NeverLossTrading

Prior to answering this key question, let us clarify the difference between a trader and an investor: From a top-down perspective, there are many elements where both do the same: Participating in the financial markets with assets like stocks, commodities, currencies, treasuries and their derivatives: Futures and options. However, there are behavior differences, where the action of the one is very different to the other: The investor usually takes a longer-term perspective and mostly only makes money when an asset bought, increases in market value. A trader focuses on participating in the short-term price moves of assets and mostly uses methods and trading instruments, which allow making money when prices move up or down. Successful traders and investors manage the following challenges: Challenge-1: Finding assets with a future perspective price move. Challenge-2: Applying a method of protecting profits. Challenge-3: Managing risk. Given the circumstances that some assets have price developments: With-, separate from, or against the markets, makes Finding Assets with a price move potential a key challenge. When those are found, the second challenge is to define how far their price move will reach to realize profits or find forms of protection prior to a potential reversal price move. In general, there are two basic methods to identify trade- or investment potentials: Fundamental Analysis: Where you equate financial and other business factors of an observed asset to decide for its future perspective. This is the arena of smart people working for the big investment firms, constantly analyzing the world’s markets and finding assets to invest in. As a private investor; however, if we try to replicate the same; we are facing a hard time in keeping up with the information base and point of view of institutional investors. Their managers have contact to the world leaders of business and politics and use pre-information constantly to their benefit. Technical Analysis: If applied right, a sound chart analysis helps you to spot and follow the action of institutional money moves with a trading system which equates the happening in price, volume and volatility for identifying asset in supply or demand, for you to trade along with the referring price moves. Given the magnitude of more than 40,000 investment instruments in the US-markets only, you might want to find a service, helping you to identify assets with institutional attention, fundamentally or technically. Protecting Profits The equation to consider is: Protecting Profits = Making Profits. A common saying is: “You trade with the trend until it comes to an end”. However, there are two fundamentally different ways of making and keeping profits: Way-1: You find a systematic to trail a critical price level along with the price move of an asset and when the price direction reverses to this level, you either exit your trade or you apply a method of profit protection against a potential counter price move. Way-2: You define positive trade exit price levels by equating the minimum and maximum expected price move from trade entry. When those critical price levels are reached, you either exit or you apply a form of protection to assure that the gains you made cannot disappear from your account. Check the graphics below for examples: Trail Your Stop (Way-1) Approximate Min and Max Price Expansion (Way-2) Managing Risk Managing risk builds the foundation for successful trading or investing. Only when you are able to prevent major draw downs in your trading/investing account, you will be suited for staying long-term in the trading/investing business. If the foundation of your trading system/plan is not standing on solid ground, your temple of success will quickly fall: Always be aware that there is no risk-free trade and the higher you put your return expectation, the higher the risk will be to accept a trade or investment. At the end of the day, a million dollars is a million dollars; however, if you are able to build up a trading plan, where you keep a constant low risk, while producing constant returns from multiple trades, you are better on than aiming for a onetime high return with an associated high risk: Imagine a trader with a $20,000 account, if he aims for a onetime return $10,000 and an associated risk of $10,000. When he fails, 50% of the account holdings are gone and the trader needs a 100% return on the remaining capital to just breakeven. Instead, if he is striving for a $1,000 return/trade with an associated risk of $1,000, he has a much higher probability to being long-term successful, as long as he constantly finds and trades assets with high-probability trade setups. The key question arises: How to define an appropriate risk in relation to the considered return? Our recommendation is to consider two risk levels: The minimum risk is the one you need to accept to allow for a price move in the desired direction, considering the natural price distribution of the asset to trade: Finding this price level prevents that you will be stopped out even so the price moves in your desired direction. If you continuously experience being stopped out and afterwards you see the price taking off, your risk tolerance was too narrow. Best is when a computer programs measure the statistical volatility of an asset at the time to trade, giving you a clear-cut approximation, where to put the stop- or trade adjustment level. Aside from this, you can surely pick a major support or resistance level where the price haltered in the past, at which your base hypothesis of the directional price move will no more have validation when it is surpassed. In addition to the minimum risk, you need to decide for a maximum risk to allow for accepting a trade, with the implication: When the maximum risk level is touched, a trade adjustment is necessary, which can be released or enforced, depending on the continuation of the price development. If your experience from the past was: Small gains, small gains and big losses, your risk tolerance was too wide and you face the danger to drain your account by either having no trade adjustment or stop level or an inappropriately wide risk tolerance, which is not in relation to the potential reward of the trade you entered. For any trader, if the relation from the maximum risk to the expected return is not in your favor, just do not accept the trade. Price levels, where the prices remained for a longer period in the past, can be used to define maximum risk levels. However, you can also help yourself finding those levels by letting your computer build the associated volume-price-relations, so you can see on the chart where the critical price levels are. Prepare for your trading success by installing the elements of asset selection, profit protection and risk management. The knowledge how to apply those instruments to your benefits is not widely accessible, however with the help of this article, you can check and balance where you stand today and how you can create your trading future by gaining the necessary knowledge and obtaining the referring instruments, helping you to develop yourself into the trader or investor you want to be.

