Wednesday, February 29, 2012

Psychology of Emotions: 6 - Love

The next emotion on the list is love....

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.


Fear and Greed are the two big easy ones. Anger and Hubris are both negative and apparent when you think about it. As far as emotions that can hurt our portfolio, Love is an odd one.
Most of the time in other areas of our lives, its a positive good thing. This can make it seem like with our finances that there isn't a problem in the first place.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Monday, February 27, 2012

Week 44 update and Free cash flow rant

Youtube was giving me editing problems all day not letting me adjust the thumbnail ...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.


To be honest I am not sure what emotion that is on my face lol.



Weekly Activity
$150 deposit into Investing
$32.30 deposit into Trading
$1.72 dividend from ERF


Model Portfolio Totals

Trading Account: $993.39
Estimated Monthly Income: $0 (Not ready to trade until Phase 1 completed)
Max loss per trade (1% of account): $9.93
Portfolio stop (3% account): $29.80

Investing Account: $2,407.17
Estimated Monthly Income: $7.68 ($0.163 from DRIP shares)
Stock
     ABT: $0.76 income/month
     WMT: $0.53 income/month ($0.003 from DRIP shares)
Energy
     COP: $0.76 income/month
     ERF: $1.74 income/month ($0.052 from DRIP shares)
REITs
     O: $1.08 income/month ($0.023 from DRIP shares)
Bonds
     JNK: $1.66 income/month ($0.060 from DRIP shares)
     PCY: $1.14 income/month ($0.025 from DRIP shares)
Maneuvering Cash: $600

Savings Account: $1,300
Emergency: $1,000
Portfolio Protection
     Trading Account: $50
     Investing Account: $250
CDs: $0
Precious Metals: $0



Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Friday, February 24, 2012

Time difference with the Coin Flip account Part 2

I continue talking about what I found with the demo forex trading and what changes I plan to make.

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.


Static Stop Loss order vs Trailing Stop limitation with MT4
I used the term trailing stop and stop loss back and forth but I want to be sure everyone is clear about the differences as far as it pertains to Metatrader 4 (MT4).

MT4 software interacts with a broker's software. It can place a trade, place a profit stop, and place a regular stop loss order with the broker and that is stored on the broker's servers. The local MT4 client installed on your computer manages a trailing stop. Once a trade hits the MT4 trailing stop it sends a market order to exit your trade to your broker software. From your broker's point of view there never was a trailing stop, it only received an order to exit the trade. The danger is in if your computer losses its connection to the broker server you have no protection if you were only relying on the trailing stop. The broker server sits there watching your account go bankrupt wondering when you are going to tell it to stop.

What MT4 will do though is send a stop loss order that is static in price. This appears on the Oanda software when I look at it through their software. The trick will be in programming MT4 to check the amount of profit and move the stop up to match making a synthetic trailing stop loss but it is still technically a regular old stop loss order as far as the Oanda server is concerned. Then if my connection is lost at least I do have something out there protecting me.

Shrinking Synthetic Trailing Stop
I also want to go into a bit more detail about how the synthetic trailing stop will shrink as the trade becomes more profitable because in reviewing the video I kept using decrease, shrink, increase in possibly confusing ways. Right now with a 50 pip trailing stop I will always give up 50 pips. The following chart shows how many pips in my favor a trade goes before reverting and hitting its trailing stop and the net amount of pips. The 100 mark hits the profit stop so the trailing stop is not triggered.

100 pips profit, 0 TS, 100 net pips
90, 50 TS, 40
80, 50 TS, 30
70, 50 TS, 20
60, 50 TS, 10
50, 50 TS, 0 net pips break even point
40, 50 TS, -10
30, 50 TS, -20
20, 50 TS, -30
10, 50 TS, -40
0, 50 TS, -50

Now my plan is that for every 4 pips of profit I will decrease the size of the trailing stop by 1 point, making it small so that the more profitable I get with a trade the more I will keep.

100 pips profit, 0 TS, 100 net pips
90, 27 TS, 63
80, 30 TS, 50
70, 33 TS, 37
60, 35 TS, 25
50, 37 TS, 13
40, 40 TS, 0 net pips break even point
30, 43 TS, -13
20, 45 TS, -25
10, 47 TS, -37
0, 50 TS, -50


This does a number of things.
1: It keep me in the trades that go immediately against me the same amount of pips so that I can survive the volatility and hopefully make it to the 100 pip level
2: The smaller sized losses are lessened but still give ample room, 43, 45, 47 pip stop losses are still a good level. A few pips shaved off each loss will add up.
3: The break even point is now 40 pips vs a maximum of 50 pips loss. This shifts the averages to my favor.
4: The moderate wins I am keeping more.
60 pips keeps +15 more pips then the previous trailing stop.
70 pips keeps +17
80 pips keeps +20
90 pips keeps +23

What would this have done to the results? I would have gained +273 pips for +$30.03 more then a 50% gain in profit.
However, and this is important, I would have been stopped out a little bit earlier in some of these trades. That is one of the dangers of back testing that you fit the data to make it work your best case scenarios.

