DOLLAR HOLDS NEAR 4-YEAR HIGHS AS YIELD ADVANTAGE LURES FUNDS

The dollar held near a four-year high against a basket of major currencies on Friday, and further gains looked likely for the US currency as it boasted its the biggest yield advantage over the euro in 15 years.

The dollar index is on track for its 11th successive weekly rise, a feat it hasn't achieved in four decades, as investors prepare for an eventual rate hike in the United States after the Federal Reserve wraps up its massive stimulus program next month.

The European Central Bank and the Bank of Japan, in contrast, are seen as likely to offer more stimulus to support their flagging economies in coming months.

"At the moment, the economy with strong business sentiment is that of the United States... The dollar is becoming the destination of funds that are escaping stimulus elsewhere," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

The dollar index stood at 85.136, little changed from late US levels but up 0.5 per cent so far this week and not far from a four-year high of 85.485 hit on Thursday.

The yield premium US Treasuries offer over German Bunds stood near 15-year highs on Thursday as markets weighed the prospects of US interest rate hikes against the chance of more monetary stimulus in the euro zone.

High bond yields tend to attract more fund inflows as bond investments account for a big chunk of international capital flows.

The euro traded at $1.2758, having fallen to a 22-month low of $1.26955 on Thursday, breaking below an important support around $1.2750 from triple bottoms hit in March-July 2013, pointing to the chance of further declines.

The common currency also slumped to a two-year low against the British pound on Thursday, falling as low as 77.855 pence . It last stood at 78.105.

Against the yen, it dropped to 138.43 yen in early Friday trade, its lowest level in two weeks.

The yen recovered slightly as a sharp fall in Wall Street shares on Thursday sapped risk appetite and drove demand for the safe-haven Japanese currency.

The dollar stood at 108.61 yen, having lost a bit of momentum after hitting a six-year high of 109.46 yen a week ago.

The Australian dollar was another casualty of the broad US dollar gains, trading at $0.8795, just above Thursday's low of $0.8774 - a level not seen for nearly eight months.

The New Zealand dollar flirted with one-year lows, still smarting from the central bank chief's tough talk on the previous day.

The kiwi traded at $0.7948, near a trough of $0.7912 hit on Thursday, when the Reserve Bank of New Zealand Governor Graeme Wheeler said that the exchange rate is unsustainable and at unjustified levels.

HAVE A JOYFUL WEEKEND

RATIO ANALYSIS: USING FINANCIAL RATIOS

There is a lot to be said for valuing a company, it is no easy task. If you have yet to discover this goldmine, the satisfaction one gets from tearing apart a companies financial statements and analyzing it on a whole different level is great - especially if you make or save yourself money for your efforts.

In this section we will try to present 19 basic fundamental analysis ratios to help you get started. The ratios are presented in a simplified manner to make them easier to understand. Sure some of the ratios have different varieties, but by the end you will understand the basic premise and reasons for fundamental analysis.

The Ratios:

Performance	Activity
Book Value Per Common Share	Asset Turnover
Cash Return On Assets	Average Collection Period
Vertical Analysis	Inventory Turnover
Dividend Payout Ratio	Financing
Earnings Per Share	Debt Ratio
Gross Profit Margin	Debt / Equity Ratio
Price/Earnings Ratio	Liquidity Warnings
Profit Margin	Acid-Test Ratio
Return on Assets	Interest Coverage
Return on Equity	Working Capital

NIFTY FUTURES UPDATES (SEP 26)

Exactly as predicted in early market hours Nifty Futures yesterday after trading below

our mentioned level of 8011 reached the target of 7983 & 65 within minutes and slides  even more than that!

