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Author Topic: The #1 Reason Why You Need to be Trading  (Read 881 times)
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tamo42
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« on: 2011 Jan 04, 12:08:22 am »



This article is going to be different than the usual momentum trading article.  Here I am going to explain why trading profitably is so important.  Without it, or something very similar, you will be financially injured by the system.  What follows is a detailed guide of how the way money works in our current economy effects you, and why you need to be prepared.

Many people wonder why the stock market is making new highs at a time when confidence across the country is very low.  The answer lies in the way money works.  Let's recap a quick overview of the creation of new money:

1, the government needs money and asks for a loan (a bond) from whomever is willing to pay
2, the government promises to pay interest on this loan
3, some entity (usually a bank) buys the bond, thus giving the government cash to spend
4, the Federal Reserve (Fed) buys the bond from the bank
5, the Fed makes up this money.  It doesn't come "from" anywhere or anything.
6, the receiving bank can then use this money for whatever it sees fit.
(This neglects the quantitative easing phenomenon in which the Fed gives money directly to the government and bypasses steps 3 and 4)

And new money has entered the system.  This is called base money because the bank can then lend against it using fractional reserve, and increase the amount of money in the system.

You might have heard that the Fed has increased its balance sheet dramatically ever since this credit crisis started a few years ago.  What that means is that the Fed has bought a whole bunch of stuff, and created a whole bunch of money to pay for it.  

The unusual thing is that we haven't seen prices go up a huge amount.  We would expect prices to go up as new money enters the system.  The question is why hasn't everything gone up across the board?  The answer is simple, the banks that get the new money from the Fed aren't using it to make loans across the board.  Where we are seeing rising prices is where the money is going.  Mostly that has been commodities, food, energy, and the stock market.  These are all markets that are very easy to play paper money games with.  Markets with a great deal of tangibility - say, housing and manufacturing - have been lagging behind because these markets require real investment that can't be liquidated at the touch of a button.

The bottom line to all of this is that the people of the economy, those who receive wages for a job, are the very last to get this money.  Wage earners will be the hardest hit as prices rise before their paychecks do.

That is why investment and trading has taken on such a huge importance in our culture.  That's why we spend so much time talking about it here at Live Business Chat.  It is the major way the people of the economy can keep up.  If you aren't taking steps to keep ahead of the inflation tax, you will be poorer than you know while thinking you are a big winner.

So be prepared.  Know that while right now it is "just" energy, food, commodities, and the stock market that are rising in price, soon it will spread to other areas - it always does.  When everything goes up in price 10% and your paycheck stays the same, you are 10% poorer in income.  Your investments, trading, and financial positioning are what will allow you to grow and thrive in such an environment.

That's why I do what I do.  Just today, I used leverage in the form of options to make a 4.2% return on AAPL.  Today.  I made 4.2% in 13 minutes (320 calls from 10:06 am to 10:19 am).  That simply can't be done in the world of a 9-to-5 job.  If you want to stay ahead your choices are: own and operate a business, invest very intelligently, or trade very intelligently.

I do all 3.  What's your choice?
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Neal McSpadden
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« Reply #1 on: 2011 Jan 04, 04:06:50 am »

Wow great article...

I have a question about these option handling.. i tried to read about it coz im not used to that at all.. And there isnt much i cant find in german about that subject ( suprisingly) But is it true that i buy 400 options for 600 dollar, i actually could lose -3000 dolllar or more if i dont time everythign right? Thats what i could read out.. I might read the wrong thing haha.. but if thats the case its a really high risk play..

I would love if u would go deeper into details with your trade with options u did yesterday with AAPL.

100 people have probably 100 diffrent views what invest very intelligently means.
My neihgboor would say buy GM shares as much as u can and sit down. My COO would say put everything into gold bullions. my friends would say invest into real estate business and so on.

Its not so easy to find the right/intelligent investment idea
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dobedo
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« Reply #2 on: 2011 Jan 04, 07:31:52 am »

So buy-n-hold is no good after all? I thought badon wants us to buy coins and hold them.

