Lagging Indicator Definition: Day Trading Terminology

This is an economic statistical indicator known to shift after macro economic conditions have shifted too. It also refers to a measurable indicator which has been found to change only after the economy itself has started to shift and follow a particular trend. According to financial experts, lagging indicators are technical factors known to trail the price action of an underlying security.

It is commonly used by traders with the purpose of generating transactional signals or even to confirm the strength of a given pattern. That is why a significant shift in the market occurs just before the indicator provides a signal.

A lagging indicator is beneficial when it comes to confirming long term trends but sadly, it does not predict them. Furthermore, it helps financial experts and business people to understand the economy and factors that shape it. That is why paying attention to lagging indicators gives one ideas on the direction of the economy allowing you to plan your finances or career beforehand.

Examples of lagging indicators
i. Unemployment rate
ii. Corporate profits
iii. Labor cost per unit
iv. Interest rates
v. Consumer price index

Unemployment Rate

Let’s face it; majority of nations around the world are faced with high unemployment rates. Graduates are leaving college and university for the job market only to find that no opportunities are available. Those that are available pay meager earnings which can be difficult to meet monthly needs like rent, food and student loan repayment.

One thing you need to note is that unemployment is used by economic experts to measure how many people are searching for work. That is why for an economy to be rated as healthy, the unemployment rate should be around 3% to 5%. This is not so in many nations.

The higher the unemployment rate, the less money people have to spend which in turn affects businesses like retail stores. The problem further affects housing markets, stocks and the GDP among others. While it’s a great indicator, unemployment rate can also be misleading. This is because it only reflects the unemployed who have sought jobs within the past four weeks.

Corporate Profits

It is a common practice for companies to announce their pre-tax and post-tax profits at the end of every financial year. This is so for publicly traded companies. The reason for doing so is to reveal to the shareholders how the company has performed.

Corporate profits are synonymous with the rise in GDP especially when they are strong. This helps to reflect an increase in sales finally encouraging job growth. Despite the good news above, corporate profits don’t reflect a healthy economy.

In 2008, nations around the world experienced economic decline as a result of recession. No one had predicted this outcome because several companies had experienced increased profits due to outsourcing and downsizing. The result was more jobs were taken out of the economy which shows that this economic indicator displayed the wrong outcome.

Labor Cost Per Unit

In the manufacturing sector, direct labor costs are determined by how quickly and efficiently factories are able to produce complete items. The costs do vary with every production run but to ensure efficiency, they have to remain within the same variance range. With the labor per cost unit, one can be able to identify why the actual costs are higher or lower.

As a lagging indicator, labor cost per unit has been found to increase when manufacturing companies produce less per employee. This has been attributed to slower orders. As a result, companies will begin to lay-off workers in order to survive. This will result in higher unemployment rates. Factories may also opt to produce more which may result in a surplus.

Interest rates

In the financial world, lending is a common phenomenon. It allows individuals and businesses to seek financial help which can be used to start a new business or expand the existing one. While financial help is readily offered, there is a catch…interest rates. This is the cost of borrowing money.

It is based on the federal funds rate and represents the rate at which funds are lent from one bank to another. The rate is normally determined by the Federal Open Market Committee.

What you need to know is that the rates do change as a result of economic and market events. If the federal funds rate rises, lenders and financial institutions will pay higher interest rates. This cost will definitely be passed down to the borrowers. As a result, borrowers will be discouraged to borrow resulting in the stagnation of the GDP growth.

Low interest rates can lead to inflation which distorts the economy and currency value. That is why interest rates are vital economic indicators.

Consumer Price Index

This is a factor that measures the weighted average of prices of consumer goods and services. Some of them include food, medical care, shelter, clothing, electronics and transportation among others. Financial experts calculate the index by considering the price changes of every item in the predetermined basket and averaging them. As a result, the changes are used to indicate the cost of living.