Only actual testing will tell.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Time difference of the Coin Flip account Part 1

How do we develop a trading system?

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.



Most books on trading strategies and technical analysis (TA) give definitions and basic info textbook information. The ones that do go into how to use them always add one thing in with each "strategy"...

"... this doesnt always work so find what works for you."

Its frustrating to me to have paid good money to be told a bunch of ideas with no conviction behind them. Yes, TA isn't science that works every time but how many people are helped having a couple dozen TA tools thrown at them at then told to figure it out. The other end of the spectrum is to pay someone to manage your money. They won't be telling us exactly how they handle trades because then what is the point of paying them once you know how? At least our expectations are set ahead of time so those that want that can get it.
For the do-it-yourself money manager, way we have to develop a system ourselves.

To do that we from a position of no experience can be intimidating. I admit its probably the #1 reason I have held back with trading in general and sticking to only dividend investing for so long. That fear of the unknown can easily be dispelled by making it known.

That still leaves us with how do we develop a trading system. In this video I go over what I found through observation. The next will cover how I plan to use what I found.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Wednesday, February 22, 2012

Funding your portfolio... home yogurt making?!

Planning an investment portfolio or demo trading and learning the forex is nice and all but will do little good if one doesn't have any money. From time to time I like to look at different ways to increase the Theoretical Family's cash flow no matter how silly or outlandish it may seem. This brings me to yogurt.

I eat a ton of yogurt weekly. When it comes down to it, yogurt is just cultured milk right? Why then are those little plastic cups of yogurt priced at $14.9 a gallon when a gallon of milk is $3? Perhaps a do-it-yourself investor can become a do-it-yourself yogurt maker. A couple years ago my girlfriend bought me a home yogurt maker. I find it a fun in being creative but does it save money that could be applied to the Model Portfolio?

Process
Home yogurt making is actually incredibly easy.  Heat milk to 175 degrees. Let it cool to 115. Add a pinch of culture (1/32 tsp). Seal the mixture into incubator jars for 10-20 hours.  The machine beeps when its done.
That's it. It isn't rocket science. Keep in mind that people have been making it for thousands of years. I think that conventional wisdom of food handling makes most of us scared to try this.


Health benefits
Have you taken a look at the ingredients on those yogurt cups? Gelatin, high fructose corn syrup, modified corn starch to name a few. They put a ridiculous amount of sugar in those things to cover up the tart from the yogurt.
The ingredients for homemade yogurt is fat free milk and bacteria culture. That's it. Store yogurt only has 1 strain of bacteria. The cultures you can buy have 5. With all the rage of probiotics for health these days you can make healthier and no sugar and fat free yogurt.


Economic benefits
A typical 6 ounce cup of yogurt I see in stores for $0.70
One gallon of milk is $3. A standard 32 ounce quart of milk ends up giving 22 ounces of yogurt. Water is lost from evaporation from boiling and separation during the culturing process.
6 ounces of home made yogurt ends up costing $0.20.  Yes you save $0.50 each one.

Now you do have to buy the $55 machine and that means you have to make 30.38 quarts of yogurt to break even. Up front that may sound like a lot up front but if your family eats 4 of the grocery store cups a week then that's 1 quart a week. Less then a year to break even. If you only do this once every other week then 1 year, 2 months you will break even. Mine has been going nicely for about 2 years now.

I'm going to list this on the funding page as an idea to entertain. 31 weeks from now I'll start counting up $1.81 a week. I doubt I will add that savings into the actual deposits but I think it will show us the power of nickel and diming your way towards a portfolio.

The power here is NOT in a big up front investment. Time works in our favor.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Saturday, February 18, 2012

Week 43 update

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.





