When to sell? There is no hard and fast rule, except one: Sell long positions immediately if the reasons for purchase prove themselves to be wrong by declining in price.

Good "buyers", that is to say, those who know how to recognize real bargains, are often weak "sellers" because they tend to sell too early or hold on too long.

They either become uncomfortable as soon as their positions reach "normal" valuations (sell too early) or tend to give their positions "the benefit of the doubt" when early signs of weakness begin to show up (hold on too long).

Periods of depression, bad business conditions, and public apathy are naturally followed by periods of overvaluation, good business conditions, and public over exuberance.

At such times as stock prices advance beyond the most optimistic expectations of those who bought very early and very low they begin to feel uncomfortable and unsure of their positions.

Intelligent liquidation is not simply the reverse of intelligent accumulation. Unwinding of long positions is not the same as initiating short positions. Stocks often make unsatisfactory long holdings without being clear-cut short sales.

Never allow a large unrealized gain to turn into a loss. If your commitment is large, scale out of the position in stages on the way up.

This is as close as it is possible to come in deciding when to sell.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading, Don Heggen

When you place a market order, you are essentially telling a broker to buy or sell a stock at the current market price. A market order is the way your broker normally places an order unless you give him or her different instructions. The advantage of a market order is that you are almost always guaranteed that your order is executed as long as willing buyers and sellers are in the market place.

Generally speaking, buy orders are filled at the ask price and sell orders are filled at the bid price. If, however, you are working with a broker who has a smart order routing system, which looks for the best bid you sometimes can get a better price on the NASDAQ or AMEX exchanges. Whenever the order involves the NYSE, you need a good floor broker. In most brokerage houses, market orders are the cheapest to place with the lowest commission level.

If you want to avoid buying or selling stock at a price higher or lower than you intend, you must place a limit order instead of a market order. When placing a limit order, you specify the price at which you will buy or sell. You can place either a buy limit order or a sell limit order. Buy limit orders can be executed only when the price of the stock you are buying is at the limit price or lower. A sell limit order can be executed only when the selling price is at the limit price or higher. In other words, you set the parameters for the price that you will accept. You can’t do that with a market order. The risk you take when placing a limit order is that the order may never be filled. Most firms charge more for executing a limit order than they do for a market order. Be sure that you understand the fee and commission structures if you intend to use limit orders.

Trade Stocks provides detailed information on Trade Stocks, Online Stock Trades, Wise Stock Trades, How to Trade Stocks and more. Trade Stocks is affiliated with Penny Stock Research.

Although tax strategy considerations should not be the dominant factor in the investment decision making process, neither should they be ignored.

Every investment decision has tax consequences so why not make the most of them? After all, we don’t make the rules, but we do have to play by them. Why not, if given the choice, maximize the advantages and minimize the disadvantages?

Smart tax strategy will do that for us.

The results of investment transactions, for most traders and investors, are classified as capital gains or losses. Capital gains and losses are further classified as short term or long term. Short term, as of this writing, is less than a year. Long term is a year or more. It wasn’t always that way and it may change again in the future. Tax laws are always changing.

So, we actually have four categories: Short term gain vs. short term loss and long term gain (good stuff) vs. long term loss (bad stuff).

Long term gains are taxed less than short term gains. Long term losses are less desirable than short term losses.

Here’s why: Short term losses are subtracted from short term gains to determine net short term gain or loss. So far, so good.

Next, long term losses (the bad stuff) are subtracted from long term gains (the good stuff) to determine net long term gain or loss which also decreases the good stuff and increases the bad stuff! Did you catch that?

Then the net short term gain or loss is offset against the net long term gain or loss to determine the over all net short or long term gain or loss. Confused? Good! You’re supposed to be.

Can we turn this around to our advantage? Yes, we can!

How? Simple. Smart tax strategy to the rescue.

Determine, right now, that you will NEVER, repeat NEVER allow any loss to become long term.

Make sure all losses remain in the short term category.

Look what this does to our calculation: No more bad stuff. Bad stuff all gone. Only stuff left is good stuff.

Profitable investors will always have either net short or long term capital gains while unprofitable investors will always have net short term capital losses.

Either way, smart tax strategy gives us our most tax advantaged position.

Good for us. We deserve it.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading, Don Heggen

In these uncertain times many investors are worried about there mutual fund performance and are looking for mutual fund alternatives for growth.

There is one simple investment (and we mean anyone can do it) that has on past performance exceeded gains of 50% per annum, and this looks set to continue.

So what investment are we referring to?

The investment is copper

Prices of copper have increased in price more than six-fold since late 2001!

These gains look set to continue and this investment is a great alternative to mutual funds in terms of performance and risk / return.