The consumer price index is reported on a monthly basis by the US Bureau of Labor Statistics. Two types are reported:
i. CPI-W
ii. CPI-U

CPI-W is used to determine consumer price index for urban wage earners and clerical workers. CPI-U is for urban consumers. A higher cost of living results in inflation which in turn erodes the value of the currency. This has been found to decrease the purchasing power, job growth and GDP. In case of deflation, the results could be an economic depression.

Final Thoughts

A healthy economy creates a suitable environment for businesses to thrive. Not only will new start-ups be opened but more people will be employed, borrowers will experience moderate interest rates and the cost of living will be favorable.

To determine the health of an economy, it’s wise to use lagging indicators. They include unemployment rate, corporate earnings, labor cost per unit, interest rates and consumer price index.

Let The Next Five Minutes Save Your Trading Career

 As a beginner trader, one the most important concepts to understand is all about psychology. The sooner we figure this out, the faster we’ll get the desired results. There are so many great books about this matter that I recommend you reading (my favorite one is “Trade Mindfully” by Gary Dayton) that go further in detail on describing how complex we’re built as human beings when it comes to mind balance.

In particular, dealing with losses is by far the biggest issue among traders (read more about it in my previous blog post here). From the newbie to the most veteran of all, every single one of us will experience getting stopped out of a trade, realizing a loss. Especially for day traders, from this point on the strongest desire is to immediately make it all back. The problem is now that the emotional composure can be in real trouble causing the ability to get good decisions about the next trade to be seriously compromised.

In fact, I personally believe that the capability to promptly bounce back and recover from a loss is one of the hardest to achieve when it’s much easier to jump into another trade and, next thing you know, to get into even deeper holes. If you’ve ever found yourself in this situation, here are my own four practical instructions to deal with it.

Add these four practical steps to the trading routine

Right after a losing trade (more importantly, in case this is the first trade of the day) I highly recommend to:

1. Stop Trading for 5 minutes: take a deep breath and start the countdown timer. Until it doesn’t reach zero, do not take any more trades. Until then, focus on the next two steps.
2. Write down your emotional state: always keep a pen and a sheet of paper nearby the trading station. Whether is anger, frustration or anything else it doesn’t really matter. Writing down how you feel is an effective way to start letting it go.
3. Have a short walk: this will allow your mind and body to “physically” get rid of that sensation and, also, you can take advantage of this time to mentally post-process the trade. Did you respect the trading plan? Remembering that losses are part of the game always help.
4. Wait until the next “A” quality setup: get back to the trading station, make sure that the countdown has finished and start hunting for the net “A” quality setup to present itself knowing that now, after only five minutes, you may have recovered the proper psychological state to start trading again.

Of course, this time-span is arbitrary and can be readjusted to fit your own personality. A great approach can be to lower this countdown time as experience grows. The main point remains that discipline, perseverance and patience will make a trader being successful in the long run.

“Use the losses and failures of the past as a reason for action, not inaction.” -Charles J. Givens

See you in chat-room!

Trade safe,

Roberto Barbaro

The Ultimate Answer For Questions About Freedom

When I decided to radically change my life and to focus entirely on trading (read more about it in my previous article here), of course I did not know exactly what was lying ahead for me. But luckily, I decided to look at the mystery behind that state of uncertainty more as a stimulus than a hurdle that would have prevented me to move on. I’ve just had enough of the 9-6 office habit that I was willing to sacrifice the level of comfort I had gained and got prepared to start completely new.

During this phase of my life, I started digging deeply within myself with the only goal of working for something I was really passionate about. I quickly realized I wanted to learn how to trade mainly because I’m literally in love with the process of doing that (and, yes, I’ve done another article about this you can read here). With that said, I also love doing many other things, including a profound passion for traveling the world.

In fact, one of the greatest benefits about trading that has always been fascinating to me is the possibility to do it from potentially anywhere in the world. In my opinion, this is by any means, the ultimate definition of freedom. And I was in desperate need of that! But, that’s another story, because here I want to give you my best possible pieces of advice about trading “on the go”.

