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Education

Putting Purpose in your Money Management

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How many times do we promise ourself we are going to lose 30 pounds, exercise regularly, eat healthy, etc, etc, etc. And how many time do we start out great only to lapse back into the same old habits? It sounds so good when we are making the commitment and in our minds eye and heart of hearts we believe this time is different. But, it leads to the age old question: How and why does this keep happening? Psychology and the study of human behavior has answers in many different themes, but they all seem to lead back to the simple solution of motivation. Are we motivated enough to follow through on our promise and to work daily to achieve the habits necessary to accomplish our goal or desired outcome? If we would focus on a system for eating right every day versus losing 30 pounds the probability of success increases significantly according to studies. That would lead me to the conclusion that I need to have a well defined system that I can practice every day that fits both my personality and motivation.

purpIt would seem logical to say that motivation is the momentum that drives the discipline to develop systems that lead to lasting habits. If we set out to lose 30 pounds and we are committed to walking 3 miles per day as part of achieving the objective, my motivation is to lose weight and therefore I walk. We start out great getting up an hour earlier every morning to put in the three mile walk. But, as time goes on… do we maintain our motivation or does it wane? Set backs come… we are too tired, the weather is bad, too cold, too hot, snowing, raining, and eventually we stop walking all together. There are endless articles and speeches on how to motivate yourself, but the real challenge comes in sustaining motivation. This is where a well defined system comes into play. A system is simple Boolean Logic… IF ____ Then _____. If it is raining I will walk 10 flights of stair in my office building. It plans for contingencies if things go wrong. This is the first issue investors/traders have to deal with in achieving their stated objective relative to investing their money. Define a system that allows for best and worst case scenarios. Practice the system to the point of being habitual. As you perfect it… improve it. Keep records and stay focused on the end goal or purpose for the process.

Put this in perspective of the following purpose… I am 40 years old and I want to retire when I am 65 years old with $3000 per month of income. This is a 25 year goal! The odds are good you cannot or will not sustain your motivation for the next 25 years towards hit purpose. This begs the question of how do keep yourself motivated to save $300 per month for the next 25 years? Better yet how to do I stay motivated to manage the money year in and year out. If I believe I am going to stay motivated about a goal 25 years into the future, I am only kidding myself.

For me personally, the word purpose better defines how to achieve both short and longer term goals especially when it come to my money. What if I define the purpose for investing $300 a month for 25 years so I can retire and live the lifestyle I want for the remainder of my life? Being motivated is driven by my defined purpose. I still have to define the motivation to manage the money and continue saving or even increase my savings amount monthly. What if I learn to manage the money better? What if I increase my savings by $50 per month every 6-12 months? I will get to the goal, $3000 per month, sooner. Thus, the motivation stays engaged in the process by understanding the purpose for managing the money. First, retire with $3000 per month of income. If I get better at managing the money and save more per month I could retire sooner.

Investing on purpose is key to getting where you want to be. Purpose in turn helps you develop the habits necessary to obtain your goal. If I put on my calendar the last day of every month to review my retirement portfolio and recalculate the outcome based on the current balance when I can retire the motivation stays fresh. When I have setbacks from the markets moving lower I may want to find ways the next month or two to save more money to help buy more shares in my retirement account cheaper. Defining the purpose will create the habits which in turn drives discipline… which accomplishes the goal or the desired outcome.

Recently I have been working on the idea of making $500 per day from my portfolio. This would equate to approximately $120,000 per year. Being that I am not a day-trader, I had to find a way to translate this into my strategy/system for investing. The purpose behind this endeavor was to make me more disciplined in my active approach to managing money. This drove down to the simple task of managing the emotions involved in making buy and sell decisions in my portfolio. If I could look at the positions and determine if they are achieving the objective/purpose for which I bought them… adding $500 per day of value to my account, I would be on my way to achieving my goal. Without getting into all the details of how this can be done, I want to focus on the purpose… maintaining the lifestyle I want without having to go to work every day.

