Tuesday, 29 May 2007

Go With the Trend

This time I have picked an article by David D. Wells, which some of the newer traders may find useful. In it David tries to explain how you can make lots of money by jumping on the bandwagen or following the trend as we traders say:

Money is one of the biggest concerns for most people. Learn to master money and that success can transfer over to every other part of your life if you let it. As you already know mastering money is not easy but it can be made simple with some little-known techniques.

The techniques I am going to reveal here have been responsible for literally millions of dollars being created and even billions of dollars, as mentors such as Jim Rogers have taught me.

Jim Rogers is one of the greatest commodities traders in history. By my estimates he has made well over $1 billion trading commodities. Learning some valuable lessons from Jim allowed me to turbo-charge my profits.

FOLLOW THE MONEY: You can earn large amounts of profits by first letting the wealthy use their money to search for opportunities and then jumping on board. Find out where the big money is investing and get in. This is sometimes referred to as following the trend.

You can literally make tens of thousands of dollars doing this. The trend is your friend is a phrased used often by me and other successful traders.

KNOW WHEN TO GO: You must be careful to recognize when the trend has ended. Amateur traders often get in when it is too late because the trend has ended. Another challenge is they get in a trade and stay too long.

Unless the market is already trending down there really is no way to know if it is too late however you can limit your exposure to risk. Use a tool called a STOP LOSS. This does exactly what it implies, it stops your loss.

This tool should be used on every trade every time. This tool also keeps you from staying too long in a trade. It is easy to use. At the time you place your trade also place your stop loss meaning where you want to exit a trade if it does not continue to go in your favor.

BONUS TIP: As you make profits cancel your old stop loss and enter a new one so that it locks in a certain amount of profits. As you continue to make money keep moving your stop loss to lock in more and more profits.

USE LEVERAGE: You must learn how to effectively use your money. Most people use their money on a 1:1 basis. A few people know how to use their money on a 1:2 basis. The great traders use their money on a 1:10 or even a 1:20 basis. This means that for every $1 they invest they control $20.

For example, if you invest $1,000 do so to control $20,000. This is leverage at work. Your risk has not been enhanced because as previously discussed you will use a STOP LOSS.

This type of leverage that David has just mentioned is what we CFD Traders use.

Now let us take a look at a market to apply these techniques. Since 2001 Gold has been in an uptrend. Will it end soon? Who knows for sure but the analysts tell us that it will not end anytime before the end of the decade.

If you had invested $1000 in Gold in 2001 you would have $40,000 at the time of this writing. In six years you would have earned 40 times your investment!

This is just one market. There are many, many other markets where these techniques can be applied.

Crude oil, of which gasoline is made from, is also in an uptrend. If you had invested $2,000 in crude oil at the end of 2003 as of this writing you would have $30,000. In four years you would have earned 15 times your investment.

The good news is if you invest correctly there is still plenty of money to be made.

Learn more by visiting http://www.WealthCodeBreaker.com.
© Copyright David D. Wells. All rights reserved. You are welcome to forward the entire Article to anyone interested as long as it is not edited in anyway and includes the Resource Box. He is a superstar trader and bestselling author. Let him show you how fortunes are made in the 21st century. Subscribe to his free newsletter at www.themoneymotivator.com.

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