The top 4 tips for trading “on the go”

I always like to give my contribution to traders in the best possible way to truly help anybody that would find himself in the same situation. Personally, this is the first time I’m actually traveling and trading away from my main trading station. So here is what I’ve in store for you that I’m learning from trading and traveling:

• Make sure your laptop has every tool and is set up with everything needed for your trading activity and test your traveling environment for at least one full trading day while still being at home;
• Trade with lower size than usual, especially at your first experience. I’d suggest to not go over 50% of the normal sizing. You don’t want to get overexposed in a non-familiar environment;
• You’ll never have the exact same setup or layout that you have in your main trading station at home and that’s ok. As traders, we always need to adapt to the surrounding circumstances, this is a great chance to prove yourself you can readjust to them. I’ve started trading with as little as one laptop and an iPad used as an external display and I can tell that’s enough to make money, as long as we’ve brought the skills to do so;
• Prepare a checklist that contains everything you need when packing the next time. This will allow to have everything you need to perform the trading activity once you have a stable internet connection. And remember to keep updating it as your needs evolve.

“Man cannot discover new oceans unless he has the courage to lose sight of the shore.” – Andre Gide

See you in chat-room.

Trade safe,

Roberto Barbaro

Grinding Out A Challenging Month As A Day Trader

Hey all, JohnL10 here!

Now that April is over, I can put some of my thoughts on paper about why I think it was a challenging month for both long and short biased small-cap traders.

From my perspective, there hasn’t been much follow-through on positive corporate news from the companies that we focus on, and it seems like we’re on the tail end of a lot of hype from earlier this year. Contrary to Q1 of 2017, where I have already made more than a 6-figure salary in 3 months, Q2 is starting to be much more challenging.

Here’s the run down:

Many of the stocks that we’ve traded in Q1 have raised a lot of capital, even back during Q3-Q4 of 2016. During that time, stock that was sold to private investors gets locked up and is restricted from trading. Most lock ups are anywhere from 3 to 6 to 12 months long.

I feel like for the entire month of April, maybe those shares are now unlocked, and those investors are selling at any price, thus what is making stocks that gap up on positive news, make new lows and go red on the day, sometimes often making a new low right before market close. Something like that, isn’t short-biased traders pounding a stock down, it’s financers selling their unlocked shares all day long, taking easy profit off the table.

That’s not anything new if you have experience in the capital markets, or know anything about how these companies are financed. Debt, or worse, toxic debt is sometimes the only way for these companies to raise money and keep the lights on. Now of course, short sellers take advantage of the opportunity and take a small piece out for themselves, but from what I have been seeing, it hasn’t been easy for shorts either.

The market is crowded and every newbie trader wants to short, making many trades difficult. This also is making borrowing very hard for the more experienced traders. They are left with only the hardest and most expensive borrows, which makes their trades quite limited. It got so bad I have even seen short biased traders tell new people to go long! They want people off their playground.

It’s quite simple, if traders see stocks keep going up, like the shipping mania for example, everyone wants to go long. Then a trend-shift, traders see stocks giving back almost all their gains or more, they want to go short. For me, I stick to what I am good at. I go long, and the only difference in this kind of market is how long I go long for.

The reality is there’s a finite amount of borrows out there, and if enough people want to go short, there won’t be any supply. So what happens then?

The market usually corrects itself and punishes naïve traders via a short squeeze.

The market gives and it takes, but when it takes, you must hold on for dear life. In the screen shot below of my trading P&L for April, I make an analogy about walking into traffic. You don’t want to stay out there for too long or you will get killed.

That’s how April was as a long-biased trader. If you overstayed your welcome in a trade, you were killed. If you stepped out at the wrong time, you were killed. If you stepped out in front of the wrong trade even if you timed it right, you were killed, if you tried to make any bias about corporate news, you were killed. There was only 1 way to live, and if you figured it out soon enough, you might have done well. If you didn’t, you learned something about yourself and will become a better trader.

I am not sitting here all high and mighty, trading is a very difficult. Emotions are not easy to overcome, as they keep changing and becoming more complex as you evolve as a trader. The emotions you had when you started to trade are long gone and now suddenly, you have much more different emotions. It’s a constant struggle with ones self.