It’s easy to invest in copper.

This is a bull market and all traders need to do is to time their entry correctly and then sit back and enjoy the ride.

So why is copper so bullish

Quite simply, we have low inventories tight supply and huge demand as global economic demand soars, as the new economic super powers of China and India join the economic elite.

Copper is a barometer of economic growth and global demand overall is soaring, there is simply not enough copper to meet demand and this means higher prices.

Risk

When looking at mutual fund alternatives is copper more risky than mutual funds?

We don’t think so, at the end of the day, mutual funds are much more volatile than many believe and the investment performance of most fund managers is dire – if you make double digit gains your lucky!

Copper on the other hand is up 600% in just a few years and you can trade with unlimited profits and limited risk with options.

Diversification

Reduces risk of your overall portfolio and copper is therefore an mutual fund alternative investment that can compliment your existing portfolio and reduce risk.

Commodities buy and hold

If you are looking at commodities as a mutual fund alternative then you need to adopt a simple buy and hold strategy for long term gains – Keep in mind, your investing for the long term.

Other opportunities for 50 – 100% annual gains

Copper is not the only commodity that makes a great mutual fund alternative investment, there are many more.

We have recently for example, written articles on energies and you may have seen our recommendations in just two weeks make more than most fund managers do in a year!

Check out our previous articles and you will see.

In fact, our copper trade last week achieved a similar performance!

Commodities are a great mutual fund alternative investment, because they are easy to understand, their real and everyone can follow the trends happening in the global economy.

Could this be the most profitable of all?

As a mutual fund alternative copper is a great investment, crude oil and unleaded gasoline have also done very well for us, but perhaps the best mutual fund alternative of all is natural gas.

Natural gas continues to trend lower, but will probably become one of the biggest commodity market bull moves of recent years and investors can easily make 100% per annum.

Why?

Because crude oil prices are high and natural gas is cheap and not subject to geo political concerns that affect crude oil.

So, the switch to gas that has already started will accelerate. Furthermore, supply will not be able to keep pace with demand and this will see huge price spikes.

For now natural gas is trading lower, but not for much longer in our view, traders who want a mutual fund alternative should consider this commodity as well.

Copper but many more options

Copper is a great mutual fund alternative investment right now and natural gas could join it in a huge bull run.

If you want mutual fund alternatives that are easy to understand and trade, look no further than commodities, with copper and natural gas two you should consider.

These mutual fund alternative investments can make you 50 – 100% annual gains just by using a simple buy and hold strategy and you don’t need a fund manager to do them, so you can save the fees and not have to hear the excuses for poor performance!

For more free info

On the potential for copper and to recieve a FREE investment newsletterthat outlines the potential for copper natural gas crude oil currencies and other commodities visit http://www.wellingtoncr.com

The butterfly spread is a conservative strategy with both limited profit potential and limited risk. It is actually a combination of a bull spread and a bear spread. It can be constructed using all calls, all puts, or a combination of each.

Three strikes are used: one high, one low, and one in the middle. You buy the upper and lower strikes and sell the middle strike.

For example, suppose a stock is selling at 50 and your option pricing model indicates the 50 strike front month options are "rich" and should be sold. Your opinion on the stock is neutral. You sell the 50s and buy the 45 and 55 strikes.

Another way of looking at the butterfly spread is selling a straddle and buying a strangle: Selling the 50 strike straddle and buying the 45/55 strangle, in this example.

If you took in a net credit of $3.50 per spread, that is your maximum possible profit for selling the spread.

The risk is the difference between strikes (5 points) minus the credit received (3.50) or 1.50 points per spread. Not bad.

Your profit range, in this example, is the middle strike (50) plus and minus the credit received (3.50): 53.50 - 46.50.

The risk is limited should the underlying fall below the lowest strike or rise above the highest strike. The maximum profit, as in all strategies involving the selling of option premiums, is at the strike price of the options sold. In this case, the middle strike.

Should the underlying experience a large move in either direction, some strategists close out the profitable side of the butterfly spread near its maximum profit point thus preparing to capitalize on a price reversal, should one occur.

Caveat: In this, or any, strategy involving the shorting of options, avoid early assignment by closing the position if the short options trade in-the-money, at or near parity.

Always keep in mind the "time value" of money. By that I mean consider closing the position early if most of the potential profit has been earned and there remains a considerable amount of time left till expiration.

For instance, if you find that you’ve earned more than half of the maximum potential profit in less than half the time to expiration, is it wise to stick around for the small remaining profit?

Suppose, for example, you’re ahead 80% of the maximum possible profit in less than 50% of the time remaining. Do you really want to stick around for the remaining 20% and risk losing back the profit that you’ve already earned?

