Trade Money Management
Here come the non-glamorous hard working nuts and bolts of trading, trade money management but none the less important.How to manage your risk.You see it does not matter how perfect you think your strategy is at some point in time it is going to go wrong. “Not mine” you might be saying to yourself. You might think that you have the perfect system that no one has ever thought of before. You might have back tested it till the cows come home and traded a demo account for months. It works, It works, It works! Oh and by the way you might think it’s new but you can bet your bottom dollar somebody somewhere has thought of it before.So you start live with your own hard earned cash. At first all looks great but then some sad day it doesn’t. It all goes wrong and that last trade was enough to wipe out all your previous gains and then some.If you do not have your trade money management in place you might win 9 out of 10 trades but the 10th trade will lose you more than the previous 9 winning trades. I see it happen all to many times. There are three things you need to be thinking about and we will be covering them all here soon. What happens when my strategy goes wrong?Having a stop order is an important yet simple way to make sure you do not over expose yourself to the market. We will never go into a trade thinking it will go against you but there will always be a time when it does. So our advice will always be “remember to place your stop loss orders” They will get you out of so much trouble, protect your capital and give you peace of mind. So it’s worth saying again “place those stop orders at the time of placing your trades”.There are three types of stop order that you might think about.1. The normal stop
2. The guaranteed stop
3. The trailing stopAll three have them plus point and depending how you look at things will depend on which one will be right for you. Let’s take a look at what the differences are.The normal stop:When you place your trade the stop will be a point on the chart where you have planned to close out of the trade, therefore risking no more past that point. If the market starts to move against you and this point is hit your trade, with you losses, will be stopped and the trade will be closed. This means you have more control of your loss instead of just blindly leaving the trade and your account open to a greater hit. Sounds sensible right? You will be amassed at the amount of traders who think they can do without stops. They don’t tend to spend that long trading as their account gets burnt very quickly.The guaranteed stop:The difference from the normal is small and will cost you a little too. Normally in the form of a little extra on the spread, a few more points on either side of the bid/offer price but some might say it’s worth it. The normal way a trade is stopped out is seen in the example above. The market starts to move against you, your stop loss order is hit at the exact level you have stated and your trade is closed. The market though does not have to work like this. There is nothing to say that it has to move up or down in an orderly faction. If for example there is some unexpected news the market might “gap” in either direction especially after the weekend when the market has been closed. It tends not to happen as much to the forex as it does with the stock market but there is still a chance that you can be caught out by this. The way to protect yourself from this would be to use a guaranteed stop which would close your trade at the point you have chosen even if the market gaps pass this.The trailing stop:This does exactly what it says. You set where you would like the stop order to be and if the market moves against you it will stop you out at that point. If on the other hand the market moves in you favour and your trade goes into a profit then the trailing stop moves with it locking in some of your profit, good way to protect some of your profits by locking them in as early as possible.Don’t be fooled into thinking that the market might somehow know where your order is placed and move to stop you out of trade, so therefore don’t set you stop orders. It just does not work like that. Instead remember not to place your orders to tight as you must give the market room to maneuver so that you don’t get caught out in the general noise of the day. It might take you a while to judge how far to set your order on any given currency pair or time frame but it will come with experience and why we promote the use of a trading journal to help with things like this.2. Risk-Reward ratio, is the trade worth making?Understanding the risk reward ratio of all your trades is a must have parameter of any sensible money management strategy.It is all too easy to lose money trading the forex. If you trade far too high a percentage of your account at once, before you know it, after only a few hard hitting trades your pot is empty. Or you might well have a high percentage of small winning trades, then along comes a large losing trade that again wipes you out leaving the pot empty and you wondering what happened.As risk is a part of every trade it is a must for every trader to work out what he/she stands to gain versus their loss before you hit the buy button.This means a trader should know, before taking a trade, how much of your capital you are willing to lose versus the potential reward or amount you stand to win if the trade comes good.It’s easy to work out so let’s look at a few examples.If the ratio is say 1:2 then for every unit you would potential loss you will be looking for a return of two units. So if you have set your stop loss order 20 points/pips away from your opening order then you would be looking