The reality is from 4/12 to 4/28 I was almost red every other day. Being up 4-figures, and then a small 3-figure profit. Then being up 4-figures again, and then up only 3-figures. Those 3 figure days I barely got out alive. I was probably even red on most of those days and somehow came back to green.

So what’s the end result? I still grossed $21K on the month, averaging about $1.1K per day for the month of April. A $21K month is $250k+ a year in just capital gains. I am cool with that; especially considering that I have other businesses that provide income! The most important thing I had to realize was, I really needed to not have a big red day, as I knew, if we never saw a good trade for the rest of the month, it would be hard to recover.

The strategy I trade is very similar to what Ross trades day to day and what he teaches in Warrior Pro course. Although Ross himself had somewhat of a difficult month, he also has additional pressure of being the head moderator who voluntarily reports his entire trade history daily. That’s a lot of stress that I don’t have. I don’t know any traders that do daily video recaps, showing their P&L like he does throughout the good and the bad, only to have people judge you. So you have to give a certain amount of respect for that, it’s not as easy as it seems to lead, trade and teach, all at the same time.

So that about wraps up what I wanted to say. Many traders can trade the same strategy and have wildly different results, and I think April is a good example of that.

Keep it up, and see you in chat.

3 Ways To Tell If  Stock Is Bottoming

Traders and investors well versed with the business know that it’s better to purchase assets (stocks, options and ETFs) after they decline rather than when they have risen. Buying assets when they are priced low may seem like a wise strategy because you think profits are just around the corner.

One thing you need to remember when buying low is to be cautious. If you buy a stock after it has experienced substantial decline and believe the present conditions will lead to its decline further, abort the trade.

Bottom in day trading refers to the lowest price reached by a commodity or index within a given period of time. The time frame can be a year, month or intraday. In order to determine the future price of a stock, option or index, analysts usually determine the bottom of a particular security.

The history of a stock’s price movement and trading volume is used to know future prices of securities. Analysts believe that price movements are trends and not random occurrences. Dozens of price patterns help to decide if a stock should be bought or sold.

Here are the technical aspects of a stock bottoming.

Look For Increased Volume

As an investor or trader, there are clues you can use to determine if a stock is nearing a point bottom. Majority of analysts’ reason that stock prices and relative volume are the two most important indicators. According to analysts, securities tend to bottom when few sellers are available for a particular stock. When few sellers exist, more buyers remain and if the buyers will be willing to pay a higher price, it means the price bottom will have formed.

What you need to know is that stock volume adds credibility to stock prices and price direction. This means that the higher the volume of stock bottom, the stock will not experience lower prices in the near future. For stocks to bottom, they have reached the inflection point.

The inflection point refers to an event that changes the progress of a company, economy or geopolitical situation. It is the turning point after a dramatic change where positive and negative results are expected. Inflection points are significant and its effects are well known and widespread.

It is also where the direction of a curve deflects as a result of an event. So, if fewer sellers exist selling at lower prices, people will be looking to sell high and if buyers remain, the prices of the securities will rise.

Look For Prices To Reclaim Moving Averages

Moving averages help to smooth out price data forming trend following indicators. They don’t predict price direction. They define current direction with a lag. Despite the phenomenon of lag, moving averages help to smooth out price and filter our noises. There are two popular types of moving averages.

a. Simple moving average
b .Exponential moving average

Simple moving average is usually formed when the computing average price of a stock is over a number of periods. Since simple moving average is based on closing prices, a 5 day simple moving average is calculated as the sum of five days divided by five.

Exponential moving average is formulated to reduce the lag. It achieves this by applying more weight on recent prices. Three steps are involved when it comes to calculating EMA. The calculation begins with the simple moving average which should be in the previous period as the EMA. The calculation proceeds with weighting multiplier finally concluding with EMA calculation.

