Author: Online Trading Academy

Tips for Buying a Boat You’ll Love

As most any of the more than 12.7 million U.S. boat owners would probably attest, nothing matches the fun, freedom and serenity they feel when out on the water. While it’s true that boats are costly and require a serious time and resource commitment, if you have your heart set on boat ownership you’re in the right place. Here are some great ways to empower you on the path purchasing a boat.

So, assuming that you’ve already landed on the size, make and/or model boat you want, you now have four (or so) ways to go about buying it. Each has its advantages and disadvantages, and it pays to weigh each option carefully. Our mission here is the same as yours: To make sure you get a good value on a quality vessel that you can start enjoying right away.

A couple on a boat drinking and sharing a toast

Financing a Boat

Unless your boat purchase is to be an outright cash transaction, odds are you’ll need some sort of financing. This is where having and maintaining a healthy credit score pays off, because it will help afford you (relatively) cheap access to the capital needed to buy your boat.

Boat financing really doesn’t differ very much from a home mortgage or auto loan in that you’ll kick in a down payment—10%-20% of the purchase price, perhaps—and then make monthly payments to the lender for the rest.

Rates and loan terms vary, of course, and highly depend on factors like your credit score and financial history, income and current assets, and the sale price of the vessel. However, loan terms can last as long as 20 years (for high-priced boats) and interest rates at the time of writing were between 5% and 7%.

Just like with a home or auto loan, you should shop rates and terms across many different lenders and use the internet to your advantage when doing so. Be sure to have your financial house in order when applying for financing, and take steps to improve your credit score in the months prior to ensure you’re a strong candidate for lending.

Boat Sharing

Heightened interest in boating has given rise and staying power to a couple of alternative boat ownership strategies. Tweet: Heightened interest in boating has given rise and staying power to a couple of alternative boat ownership strategies. For those who want to defray the substantial costs of boat purchase and ownership, these options are worth considering:

  • Shared Boat Ownership
  • Peer-to-Peer (P2P) Boat Rental

The shared boat ownership model simply entails two or more parties (typically friends or relatives) agreeing to split the costs of buying and running a boat. They then share time equally or as agreed upon between the parties. The advantages are clear: Shared ownership enables you to reduce your overall financial commitment, or perhaps increase your buying power to afford a bigger, better boat than you might on your own.

The down side of shared ownership, of course, is that you don’t fully control the asset. Because disputes can arise and come between friends or family members, it’s important to draw up and enter into a basic contract that governs important items like:

  1. The division/sharing of use
  2. How all boat-related costs (docking, fuel, storage, maintenance, insurance, etc.) will be shared
  3. What happens if one party can no longer afford their share of the vessel
  4. Settling of disputes

Another way to defray costs and turn your boat into an income-producing asset is by way of peer-to-peer (P2P) boat rental. This concept works a lot like Airbnb, except it’s specific to boats. Willing renters use the Internet to connect with you, the boat owner, or a third party which helps broker the rental transaction (in return for a percentage of the fee).

P2P boat rental is gaining in popularity and can create a ready income stream for some boat owners. However, it’s imperative that you require renters to either buy supplemental insurance coverage (through a third party), or sign an acceptance of liability. That’s because your standard boat policy is virtually certain to deny coverage in the event of an incident for which you were not the boat’s operator.

Buying a Used Boat

Dealers and especially the boat show circuit are excellent sources for buying new or used boats. Particularly if you know what you want to buy, boat shows can provide access to multiple dealers eager to turn over excess inventory. As a result, the boat show environment promotes price competitiveness and gives willing buyers access to multiple onsite lenders as well. For these reasons, you may want to brave the crowds and fast-paced atmosphere.

Now, here’s the most important advice there is if ever you’re considering buying a used boat: Do not make any commitment, financial or otherwise, until you have the vessel surveyed by a licensed marine appraiser. The survey may cost you around $400 for a smaller vessel, and up to around $1500 for a larger one, but the information provided will do much to empower your decision.