This process is helping me develop better habits that are driving my discipline system to implement the strategy for my money. I have developed a system for spending an hour a day managing the positions to achieve their objective/purpose. If there is a position in the portfolio not achieving the objective it is sold. Positions are added to the portfolio based on my strategy and managed to achieve the objective. Simple, defined, implementable, trackable and achievable. End result managing money and living on purpose!

Three steps for staying on purpose:

First, find your purpose for investing your money or stated differently… putting your money at risk. Define your system in terms you understand, believe in, and are willing to commit to daily to achieve the desired outcome. It is YOUR money, you have to own YOUR purpose in order to accomplish YOUR goal.

Second, define your strategy, system and needed habits before you start. Practice, practice and practice some more. Implement your strategy small at first, gain confidence and develop good habits, then increase the size of your positions as your confidence grows along with your education. Maybe you start with making $50 per day and grow it from there. Whatever it takes to keep you engaged in the process and stay on purpose.

Click for Video

Click for Video

Third, hold yourself accountable daily. That is why I designed the $500 per day goal. It is manageable, measurable, and achievable for me to gain the confidence to keep doing it every day. I am motivated to be accountable to myself and my future as I laid it out and believe in the purpose for implementing the strategy every day.

It is too easy to get caught up in the complexity that is the market. It is equally easy to get distracted in trying to find the BBTS (bigger better trading strategy). If you stop long enough to define what you want, the purpose, a strategy for achieving it, you will develop the disciplined habits it takes to achieve the end objective. Managing my money on purpose helps me to live on purpose, doing and experiencing the lifestyle I want to live. It all starts and ends with investing on purpose in order to live on purpose.

Purpose drives good habits for investing

By | Education, Jims Notes | No Comments

How many times do we promise our self we are going to lose 30 pounds, exercise regularly, eat healthy, etc, etc, etc. And how many time do we start out great only to lapse back into the same old habits? It sounds so good when we are making the commitment and in our minds eye and heart of hearts we believe this time is different. But, it leads to the age old question: How and why does this keep happening? Psychology and the study of human behavior has answers that in many different themes, but they all seem to lead back to the simple solution of motivation. Are we motivated enough to follow through on our promise and to work daily to achieve the habits necessary to accomplish our goal or desired outcome?

purpIt would seem logical then to say that motivation is the momentum that drives the discipline to develop lasting habits. If we set out to lose 20 pounds and we are committed to walking 3 miles per day as part of achieving the objective, my motivation is to lose weight and therefore I walk. We start out great getting up an hour earlier every morning to put in the three mile walk. But, as time goes on… do we maintain our motivation or does it wane? Set backs come… we are too tired, the weather is bad, too cold, too hot, snowing, raining, and eventually we stop walking all together. There are endless articles and speeches on how to motivate yourself, but the real challenge comes in sustaining motivation. This is the first issue investors/traders have to deal with in achieving their stated objective relative to investing their money.

Put this in perspective of the following goal… I am 40 years old and I want to retire when I am 65 years old with $3000 per month of income. This is a 25 year goal! The odds are your motivation will fall off long before you get near that objective. How do keep yourself motivated to save $300 per month for the next 25 years? Better yet how to do I stay motivated to manage the money year in and year out. If I believe I am going to stay motivated about a goal 25 years into the future, I am only kidding myself. For me personally, the word purpose better defines how to achieve both short and longer term goals especially when it come to my money. What if I define the purpose for investing $300 a month for 25 years is so I can retire and live the lifestyle I want for the remainder of my life. Being motivated is driven by my defined purpose. Investing on purpose is key to getting where you want to be. Purpose in turn helps you develop the habits necessary to obtain your goal. If I put on my calendar the last day of every month to review my retirement portfolio and recalculate the outcome based on the current balance when I can retire the motivation stays fresh. When I have setbacks from the markets moving lower I may want to find ways the next month or two to save more money to help buy more shares in my retirement account. Defining the purpose will create the habits which in turn drives discipline… which accomplishes the goal or the desired outcome.