As said earlier, identifying trends is a key factor of moving averages. It is used by most traders who want to make the trend their friend. When it comes to stock bottoming, traders have a higher chance of success by considering prices to sell high. One way of doing so is by using short term moving averages of 9 to 20 EMAs.

Confirm With Major Indicators

The Moving Average Convergence/Divergence oscillator or MACD was developed by Gerald Appel in the late seventies. It is one of the simplest and most effective momentum indicators. It helps turn two trend following indicators into a momentum oscillator. MACD achieves this by subtracting the longer moving average from the shorter moving average. This means MACD ends up providing the best of both worlds: trend following and momentum.

When it comes to stock bottoming, MACD and RSI are great indicators. MACD is known to fluctuate above and below the zero line. Relative Strength Index (RSI) is an indicator developed by Welles Wilder. It helps to compare the magnitude of recent gains and losses. Using both indicators, traders can turn from oversold conditions and start heading up.

Look For a Higher Low

In trading, there is no crystal ball to reveal to you when the prices are right to buy or sell. The only way to ensure that traders have made wise decisions is by implementing sound strategies. One of those strategies is putting in a higher low from previous low when it comes to stock bottoming. This will help to avoid buying into securities that are falling. Going against the grain is a strategy many traders feel works well when it comes to stock bottoming. As a trader or investor, it’s worth your time to read the signs and get to avoid losses.

Bottom line

Every investor wants to know when prices are about to make major changes in any direction that is top or bottom. By looking for major indicators like MACD and RSI or for increased stock volume, traders and investors alike can determine stock bottoming clearly. Furthermore, it will make you a more successful trader or investor.

How George Soros Became So Legendary

There are few investors on this planet that have not heard of George Soros at all. He is a lightening rod of controversy for some and admiration for others. There is basically no in between. This is largely because of the interesting ways in which he has made his money and also because of the political actions he takes with that money.

George Soros made one of the most famous trades ever back in 1992 when he made a huge bet against the British Pound which netted him $1 billion in profit in just 24 hours. It was probably the quickest billion dollars anyone has ever made and one of the most famous trades ever taken, which later became known as “breaking the Bank of England”.

At the same time, it was a huge bet which just as easily could have gone against him but if you want to make the big bucks you have to risk big bucks. It was definitely a gambler’s move, and not something that would be recommended for just your casual investor. Despite this, Soros made out like a bandit and has only continued to grow his net worth averaging over 26% for the past 41 years. In fact, if you would have invested $10,000 with Soros back when he started in 1969, it would be worth over $143 million!

Why Is Soros So Controversial?

George Soros certainly draws enough criticism from the public. This happens as a result of his liberal political outlook and the fact that he backs liberal causes all throughout the world with large amounts of money. Most recently, George Soros was involved with giving $25 million dollars to the Hillary Clinton for President campaign as well as other Democrats running for office in this most recent election. This particular investment did not pay off, but Soros drew ire from the political Right regardless.

The billionaire has also been active in working on the Syrian refugee crisis. He has tried to work with European countries and others to resettle those who are escaping the brutal civil war in Syria. He considers this a humanitarian crisis and wants to do what he can to prevent people from suffering more than they have to. Of course, even this is something that draws scorn from some people who disagree with such actions.

In Retirement But Still Picking Stocks

Soros has officially declared that he is retired from the day to day stock picking that he once did for his funds. He has more than enough money to last the rest of his lifetime as well as the lives of his children and their children and their children and so on. As a result, he spends more of his time working on the political and charity causes.

The fund still continues to select investments and gather new investor’s money for its operations. Some recent changes to the fund included purchasing up Tivo shares and massively reducing shares of Dish Network. This could be indicative of a move that goes to show that Soros and his investment funds believe that the world of technology is moving towards a different way of how we use our technology.

The fund has sold out of a lot of its gold positions, but Amazon is getting a lot of love from them. It is great to see because all of this information is available to even people who are not invested in the Soros funds. The information is a little delayed compared to when the trades are actually made, but it is still valuable insight nonetheless.