Weekly Activity
$100 deposit into Investing
ABT raised yearly dividend 6% (+$0.05 per month free)
$1.08 dividend from O


Model Portfolio Totals

Trading Account: $961.09
Estimated Monthly Income: $0 (Not ready to trade until Phase 1 completed)
Max amount in Forex trade (50% of account): $442
Max loss per trade (1% of account): $9.61
Portfolio stop (3% account): $28.83

Investing Account: $2,254.26
Estimated Monthly Income: $7.67 ($0.152 from DRIP shares)
Stock
     ABT: $0.76 income/month
     WMT: $0.53 income/month ($0.003 from DRIP shares)
Energy
     COP: $0.76 income/month
     ERF: $1.73 income/month ($0.041 from DRIP shares)
REITs
     O: $1.08 income/month ($0.023 from DRIP shares)
Bonds
     JNK: $1.66 income/month ($0.060 from DRIP shares)
     PCY: $1.14 income/month ($0.025 from DRIP shares)
Maneuvering Cash: $450

Savings Account: $1,300
Emergency: $1,000
Portfolio Protection
     Trading Account: $50
     Investing Account: $250
CDs: $0
Precious Metals: $0



Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Friday, February 17, 2012

Emotions: 5 - Hubris

This is the next part in my series on how emotions can damage our investing and trading portfolios...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.


Hubris is one of the main reasons I do not care for professional money managers. They get control of vast amounts of other people's wealth and think too much of themselves. How many times do the financial TV shows trot out some big shot fund manager and ask them, "What should the average investor do?" They then give everyone advice without knowing anything about our goals and needs. What was the reason for that guest speaker being on the show? They made a lot of money. How they did it isn't important if its safely, riskily, slowly.
Several months or perhaps a year later we see a report on how they blew up their fund because they couldn't admit they were wrong and walk away from a bad investment. But that's ok because they are old news and the show's host has a new fund manager to give us advice.

I suppose in their defense, money management is one of the few industries where people directly question them. You wouldn't go to your doctor and he gives you an X-Ray and you question and disagree with the prognosis. As an honest fund manager trying to do whats best it would get annoying having your clients question everything and why you aren't making as much profit as last nights guest speaker on TV.

On the other hand, money management isn't brain surgery. You do not have to get a doctorate before successfully handling money. In fact I would dare say that it has as much to do with emotional discipline as it does with using a great strategy.

By identifying what are the common big reasons why people lose money investing and trading, we can focus on removing those reasons. Everything that is less are the small reasons for failure plus the small and big reasons for success. Experience can be gained in investing and trading. Humility and admitting your weaknesses is harder to learn.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Thursday, February 16, 2012

Cleaning up the spreadsheet apperance

I'm changing the appearance of the other spreadsheets to be a little bit more appealing. The pure white aspect is a little eye bleeding in trying to follow. No data is being changed, its purely cosmetic.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Tuesday, February 14, 2012

Dividend Spreadsheet Explanation

Just an entry explaining the investing spreadsheet, what is being tracked, and also why...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.


I've been wanting to make a reference video for some time now so everyone can be on the same page so to speak with the investing account's numbers. Since I redesigned it today it seemed like a good time.

Why does the Investing spreadsheet keep getting redesigned. Honestly its for you guys. My own spreadsheets I have for other portfolios are.... a bit overboard. 4 tabs with 25+ columns each page. Thats a bit much for the Model Portfolio. I am working a balance of enough info for ideas on how you can track your own portfolios but also not going too much to have your eyes glaze over.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Sunday, February 12, 2012

Week 42 Update and Flexibility



EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.





So why the focus on flexibility for the Model Portfolio?
We as do it yourself investors and traders will (hopefully) spend a good deal of time planning how our portfolios will work. Which things we will investor in. How does this market look to trade. In the end though no matter how detailed and complex our planning may get, once we place our money at risk, anything can happen. We have to be open not only to the fact that we might be wrong but that sooner or later we WILL be wrong  on the profitability of an investment or trade. What then? A lot of focus is spent on how we will live life in retirement and spend our riches of profit on but thats a long journey to get there.

In this week's update video I discuss the importance of flexibility for savings but what about the other accounts?

For the dividend investing account, at some point one of the stock I buy will probably have problems. I need to be in the position to recover. If a company's price drops enough but I still want to own them then I need flexibility in the account to be able to buy more. That is what the cash position in the investing account is for.
If I no longer want them I will sell and probably not get as much income in the replacement purchase because I had less. That is what the Portfolio Protection part of the savings account is for.
I need to be able to add more money in to replace that lost income. Otherwise I have to decide how I will lower my standard of living to adjust the lower income.

