Tag: how to

Forex Trading; Constructing a Spread position

 

WHATS KILLING MY PROFITS?   There are many things that eat away at investors profits.  Most all of them are avoidable.  Of course we cannot control the markets movements, neither its direction nor how far it moves, but we dont have to.  We know the market moves.  For the most part a currency pair will constantly be moving up and down, unless there is a huge national event in a country.  Even then, the currency will move back the other way again.

     One of the biggest killers of profits that I have seen is the use of “strategies” when investing in Forex.  I have an entire article on strategies, so this one will focus on the use of spreads.  Many times investors will attempt to use strategies from other investment vehicles (i.e. stocks, options, futures, etc.) in the Forex market.  Although these can be adapted to work they often are not.  Most investors simply take a proven formula for trading from one investment vehicle to another and they lose money.  

     Spreads are no different.  

WHAT IS A SPREAD?  The concept is easy, the definition of a spread is:  Options spreads are the basic building blocks of many options trading strategies. A spread position is entered by buying and selling equal number of options of the same class on the same underlying security but with different strike prices or expiration dates.

 

 

     Many Forex traders have never traded options and dont truly understand how they work.  A spread in an option position means that you bet on two sides, up and down.  This strategy depends on only one thing to win, volatility.  When the market moves a good amount in either direction the option holder can make money.  This is a Very simple definition of a quite complex trading strategy.

     When you apply a spread to Forex you get a buy and sell on the same currency pair.  So you would place a buy and a sell order on the same currency pair, hoping for volatility, the price to fluctuate up and down.  This typically happens every trading day on many different currency pairs.  So why do so many investors lose money with this strategy?  Because they dont adjust the “buy in” position rules to fit Forex trading.   Meaning, they enter the trade in the wrong way, incorrectly constructing a spread for Forex.

     HOW TO CONSTRUCT A SPREAD;  A very simple example is this:  when you construct a spread position on a stock option you will enter a buy and sell order, and those will typically be at different strike prices (target price).  When you apply that same principle to a currency pair the entire dynamic is changed!  Because there is a whole other element that needs considered that you Don’t have with an Option spread, and that is entry price.  I am trying to keep this very simple while explaining very complex actions.  You see, when you sell an option contract (as when building a spread position) you actually Recieve money in your account (because it not only represents your short,bearish, belief of the underlying asset (same as the forex sell),  you Actually literally sell something).  In Forex you do Not get a payment for a “selling” a currency pair.

When you sell an option, you will actually instantly receive the limit price in your account.  

 

That would be buying abc/def currency pair at 107.468 and selling at at 107.348 as an example.  The one part we havnt considered yet is where we buy in at.  This one simple piece can make all the difference in you loosing or making moneu on a trade.  

WHERE DO YOU BUY IN AT?  The key to making money on these swing trades is to buy in right. In the Forex world buying “in the money” on a spread means to overlap the prices where you buy and sell your opening position.  Here below you see an example to make it clear.

 

 

So as you can see from the real spread position above, I entered the spread trade “in the money”, meaning I constructed my spread for optimal profit and probability of profit.  

IN THE MONEY;  In Forex entering a position in the money means buying at a higher price than your selling price.  As you see in the screenshot above, I bought a currency pair, and sold the same currency pair, “in the money”.  You can see that an in the money spread is truly in the money, meaning in the profit at the same time!  Both the buy and sell orders are Both in the profit at the same time.  This is a proper Spread.  Of course the further in the money you enter, the safer and more profitable it will be.  This can be easily done by using “limit” buy and sell orders.