There are different interpretations of success, reaching form “participation is everything” to attainment of wealth and fame. Let us take the same range of interpretation for trading/investing then it would read as follows: “Success is making money” to “success is attaining wealth”. Trading is a professional business and professional attainment is measured on score cards. Fund managers performance for example is measured in how close the fund performs to the referring index. For funds, which relate to large caps or the overall stock market, the S&P 500 index is generally used as the base line. If you want to do the same as a private investor, take SPY: The ETF of the S&P 500, which has a year-to-date-November-2013 performance of 27% growth. If your trading/investing account grew with the same rate of return, you met the index. In case you run on a lower return rate, you are in good company, because most of the fund managers: Mutual Funds, Exchange Traded Funds, Hedge Funds are not achieving the average fund performance either; only a small number of funds is beating the S&P 500, where the best in class run at double the return rate of the S&P 500 (We will report separately in giving you a detailed overview on Hedge- and Investment Fund performance). Let us take a look at the top 10 stocks of the S&P 500 and their year-to-date-November performance: 1 Exxon Mobil Corporation Common (XOM): 8.0% 2 Apple Inc. (AAPL): -1.1% 3 Microsoft Corporation (MSFT): 42.6% 4 Johnson & Johnson Common Stock (JNJ): 32.2% 5 General Electric Company Common (GE): 25.8% 6 Google Inc. (GOOG): 43.7% 7 Chevron Corporation Common Stock (CVX): 10.8% 8 Procter & Gamble Company (PG): 21.6% 9 Berkshire Hathaway Inc. Class B (BRK.B): 24.2% 10 Wells Fargo & Company Common Stock (WFC): 26.0% The results show that we have a wide spread of developments, reaching from -1.1% (AAPL) to +43.7% (GOOG), with an average performance of the top 10 stock at a return rate of 23.4%. Take a look at the Berkshire Hathaway Fund performance in relation to the S&P 500: -2.8%, which would be seen as an average good performance for fund managers. However, had you bought SPY-shares, you would have been better on. How can you do better than average and most important, how will you be able to produce wealth, when the markets might not give such a positive development in 2014? You need a trading or investing system, which shall give you the following: Seven Critical Elements of a Trading Flexibility to trade/invest in various assets. Why various assets? In case stocks halter, institutional money might flow into assets like commodities, currencies, treasuries and you should be prepared to participate in institutional money moves when they happen. A system, which lets you produce income if the markets move up, down or sideways. In average, markets drop with three to five times the speed they grow. Hence, you should be ready for applying short trading strategies applicable to all kind of account holdings: IRA, 401(k), Cash, Custodian, and Margin. Clearly defined entries and exits: Institutional money is moving the markets and institutions leave their trace of directional intends. With the right trading system on hand, you can spot and trade along with those actions. Focus on spotting and trading along with institutional money moves, produce constant income and reinvestment. Such method makes you independent from picking the right stocks with long term growth. Imagine, you were able to win two out of three trades, with an average trade duration of four days, aiming for a 1.5% return/trade, making income to the up- or downside; then you are striving for an annual return of 62%, regardless of the directions the market take. If you can apply this method successfully, you will beat the best hedge fund managers of the world by far. Risk management: Professional traders have clear guidelines of how they act. As a private investor/trader, you need the same: Define the odds ratio for every trade and adjust the lot size of your investments to hedge and leverage your positions accordingly. Have trade repair strategies in place, helping you to turn potential losers into winners for all account types. Have a method to spot key assets on the move. Never fall in love with a stock or asset. No stock has to grow. The performance of an asset is the result of supply and demand. Apply a system which helps you to visualize when changes in supply and demand occur in an asset and be part of the directional move. [*]Journal your performance to see where you do well and where you have needs for improvement. Pros of every genre: Sports, theater, movies, trading, do this and you need to do the same to strive for constant improvement and long-term trading success. Clear cut documentation for every trade situation and asset, so you can always go back to the drawing board for revisions. Hence, please consider: Those who fail to prepare, prepare to fail. Good trading. Thomas