For the forex trading account, I could hit a bad series of losses. The plan would be to stop trading and figure  out what is wrong to prevent future losses. However by no longer trading I am also putting future gains on hold. Will that impact my growth models and delay my goals? When I restart trading the account will be lower from those series of losses. My profitable trades will be smaller because of that. I need flexibility and cash on hand to be able to get back to growing the account.


Weekly Activity
$100 deposit into Savings
Purchased COP
$1.45 dividend from JNK


Model Portfolio Totals

Trading Account: $961.09
Estimated Monthly Income: $0 (Not ready to trade until Phase 1 completed)
Max amount in Forex trade (50% of account): $442
Max loss per trade (1% of account): $9.61
Portfolio stop (3% account): $28.83

Investing Account: $2,135.79
Estimated Monthly Income: $7.62 ($0.147 from DRIP shares)
Stock
     ABT: $0.71 income/month
     WMT: $0.53 income/month ($0.003 from DRIP shares)
Energy
     COP: $0.76 income/month
     ERF: $1.73 income/month ($0.041 from DRIP shares)
REITs
     O: $1.08 income/month ($0.018 from DRIP shares)
Bonds
     JNK: $1.66 income/month ($0.060 from DRIP shares)
     PCY: $1.14 income/month ($0.025 from DRIP shares)
Maneuvering Cash: $350

Savings Account: $1,300
Emergency: $1,000
Portfolio Protection
     Trading Account: $50
     Investing Account: $250
CDs: $0
Precious Metals: $0


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Wednesday, February 8, 2012

Trading psychology benefits of demo trading.

I entered in today's second forex trade for the coin flip account and noticed something of my mentality that I wanted to share. Here is a screenshot of the trade. Its a 15 minute chart of the EUR/USD. About 4/5ths the way to the right is a green arrow. That shows my trade's entry point.


Notice for most of the recent past the candlesticks were very small. Not much action. Then as I am getting ready to enter my buy trade we get possibly the largest 15 minute candlestick of the day going against me.... as I enter the trade. The next candlestick started to go down further.

What were my thoughts? Was I yelling at the coin for coming up heads? Perhaps yelling at myself for logging on at the time? No. My thoughts were of something new this trade vs other ones.

"Yeah that's not a good start but my trading history shows on average a trade gets me +$0.81. There have been plenty of trades that looked bad at the beginning that turned around. The 50 pip stop loss gives plenty of wiggle room. By entering this trade there is no reason to think this trend shouldn't continue."

At the beginning of this coin flip experiment I was keeping a close eye on each trade. Guessing what was going to happen and guessing where I would be stopped out at.  After 28 trades I have realized that the begging and pleading does little good to will the market into a direction. The trades have become a routine pattern. Flip, enter trade, done.

This is a benefit of demo trading that I think some experts do not realize. The practicing and conditioning of ourselves is as beneficial as practicing our trading strategy.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Tuesday, February 7, 2012

New investment: ConocoPhillips (COP)


The order has been filled for the next investment in the Investment Account...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.


Let's take a look at the Fastgraphs for COP...



At first glance the current price vs the fair value of COP seems to be great with a wide margin compared to most other stock. However I think its more accurate to compare a stock to its own history. As seen above, COP hardly ever goes above its fair value. Therefore the average COP trading value has to be under fastgraph's valuation. I'm not going to work through a formula to figure out exactly what that average is. Looking at the chart I think its safe to say its a nice valuation compared to its earnings.


Charts provided by Fastgraphs.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Sunday, February 5, 2012

Week 41 Update






EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.



Weekly Activity
$100 deposit into Investing
$1.11 dividend from PCY


Model Portfolio Totals

Trading Account: $961.09
Estimated Monthly Income: $0 (Not ready to trade until Phase 1 completed)
Max amount in Forex trade (50% of account): $442
Max loss per trade (1% of account): $9.61
Portfolio stop (3% account): $28.83

Investing Account: $2,143.34
Estimated Monthly Income: $6.84 ($0.133 from DRIP shares)
Stock
     ABT: $0.71 income/month
     WMT: $0.53 income/month ($0.003 from DRIP shares)
Energy
     ERF: $1.73 income/month ($0.041 from DRIP shares)
REITs
     O: $1.08 income/month ($0.018 from DRIP shares)
Bonds
     JNK: $1.65 income/month ($0.051 from DRIP shares)
     PCY: $1.14 income/month ($0.025 from DRIP shares)
Maneuvering Cash: $600

Savings Account: $1,200
Emergency: $900
Portfolio Protection
     Trading Account: $50
     Investing Account: $250
CDs: $0
Precious Metals: $0



Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.