Forex Trading; “dollar cost averaging”

You can trade with me HERE

Forex has many benefits over other investment vehicles.  Trades in Forex have their own set of rules.  By combining certain strategies used and modified in other securities they can be optimized for trading in the Forex market.  One thing that commonly is used and taught in securities trading is the concept of dollar cost averaging.  This is when you buy a security such as a stock, it goes down in price instead of up as you expected and you buy more to lower you overall cost per share.  An example would be: you buy 100 shares of xyz corp at $10 per share.  The price then drops to $9 per share and you buy another 100 shares.  By doing this you now average $9.5 per share.  If you bought at $10 per share and the price dropped to $5 and you bought another $100 your average cost would be $7.50 per share.  So the stock would only have to go back up to $7.50 for you to break even.  Even though you bout half of your stock at $10.  Anything now over $7.50 and you are in profit.  This is dollar cost averaging.

     This tactic is often used when purchasing many stocks and other investment vehicles.  Although this can be a great strategy for stocks, it doesnt work as well when used in Forex trading.  The reason that it can be a good strategy for stocks is because people use this when they plan on a buy and hold.  This is an important concept to make it work.  BUY;  normally when purchasing stocks they are bought and paid for.  You won’t get a margin call if the stock goes down if you pay for the stock.  HOLD;  normally the stock is purchased with the intent to keep them long term and hold them for either dividend payments and/or appreciation.

     Because Forex is completely differnt than stocks neither of these apply, and here is why.  When you enter a “buy” or “sell” position in Forex you dont really buy it.  You dont really “own” the currency that you “bought”.  You actually entered a trade comparing two currencies, betting on whether one currency will increase or decline in value vs. the other currency.  These are called “Pairs” or “Currency Pairs”.  This is a huge distinction because not actually owning a currency, but meerly owning a position leaves you open to actual losses.  This is what I mean;  if you purchased a stock or an actual currency say Google stock or the British Pound, then you will still have those and never owe money.  You already bought it and own it.  But in Forex trading you dont actually own a currency, you own a position “a bet or wager” on a pair of currrencies.  

     Lets say you bout British Pounds while traveling and held on to them.  It will never be worth $0 and you certainly couldnt owe anyone for having physical bills in your wallet or Pounds in your bank account.  The percieved value of that Pound may go up and down compared to other currencies in the world, but you still have the money, and you cant owe on it.  When trading currency pairs you can actually lose Everything, meaning the value of your position “investment” can be absolutely Worthless.  Even worse, you can actually lose money by owning it, ending up with a loss and a debit from your account.  If you deposited British pounds into your bank or brokerage account your balance would never go down.  If you bought “or sold” a currency pair with British pounds in your account you can actually owe the brokerage money!  If the pair you own against the Pound goes down, it will show a negative amount on your home screen.  

     The idea of holding a currency pair is not how it is done.  You enter a trade or position in a currency pair to unload as fast as it will move up or down.  We enter Forex trades for short term movements and gains.  For this reason the holding strategy doesnt work with Forex.  We buy and sell as fast as we possibly can.

     For these two reasons dollar cost averaging does not work with trading Forex pairs/positions.  Most of the time, as a general rule, the markets move in normal cycles.  There are swings of ups and downs and that is completely healthy and normal.  “Market corrections” “bubbles”, these all happen.  Its part of the industry.  So imagine you purchased Netflix shares at $25/share.  You bought 100 shares (for easy math purposes).  Your average cost is $25/share.  Then 2 months later they miss a projection and lose a contract and the stock plunges down to $15/share.  At this time if the fundamentals of the company and your opinion of its health and growth have not changed then you found the perfect opportunity to buy more “on sale”.  Great buy because you know its just a normal swing in the cycle and you got a great deal on another 100 shares.  Now your cost per share is $20!  Now when it goes back up to $25 you are already at 20% profit!

     However, if you bought a currency pair in the Forex market and the same movement happens, it could cause a Catastrphic chain of events!  If you are heavily leveraged (which most people are and do in Forex) you could lose your entire account from this one position owned.  This is why;  Lets say you built your $100 to $600 in your account.  Very nice job.  You enter a position in a Pair and it goes the wrong direction.  You think it will come back up (and it probably will), however time works against you in Forex.  If it falls too low before it comes up you lose it all.  Your position goes down and you will see a negative amount on your screen.  That negative number will keep increasing and you watch your margin shrink on screen.