Recently I have been working on the idea of making $500 per day from my portfolio. This would equate to approximately $120,000 per year. Being that I am not a day-trader, I had to find a way to translate this into my strategy for investing. The purpose behind this endeavor was to make me more disciplined in my active approach to managing money. This drove down to the simple task of managing the emotions involved in making buy and sell decisions in my portfolio. If I could look at the positions and determine if they are achieving the objective/purpose for which I bought them… adding $500 per day of value to my account, I would be on my way to achieving my goal. Without getting into all the boring details of how this can be done, I want to focus on the purpose… maintaining the lifestyle I want without having to go to work every day. I happy to say I am developing better habits that are driving my defined discipline to implement the strategy for investing my money. I am finding a way to spend an hour a day managing the positions to achieve the objective/purpose. If there is a position in the portfolio not achieving the objective it is sold and another added to the portfolio that will achieve the objective. Simple, defined, implementable, trackable and achievable. End result living on purpose!

Three steps for staying on purpose:

First, find your motivation or purpose for investing your money or stated differently… putting your money at risk. Define in terms you understand, believe in, and are willing to commit to daily to achieve the desired outcome. It is YOUR money, it has to be YOUR purpose in order to accomplish YOUR goals.

Second, define your strategy, process and needed habits before you start. Practice, practice and practice some more. Implement your strategy small at first, gain confidence and good habits, then increase the size of your positions as your confidence grows along with your education. Maybe you start with making $50 per day and grow it from there. Whatever it takes to keep you engaged in the process and stay on purpose.

Click for Video

Click for Video

Third, hold yourself accountable daily. That is why I designed the $500 per day goal. It is manageable, measurable, and achievable for me to gain the confidence to keep doing it every day. I am motivated to be accountable to myself and my future as I laid it out and believe in the purpose for implementing the strategy every day.

It is too easy to get caught up in the complexity that is the market. It is equally easy to get distracted in trying to find the BBTS (bigger better trading strategy). If you stop long enough to define what you want, the purpose, a strategy for achieving it, you will develop the disciplined habits it takes to achieve the end objective. Managing my money on purpose helps me to live on purpose, doing and experiencing the lifestyle I want to live. It all starts and ends with investing on purpose to live on purpose.

Dare to Dream!

Why is it called a “test”?

By | Education, Jims Notes | No Comments

Q&A from an avid reader:

Jim,
You can say that again (“money psycho” market)…
….on the bright side, this is indeed an opportunity for me to ask another question…
…in the context of crude oil you said yesterday:

Crude bottomed, bounce for four days off the low, and technically is testing the move back to support. If it holds that would equal an opportunity to trade the upside continuation. If you are a technician and understand that trading opportunity… by all means trade it.

…so my question: What the heck is a “test” anyway?? Is the above “testing”  just a conglomeration of money psychos spontaneously selling crude just to see if they can (micro term) push crudes price below support (before they then believe in the support) ???? …or is it more likely a  huge hedge fund doing that???
….or maybe both?? (meaning, the hedge fund or institution starts the crude selling towards support, knowing that money psycho’s will join the selling, and then if crude doesn’t break support the test held)???