If sustain above 7905 for 30 minutes,

Nifty Futures would have a hike upto 7940-60-70

Suppose if cuts & trades below 7904 for 15 minutes

see an intraday slide upto 7892-82

INTRADAY RESISTANCES @ 7960 - 74

INTRADAY SUPPORT    @  7880- 7867  

Trade carefully with the mentioned time and levels

ALL THE BEST

இன்றைய சந்தை அடிப்படை (செப் 26)

இந்திய நேரப்படி இன்று மாலை ஆறு மணியளவில் வெளிவர இருக்கும் அமெரிக்க நாட்டின் GDP (காலாண்டு தகவல்) மற்றும் GDP விலைக் குறியீடு விவரங்கள் சந்தையில் முக்கியத்துவம் வாய்ந்ததாகக் கருதப்படுகிறது!

Bureau of Economic Analysis வெளியீட்டின்படி சென்ற காலாண்டில் 4.2 சதவிகிதமாக வெளியான GDP இம்முறை 4.6% ஆக உயர்ந்து வெளியாகுமென அனுமானிக்கப்படுகிறது!

புள்ளிகள் அதிகமாகும் பட்சத்தில் டாலர் மற்றும் கச்சா எண்ணெய் வலுப்பெற்று தங்கம் சரிய  ஏதுவாகும்!

சந்தையில் இன்று தங்கம், கச்சாஎண்ணெய், இயற்கை எரிவாயு, வெள்ளி மற்றும் காப்பர் அதில் கவனமாக செயல்படவேண்டிய நேரம்.

6:00 – 7:00 PM;  

வெல்க!

DISCLAIMER 

THE RECOMMENDATIONS MADE HERE DO NOT CONSTITUTE AND OFFER TO SELL OF A SOLICITATION TO BUY ANY OF THE SECURITIES/COMMODITIES OF ANY OTHER INSTRUMENTS WHATSOEVER MENTIONED. NO REPRESENTATIONS CAN BE MADE THAT THE RECOMMENDATIONS CONTAINED WILL BE PROFITABLE OF THAT THEY WILL NOT RESULT IN LOSSES. READERS USING THE INFORMATION CONTAINED HEREIN ARE SOLELY RESPONSIBLE FOR THEIR ACTIONS. SURFING OR USING ‘tradersharmony.blogspot.com' DEEMS THAT THE SURFER ACCEPTS AND ACKNOWLEDGES THE DISCLAIMERS AND DISCLOSURES.THE INFORMATION PUBLISHED ARE FOR EDUCATIONAL AND INFORMATIVE PURPOSE ONLY AND THE USER/READERS SHOULD TAKE ADVICE OF HIS/HER ADVISER BEFORE TAKING ANY DECISION FOR BUYING, SELLING OR OTHERWISE DEALING WITH SECURITIES/COMMODITIES OR ANY OTHER INSTRUMENT WHATSOEVER.

HAVE A THRILLING THURSDAY

RATIO ANALYSIS: FINDING THE DATA

Before we delve into the different ratios and how they work, let's briefly discuss where you can find the data for each ratio.

The first step in ratio analysis is to find the data. For the 19 ratios we will be taking you through we will be using a fictitious company, Cory's Tequila Co. All the data for these examples will be provided, but when you decide to do this on your own there are several different areas where you can find the latest financial figures for a particular company. Finding financial reports is easier than ever thanks to the Internet, here are some sources:

Company Websites - Almost every public company has a website or investor relations department. For the most current quarterly or annual report you might want to check in these places first. Walt Disney is an excellent example of a company that uses the web to get information out to shareholders and prospective investors. It takes no time at all to find their investor relations section.

Securities and Exchange Commission (SEC) - The information posted in the electronic gathering, analysis and retrieval.

(EDGAR) database includes the annual report (known as the 10-K), quarterly report (10-Q), and a myriad of other forms that contain every type of financial data.

Yahoo! Finance - A touchstone for many individual investors, Yahoo! Finance is a great resource for financial news, and lays out ratios and performance data for individual companies.

Hoovers.com - A great site for company analysis; some of the data requires a subscription.

These are by no means the only places to find the financial statements, there are countless free and pay sites out there offering similar features. Now let's move onto the meat of this tutorial: the ratios.