 

 

 This may be only 1 of 12 trades or postions that you are in right now, but that one will bring the Entire house down.  When your negative number gets to a certain percentage the brokerage house will Automatically trigger a sale at that huge lose!  Yes.  And it get worse.  Now your other positions cannot sustain the low margin level because you just lost a huge portion of what was in your account.

 

This will cause Another auto trading trigger by your broker to sell off the next highest losing position in your account!  Giving you Another huge percentage lose.

 

Then it happens again!

 

And again!

 

Until Every position is sold at a loss.  Dollar cost averaging is Not the only way to trigger this chain of events in Forex, but it is the one that most fall victim to.

 

 

These are screenshots of this actually happening to a trader.  Eventually, (within hours) his entire account was sold off at a loss by his broker.  This investor managed to build $100 ito almost $1,000 in just over a month!  Then, in just a matter of hours he watched it ALL leave his account!

 

 

Once this chain of events happens there is little or Nothing you can do to stop it except make an Immediate deposit into the account to cover the negative margin level until the Pair turns the other direction!

 

As you can see, the free margin is in the negative, which means that you cannot make Any more trades.  If you had free margin left you could possibly make a quick profitable trade to increase the margin ration to stop an auto sale.  But as you see here, dollar cost averaging kills that option.

 

The currency Pair kept dropping in value and when the Free Margin level became a higher dollar amount than the Equity, the auto sales triggered!  One by one, in a matter of minutes now the investor lost his Entire account balance!

 

Lets look at why most fall into this trap.  As you see in the screen shots below that this investor did many trades on the Peso Pair.  It was running up and down and he was catching the waves of volatility.  

 

 

He had money both when it went up and down.  Goes up he keeps making money.

 

 

He made money when it went down.

 

 

He kept making money when it went down, believing it would always go back up before the margin threshold was hit.

 

 

So still believing that it would again come back up, he tried to dollar cost average (greed in Forex) and make extra money on the way back up.  However it did not turn upwards in time and his account was Completely emptied by auto trades triggered, forced on him by the brokerage house.

     In just a few minutes he watched weeks of work building his $100 into almost $1,000 shrink to $.59 in his account.

 

Start your profits coming today!  Click HERE to begin making your money work for You!

 

 

 

 

A Wealth of Ignorance

A Wealth of Ignorance;  Why the rich get richer

 

 

“Ignorance is Not bliss, in finances ignorance causes poverty!”  Tony Robbins

 

There isnt a one of us out here that haven’t received money advice from a friend, co-worker, book, boss, etc.  The amount information or misinformation thrown at us about money is astonishing!  

     One of the top 3 peices of advice I have received in my life came while I was in Malaysia.  I was there with a good friend of mine, a self made Millionaire.  We were driving in his car through the capital of Kuala Lumpur on the way to a business meeting near KLCC (the Twin Towers).  I was young and excited to be around him and his colleagues.  In an attempt to participate in his circle I told him about a great business idea an aquantence of mine had, it was a Million dollar idea!  As I was giving him the overview, he stopped me in mid-sentence.  He interrupted and asked me a question; “how much money does your friend make” he asked.  I replied that he made over $150,000 a year.  He then looked at me and said, if your friend knew how to make a Million dollars, he would be a Millionaire.  He then went on to explain to me about advice and mentors.  He told me that if I wanted to make $150K/year that my friend could certainly tell me how to do that, but he doesnt know how to make a Million dollars a year.  He then cautioned me about taking advice from people who have not done it already, and people who are not where you want to be.  He advised me to seek out counsil and advice from educated, experienced, and proven men.  

     This conversation drastically changed my life forever.  From that point onward I saught out advice from those who have already accomplished what I am trying to do.  Talk about a shortcut.  A surefire way to the top as fast as you can go.   Learn from the mistakes of others, and follow the proven formulas for success in whatever category of your life that is.  Of course this is not to say that common people in our lives have nothing to offer.  They may indeed have some great ideas; however actual implimentation of those ideas into monetary success are two different things.

