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Capital raising for the masses

by Trading Pal on 23 May 2017 permalink
Crowd funding is a new phenomenon in cyberspace at the cross-roads of social media and equity markets.

Raising funds for a small business was an anathema. You either borrowed funds from your bank manager or a local solicitor. Today people seek funding for all sorts of ventures like a music festival, a movie, a video game, a technical innovation.

There are two funding models: All Or Nothing and Keep It All. In the first all monies are returned to investors if the targeted amount is not reached by the deadline. In the later, the onus is on the entrepreneur to return funds to investors or carry on the project with whatever was raised.

The promoting website is the only one with a stable business model if you allow me to be circumspect. They don't offer any endorsements or guarantees as to what gets promoted on their pages but they levy a percentage tax on all donations transacted through them.

The amazing thing is that you see lots of hype about fashion, entertainment, technology but few brick and mortar businesses like your local garage, an independent corner store or a cheese manufacturer.

So what does the future holds? The monopoly of long established equity markets is under threat. The recent annual report of the ASX (Australian Stock Exchange) makes sober reading in the face of CFD trading (contracts for difference) and the growth of dark pools and HFT (high frequency trading).

So it looks like the big players are going to do their own thing anyway. They are a law unto themselves, transcending national boundaries and regulators.

When you have a business idea you would go for seed money or angel funding. As opposed to venture capital these involve much smaller amounts (up to $50,000) and seek active participation in the new start-up business. Many are searching high and low for the next facebook to emerge and you have to kiss many frogs to find Prince Charming.

The emphasis is not on creating employment for those who need it the most. Instead it is for going after the latest fads. A new app for mobile phones which will be so compelling that its distribution will reach a viral effect. It is free to download to gain instant market share and carries a payload of advertisements for all those who will join on the band wagon. It does not offer any intrinsic value until users realise that they have been duped and the cycle repeats itself.


Gamblers, Speculators and Investors

by Trading Pal on 16 May 2017 permalink
Gamblers rarely see themselves as gamblers nor would they want their spouse to know what they are really doing. If there are some winners in the market there must also be some losers and I am afraid gamblers make the bulk of it. They compound their misfortune by trading with borrowed money rather than some set-aside capital they can afford to loose if it comes to that. They are attracted to the market for all the wrong motives and supply the grapevine with reasons why you should not be trading. They have no discipline no patience and no accountability. They have no notion of a calculated risk and do not take a break to regather themselves after a loss. Instead they try to make up for it by trading double the original quantity. Their demise is deserved. They suffer from a psychological addiction which blinds them to the consequences of bankruptcy to themselves and their family if they still have one.

Speculators are savvy traders who have a nosy interest in the market. They like to uncover profitable patterns and only trust what they have observed after some long and meticulous research. They use math and charting to document their findings but unlike specialists who know it all but never trade speculators take trades every day as a matter of personal discipline. They learn to take losses in their stride knowing that the next gain is just around the corner if they keep trading and maintain their safeguards. Speculators tend to trade commodities, forex and indices which cannot be manipulated by a single large player. Speculators are predominantly short term and use technical analysis.

Investors are in for the long term and use mainly fundamental analysis. They have a vested interest and inside knowledge of a given industry. They know the main players in the game and keep themselves informed of anything that might impact their industry. Investors tend to trade stocks of all capitalisation. They might know that so and so has been appointed to the board of directors of some unnoticed company and vote with an order for a bundle of shares. Investors are experts at sifting through information. In fact recent scandals have highlighted the fact that what you know and what you do with that information can make you a fortune. Insider trading is hard to quantify, hard to prosecute and hard to expose. Retail investors are in danger of being duped by insiders and recriminations are the norm at company annual general meetings. Share options and the plethora of new weird and wonderful share issues muddy the waters for newcomers.

Find out more at Trading Pal


Are You Miffed by Trading Myths?

by Trading Pal on 09 May 2017 permalink
In this information age where all the facts are available the behaviour of a crowd should be rational. Well, economists deserve the lack of respect they are getting because they fail to grasp that crowds are impulsive. The more a trader trades the higher the danger of being over-confident.

People fall in love with the stocks they are holding. As a result they discount any negative information but seek any confirmation that they have done the right thing.

People buy high and sell low when they should be doing the opposite. Of course people will explain their behaviour by saying that if they bought a somewhat high price there is enough momentum to sell higher. This will work in a bubble situation and reinforce bad habits at the same time. You could call that the greater fool method where as long as you can find someone more crazy than you it will justify your action.

The motivators here of course are greed and fear. Greed of missing out on a good move while you have no idea how close to the top you really are. Fear of a paper loss turning into a debacle while at the same time savvy investors are buying the very stock you are getting rid of in a fire sale. Two years later, not only it regained your entry price but added 50% growth to that.