Pay particular attention to these two survey components: engine hours and compression-per-cylinder. If a marine survey on a used boat reflects low engine hours and high (and equal) compression-per-cylinder, you’ve probably got a good boat there. If these numbers are suspect, however, it may be an early warning sign about hidden problems and you should walk away or at least use extreme caution.

Lastly, don’t focus so much on the boat that you ignore the trailer. Purchasing a used boats may also mean a purchasing a used trailer which if rusted, rotting or in need of repair can easily break, leaving your new, used boat on the ground before you even get it in the water.

Viable Alternatives to Boat Ownership

In the end, remember that there are many ways to get out on the water, some of which don’t require you to buy a boat at all. Especially if you’re new to boating or lack experience as a boat captain, it’s probably best to test the waters, so to speak, with one of the below alternatives to boat ownership before jumping in and assuming all the costs and responsibility of owning a boat.

Boat Clubs & Time Shares

Access Free Financial Educationboat club membership will afford you access to a fleet of vessels, and because the club handles the storage, cleaning and maintenance for you, you save a lot of money and hassle in the process. The rules and fee structures may vary widely with each club, though, so be sure to do your research and gain an accurate understanding before signing up.

There are also boating time shares, which allow you to buy a block of time in a fleet of company-owned boats. Here again, if you’re new to boating, perhaps try this for a year before deciding whether to buy a boat of your own. Like with any time share purchase, though, don’t be pressured by hard sales tactics. Be sure to ask questions to gain a clear and accurate understanding of the rules and usage structure.

Beyond boat club membership and time shares, there’s still the option of good old-fashioned boat rentals or charters. These allow you a range of options depending on your needs and desires. Taking the time dabble a little bit before making a full-scale leap into boat ownership can help you make an informed decision, and ensure you buy a boat you’ll be happy with for years to come.

Special thanks to insurance and boating industry expert, Jason Peters, for his meaningful contributions to this article.

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What is a Bear Trap on the Stock Market?

There are many dangers inherently found when investing or trading in the equity markets. But what increases your risk is not knowing how to identify or avoid the many traps purposely set up to take your money. One such trap is the Bear Trap in Stocks.

Markets move higher because of an imbalance between buying and selling pressure. For example, when there are a lot of people wanting to buy but no sellers to match them at the current price. In this instance, to attract sellers, the buyers will raise their bids, (the price they are willing to pay for the stock). The higher price is likely to attract sellers to meet the demand.

The problem is that when anyone buys a stock, they automatically become selling pressure on that stock. Remember, once you own a stock, you only profit from it once you sell it (unless you earn dividends on the stock). So, if too many people buy the stock, it will diminish the buying pressure and increase the potential selling pressure.

What is a Bear Trap?

In order to create more demand and get the prices of stocks to move higher, institutions need to shake out the amateur/novice traders. They do this by pushing prices lower to make it seem like the stock or the markets are becoming bearish. The fear of losing their small profits, or of losing money in general, will force the novices into selling their stocks. Once a trader has been stopped out or tricked into selling their stock, they will frequently jump back in if they see the prices moving upwards beyond the price that they had originally bought in. This, in turn, creates more demand and drives the prices higher just as the institutions wanted.

When to Expect a Bear Trap

Institutions buy stocks at wholesale prices, usually after they drop. This will cause downtrends to reverse and markets to rise. This is the best time to buy, but many amateur and novice investors and traders wait and buy once they see that prices are already bullish. Worse yet, many people are taught to buy breakouts and chase price as it moves higher. This signals to the institutions that it may be time to set the bear trap on the stock. When you see an increase of volume accompanying a breakout in price, a bear trap is usually not far off.

Chart showing a bear trap on stocks in the market

Bear traps on stocks can also be found on intraday charts. The same setup is usually observed, prices breaking out to fresh highs where institutions will sell or short sell to the novices buying the breakout. This halts the upward movement and scares the novices into panic, causing them to sell their stock or triggering their stops. Once the price drops into demand, the institutions buy to cover their shorts and send prices higher where novices will jump back in for fear of missing out.