     I have said this for years:  “Wall Street University is the most expensive education that you can buy”.  

The sheer percentage of people who lose money in the markets is astounding!  Your odds of actually making a profit trading securities to any mesure of real useable equity growth is extremely low.  By this I am saying that most people will lose money trading securities.  Those who do manage to make money do not make an amount that could make them a living or provide for a secure future.  There ARE people who make money in investments as a living.  They are very few in comparison.  If you wish to enter the world of investments and securities, do not waste your money paying Wall Street University tuition, learn from those who actually make enough money to produce the same results you are looking for.  

     Much of the “investment” and advice we get on money is stemmed from our Great Depression.  People still dont trust banks, how many times have you heard saying such as “rich people are greedy” “save your money” “the rich keep getting richer and we just get poorer” “start a savings” and the plethora of other sayings that we have heard from childhood?  These sayings are all stated by people in our lives that really dont have money.  “Money is the root of all evil”.  “money cant buy happiness”.

     The world is full of accomplishers.  People who have realized their goals and dreams.  Those who have found the path to success.  We Do Not need to reinvent the wheel.  Invention is wonderful and that is how progress is made.  But most of us are not at that point in our lives.  We are not going to change the world with our innovative ideas until we have gotten our lives and fincances to a point where we can actually impliment those ideas and make them reality.  

     Focus on gaining wealth first.  Do this by following the patterns and practices of those who have gone before you and found the way.  If a trader isnt making money in real time, dont follow his advice.  If an investor isn’t performing at the top of his game dont mimic him.  

     “it takes money to make money”.  How many times have we heard that.  I have another write up on this, but sufice it to say for now that that is what poor people say.  The truth is investing is about making your money work.  The majority of people in this world work for their money.  Sell their time for an hourly rate.  The wealthy make their money work for them.  And they do that through proper investments and strategies.

     Follow me on Instagram @droneprecisionstrategies for real time trading and money making.  Watch it happen live!  You can trade and make money with me HERE.

Meeting with Business and Investment power houses!

J.T. Fox and I in Chicago

 

India’s elite, business meeting in Chennai India.

Dr. Adam Alwardi and I, signing books.  Not only is he an MD, he is also the owner of a successful Real Estate company.

 

Neil Strauss and I in Las Vegas, teaching an advanced class to “the Society”

 

 

Business battle uniform

 

 

 

 

 

Tactics and Preparedness Magazine article; Alternative protein sources series by Kelly Alwood

December 2016

Tactics and Preparedness Magazine

 

 

 

Get the magazine HERE now!

Kelly Alwood article on Alternative meat sources; part 1. Tactics and Preparedness Magazine

This is the first article in a series about acquiring and processing alternative meat and protein sources for survival.

 

TPjune16-rat-cover

 

TPjune16-rat-pg1

TPjune16-rat-pg 2

 

This is a great magazine and I highly recommend that you click HERE now and subscribe so you get every article!

You can also find my book HERE.  Get it today on Amazon

 

American Survival Guide Magazine; Special Edition by Kelly Alwood

What an amazing issue of American Survival Guide Magazine.

This issue is packed with ruck sacks of knowledge from absolute experts in their fields.

USG Cover

 

usg p1

 

USG p2

 

USG p3

 

USG p4

 

Many retail stores carry this including Walmart and Barnes and Noble.

Pick yours up today, and you can subscribe at the link below.

You can subscribe to the magazine HERE

The only other magazine I recommend you subscribe to is Tactics and Preparedness magazine found HERE

 

Womens Saftey VS Fashion

This weekend I was speaking with a mental health clinician.  She was young (mid 20’s), and petite.  Her job is home visits and other transport and meetings with clients.  She was telling me about two of her new clients that were assigned her.  She told of how one of them touched her, and told her they should “hook up”.  The other client calls and texts her and stalks her, on Facebook and other social media.