for a gain of at least 40 points/pips.If the ratio is 1:3 then for every 3 unit you would potential loss you would be looking for a return of three units. Again if you have set your stop loss order 20 points/pips away from your opening order then you would be looking for a gain of at least 60 points/pips.Setting your parameters at 1:2 ratios is the leased you should be looking for. To put that into some context it would mean that if you were successful on 40% of your trades, which is not so out there, then in the long run you will be a profitable trader. “Wow that’s less than half my trades and I can still be profitable” Yeah well that kinder reduces the pressure a bit doesn’t it. This is where we go back to our psychology again, patience and self-control. Also how great is it to hear someone actually tell you that you don’t have to be right all the time?”Let your profits run and cut your losses quickly”"Which risk-reward ratio should I be using?”Whether you look for a return of two, three, four or even five times your potential loss is really down to you but as we have looked at 1:2 is a good starting point for beginners. Then as you become more experienced build on that and you will find that some trades offer more easily to three to four times your potential loss but always make the goal two. If you don’t you will be just gambling your hard earned money away. Remember if the trade is not worth doing then be patient there will soon be one that is worthy of risking your money.3. How much of my overall account should I trade?Position sizing is all about how much, in terms of percentage amount of your overall account should you be willing to risk on a single trade.Far too many traders make a huge mistake at the start by choosing to risk far too large a percentage of their accounts on any one trade. They have an over confidence that their new found knowledge is much greater than the average newbie and so believe they will achieve complete global domination of the financial markets inside one month. Only to find that after a limited amount of trades their trading careers come to an abrupt end and global domination is over before it ever really began.That is why position sizing is so important to us all if we are going to get this right.”So how much should I trade?”Well we believe that most sensible positions on this would recommend that 2/3% of your overall pot should only ever be risked on any given trade. Now I know what you’re thinking “it’s going to take me years to buy that boat I have my eyes on” right? Well yours might not be a boat but you get the point, and the thing is as much as I hate to have to say it but at some point we all have a losing streak. So when this happens will determine your chances of staying in the market, will you be risking too much and be out? Or will you be using a sensible position sizing strategy and after you come through the other side of your losing streak still be in the market to reap the profits that will come your way. This is how we will achieve our long term goals.For example if you have set your max risk at 2%, you would have to loose in theory 25 times in a row to wipe out only 50% of your account and how unrealistic is that? We would hope by the way, that you stop way before you hit 25 and evaluate your trading strategy to see what’s going wrong but it does take away a lot of the stress when you adopt this approach to position sizing.It’s just simple math to work out how much to risk on a single trade.For an account size of 500 and a risk of 2% the amount per trade would be 50
For an account size of 5000 and a risk of 2% the amount per trade would be100
For an account size of 10000 and a risk of 2% the amount per trade would be 200
For an account size of 500 and a risk of 3% the amount per trade would be 75
For an account size of 5000 and a risk of 3% the amount per trade would be 150
For an account size of 10000 and a risk of 3% the amount per trade would be 300To help you with the calculations you could put everything into a spread sheet so that can automatically workout for you your position sizing. We will be publishing one here soon and we will be making it available to download for free if you’re not sure how to go about that.The most important aspect of trading must be to protect your capital, keep the risk of wiping your account out to a minimum so as to make it as hard as possible to lose over the long run. The aim is to take the stress away and to help you sleep at night no matter what happens. Trading should be fun as well remember.
Health Reform Changes Affecting Small Business
“Don’t tax him. Don’t tax me. Tax the guy behind the tree”- attributed to Former Congressmen RostenkowskiOwners of small businesses and their workers could be severely impacted by the recently enacted health reform legislation. Some key provisions related to tax credits, new excise taxes, penalties, and some higher taxes, all of which depend on a number of factors such as number of full time employees in the business, average incomes of the employees etc. This article will provide you an overview of its significance to self employed taxpayers who have less than ten full time employees.Generally, the present Obama administration and Congress have noted that the new health reform proposals will provide better insurance for small businesses at a lower cost, which will create more jobs. However, there is also a lot of strongly negative feelings among the business community. Let me present some of the provisions so that you can judge for yourself and plan accordingly.Benefits to small businesses: Despite the negative press about the law, there really are some positive changes that will affect small businesses.