— Avid Reader

Thus my point if you are technician trade it. If not…. Don’t

(See chart)oil_chart

  • Note the support/resistance lines drawn at 11.23 and 10.70
  • A test is a move back to those lines of support (on a test) or near them, between them, etc.
  • Wednesday’s bar (red) showed a test between the two lines (10.81 low) @ 2:20 pm
  • It then bounced off the low (TEST) and held higher into the close.
    1. If you are an educated, experienced and disciplined trader you add the position into the close @ 11.05 as example and go today with a stop below 10.70 support (10.65).
    2. Risk of the trade 40 cents or 3.6%
    3. Target for the trade = Tuesday’s high 12.45 or 12.2%
    4. Risk/reward 3.4 to 1
    5. If you are not experience, etc. you wait for today to confirm the entry by opening at or above the close. Entry 11.19 at open (you can see premarket it will open higher)
    6. Risk of the trade 54 cents or 4.9%
    7. Target same 12.45 or 2.3 to 1 risk reward.
  • With move higher I would move stop to the 11.05 price  and watch. Limiting my risk to even on first, and 14 cents on second.
  • Don’t worry too much about all who is creating the test or direction… conspiracy theories only create emotions in trading and there are already enough.
  • There is never a sure thing only statistical percentages that put the momentum, cycle, retracement, etc. in your favor.
    1. Remember this:
      1. Everything works sometime
      2. Nothing works all the time
  • When my money on the line the question is will it work this time.
  1. Putting things in your favor means aligning:
    1. Trend
    2. Momentum
    3. Cycle
    4. Support/resistance
    5. Time frame
  2. Remember what moves the market…
    1. Not technical or fundamental data
    2. People move the market – institutional traders are people they just happen to know and see more than the retail trader.
      1. Driven by feelings and beliefs
      2. What separates the winners from the losers… experience, practice, education and discipline (good habits).
  • Charts are just a recording of the actions taken by people – plain and simple
    1. Some psychos
    2. Some disciplined
    3. Discipline wins over psychos 95% of the time

You can now teach your own webinar on testing of a breakout move.

Enjoy,
Jim

Bigger Trend Worth Watching

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One of the first trading rules, guidelines, habits, or principles I learned was to respect the trend of the market, and equally important, don’t fight the trend. Of course that introduced the challenge of what trend are we watching and how long should a trend be in place before it is a trend. I taught on this topic in a December webinar and the importance of defining the timeline of the trend you are using and putting that trendline into perspective as it relates to the strategy you use to trade within the trend. The chart below is a weekly chart of the S&P 500 index going back to the 2012 bottom or pivot point for the current long term trend.

SP500

The reason I am putting chart up is to show that the trendline is still positive. Despite all the volatility and talk about the market being in trouble, the trend is still in place. The point being sometimes we need to take a step back and look at things from different perspective. The short term day-to-day noise and activity can sometime take over what is really taking place in the markets longer term. Stop, evaluate, project and determine what you belief looking forward with all the facts not just those screaming the loudest currently.

The chart below is the daily chart of the S&P 500 index and it gives a different perspective as the market shows signs of breaking down short term. The best case is we are in a consolidation phase for the index and looking for a catalyst up or down short term. The negative sentiment and volatility index is building momentum from investors and only serves to raise concern short term. With that in mind, we would manage the short term view differently than the longer term view. We need to manage our risk on any short term trading positions and set exit points or stops at the risk levels that fit the position. Currently we are using 1972 as the absolute support point for any short term position and 1992 as a possible exit point if we fail to hold the bounce higher from last Friday.

Chart

If the short term breaks the key support levels the longer term trendline would come into play and prompt decisions of how to treat longer term positions should the downside accelerate based on key short term events. Here in lies the challenge of managing your positions relative to stops, targets and entry points each day. But, it can be done, you just have to put in the extra work to understand what the current story is in the market, what is driving the short term and the longer term views, are they sustainable or are they just  a short term event impacting how the short term behaves. This requires discipline to read, research and understand the story behind the moves. It requires discipline to carry out the actions you predetermined prior to investing, stop points, target points and be patience points. Keeping your emotions out of the decision is the reason you put in the effort/research up front to determine each before the emotions of the market moving prompts emotional decisions. The adjustments to be made moving forward are then a matter of formality in light of the predetermined objective driving the decisions.

All of this activity and adjustments repeated over and over again are what builds good habits in the process of trading your money in the financial markets. Let the trend be your friend both short term and long term in building a defined strategy for investing and trading your money. Don’t forget to step back and take a bigger view to keep it all in perspective. There is still plenty of work to do short term before we can define the impact on the longer term trend. One day at a time, one trade at a time and one goal at a time. Keep your eye on the prize.