(to be contd)

NIFTY FUTURES UPDATES (SEP 25)

Exactly as predicted in early market hours Nifty Futures yesterday after trading below our mentioned level of 8038

reached the target of 8012 and even more than that!

If sustain above 8012 for 20 minutes, it would have a hike upto  8042-62

Suppose if cuts & trades below the level 8011 for 15 minutes

see an intraday slide upto  7985 and below that for 10 minutes

see more slide upto 7967

INTRADAY RESISTANCES @  8045 – 65  

INTRADAY SUPPORT    @  7983 – 65

Trade carefully with the mentioned time and levels

ALL THE BEST

இன்றைய சந்தை அடிப்படை (செப் 25)

இந்திய நேரப்படி மாலை ஆறு மணியளவில் வெளிவர இருக்கும் Initial Jobless Claims, Durable Goods orders மற்றும் மாதாந்திர தகவல் அறிக்கையான Core Durable Goods Orders ஆகிய  தகவல்கள் அமெரிக்க டாலர் குறியீட்டில் குறிப்பிடத்தகுந்த 

பாதிப்பைக் கொண்டு வருமென்று எதிர்ப்பார்க்கப்படுகிறது!

சென்ற மாதம் -0.7% வெளியான Core Durable Goods Orders இம்முறை 0.7% ஆக 

உயர்ந்து வெளியாகுமென அனுமானிக்கப்படுகிறது!

அப்படி நேரும் பட்சத்தில் டாலர் மற்றும் கச்சா எண்ணெய் வலுப்பெற்று 

தங்கம் மேலும் வீழ ஏதுவாகும்!

தொடர்ந்து இரவு எட்டு மணிக்கு வெளியாகும் இயற்கை எரிவாயு 

கையிருப்புத்தகவல் கச்சா எண்ணெய் மற்றும் இயற்கை எரிவாயு அதன் 

தினவர்த்தக நகர்வு தனில் அதிவேக அலைகளைக் கொண்டு வருமென 

எதிர்ப்பார்க்கப்படுகிறது!

சந்தையில் இன்று தங்கம், கச்சாஎண்ணெய், இயற்கை எரிவாயு, வெள்ளி 

மற்றும் காப்பர் அதில் கவனமாக செயல்படவேண்டிய நேரம்..

6:00 – 7:00 PM; 8:00 – 8:30 PM

வெல்க!

DISCLAIMER 

 THE RECOMMENDATIONS MADE HERE DO NOT CONSTITUTE AND OFFER TO SELL OF A SOLICITATION TO BUY ANY OF THE SECURITIES/COMMODITIES OF ANY OTHER INSTRUMENTS WHATSOEVER MENTIONED. NO REPRESENTATIONS CAN BE MADE THAT THE RECOMMENDATIONS CONTAINED WILL BE PROFITABLE OF THAT THEY WILL NOT RESULT IN LOSSES. READERS USING THE INFORMATION CONTAINED HEREIN ARE SOLELY RESPONSIBLE FOR THEIR ACTIONS. SURFING OR USING ‘tradersharmony.blogspot.com' DEEMS THAT THE SURFER ACCEPTS AND ACKNOWLEDGES THE DISCLAIMERS AND DISCLOSURES.THE INFORMATION PUBLISHED ARE FOR EDUCATIONAL AND INFORMATIVE PURPOSE ONLY AND THE USER/READERS SHOULD TAKE ADVICE OF HIS/HER ADVISER BEFORE TAKING ANY DECISION FOR BUYING, SELLING OR OTHERWISE DEALING WITH SECURITIES/COMMODITIES OR ANY OTHER INSTRUMENT WHATSOEVER.

செவ்வாயின் சுற்றுப்பாதையில் மங்கள்யான்

India's maiden mission to Mars, the Mangalyaan has been on a 300-day marathon covering over 670 million kilometres (420 million miles). Science writer Pallava Bagla traces its journey as it nears its planned arrival in orbit.