Small Business Exchanges: Small business will be able to pool their resources in state exchanges called “Shop exchanges” in order to buy insurance. Normally these exchanges apply to companies who have less than 100 employees by 2014;however, states have the option to limit access to these exchanges for companies of under 50 full time employees. Premium expectations are expected to reduce overall insurance costs by 1-4% per year for each employee, which is a very good provision under this plan.
Tax Credits for certain small employers who provide insurance. Generally, if you have fewer than 50 full-time employees, you don’t have to provide health insurance for your workers. However, if you do provide insurance, you might be eligible for a yummy tax credit, which is a dollar-for-dollar reduction in your taxes.
To be eligible for this credit, you have to have less than 25 full-time employees whose annual average earnings (not counting the owner) of no more than $50,000. For companies of 10 or fewer employees, you would be eligible for a 35% tax credit (which goes up to 50% after 2013) in later years, if your average full time equivalent wages are less than $25,000 per year. This credit begins in 2010 and goes till 2014. There is a second phase of the credit that small business would get up to 2016. Thus, qualifying small businesses can get this credit for up to six years.Sandy’s elaboration: This credit sounds great, but having it apply to small businesses (of no more than 10 full-time workers) and who average under $25,000 of wages will substantially reduce its applicability to most businesses. Estimates are that this will benefit about 7% of self employed businesses.
No more lifetime caps: For most health insurance, there is a $2,000,000 lifetime cap for usage. Starting immediately, these caps are to be removed. This could allow coverage for a number of small business folks who might have exceeded the cap.
No pre-existing conditions: starting in 2014, there will not be any pre-existing conditions. Thus, even if you have a major medical problem, you will be guaranteed to get health insurance. This is a great provision that will allow coverage for those small business folks and their employees who might not have been able to get insurance coverage.
Dependent children can be kept on parent’s insurance through age 26: Normally, kids who turn age 21 have to get their own insurance and can’t be kept on their parent’s insurance. This will be changed so that dependent children who are under age 27 can be kept on the parent’s insurance. This becomes effective on March 30, 2010. I should note that although dependents under age 27 can be added to the parent’s insurance e policy, there is no requirement that an employer add them to the policy.
Small Businesses are exempt from penalties for failing to provide health insurance: Generally only companies that have 50 or more full-time employees need to provide health insurance coverage or face penalties. However, since small businesses of under 50 full-time employees don’t need to provide any coverage, they are exempt from these “Pay or Play” penalties.
Sandy’s elaboration: If you have a business with 50 more more full-time employees, you are indeed required to provide health insurance.As you can see, there are some good provisions for both the business owner and for small businesses. Thus, why the strongly, negative comments from the business community? The reason is that there are a lot of congressional “gotchas” that affect everyone.Problems with the healh reform legislation
New taxes: There are a number of new taxes and costs that will beef up the overall insurance costs for small businesses. For example, there is an income tax increase starting in 2010 of between 5%-10% for those who make over $200,000 of adjusted gross income. In addition, Medicare has been increased for everyone by.9% for all employees and for the owner who make over $200,000 of adjusted gross income and is single. Married taxpayers filing joint returns have to make of $250,000 of adjusted gross earnings in order for this.9% Medicare surcharge to kick in. This may not sound like a lot, but, for someone earning $300,000 in salary, this could result in a $900 increase in Medicare taxes for each employee in that income bracket regardless of profitability of the business! In addition, if the adjusted gross income of the worker or the owner is over $200,000 ( for single taxpayers) or over $25,,000 (for married filing joint taxpayers), there will be a 3.8% Medicare surcharge on all of their interest, dividends, rents and royalties. This will also apply to dividends from S Corporations. So much for saving costs!
New excise taxes: In order to help pay for this new law, there are some additional excise taxes on many medical devices that ordinarily aren’t purchased by most people. Thus, there will be no excise taxes on glasses, hearing aids, and contact lenses. Most other devices, however, will probably have the excise taxes apply to them. In addition, there will be additional taxes on the health insurance companies, some insurance plans and pharmaceutical companies. You might wonder how these additional taxes apply to self employed taxpayers. The reason is that these additional costs will be passed through to everyone including the self employed.