Although his ways may be controversial to some, there is no question that George Soros is one of the savviest investors in the history of the world. He knows what he is doing, and his results speak for themselves.

Marriage And Merging Money

Marriage And Merging Money

Money is often an issue that tends to cause the most friction between a newlywed couple. In a world where the majority of people are concerned with their own personal well being, it is easy to forget that marriage is a mutual arrangement, not a solitary effort. Trust is a vital component in establishing a strong commitment in this shared life with your new spouse. A couple’s financial situation can be the source from which a newly forged partnership flourishes or the one thing that can sabotage a relationship.

As you begin your journey and build a future together, carefully consider the following do’s and don’t’s of money management in marriage.

The Do’s

Set Boundaries

Establish an understanding that you and your spouse have made a commitment to each other and that the majority of monies should be shared. Create a household budget and manage the mutually held funds accordingly. All should be considered “ours, not mine.”

Create Bank Accounts

Create three separate bank accounts. One individual account for each spouse and a joint account where an agreed upon amount will be deposited monthly based on a percentage of earnings. The joint account will function as the expense account for the household from which all monthly bills are satisfied.

Pay Off Debt

There are very few investment decisions a couple can make that have a greater return than eliminating debt. Paying off credit cards or loans with exorbitant interest rates of say 15-20% or more is the economic equivalent of an investment with the same return. Incorporate debt payments into the monthly budget and always strive to pay more than the minimum payment. The balance of remaining money should be used for an emergency fund; even $20 a week compounds quickly and can help in the event of an unexpected surprise.

The Do Not’s

Overlook Retirement

Retirement years appear to be far off and are oftentimes overlooked in the financial planning process as you have more pressing issues to deal with after recently being married. However, it is imperative that you set aside a predefined amount each month for retirement, regardless of what you earn. Utilize your employer’s retirement savings plans especially if they offer a matching contribution as this is free money at no charge to you while providing significant tax benefits. According to the New York Times, odds are strongly against you in saving enough money to support your retirement.

Lie

According to Forbes, 31% of Americans polled attest to having lied to their spouse about money. Newlyweds can circumvent the frustration and stress that comes along with deception by formulating a set of rules and talking openly about finances. Create a budgeting plan and stick to it.

Take On Additional Debt

Living within your means is easier said than done, but it is important to not overspend and ensure your financial future. Budgeting to live slightly below your means is ideal, as you then have the ability to save something and get one step closer to financial freedom. Debt acquired prior to a marriage and how it is handled can become quite complicated. Nothing can substitute the time spent consulting with a professional such as an attorney or accountant to determine how this type of debt is managed in accordance with state laws and other regulations.

Final Thoughts

This list is by no means exhaustive but discussing these “do’s and don’t’s” is an enormous stride in the right direction. As these discussions commence, additional concerns are sure to arise and keeping an open and honest discourse about money will pay off in numerous ways.

Employing Momentum Trading Strategies in Amplifying Profits

Combining advanced trading courses with an active chat room, Warrior Trading is staffed by professionals who demonstrate the fundamentals of successful swing and day trading in real time. Warrior Trading provides chat room members with real-time insight into the reasons for profit-seeking trades that employ proven strategies, such as gap and go and momentum.

A high-risk, high-reward strategy, momentum trading involves identifying stocks that are witnessing high-volume movement in a single direction. The trader seeks to take advantage of that movement and profit while it lasts, with typical positions lasting from a few minutes to a couple hours.

A key to success in this involves doing homework each day prior to the bell, identifying those stocks that are generating the most buzz in chatrooms and on message boards. Analyst recommendations and earnings are then perused and the list of stocks carefully tracked as markets open.

Identifying a breakout involves utilizing a host of technical indicators, with a particular focus on net stock changes over specified timeframes. Buy triggers and, in the case of shorted stocks, sell triggers are set in place within specific momentum periods and market orders reflecting how the investor expects the stock to run in the short term. The challenging aspect of this involves predicting how markets will react to specific news within a set timeframe and setting the trading parameters correctly.