The butterfly spread is a favorite strategy of many traders.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading, Don Heggen

The best Trading Vehicles have two characteristics that are paramount: Price and Liquidity.

If you’re trading stocks, look for good liquid trading markets that are tight and fluid.

Bid and Ask quotes are narrow and close to the last trade. The quotes have depth to them and can accommodate large orders without disturbing the price.

All this results because of the competition between large numbers of market participants.

The opposite situation is present in thinly traded markets.

Lack of large numbers of market participants means quotes are wider and smaller in size, resulting in huge "slippage", choppy markets, and disappointing order executions.

If you can’t get in or out of a given market with ease, you’re in the wrong market.

If the trading crowd is not interested in a particular market neither should you.

Go where the action is.

For instance, Exchange Traded Funds (ETF) are the closest you can get, in a single security, to being able to trade "the market".

In appearance they resemble an index fund, but they trade exactly like any other stock.

Index funds don’t encourage short term in-and-out trading. They call such activity "disruptive". And, truthfully, they’re right. It is disruptive, distracting, and annoying to the fund portfolio manager.

The ingenious way ETFs are put together, all the in-and-out trading in the world will not disrupt anything inside the unit portfolio. In fact, they were designed to accommodate and encourage such activity. Why? Because the public wanted it, that’s why.

Traders and investors wanted a vehicle that they could buy-and-hold, collect dividends, trade, buy on margin, sell short (without that outdated "up tick" rule), options trade, and whatever else they wanted to do with it, and did Wall Street ever deliver the goods!

Broad based indexed exchange traded funds hit the ground running and never looked back.

They have had a profound effect on the way investors and the entire investment management industry think about investing.

In fact, they have proved so popular they spawned a universe of sector ETFs on industry groups.

All the requisites of an excellent trading vehicle are present.

Also, as a trading vehicle, Single Stock Futures (SSF) are a traders’ dream come true.

In legal terms, an agreement between two parties where one party commits to buy a stock and one party to sell a stock at a given price and on a specified date.

The contract is completed at expiration or, in most cases, by offset prior to the expiration date.

The many advantages are:

(1) Greater leverage: Lower margins (20% vs 50% for stocks) and no interest to pay.

(2) Greater cash flow opportunity: Treasury Bills can be used as collateral.

(3) Easier and cheaper to sell short: No need to borrow stock, no uptick rule, no dividends to make up. SHORTS even earn the "basis" premium that the LONGS pay.

(4) An almost perfect hedging device, SSFs are more efficient than options. No strike prices involved. The only difference in price, between the futures contract and the underlying stock, being the basis which zeros out by expiration.

(5) Foreign investors can reduce currency risk.

(6) Additional sophisticated trading strategies not otherwise available.

(7) Broad liquid markets make these ideal trading vehicles.

If you like ETFs, you’ll love SSFs.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading,

Don Heggen

The Iron Butterfly spread, as the name implies, is a variation of the butterfly spread. The "iron" terminology part of all spread strategies means to widen the range of the protective strangle purchased.

By purchasing the protective "wings" of the spread further out-of-the-money, the overall net credit received for selling the spread (that is to say, the potential profit) is increased, although with correspondingly increased risk of the overall position. Gee, increased reward/increased risk! No surprises there.

However, widening the range of the spread also offers possibilities for "rolling" the position up or down as a follow-up action, if needed, without disturbing the protective wings of the spread. Increased flexibility. Nice.

The Condor spread is also a variation of the butterfly spread.

Think of it as selling an expensive strangle while buying a cheaper one. The entire position is put on for a net credit.

Because the strategist is selling a strangle, rather than a straddle, the condor spread takes in less credit than the butterfly but has a broader profit range.

The ideal time to put on this spread is when the stock is trading mid-way between strikes.

For example, if a stock were trading at 47.50, the strategist would sell the 50 calls and the 45 puts and buy the 55 calls and the 40 puts.

The maximum profit range would be between the strikes of the options sold, 45 and 50 in this example.

The break-even points would be at 45 minus the credit received and at 50 plus the credit received.

The maximum loss points would be at 40 on the downside and 55 on the upside.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading,

Don Heggen

The monthly chart below shows SPX managed to close the month above the middle Bollinger Band, maintained the bullish MACD, and held Money Flow steady. So, the cyclical bull market remains intact. Also, intermediate-term technical indicators, e.g. the NYSE’s Summation Index, Bullish Percent Index, and Oscillator MAs, reached low enough levels in June, consistent with other cyclical bull market pullbacks, to indicate an intermediate-term bottom. However, a breakdown of those lows will lead to a larger correction or a bear market. Also, SPX had a classic October to May rally and has entered the seasonally weaker period. Consequently, a volatile trading range will likely take place over the next few months.