Applying good statistical concepts to a small sample is another trap. Just like the random flip of a coin will give an equal number of heads and tails, rises and falls in the market seem to follow evenly. But if you rush to apply this to a small timeframe you are being over-confident. There could be 10 heads in a row in a coin flip experiment and over 500 attempts it is irrelevant. Likewise the market has a fractal nature and there are rises and falls within larger rises and falls. Don't think the market will do you a favour by behaving as you want just because you have a vested interest which colours your perception of things.

People develop a pet formula out of random reinforcement. The mind is quick at working out a correlation between random events. If you made a profit out of two companies in Australia you are going to seek other Australian stocks and become an expert in down under issues. Little did you know that the fact your first two Australian wins were a fluke and it went downhill from there. There was no connection there. The company names might have started with letter B or the CEOs might both be over 6 feet in height!

One thing you can do is to compare your performance with an automated trading system and see how you can improve your skills. For such a system check out Trading Pal


Common Ways to Invest to Earn Money Quickly

by Trading Pal on 02 May 2017 permalink
Just like you can't hurry up the growth of a plant or animal without side-effects, the return on investments is a function of time. The more work you put in, the more results. Nothing happens by chance. But what about those who win the lottery?

That would be the perfect example of a load of cash for next to no effort with instant results - the time gap between you buying the ticket and the publication of the draw. But how reliable is that? Some addicted gamblers have bought tickets all their life and are still betting on it for their retirement. It's amazing what you can get people to do with the right propaganda. Some obviously think they are not paying enough taxes.

Lottery is akin to gambling. The illusion of massive returns for no effort. Lotteries are very sound businesses for casinos and government coffers hence their existence. They produce absolutely no value for the economy but generate social problems which beset the poor and vulnerable. Lotteries would disappear into oblivion if it wasn't for the massive exposure they are getting. The stark truth is that many winners are broke within 5 years because they didn't have the mindset to use their gain wisely. Statistically there is as much chance of you winning the big draw as you being zapped by lightening.

The more hands on you are with your investment the more control you have and the more returns you will get. You need to train yourself to be the nosey type who can suss out opportunities. Do you know that some businesses do as much turnover in the two months leading to Christmas than during the rest of the year? There you have it. Hire a stall in a shopping mall and move merchandise with the help of family members.

By now you have noticed that it's all about doing the right thing at the right time, at the right place. The reason so many investments go awry is that people don't do their homework and trust blindly a manager to look after their money for them. The issue is why should you get a free ride on some investment while someone else is doing all the work and carrying all the risk? The stock market was supposed to be the trading exchange to connect all interested parties. Unfortunately is has become the den of robbers where sheep are being fleeced.

Now let's have a look at another law at work: The more you give, the more you receive. Once you find a worthy cause to mobilise your time and resources you will find yourself empowered to do more. Go and find a cause that really turns you on the inside and throw your weight behind it. It is a biblical law and it works for Christians and non Christians alike because God looks at the attitude of the heart.

If the stock market interests you check out http://tradingpal.info an automated trading system which you can use to compare against your own performance.

To find out more about Christian values check out http://witness4christ.net


Safe Ways to Invest Money With Fewer Risks

by Trading Pal on 25 Apr 2017 permalink
Buy yourself a safe and charge yourself $10 each time you open it to count what's inside. Seriously, can you really get around the correlation between risks and returns?

The concept that you can get your money to go out and work on its own is called investing. But maybe your money might feel abandoned and would like your company instead, rather than working with strangers.

We live in a mindset where few people are in business for themselves. The majority work their guts out to make some corporation rich and they demand high returns for the savings that cost them so much blood sweat and tears.

It wasn't always like that. Since we have moved from an agricultural age to an industrial age and then onto an information and now entertainment age we need to go back to the basics and see unshakable laws at work.

The safe investment with fewer risks is when you have a hands-on approach to investing. Why would you trust some glossy prospectus to park your money to work on dubious ethical ventures? This is a cop-out and you deserve to be fleeced for believing a falsehood.

It's your money. You need to take charge and be responsible for it. Maybe the root of the discomfort is that you do not have clearly defined goals - both short term and long term. Even taking a holiday could be a very productive investment if it opened your mind to find out what you really want to do with your life and set aside resources for you to get there.

Setting goals will force you to investigate issues that really resonate with you and will give a meaning to everything that you do. Your research will lead you to solve problems where you have to give out of your substance - both time and money. You and your money working together - what a beautiful partnership!

One of the obvious long term investments people will ever make is real-estate. But unless you are quite clear about what you want to achieve and who with, you will never know what sort of accommodation/business abode you really need and in which part of town.

What maybe a sound safe investment for some might be very risky for others who lack the connections and the industry background. Say you worked all your life in the mining industry. Picking speculative stocks of oil exploration companies might be a clincher for you because you know the background of most of the directors on the board and you trust their experience. Someone else might be fooled by some fake new venture just setup by a creative broker to "pump and dump" on the stockmarket.


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