On the morning of 24 September, the Indian Space Research Organisation (Isro) will slow down the spacecraft sufficiently so that it can be caught in the orbit of Mars.

If that happens, "India will become the first Asian country to have achieved this and if it happens in the maiden attempt itself, India could become the first country in the world to have reached distant Mars on its own steam in the first attempt," explains Isro chairman K Radhakrishnan.

Both Russia and the US failed in their maiden attempts. The first Chinese mission to Mars called Yinghuo-1 failed in 2011 alongside the Russian Phobos-Grunt mission with which it was launched. Earlier in 1998, the Japanese mission to Mars ran out of fuel and was lost.

Undoubtedly, India - a late starter - is way ahead of its Asian rivals in trying to get to the Red Planet.

Says Mr Radhakrishnan: "We are really not racing with anyone, but with ourselves to reach the next level of excellence."

'Pink of health'

India's Mars Orbiter Mission (MOM) - an indigenously made unmanned robotic mission weighing 1,350kg (2,976lb) - was launched from the rocket port at Sriharikota on the coast of the Bay of Bengal on a balmy afternoon on 5 November last year.

Since then, the mission "has been in the pink of health", says Isro, and has been cruising at breakneck speed to reach close to Mars, half-way around the Sun.

The 4.5bn rupee ($74m; £45m) mission is, as Mr Radhakrishnan says, "the cheapest inter-planetary mission ever to be undertaken by the world".

On his visit to India's rocket port on 30 June, Prime Minister Narendra Modi said: "The [making of the] Hollywood movie Gravity cost more than our Mars mission - this is a great achievement."

India's low-cost and quick turnaround satellite mission has been attracting a lot of global attention from the scientific community that seeks to better understand the mysterious Mars.

On the morning of 24 September, Isro will re-orient Mangalyaan and fire its on-board rocket motor for about 24 minutes to slow the spacecraft.

It's a very tricky operation - if it does not slow down sufficiently, it will miss being caught by the gravity of Mars and the mission could be lost in outer space; but if the rocket engine fires more than required it could slow the Mangalyaan so much that it could go crashing down on to the red soil of Mars.

Since 1960, there have been 51 global missions to Mars and the overall success rate stands at 42% so the odds are loaded against the Indian Martian entry.

M Annadurai, head of the Indian Mars mission, says: "We are confident that the laws of physics will favour India and the country could have its first robotic Martian baby soon."

'Delusional dream?'

Isro dubs the mission a "technology demonstrator", essentially showcasing to the world that India is no longer a country of snake charmers but a high-tech hub that has developed its technology against the odds and stringent sanctions.

If Mangalyaan indeed reaches Mars, it would also make a big global geo-political statement ahead of Mr Modi's imminent visit to the US.

INVESTORS POSITIVE AS PSU BANKS TO BENEFIT WITH DILUTION OF BASEL III NORMS

Over the past two years, investors have been sceptical of public sector banks due to two reasons -- continued rise in stressed assets, and the need to raise capital to meet the Basel III norms.

However, investors' concerns on capital requirement of major public sector banks may ease after RBI recently relaxed the norms for issuing Tier 1 instruments.

Moreover, easing of liquidity may lead to an expansion in net interest margins (NIMs) in the next few quarters. \

As a result, large-sized public sector banks such as SBI, Bank of Baroda (BSE -2.66 %), Punjab National Bank (BSE -2.15 %) and Canara Bank (BSE -4.17 %) may be back on investors' radar.

Such banks will be the major beneficiaries with the dilution of a few guidelines of the Basel III norms. Some of the noteworthy amendments made by the central bank include allowing retail investors to participate in Tier 1 instruments and a revision of loss absorption mechanism for non-equity instruments as temporary or permanent compared to permanent earlier.

These measures will lower banks' cost of raising Tier 1 capital. In July, Bank of India had raised Tier 1 capital at 11% interest rate. But with the new norms, the cost of these instruments for larger banks may come down. Also, the equity requirement will be lower as Tier 1 debt capital may be raised at a cheaper rate.