IMG_5971

In the daily task of her job she must meet alone with clients, most of which are males, and all of which have a mental illness.  She expressed concern over the physical threat that she faces every day. I suggested several options, and this is where it became interesting to me.  All of her objections were based on her clothing.  How she looked.

As with most women now a days, they were tight fitting clothes.  Yes ladies you look good, and men like to see it.  Men like yoga pants and tight shirts, low cut blouses etc.  So this much you have accomplished.  You want to look good, be seen and admired.  But at what cost?  At what point do you evaluate your whole lifestyle and come up with some sort of compromise.  One of my suggestions was OC spray.  She explained to me that with her tight fitting shirt and pants, that it would “bulge out and look like a tumor”.  The same responce when asked about a gun, stun gun, and knife.  For the purpose of this discussion we are going to completely ignor the topic of training.  What we are looking at here is a womans decision that fashion over safety is acceptable.

My suggestion was very simple, adapt your clothing to accomodate some form of protection.  This young lady is at high risk of physical assault every day, and yet she would rather have “that look” than compromise even a little to provide any form of protection for herself.  This was very interesting to me psychologically.  She completely understands the risk, and is not willing to adapt to overcome it.

Now we look at other women.  The “average woman”.  Lets define her as someone who’s daily job does not directly involve a high risk of physical assault.  The statistics show that a woman is raped every 65 seconds in the United States.  That does Not include physical assaults (battery, robbery, abuse, etc).  The risk of physical assault on women is quite high.  This is 2016 and violence against women is not getting any better.  When you look around the streets, mall, shopping centers, sidewalks, etc, what you see is women with no protection.  Most have placed fashion over personal safety.

It is not the womans fault for being assaulted.  Lets make that clear.  But lets also make clear the threat that women face every day, no matter what there job or where they live.  I often here comments from women that “I’m always aware of my surroundings”  “I never do this or that”.  But the facts and statistics show that women are being victimized every day at an extremely high rate.

I deal with victims literally every day.  I would guess 98% of them all said the same thing.  That they “never imagined it would happen to them, and they never thought that person would do that”.  The other 2% are the ones that stay in a physically abusive relationship and completly expect it over and over.  But most women do not expect to be hurt today.

Women need to have a form of protection on them at all times and in all places.  (the obvious excluded; court houses, etc.)  The issue is, that women want to be admired, looked at and wanted.  Women like personal notice and attention.  However the savages in our society notice these women first, and target them for those same reasons.  Again, I will reiterate that it is not the womans fault for looking attractive and being attacked.  I’m simply stating that this is the paradigm.

In todays society, women need more than “street smarts”, friends, and awareness to be safe on our streets.  Although these and many other things can contribute to lower your chances of assault, it does not eliminate it.  Can women find a solution that fits their desires and lifestyle and have protection too?  I believe they can.  It is just a matter of making a personal decision to do so.

Men also have a simular issue.  Men will do things and intentionally put themselves into dangerous situations.  Men like the “rush”.  Whether it be fighting at the bar, skydiving, or driving crazy, men also willingly compromise their saftey at will.

There is a part in each of our brains that will at times take over logic and deminish out decision making abilities.  We should all be aware of this, and do a manual override on it when we notice it.  When that little voice in your head says “dont do it”, its most likely the logical part of your brain warning you.

IMG_3006

 

For gun training at home, click HERE ladies.

To never be manipulated again, click HERE

Feature article; Tactics and Preparedness Magazine AR-15 Hunting

This is one great magazine.  I highly recommend that you subscribe and read it every month.  Every issue is packed with topics you love, with tons of great pictures, by guys who really know their stuff.

This month we look at using our combat weapon as a practical preparedness and survival tool as well.

 

 

TParhunt-cover-alwood

 

TPapr16-hunt2-alwood

TPapr16-hunt3-alwood

TPapr16-hunt4-alwood

Subcribe to the magazine HERE

Follow me on twitter @kellyalwood

Subscribe to my Youtube Channel for great videos covering tons of Man topics.