Intraday chart showing a bear trap on stocks in the market

How to Trade a Bear Trap

Free Trading WorkshopTo be profitable in the markets, you want to trade like a professional. Bear traps on stocks are usually set in the same circumstances as those described above. Now that you know what the professionals are looking for to set the bear trap and how they trade them, you could trade and invest right alongside of the smart money.

If you follow OTA’s Core Strategy, you have a set of rules and will trade and invest with the dominant trend and quality demand and supply zones. There are also Bull Traps that can be a danger or an opportunity for traders. To learn more about the Core Strategy and/or other market traps and opportunities, visit your local Online Trading Academy Center today.

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Investors Inside Track to Good Real Estate Deals!

If you ask the guy on the street what makes a good real estate investor, he’ll tell you, ‘Someone who has the inside track to good deals.’ There is no magic formula for having the inside track, just two key elements: limited competition and an urgent need by a seller to liquidate the property.

How do you find these opportunities? It comes down to hard work, access to good data, knowing how to negotiate and create a win, win situation, a system to track and analyze properties quickly and a work ethic to stay consistent. As Tom Hanks said in A League of Their Own, ‘It’s supposed to be hard.  If it were easy, everyone would do it.’ At OTA Real Estate, our education, tools and coaching could help the investor find these inside track opportunities which we call off market and grey market real estate deals.

What Are Off Market and Grey Market Deals?

Simply stated, off market properties and grey market properties are those that have not been listed by an agent and added to the MLS (Multiple Listing Service). The MLS, according to the National Association of Realtors, is ‘… a tool to help listing brokers find cooperative brokers working with buyers to help sell their clients’ homes. Without… the incentive of the existing MLS, brokers would create their own separate systems…, fragmenting rather than consolidating property information.’

Free Real Estate Investing WorkshopGrey market properties, as defined by OTA Real Estate Wholesale Instructor Joe Short, are, ‘properties that are actively for sale but significantly underexposed to the general buyer’s market place. Typical grey market properties are those sold at most auctions and so-called FSBOs (for sale by the owner without the assistance of a licensed real estate agent). Some real estate professionals, such as Wholesalers, operate in grey markets wherein they find off market properties and market them to a limited, specialized group of (usually) cash buyers.’

Off market properties are defined as properties not marketed to the public. Once a property hits the MLS, by design it is exposed to the greatest number of potential buyers. Getting to the property before the public naturally limits competition, potentially allowing the investor to get a favorable deal.

Here at OTA Real Estate, we teach many grey market and off market real estate strategies including, but not limited to: pre-foreclosure, foreclosure, bankruptcy, divorce, targeted list, tax sales, REOs and probate.  Through our education and the powerful patent pending Deal Board, we not only educate our students on how to find these off market real estate deals and grey market properties, we also offer local and national data sources to access them quickly.

Good Fortune,

Diana D. Hill –

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The Benefits of Mindful Meditation for your Trading

Mindfulness, over the past few years, has become synonymous with meditation.  Now, that doesn’t mean that all who read this missive will know that to be true. In fact, there are still great numbers of people, traders included, who have no clue that this is so.  Additionally, when the word trading is coupled with meditation, there are large swaths of traders whose eyes roll and glaze over at the notion.  There are a number of reasons for this phenomenon; for example, meditation is still not fully understood and is often mischaracterized as strictly a religious exercise and/or it is thought to be so esoteric as to not be useful for something as practical as trading.

To combat this notion, I’ll list some of the benefits of a mindfulness practice that accrue to the trader.  These are just a few of the myriad positive adjustments meditation that will support you and your trading with physiological, mental and emotional benefits after just 8 weeks of practice as outlined in literally hundreds of scientific studies.

Profile of a head with brain visible and brainwaves flowing through.