Identifying and trading along with institutional money moves works for all asset classes: Stocks, Commodities, Currencies, and Treasuries. In this article, we focus on stocks. Who are institutional investors and what is their core focus? Table 1: Key Institutional Investors Table-1 shows: “Prop Traders” also act as “Liquidity Providers”: On one hand, some institutions trade their own money and on the other hand, they are providing liquidity. Hence, if a core “Prop Trading Company” wants to accumulate or dispose stocks, they have to bypass their key competitors. Even so, they try to hide their actions, the other market forces spot what is going on and trade along with it – and you can do the same. Graphic 1: GOOG – Spot Institutional Money Moves Table 2: Spot Institutional Money Moves The highlighted trade situations on the chart identify that: Price consolidation is going hand in hand with decreasing volumes. Price expansions to the up- or downside is going hand in hand with increasing or collapsing volume. Putting it all together provides you a chart-based strategy to trade right at the highlighted instances: With the direction of the price range breakout. With the Gap. With a Strong Directional Candle. Graphic-2: AAPL Trading Institutional Price Moves Over the years, we developed multiple indicators and studies, which highlight institutional price moves by spelling out potential trade entries and exits. For an example, please check: http://www.neverlosstrading.com/Top_Line.html After we clarified when to initiate a trade, the next question is which stocks to trade? To follow institutional price moves, pick stocks which are widely held by multiple institutions. When you select the S&P 100 and the NASDAQ 100, you already found the core of the trading opportunities. Each of those stocks is held in most mutual funds and by multiple institutional investors. The next challenge is to find trading opportunities. We developed special scanning programs; however, you can find tradable stocks by picking those with a stronger price move than the referring index: For the S&P 100 choose OEX. For the NASDAQ 100 choose QQQ. Stocks to trade are those with an above or below the comparison index price-moves. With the NeverLossTrading mentorships, students will receive daily reports on trading opportunities. If you want to be part of some specific reports, please sign up with our free report link…click here. To be a successful private investor, the skills and experience for being able to make money when the markets go up and down is essential. When a major price move occurs, expect to trade one direction for no more than 10 trading days and after that expect a reversal. If you want to catch a longer trend trade, trail your stop: To the upside: Below the low of the prior candle. To the downside: Above the high of the prior candle. Why is an institutional follower strategy successful? Private investors have the advantage of speed: They can enter and exit entire positions, while Institutions need a longer time to get in and out of a position by sheer size and SEC (Security Exchange Commission) regulations. By the smaller size, you have an easier way to leverage and hedge trading positions. With a short- rather than long-term strategy, money can be made on up- or down-moves. Short-term trading allows for constantly generating and compounding interest, which gives you accelerating returns. With modern technology on hand and competitive commissions, the private investor can access all markets real time, similar to institutions.

@ZDO: The "Purple Zone" is a very strong indicator and works for me and other traders twofold: 1. Alarms that an underlying entered into a congested area where counter price moves can be expected: Already this helps a lot of NeverLossTraders to: Stay out of trades, when it is dangerous to be in. Or you take protective measures when you stay in a trade. 2. At the end of the "Purple Zone", It alarms you for a directional trading opportunity, - if one exists -, with a clearly spelled out price threshold and a defined target move. The indicator provides a 80% accuracy and beats everything else I have seen in the markets so far. If you just trade the end of "Purple Zone" indicator for what we call 1-2 Speed Units, you have a very powerful trading system on hand, while it part of packages with other indicators which provide more directional trading opportunities. Hence, you are ahead of the game and not a retrospect master with the NLT Purple Zone indicator.