Another positive for banks will be the lower cost of funds. In FY14, NIMs of large public sector banks such as SBI, Bank of Baroda, Punjab National Bank and Canara Bank had fallen to their respective three-year lows.

"The NIMs of these banks declined in the range of 45 to 90 basis points in the last three years owing to higher slippages, asset liability mismatch and falling CASA proportion," said Darpin Shah of HDFC Securities, in his latest report.

However, this trend may reverse as sufficient liquidity in the bond market has resulted in lower rates in the past few months.

As per the latest data available from FIMMDA, oneyear certificate of deposit is trading at an yield of 9.05%, down 38 basis points since the last six months.

Given sufficient liquidity, the country's largest lender, SBI, has reduced its one-year to three-year deposit rates by 25 basis

points to 8.75%. It is believed that other large-sized banks may follow suit soon. Given this scenario, NIMs of banks may see an expansion in the next few quarters. Despite this, asset quality stress may still persist for some time.

Analysts believe that it may take another couple of quarters to see any decline in non-performing assets for these banks.

At present, stocks of large sized public banks are trading at around 10% lower than their 52-week highs, while large sized private banks such as ICICI Bank (BSE -2.46 %) and Axis Bank (BSE -2.18 %) are trading near their life highs.

But, with the gradual improvement in operations, the stocks of large-sized public sector banks may spring back to reckoning. 

HAVE A WONDEERFUL WEDNESDAY

RATIO ANALYSIS – AN INTRODUCTION

Fundamental analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income statement and cash flow statement. It's comparing the number against previous years, other companies, the industry or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and how it might perform in the future.

For example, current assets alone don't tell us a whole lot, but when we divide them by current liabilities we are able to determine whether the company has enough money to cover short-term debts.

In this tutorial, we'll show you how to use ratio analysis to analyze financial reports. Comparing these ratios against numbers from previous years, other companies, industry averages and the economy in general can tell you a lot about where a company might be headed. Valuing a company is no easy task. This tutorial will shed some light on how it can be done and, ultimately, help you to make more informed choices as an investor.

(to be contd)

NIFTY FUTURES UPDATES (SEP 24)

Exactly as predicted in early market hours Nifty Futures yesterday after trading below our mentioned level of 8165

reached the targets and even more than that!

 If cuts and sustain above 8043 for 20 minutes, it would have a hike upto 8060-80

Suppose if trades below the level 8038 for 15 minutes

see an intraday slide upto  8012

INTRADAY RESISTANCES @  8040-60-80

INTRADAY SUPPORT    @   8012

Do trade carefully with the mentioned time and levels

ALL THE BEST

இன்றைய சந்தை அடிப்படை (செப் 24)

இந்திய நேர அளவில் மதியம் ஒன்றரை மணிக்கு வெளியாகும் German IFO 

Busniness Climate குறியீடு மற்றும் German Business Expectations ஆகிய தகவல்கள் யூரோ மற்றும் அதற்கெதிரான அமெரிக்க டாலரை பாதிக்கவல்லதாகத் 

தெரிகிறது!

இன்று மாலை ஏழரை மணிக்கு வெளியாகும் அமெரிக்க நாட்டின் புதிய வீட்டு விற்பனைத் தகவல் டாலர் மற்றும் தங்கத்தின் விலையை நேரடியாக பாதிக்கவல்லதாகும்.

தொடர்ந்து இரவு எட்டு மணிக்கு வெளியாகும் கச்சா எண்ணெய் மற்றும் 

Gasoline கையிருப்புத்தகவல்கள் பொருட்சந்தையில் கச்சா எண்ணெய், மற்றும் 

இயற்கை எரிவாயு தினவர்த்தக நகர்வு தனில் அதிவேக அலைகளைக் 

கொண்டு வரவல்ல செய்திகளாகும்! 