I do none of the 3 things you listed. Instead, I hire an investment broker/adviser to do wise investment & trading for me. So far, you are doing much better than me, but I get more free time on my hand to think of ways to pay taxes to government.
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FanofBadon
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« Reply #3 on: 2011 Jan 04, 07:35:20 am »

So buy-n-hold is no good after all? I thought badon wants us to buy coins and hold them.


I would say that counts to intelligent investing, point 2 out of 3 from tamo42s choices.
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tamo42
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« Reply #4 on: 2011 Jan 04, 07:43:04 am »

I have a question about these option handling.. i tried to read about it coz im not used to that at all.. And there isnt much i cant find in german about that subject ( suprisingly) But is it true that i buy 400 options for 600 dollar, i actually could lose -3000 dolllar or more if i dont time everythign right? Thats what i could read out.. I might read the wrong thing haha.. but if thats the case its a really high risk play..

Depends on what you buy.  In some cases that would be true, in other cases it wouldn't.  Essentially any position that you buy that costs money up front will be limited to however much you put into it.  And any position you get money up front risks more than you got.

I would love if u would go deeper into details with your trade with options u did yesterday with AAPL.

100 people have probably 100 diffrent views what invest very intelligently means.
My neihgboor would say buy GM shares as much as u can and sit down. My COO would say put everything into gold bullions. my friends would say invest into real estate business and so on.

Its not so easy to find the right/intelligent investment idea

To me, investing intelligently simply means in a way that creates more value than you put in.  You use the investment vehicle (stocks, bonds - hah!, real estate, collectible coins, whatever) and allow the vehicle itself to be your leverage that has more value when you sell than when you buy.  Each investment type has its own rules and strategies.

And of course it's not easy.  If it were, everyone would be rich! Smiley  And it turns out everyone cannot be rich at the same time, because we measure wealth relative to one another.  In a sense, the whole first-world is rich beyond imagining.  The standard of living has been raised so incredibly high from the days when men lived in caves that if you brought a caveman to the modern world, he would think we are all magicians - even the poor people.  But we are always striving for more.
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Neal McSpadden
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tamo42
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« Reply #5 on: 2011 Jan 04, 07:46:19 am »

So buy-n-hold is no good after all? I thought badon wants us to buy coins and hold them.

I do none of the 3 things you listed. Instead, I hire an investment broker/adviser to do wise investment & trading for me. So far, you are doing much better than me, but I get more free time on my hand to think of ways to pay taxes to government.

Like FanofBadon says, buy and hold the right things counts as intelligent investment.  Buying a huge basket of stocks over time for no other reason than because people say it's a good idea is not intelligent investment.  Over time, the stock market as a whole just reflects inflation.  The point of investment is to do much better than inflation.

And if you have an advisor that does the investing and trading for you, that's OK.  Just make sure they are doing a good job Smiley.
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Neal McSpadden
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« Reply #6 on: 2011 Jan 04, 07:51:21 am »

Do you belive modern chinese coins count to the "right things"?
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tamo42
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« Reply #7 on: 2011 Jan 04, 08:09:03 am »

Here's a more in-depth analysis of how I made 4.2% in 13 minutes:

Momentum Trading - Analysis of an AAPL Daytrade
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Neal McSpadden
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tamo42
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« Reply #8 on: 2011 Jan 04, 08:13:40 am »

Do you belive modern chinese coins count to the "right things"?

Well, I am certainly not an expert in that field.  Badon has made some very convincing arguments for why they are the right things.  I think his point about the relative quantities of coins and people in demographic terms is valid.  So yes, those coins will appreciate in value as interest in them increases as the Chinese people in general become wealthier.  I don't claim to know the prices these coins will reach, that's badon's job with his crystal ball Smiley.

I can tell you that I've been talking with badon about investment in different things for about 6 years now, and he has always been right.  As a result, I have dipped my toe in the market, but only when I can get a great deal that is profitable today Smiley.
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Neal McSpadden
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