What Are the Benefits of Meditating?

    • Sharpening attention
      By reducing the amount of internal conflicting dialogue the individual is supported in the ability to focus more intently on the trade or investment at hand.
    • Lowering heart rate
      While trading it is very easy to become overly excited and experience a racing heart. Consistent meditation relaxes the overall system and helps the trader/investor to track incoming data with greater clarity.
    • Lowering stress
      Stress levels become elevated when trading/investing due to hard earned capital at risk. Meditation eases stress levels and helps the individual navigate through the complexities of the market.
    • Easing anxiety
      For many traders, just opening their platform increases anxiety…about being wrong, making mistakes and losing money.  Meditation helps the trader/investor to align body, mind and emotions to go in the same direction and for the same goals, thereby reducing internal turmoil and conflict.
    • Increasing patience
      Meditation helps the trader/investor to appreciate the moment and develop the capacity for waiting, which is a mainstay of successful trading.
    • Inducing calm
      Through the process of sitting still and focusing on breathing, mindfulness meditation calms the body and the mind which expands the trader’s ability to reduce distorted judgement and better deal with distracting negative emotions and thoughts.
    • Reducing susceptibility to fear and greed
      Successful trading/investing stems in part from the effective management of fear and greed, two of the most disruptive emotions to the process.  Meditation helps the trader to maintain a grounded and centered perspective that puts distance between these emotions and the task at hand.

    Free Trading WorkshopThe evidence for including a 20 to 30 minute practice in your daily routine of focusing on the breath while sitting still in awareness of the moment is so pervasive that it is nearly criminal to refuse yourself this opportunity to substantively expand your consciousness and your effectiveness. In so doing, you’ll begin to recognize the power of this seemingly obscure approach to trading.  Now, if this were all that I had to offer on this subject it would arguably be enough to cover the time-cost of reading this article; but I’ve got more.

    Mindfulness is not just a form of meditation…it is a lifestyle.  John Kabat-Zinn, Founder/Executive Director of the Massachusetts Stress Clinic and one of the acknowledged thought leaders of mindfulness, has, for over 30 years, studied the effects of mindfulness meditation and has said that mindfulness is something that transcends simply sitting and being in quiet awareness.  It is a way of showing up in the world.  It is a way of seeing things; that is, everyday things as though you had never seen them before with a sense of wonder and awe and reverence.  It is a way of interconnecting with compassion for your fellow beings and, rather than asking what they can do for you, asking what can you do for them.  Mindfulness is how you eat, bathe, walk, talk, argue, work, play, compete and explore.  Mindfulness is being deliberate as you step into the day; that is, being in the here and now.  Mindfulness is moving out of your own way as you courageously address difficulties, for instance in your trading, with a renewed sense of wonder to see how well you can navigate through your trade plan by maintaining a fierce focus on what matters most. Mindfulness is a way of acknowledging the power of not knowing and the cultivation of curiosity.  Mindfulness is a journey with no destination, a journey that enters into the depths of heart and soul to open the self to a deeper conversation with your highest and best self.

    There is so much that can be and has been said about the virtues of mindful meditation and I encourage and invite you to open your eyes both metaphorically and literally to awaken to greater meaning and purpose in life by beginning a mindfulness practice. The beauty is that although it is not easy, it is simple.  Even starting out with a relatively small practice of a few minutes a day can be beneficial.  The choice is yours, to continue sleep-walking through life while on automatic pilot and at the end of the day feeling just as depressed, overwhelmed and stressed as when you started with yet no clue as to what to do about it.  All it takes is the intention and doing nothing as you sit or lie or walk in quiet mindful awareness… just being.  This is what we teach in Mastering the Mental Game online and on-location courses.  Ask your Online Trading Academy representative for more information.  Also, get my book, From Pain to Profit: Secrets of the Peak Performance Trader. 