Just came across this posting. With the "Purple Zone" indicator used in NeverLossTrading, you have the opportunity to spot when a sideways move is initiated. The challenge is: How long will it last. Hence, we mostly propose to beginners, not to trade in a "Purple Zone". Surely, we also provide advanced trading strategies, which allow trading inside the "Purple Zone". Check out our posting at traderslaboratory: How Do You Know In Advance That The Market Moves Sideways? - TL - 14817

The Purple Zone is just one indicator in the NeverLossTrading concept and tells the trader that a time is reached where indecision increases the risk of trading. There are multiple other clearly spelled out trade entries and exits to share. When counter trend trading is a concept, which makes you successful, it would be interesting to read how you define, when a counter trend activity approaches. NeverLossTrading signals are taken from different measures, looking at momentum changes, price trend distribution, price-volume moves, volatility changes and I could go on and will be delighted reading how you measure that a counter trend trade activity is on the horizon and how you specify your trad entry and exit.

@RoBik: You might want to read the article again. The moment a "Purple Zone" opens, you are aware of it as a trader and you can expect counter trade activities and staying out of a trade as long as the "Purple Zone" continues is a meaningful measure. The key is, we do not know for how many candles the "Purple Zone' will last, when the indicator triggers the sign of indecision, however, when the zone ends and specific conditions are met, you will receive a directional trade proposal, to trade along with.

Looking at a chart, you always know in retrospect that prices moved sideways, but how to know in advance? In the NeverLossTrading concept, we integrated a study, which measures changes in implied volatility and informs the trader by painting a "Purple Zone" on the chart, indicating, that the price/volume development of a share has reached this critical stage of consolidation. Then, we either apply short term sideways strategies, or wait for the breakout signal, to trade along with the direction after the breakout. In the “Purple Zone”, we find little directional movement with various counter price trend activities until a breakout to the up- or downside occurs. To support the visibility of such price development, we shade the price chart for the time-period purple and produce a very powerful indicator, signifying: Apply short term sideways strategies, with limited risk or do not to initiate trades when the Purple Zone continues, by not knowing when it ends and in which direction prices might breakout. rend-trade when the Purple Zone is over, if the first candle outside the Purple Zone shows an arrow pointing to the trade direction: o Purple Arrow: To the upside o Purple Arrow: To the downside. GE Breakout After a Purple Zone At times we get asked why the zone is purple? The answer is: It marks a time-zone of indecision where the market forces negotiate until an upside or downside price-move concludes the decision making process. The color purple is achieved by mixing red (down-color) and blue (up-color). For the beginning financial market investor, the best is not to trade in the “Purple Zone”, but right after, when a trend is established. More advanced traders gauge the price range in the zone and take trades already at the first break out. By being aware that even light-tower-candles that occur can quickly be reverted while the “Purple Zone Indicator” is present. If we are in a trade that enters a “Direction Change Zone”, we either exit the trade or adjust the range for the stop not to be taken out by radical price movements. If we are unwilling to accept additional risk and still want to stay in the trade, the stop line (red line) of the Double-Decker at entry into the “Purple Zone” builds the point where we put our stop. A directional arrow after the Purple Zone identifies a high probable trade entry. If there is no arrow on the first candle after the Purple Zone, the study recommends not to enter into a directional trade. The best trade entry for a trend trade is two ticks above/below the trade proposal painted on the chart. The same functionality applies for Intra-Day- and Swing-Trading Charts. After our new software update, we are now allowing in the NLT-Purple-Zone-Indicator to put a computer generated price proposal at the end of the Purple Zone arrow: SPY, ETF of S&P 500 Index Signifying the Overall Market Move The trade direction-pointing arrow after the Purple Zone now resides on the price level of the cloud and identifies the new price direction to trade. The width of the cloud can be adjusted from the factory setting of 2 to a higher or lower level: If the level is set to zero, the Purple Zone Cloud disappears. If it is set to 1, it narrows the width of the cloud. A setting above 2 widens the cloud setting. Further: The alert sound and the end of Purple Zone alert can be set to individual preferences. Additional Switch Functions: - If you want the computer generated trade proposal, set the switch on “Yes”. - To receive a sound alert, when the End-of-Purple-Zone -Indicator is triggered, put the switch on “Yes”. The “Purple Zone Indicator” is an integral part of our software package. See, how you can integrate it in your trading. We offer four mentorship programs, geared to the need of the individual Investor: NLT Top-Line, for the Independent investor, where we install real-time analysis software. NLT HF-Stock-Trading: For frequent traders, able to trade the markets every day. NLT Wealth Building: If you are trading two times a week/month. NLT Income Generating: For day-trading futures and options.