Welcome to My Trading Room, Volume II

Jacques Magliolo

• Publisher: Business Expert Press
• Year: 2017
• Print ISBN: 9781631578779
• eBook ISBN: 9781631578786
• Topic: Business
• Subtopic: Finance
• Index: Business

Volume two of Welcome to my Trading Room is a practical set of guidelines to trading; starting with how stockbroking will change over the next decade, followed by an overview of why securities fluctuation. This more analytical section includes an explanation of equites, cash and bond cycles and how these influence shares price movements-which is expanded into how indices work and why they are important for traders to understand. The reader is introduced to traditional valuation techniques. This volume also details factors to help traders to establish their own brokerage firm and how to mentally prepare for a career as a trader. It is also the critical start of establishing principles and rules to trade effectively, with discipline, and knowledge. The text ends with trading insights to give novice traders an advantage in their new careers.

PART I

Prepare for the Future

CHAPTER 1

The Next Decade

Technical Indicator Wisdom 1

Always start your analysis with long-term trends.

There is no doubt that anyone who has completely mastered the art of trading successfully in a hostile and ruthless global environment, will dispute that trading is anything but simple.

I have no intention to refute such statements. Except that novice traders have to start somewhere. So here is my basic starting point, from which layers of knowledge can be assimilated.

1. The basic formula to calculate a share price: Share price = Price: Earnings (PE Ratio) × Earnings Per Share (EPS)

2. The deeper your understanding of these variables, the greater your depth of knowledge and ability to trade.

The following is the first step to acquire a deeper knowledge about your future trading strategies.

Environmental Factors

While the following factors are critical to understand and take cognizance of, these are merely some of the vast array of variables that need to be taken into account as a trader.

Variables Affecting Stock Markets

Since the early 1990s, the phenomena of markets becoming global has increasingly meant that whatever your ideology may be, whether Marxism, Buddhism, socialism, Catholic, Protestant, or capitalist, traders must get to grips with how the most dominant worldwide environmental forces operate and thus influence stock markets and ultimately share prices.

Free markets are dominating how products move across borders, how countries are integrating their national economies and even where people live. Yet, political and economic theories have largely become blurred, with the power of China operating in the free market arena, but calling itself socialist.

Therefore, the success of liberal or socialistic economic programs depends on how these are positioned to take advantage of resources locally and globally. Since the 1990s, I have followed various experts on the role of global markets and their impact on stock market trends. These trends are so powerful and intense that I concluded that a major study had to be conducted, which started out as a Masters in Economics and quickly extended into a focus for my economic doctorate. The following is a basic overview of expected changes over the next decade in stockbroking.

A Basic Overview

Eurozone and Its Aging Population

Once the Eurozone’s single market in goods and services is complete, these countries have the power to start specializing in their expert products, creating entire countries with specialist skills. Until the amalgamation takes place, gaps are increasing in the service sector, where potential economic growth is greatest, which provides strong trading opportunities for the global trader.

Europe is experiencing declining birth rates.

A declining population means less people to fill positions, which creates large demand gaps. If some European countries—such as Germany and Italy—continue to act as a cause for declining European economic growth, competitors will start to eye potential takeovers, which will create major trading opportunities.

Mergers tend to provide global traders with Pairs Trading opportunities.

Bulls and Growth Sectors

Global markets have experienced an unbelievable 7-year bull run, with the United States’ Dow Jones rising by 95 percent, the FT-100 by 45 percent, and the Nikkei by 70 percent.

However, these bulls have created their own structural problems around the world, with supply of services starting to outweigh demand, resulting in potential corrections along the way—offering traders the perfect opportunity to undertake value analysis on markets, indices, and shares.

Technology is without doubt expected to be at the number one growth sector in the near future, as digital, biological, and industrial technologies converge. This presents massive opportunities for traders, as online trading becomes more acceptable and accessible to the masses of populations around the world, especially in emerging markets.

In addition, health care and a strain on current energy sectors should lead to viable energy alternatives being developed and promoted. These forecast leading growth areas are likely to experience major innovations that will act as key drivers for economic growth in the coming years.

The U.S. Dollar and Interest Rates

While the fight to diminish the importance of the U.S. dollar continues by numerous world nations, the currency should continue to remain the world’s main currency reserve for at least the next 5 years, especially as the Japanese economy continues to fight deflationary conditions and the Eurozone combats its own debt-related issues.

Interestingly, the U.S. dollar is likely to gain ground during this period, especially against the yen and euro, but will comparatively weaken against emerging market currencies, offering Forex traders opportunities to diversify their portfolios.

The reverse in current trends should take place. First-world markets will see interest rates rise, while emerging markets are expected to get a grip and better management of their interest rates. As a consequence, numerous analysts are forecasting a shift of funds and trading from emerging markets to those of first world. The theory is that money around the world chases lower risk.

The theory is simple. Money chases higher interest rates. This may be true, but this tends to be from those with low risk appetite. Those traders looking for higher growth will continue to look at emerging markets and their growth opportunities.

This shift of money around the world creates gaps in the market and thus trading opportunities for the astute trader.

Political Interference

While free market trade has been on the rise since the breakup of communism in Russia and trade liberalization in China, the credit crises in 2007-2008 has given rise to another less free market trend—protectionist trade policies.

Under the current U.S. President Donald Trump, there has already been new protectionist policies propagated. Other countries are also looking to protect their industries in a difficult growth environment.

As economies struggle to deal with low GDP and the resultant higher unemployment rate, politicians are looking at implementing various new barriers to entry. These will cause gaps in exchanges around the world, providing fantastic trading opportunities.

Third-World Markets

Market forecasts are that domestic demand for goods and services within such markets, rather than exports, will become a driving force of growth.

According to a PricewaterhouseCoopers analysis, the largest seven emerging economies (China, India, Brazil, Russia, Mexico, Indonesia, and Turkey) will be close to 50 percent larger than the current G7 (United States, Japan, Germany, United Kingdom, France, Italy, and Canada) by 2050.

Conclusions:

• China will become the world’s largest economy, s...

Table of contents

• Cover
• Half-title Page
• Title Page
• Copyright
• Dedication
• Contents
• Trader’s Declaration
• Foreword
• Mentoring and a Knowledge Base
• Part I Prepare for the Future
• Part II Setting Up Your Trading Room
• Part III Trading Psychology and Other Issues
• Part IV Are You Ready to Become a Trader?
• Appendixes
• About the Authors
• Index
• Backcover