    Mindful Trading

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Adjusting Pip Targets in Changing Markets

Hello traders! This week’s newsletter is going to discuss the lowly expectations we have come to accept in the current forex market of late.

Last week I was teaching a futures class (yes, I know, a different asset class!) in our beautiful Houston, Texas campus. One of the questions that came up at lunch was, ‘Which is your favorite asset class, forex or futures?’. It was followed up with the question, ‘Which currency pair is your favorite?’. While having a favorite asset class or forex pair is like asking someone what their favorite pizza is, my answers to these common questions are this: ‘It depends’.

So, what does it depend on? Well historically, at least to me, it depends on which charts are the cleanest and also who is trending the most. Or put another way, what is consistently paying more pips or ticks. When looking at the following daily chart on the EURUSD, you can plainly see that the volatility measured by the wiggly blue line, the Average True Range (ATR for short) has been steadily decreasing since the beginning of the year. Currently the ATR shows a range of approximately 53 pips per day, which is the lowest since summer and fall of 2014!

Forex trading chart showing the EURUSD pair

Looking at the rest of the major pairs, the GBPUSD is at 102 pips per day (still higher than most while the whole Brexit thing plays out), USDCHF is at 47, AUDUSD at 63, NZDUSD at 57, USDCAD at 77, and the USDJPY is at 48 pips per day. Historically, these numbers (except the GBPUSD) are near the lower end of their ranges.

Free Trading WorkshopOne of the problems new traders have is adjusting to changing market conditions. If you began trading or took your first class when the daily ATR was higher (like in January of 2018 when it was around 110 pips per day on the EURUSD) your profit targets would have been more pips, say 50-60 pips for swing traders. If you are still looking for the same profit targets now, when the ATR has been cut in half, you may have to DOUBLE the amount of time in your trades to hit your target! So the point is, if you aren’t paying attention to how volatile the market is currently, and use a more volatile time for target expectations, you may be disappointed in your current trading.

There are two easy ways to help correct this issue. The first has already been hinted at: look to be in trades for a longer period of time to achieve the same pips for your trades. If you were trading from a 60 min chart and achieving 30 pips or so on your winners, you may have to go out to a 120 or 240 minute chart to achieve the same targets. The second is to look for pairs that have more volatility. The main thing to be aware of is that the leverage/margin requirement is often double, triple or even more on those pairs compared to what the majors have!

Until next time,

Rick Wright

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Pool Parties – Types of Pooled Investments

You are probably aware that in your retirement portfolio, you need to diversify your risks by owning different types of assets. Unless you are one of the few people whose career is in finance, you may not feel that you want to dedicate the time and energy needed to research dozens of different investments. There are several kinds of advisors who are happy to take your money and invest it for you, in exchange for handsome (not to say ridiculously high) fees.

But, if you want to be at least somewhat hands-on with your investments, there are a few different kinds of so-called pooled investments that are available to you. By selecting a handful of these, you can get the benefits of diversification and avoid many of the fees. In this article, we’ll do a brief rundown of the most common types and go into more detail on one of them. In future articles, we’ll more fully describe the other types.

Types of pooled investments

What Are Pooled Investments?

The basic idea of any pooled investment is that the investors own shares in a fund, which in turn owns a portfolio of investment assets. The investors’ returns consist of distributions of cash or other property paid out by the fund; as well as changes in the value of the funds’ shares. Exactly how this is accomplished differs from one type of pooled asset to another. The potential benefits of any pooled investment are diversification, savings due to scale, and, for actively-managed funds, professional management.

Some of the main categories of publicly-available pooled investments are:

  • Mutual Funds (also called open-end funds)
  • Collective Investment Trusts (CITs)
  • Exchange-traded funds (ETFs)
  • Closed-end Funds (CEFs)

To some extent, your choice of fund type may be dictated by the environment in which you are investing. Inside of a 401(k) or other similar employer-sponsored  pension plan, you may be offered only CITs, or only mutual funds. In that case, the best that you can do is choose the best from among the ones offered to you. How to make that selection is an article in itself, that we’ll go into at another time.