The daily chart below may indicate the SPX July trading range. Volume normally decreases over the summer. Major support levels are 1,253 (multi-year Fibonacci level) and 1,246 (previous support & resistance). Major resistance is 1,275 (previous support & resistance) and 1,290 (downtrend high). So, the July trading range may be between 1,246 and 1,290. There are many minor support and resistance levels within the range. A rise above 1,290 is bullish and a fall below 1,246 is bearish. Short-term technical indicators are useful (some shown below and explained in the Option Trading Log next day and next week trading plans), along with influencial market events, which may or may not have been fully discounted.

Free charts available at PeakTrader.com Forum Index Market Forecast category.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

A diagonal spread involves different strike prices and different expiration dates in which the options held long have a later maturity than the options held short.

It is a conservative strategy with limited risk and considerable profit potential.

If the spread is put on for a debit, that is the maximum risk and the possibility exists for writing options more than once against the same long leg.

If the spread is put on for a credit, the maximum risk is the difference between strikes less the credit received.

The advantage of owning options that are still "alive" after the shorter term options expire worthless, or at least closed out for a profit, means that the strategist then owns the remaining options at a substantially reduced cost, or possibly even for free.

If the diagonal spread was originally put on for a credit and the short options expire worthless, the strategist makes money no matter what happens after that; sometimes a whole lot of money. It can be like hitting the lottery or winning the Kentucky Derby!

Can you see why professional option traders love the diagonal spread? Especially, when put on for a credit? Heads they win big, tails they win small; but they still win, no matter what.

It just doesn’t get any better than that.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading,

Don Heggen

You are going to be seeing and reading a lot more about hedge funds in the coming weeks and months. Two loosely related disturbed fronts are moving towards each other that may yet converge into the perfect storm.

The S&P 500 Index, the proxy for the US stock market, is up only 1.97 percent for the year, and down 1.7 percent for the quarter. The Lehman bond fund index is down 1.5 percent for the year. US stocks and bonds comprise the overwhelming majority of assets in individual investor portfolios.

That means very little or no growth for pension fund and 401(k) beneficiaries. For mutual fund and pension fund managers that means skinny or no performance bonuses. In a word, the pressure is on to somehow make a silk purse out of the sow’s ear of an underperforming US stock and bond market. That’s being done. New filings with the SEC indicate that a growing number of mutual funds will adopt hedging strategies like short selling and option investing to keep investors from leaving the herd and taking their assets with them.

On the other side of the disturbed front, the real hedge funds, unregulated private investment pools with a $trillion plus to toss around, are getting some unwanted heat from the regulators. Although they were held off by a recent DC Circuit Court ruling in favor of the hedge funds, the SEC is hot to regulate the hedge funds and is lobbying hard for Congress to give it the laws to do so.

Hedge funds are not mutual funds. They are not bound by any investment strategy description in a Prospectus. A hedge fund can implement any investment strategy that you as a private individual who got together with a few friends could do. Other than the always applicable laws against insider trader and outright fraud that leaves lots of room for creativity and financial maneuvers.

For example, in 1994 the former head of Solomon Brother bond department and two future Nobel Laureates in Economics got together and started Long Term Capital Management hedge fund with a few friends and $1 billion in capital. Four years later LTCM was producing returns of 40% annually, and the hedge fund’s off balance sheet positions totaled a gargantuan $1.25 trillion. There probably weren’t a dozen people in the world who completely understood LTCM’s enormously complex strategy, and not many more than that who even knew enough to ask an intelligent question.

The Russian government’s bond default in 1998 created an international whirlpool of panic selling in other government’s bonds that threatened to sink LTCM and suck the entire international financial system down with it. The ultimate disaster was averted but you can bet that the memory of what “that hedge fund could have done” is very much alive in Washington DC and among the veterans of the financial press.

How does this fit together to create the perfect storm? Negative stock market returns demand a cause, identifiable culprits whose evil deeds have shaken investor confidence and robbed people of their retirement. It doesn’t matter if there is no actual connection if the story is compelling enough. Short selling hedge funds, fueled by the fallout from an insider trading scandal or two, make the perfect culprit. Hedge funds are not open to joe sixpack. The media and the public love villains.. The average hedge fund investor is a financial institution or a fabulously wealth individual. Who better?

(c) 2006 by Peter Amaral. Peter is the creator of the http://www.tradingfives.com website and author of several easy-reading ebooks on the exotic trading techniques of the legendary master traders like JM Hurst and WD Gann.