Additional 40% excise tax on Cadillac health insurance: The new law places a whopping 40% excise tax on high-cost employer-sponsored health coverage, often referred to as “Cadillac” health plans. This tax applies to premiums that exceed $10,200 for single coverage and those that exceed $27,500 for family coverage. There are some increased thresholds for retired taxpayers who are age 55 and older and for those engaged in “high risk occupations.” Thus, if you want top notch expensive insurance coverage, you will pay a lot more to get it. This even assumes that an insurance company will even offer it at all.
Increased paperwork: Generally those who do provide insurance through the exchange for their workers will need to fill out some potentially new paperwork showing the name of the employee, the amount of premium paid the contribution by the employee, notification to the employee about the coverage etc.
Midsize to large companies much provide health insurance: If you have a company consisting of 50 or more full- time employees (part time will be counted on a fractional basis depending on their hours), you are required to provide medical insurance or face big penalties. However, this is required regardless of profitability. Think about this. This could result in a number of unprofitable or marginally profitable companies going broke, which could actually substantially reduce jobs. In addition, this would spur either the hiring of more part time at the cost of reducing the number of full time employees or increase the sucking sound of companies going to places like China or India. The result of all this would mean a lot less jobs.
Bottom Line: Although there are some great provisions in the new law such as waiving pre-existing conditions and lifetime benefit caps, the increased taxes and costs incurred for most small businesses will probably exceed the decrease in health premiums resulting in an overall increase in total health costs and taxes to self employed businesses. Thus, I don’t see any job creation resulting from this law. In fact, it may well cost a lot of jobs.P.S. Check out my free lesson on “How to write off all your medical expenses!” Free Lesson http://www.PocketbookProfessor.comBy Sandy Botkin CPA. Esq
Secrets to Creating a Visual Brand Identity That Sets You Apart
8 Key Areas You Want to Keep Your Visual Brand ConsistentHave you ever wondered what your social media followers think about you?Is it possible you are sending mixed messages to your prospects?This month we’re talking about the importance of personal branding and how it helps your business. This article ties closely in with that regarding your visual brand – essentially how you come across to others.Over the years I have seen a lot of business owners who haven’t taken time to define their brand. They don’t understand when businesses stray from their brand, it dilutes their brand power and impact. Or worse, they have nothing about them that sets them apart.As a result, they complain they are attracting the wrong customers or hardly getting any leads at all…This “me too” method of marketing that mimics what competitors are doing isn’t effective. That’s why I feel compelled to share more what a visual brand is and how to build a strong one online.Whether you’re creating a new brand or updating your existing one, your brand’s visual identity is the most important factor in your marketing.Your brand is so much more than a website and a logo. It’s a user’s total experience and perception of you.So every touchpoint a prospect has with you should have one consistent look and theme. This includes your logo, website, stationery, social media, videos, brochures, business cards, and of course your personal brand in how you dress and present yourself to the world.A solid visual brand:- Helps people know what to expect from you.- Promotes professionalism and purpose.- Draws prospects who align with your ideas, attitudes and values.- Enhances confidence, trust and rapport with your followers.- Builds upon the existing brand experience they have with you in a positive (or a negative) way.Visual branding adds real power to your marketing. It increases engagement and understanding.With all these benefits to personal and professional branding, it’s more important than ever to brand your visual content and images so you stand out from competitors.How Can You Keep Your Brand Consistent?You write blog articles and posts every day. You are working back and forth on projects. How can you be certain that all the marketing you do resonates with your core brand?Creating a style guide makes it easier to keep your marketing pieces consistent.Firstly, ensure your brand is consistent in the following areas:- Headshot – Having a professional headshot goes a long way in developing brand trust.- Logo – your logo is the nucleus of your brand, everything else stems from that. Ensure it’s designed properly that includes the psychology of what it represents.- Colour Palette – Colours that will resonate with your target market and be meaningful to your brand.- Brand Message – This is the essence of your business that includes your slogan or tagline of who you are, what you do, and how you deliver value.- Fonts – Being consistent with the same one or two typefaces throughout all written materials as well as graphics- Design Elements – The use of borders, lines, shadows and filters should all become familiar to being associated with your visual brand.