What Are Differences in Pooled Investment Types?

If you are not constrained by someone else’s rules, you can consider all types. Here’s how they are the same, and how they are different:

Each of the fund types is a pool of capital that is run by a manager or management team. The investors in the fund indirectly own the assets that are in the pool. The investors may receive cash distributions from the pool derived from dividends, interest, rents or royalties generated by the assets in the pool. The investors may also benefit from increases in value of the assets themselves, reflected in the price of the pool units or shares. The management pays itself by taking money out of the pool. The rate at which they pay themselves is called the fund’s expense ratio. It can range from a few basis points (a basis point is 1/100 of 1% of the total value of the fund) to 2 full percentage points (200 basis points) every year, or even more. The level of fees charged has a big impact on the investor’s net return.

How Do Open-ended Mutual Funds Work?

The pooled investment type that is most familiar is the open-ended mutual fund. In this case, open-ended means that new shares can be created on demand and sold by the fund company to investors. The fund purchases more assets with any new money that is put into the fund. When investors want to sell their fund shares, the fund buys them back or redeems them. The price paid upon redemption is equal to the Net Asset Value per share (NAV) of the fund at the time of redemption. When redemptions exceed new money, the fund must sell assets to raise the cash to pay off the redeemed units.

Open-ended funds have two main subtypes: actively-managed funds and passively-managed funds. In the actively-managed subtype, the management attempts to use superior asset selection skills to do better than the benchmark for the asset type used. This is where the vaunted professional management comes in. The management will buy and sell assets with the pool money at its discretion to try to achieve their investment goals. There is often significant turnover within the fund, which generates short- and long-term capital gains or losses as well as generating trading costs.

Free Trading WorkshopThe second sub-type is passively-managed mutual funds. These are mainly index funds. Such a fund owns the assets that are listed as part of a specific index, such as the Standard & Poor’s 500, the Russell 2000 Small-cap index, the Aggregate Bond Index, etc. The management of this type of fund has no investment decisions to make. They simply invest in the assets that are part of the index, in the same proportions as in the index. Whenever the indexes are rebalanced, the fund management sells the assets that have been removed from the index and buys those assets that have been added to the index; and rebalances the fund. This is a clerical exercise not requiring the skills of a high-powered stock picker, so the expense ratio for passively managed funds is generally much lower than for actively managed funds.

Beating the indexes is not easy. The indexing process itself winnows out losers (because they cease to meet the requirements to be included in the index) and replaces them with up-and-coming winners. Most actively managed funds do not beat their index benchmarks consistently, and the actively-managed funds incur more trading costs as well.

For all mutual funds, active and passive, the realized capital gains and losses within the fund are taxable to the mutual fund investors, who receive a 1099 each year. The 1099 also reports any distributions the investors received from the fund and characterizes the distribution as qualified (special tax treatment), non-qualified (taxed at ordinary income rates), capital gain (taxed at capital gains rates) or return of capital (not taxed).

Mutual funds are regulated by the SEC. They have extensive reporting requirements. There is a great deal of publicly available information on the fund’s holdings and performance. Morningstar is a good source for this information.

Mutual funds are mainly useful when they are your only choice, i.e. within an employer’s pension plan.

How Does a Collective Investment Trust Work?

That statement also applies to the next pool type, the Collective Investment Trust or CIT.

Collective Investment Trusts are similar to mutual funds, except that they are not publicly available; they are sort of private-label funds usually offered exclusively to employees in a pension plan. CITs have very minimal reporting and compliance requirements compared to mutual funds. This can be both good and bad. The good is that their fees tend to be lower. The bad is that there is no neutral information available about them. The only available information comes from the fund itself.

In any situation where you are not constrained in your selection by your employer’s offerings, you will also want to consider the other types of pooled investments, the Exchange-traded Funds and the Closed-end Funds. More about them in the next installment.

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