இவை தவிர்த்து இரவு 10:30க்கு உரையாற்றும் சிகாகோ அதிபர் 

இவான்ஸ்ஸின் உரை அமெரிக்க டாலர் குறியீடு மற்றும் கமாடிட்டி 

சந்தையில் மிதமான முக்கியத்துவம் வாய்ந்ததாகக் கருதப்படுகிறது!

சந்தையில் இன்று தங்கம், கச்சாஎண்ணெய், இயற்கை எரிவாயு, வெள்ளி 

மற்றும் காப்பர் அதில் கவனமாக செயல்படவேண்டிய நேரம்..

1:30 – 2:15 PM; 7:30 – 8:30 PM

வெல்க!

DISCLAIMER 

THE RECOMMENDATIONS MADE HERE DO NOT CONSTITUTE AND OFFER TO SELL OF A SOLICITATION TO BUY ANY OF THE SECURITIES/COMMODITIES OF ANY OTHER INSTRUMENTS WHATSOEVER MENTIONED. NO REPRESENTATIONS CAN BE MADE THAT THE RECOMMENDATIONS CONTAINED WILL BE PROFITABLE OF THAT THEY WILL NOT RESULT IN LOSSES. READERS USING THE INFORMATION CONTAINED HEREIN ARE SOLELY RESPONSIBLE FOR THEIR ACTIONS. SURFING OR USING ‘tradersharmony.blogspot.com' DEEMS THAT THE SURFER ACCEPTS AND ACKNOWLEDGES THE DISCLAIMERS AND DISCLOSURES.THE INFORMATION PUBLISHED ARE FOR EDUCATIONAL AND INFORMATIVE PURPOSE ONLY AND THE USER/READERS SHOULD TAKE ADVICE OF HIS/HER ADVISER BEFORE TAKING ANY DECISION FOR BUYING, SELLING OR OTHERWISE DEALING WITH SECURITIES/COMMODITIES OR ANY OTHER INSTRUMENT WHATSOEVER.

US RULES OUT 'TRADING ASPECTS' WITH IRAN TO FIGHT IS

Asserting that it is in Iran's interest to act against the Islamic State, the US has said it will not be "trading aspects" of Tehran's controversial nuclear programme to secure commitments to fight the terror group.

"It is not in the interest of the Iranian regime for this extremist organisation to be wreaking havoc on its doorstep," White House Press Secretary Josh Earnest said

"So, like the international community, the Iranians are understandably concerned about the gains that ISIL has made in Iraq, and they have indicated that they are ready to fight ISIL," Earnest told reporters.

Earnest, however, ruled out any military or intelligence coordination with Iran on fighting Islamic State, or the ISIL.

"...the United States will not coordinate any of our military activities with the Iranians. The United States will not be involved in sharing intelligence with the Iranians."

He said the effort by world powers to persuade Iran to end its nuclear programme is "entirely separate" from President Barack Obama's attempts to build a coalition against the IS.

"The United States will not be in a position of trading aspects of Iran's nuclear programme to secure commitments to take on ISIL” Earnest said.

"These two issues are entirely separate. And the focus of the P5-plus-1 talks will remain on resolving the international community's concerns about the Iranian nuclear program," he said.

Over the weekend, Secretary of State John Kerry was in New York to engage in conversations in the context of the P5-plus-1 talks about resolving the international community's concerns about Iran's nuclear programme.

On the sidelines of those broader conversations, he did have a conversation with his Iranian counterpart to discuss IS, Earnest said.

Later this week, Obama would chair a meeting of the UN Security Council on the threat posed by foreign terrorist fighters, Earnest said.

"We have seen that there are several dozen countries from around the globe -- not just the US and not just in the West, but from around the globe -- where individuals have travelled to the region, taken up arms alongside ISIL fighters.

"The concern, again, that the US has, that our allies in Western Europe have and that our partners around the globe have is that these individuals could decide to return to their home country and possibly carry out acts of violence," he said.

Earnest said at the UN Security Council meeting Obama hopes to accomplish a discussion about the kinds of global standards that can be put in place to mitigate the threat from these individuals.