- Tone – Set the tone of your business presence and stick to it – whether serious, high-tech, sarcastic or soulful, this is a big part of building a solid brand presence.Create a Style Guide as Your RoadmapA style guide acts like a map that helps your team to stay on track. Sharing your style guide with key members of your team can ensure everyone knows the style guidelines and can follow them.- Your copywriter and social media manager will understand how to write with your brand voice.- Your graphic designer will stick to the fonts and colours your brand is known for.- Your web design team can make sure your website and landing pages all have the same look and feel.This is especially important for companies with virtual employees spanning in multiple geographic regions. Make it easy for your team to access your logo, fonts and templates. Always protect your brand. Double check when new marketing pieces come in that they conform to brand guidelines.Here’s 8 areas you will want to keep your brand consistent in everything you do in your business marketing and social media efforts:1. WebsiteYour website is the biggest brand statement your business has. It serves as a reference to make sure all other brand elements are in alignment.That’s why I am so against people who use cookie-cutter template sites. They may look polished, but they lack the warmth, connection and personality of a branded website (not to mention how badly they are built.)Make sure the images you use are reflective of your ideal client. Use language that resonates with your target audience. Create an about page that helps your visitors understand your backstory and why you are passionate and good at what you do.The more your website looks and feels like you, the stronger attraction tool it will be for potential clients.2. Professional HeadshotI was very camera shy when I first started my business. So when it came time to get some updated headshots, I dreaded it. But I found that going through the process brought me confidence.My new headshots are used as a personal and business branding tool that help me to be more recognized online. They are on all my social media profiles and on our website. As a result, people recognize me when I attend local networking events.Investing in new headshots can truly jumpstart your brand and success.3. Sharing PhotosSharing photos makes your marketing more personable and showcases your personal brand. Consumers love seeing the real person behind the business.So be mindful of when you are working or in group situations and see how you can snap pictures to show followers what you are up to.Take a picture holding your new book. Grab a shot with a new friend you met while networking. Show the resort you are staying at for your business mastermind.4. VideoCreating videos helps build a strong following online. It’s important to have your videos match your brand too. Dress in a manner that is consistent with your brand.You could also shoot it in similar places or locations. Whether that’s sitting at your desk, cooking in the kitchen, or standing in front of a green screen with a projected background, that consistent setting helps build familiarity.Be warm, friendly and connective. If you promise to offer weekly video tips, then get them out on the same day each week so viewers can anticipate them. Create a custom hashtag for your video tips too.5. Branded ImagesKick up the interest of your blog articles and social media with images. There are loads of free tools to help you make graphic quotes, infographics, and other visuals to add impact.Make sure all your graphic images are consistent with your brand. Adding your logo makes it easy for people to instantly recognize the content is from you.6. Social MediaSocial media provides so many opportunities for visual branding. From Facebook cover images to profile pics, to graphics, there are endless opportunities for people to learn more about what you do.The images you use can evoke the feelings and emotions you want your brand to convey. The goal is for someone to look at your social media account and get an impression that helps them understand your unique vibe.7. Free GiveawaysWhen you are offering free reports, tools, and other goodies to visitors, make sure they have the same colours, logos, and visual feel as your other materials.When it looks professional and makes a great impression, it builds credibility. Plus, it’s just one more piece of the brand puzzle that helps them understand what you do.8. Email SignatureA graphic email signature can add visual impact to every message you send. Services like Wisestamp make it easy to add your logo, picture, and social media links to your email signature.Have your virtual team members set up a signature too so you come across as a professional team to your customers.Are you a Wanna Be or a Real Brand?It’s really important to take a look at your brand as a whole to make sure everything is in alignment.Is your visual brand- Clear,- consistent,- Authentic,- Memorable, and- In alignment with changes in the marketplace, your offerings, or your success?Even if your brand was on target 3 years ago, the nature of your business may have changed where your brand no longer accurately reflects what you do or who you serve.You have become more specialized. You may have new product offerings. Maybe you are now the host of a new podcast.Take a look at your brand with the eyes of an outsider and ask yourself if what you see truly reflect who you are now as a company.How Does Your Business Score from a Visual Branding Perspective?