly different. My focus would be to dollar cost average on an index vs. a stock. Thus if any particular stock is burned then my risk of loosing all my money is certainly lessened.

The article took an example of AIG and explained how an investor would take ages to get back the fortune spent. I would have rather put money in the finance sector, probably in an ETF or a mutual fund.

Of-course buying during market correction is a better strategy but then who can identify a bottom and then a correction.

One strategy recommended which I might partially agree is too sell off if losses get steeper than 7-10%.

What do you think?