NAREDRA MODI – LED GOVT. PROMISES 40% INCREASE IN SUPPLY OF GRAIN

The Modi government promises a 40% increase in the supply of heavily subsidised grain as it seeks to expand coverage under the food security law, a move that can inflate the subsidy bill and disappoint critics who thought the new regime would abandon UPA's entitlement-based approach.

Food Minister Ram Vilas Paswan said monthly entitlement of 5 kg foodgrain per person under food security law was meagre. "The focus of the government will be on providing food security to all. With huge stocks of grain in the country we want to increase monthly entitlement to 7 kg," he told ET in an interview. He said the food law passed by the previous government was inadequate.

"I feel the Food Security Act was prepared hurriedly. In my understanding during three months in government, it does not have clear concepts," Paswan said.

He said Modi himself, when he was chief minister of Gujarat, had observed that the grain provided under the Act was too less.

Paswan was silent about the food subsidy bill, which is already projected to be Rs 1.15 lakh crore this year, but analysts said additional grain would cost a lot of money.

Tejinder Narang, a Delhi-based analyst said the bill may rise by about 15% apart from starving the open market, which would raise prices. 

Pramod Joshi, director, International Food Policy Research Institute said if the government is raising the quantity of susbsidised grain it would also be looking at steps like focusing on the poorest households and direct cash transfers subsidies following the campaign to open bank accounts.

The issue of food security came to the centre stage last year when Sonia Gandhi spearheaded the food security law in the last year of the UPA government. 

HAVE AN EXCEPTIONAL TUESDAY

To get their heads in the right place before they feel the emotional or psychological crunch, investors can look at creating trading rules ahead of time. Traders can establish limits where they lay out guidelines based on their risk-reward relationship for when they will exit a trade - regardless of emotions

Of course, establishing price targets might not be the only rule. For example, the trader might say if certain news, such as specific positive or negative earnings or macroeconomic news, comes out, then he or she will buy (or sell) a security. Also, if it becomes apparent that a large buyer or seller enters the market, the trader might want to get out.

Traders might also consider setting limits on the amount they win or lose in a day. In other words, if they reap an RsX profit, they're done for the day, or if they lose RsY they fold up their tent and go home. This works for investors because sometimes it is better to just "go on take the money and run," like the old Steve Miller song suggests even when those two birds in the tree look better than the one in your hand.

Creating a Trading Plan

Traders should try to learn about their area of interest as much as possible. For example, if the trader deals heavily and is interested in telecommunications stocks, it makes sense for him or her to become knowledgeable about that business. Similarly, if he or she trades heavily in energy stocks, it's fairly logical to want to become well versed in that arena.

To do this, start by formulating a plan to educate yourself. If possible, go to trading seminars and attend sell-side conferences. Also, it makes sense to plan out and devote as much time as possible to the research process. That means studying charts, speaking with management (if applicable), reading trade journals or doing other background work (such as macroeconomic analysis or industry analysis) so that when the trading session starts the trader is up to speed. A wealth of knowledge could help the trader overcome fear issues in itself, so it's a handy tool.

In addition, it's important that the trader consider experimenting with new things from time to time. For example, consider using options to mitigate risk, or set stop losses at a different place. One of the best ways a trader can learn is by experimenting - within reason. This experience may also help reduce emotional influences.

Finally, traders should periodically review and assess their performance. This means not only should they review their returns and their individual positions, but also how they prepared for a trading session, how up-to-date they are on the markets and how they're progressing in terms of ongoing education, among other things. This periodic assessment can help the trader correct mistakes, which may help enhance their overall returns. It may also help them to maintain the right mindset and help them to be psychologically prepared to do business.

Bottom Line

It's often important for a trader to be able to read a chart and have the right technology so that their trades get executed, but there is often a psychological component to trading that shouldn't be overlooked. Setting trading rules, building a trading plan, doing research and getting experience are all simple steps that can help a trader overcome these little mind matters.

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