Free market capitalism: good or bad?

The debate on whether free market capitalism is overall good or bad has been raging for ages. Personally, I think that it would be a good thing, as I feel that prices should solely be determined based on supply and demand, but what I will do in this blog post is evaluate the pros and cons of each. Hopefully using this, some people can make up their own decisions.

A pro of free market capitalism is that companies will be driven to make the best product possible, in order to make their company the best one on the market. As of now, it could easily be argued that some companies such as Tesco are halfheartedly carrying out their daily affairs, because of the monopoly companies like them and Asda have on the market. Free market capitalism would make sure that all companies would be driven to make the best products possible, giving a wider breadth of choice to the consumer and incentivising companies to do the best job they can do.

Moreover, companies will be motivated to innovate more, creating a fast-growing economy and a fast expansive society as well, with new products being created every day, and people racking their brains to innovate. As of now, it’s quite lacklustre as people have no real drive. They need to want to innovate before all else.

Free market capitalism would also be highly beneficial to the ordinary worker. These days, people are more concerned about ethics than ever before and people will not buy a product from a company if it has a reputation of underpaying workers, or putting workers in degrading conditions. This would be better for the worker as they have more power over the companies, as even one worker speaking out could seriously damage a company’s profits.

Also, free market capitalism would incentivise new companies to come to the fore and try and make products which people like. Functioning oligarchies do not make people want t0 create companies, as they simply think that they cannot topple the Apple’s and the Microsoft’s of life. Free market capitalism would change this.

However, if an industry as a whole is not performing well, it could lead to mass unemployment, with lots of people being laid off their jobs due to demand being insufficient. This would create a problem for the government, as they cannot provide benefits for so many people. In this way, the collapse of even one industry could burden governments, which could detract from their ability to provide aid to the social services like healthcare and education. Imagine the UK without the NHS!

Finally, when companies are so driven to succeed, it means 90% of people who may be working equally as hard as the bigger companies will fail. Free market capitalism, then, could be construed as creating even bigger divisions between the rich and the poor, which is hardly what countries like the UK and the US with their levels of inequality bursting at the seams need right now.

Overall, however, in my opinion, free market capitalism is a good thing, simply because it would promote fairness in society.

Thanks for reading! Stay tuned for more!

Why I would sell shares in Apple now

One was in for a treat if they invested in Apple a few months ago. Shares have skyrocketed and if you bought a substanstial amount of them earlier, you could have made enough for a nice holiday soon!

But the truth, at least in my opinion, is that the only way is down for shares in the late Steve Jobs’s empire. Apple has just been ordered to pay $563 million as a result of breaching a patent. This bad news will only drive client sentiment down and, in order to get ahead, you should short back your shares as soon as possible.

Moreover, the fact that the outstanding valuation of Apple outstrips their profit/earnings ratio means that the shares will go down in value eventually, meaning your profit on the overall trade could be substantially reduced.

Of course, I can’t foresee nonlinear, unexpected events occurring, no one can, but, within all feasible scenarios that we can forward, I would say sell the shares back if you want to keep your holiday.

Why the contrarian can be just as wrong as the crowd

Contrarians have a brilliant reputation. Sometimes it seems as if they are the only ones that can make money trading the financial markets. But what people don’t see quite as much is that contrarians can be just as wildly, hilariously wrong as many a normal trader. In fact, I’m here to argue that they can be even more wrong.

When the normal trader makes a decision as part of a crowd, client sentiment leans towards far more long than short orders. When there are far more long orders than short orders, the bid price goes up, and sometimes the offer price may go down as well. Therefore, as part of a crowd, the average trader is somewhat likely to make money.

However, a contrarian can be a lone bull in a field of bears or vice-versa. His or her order won’t really change anything and therefore things can go wildly wrong for them if they make a huge error in judgement. Moreover, contrarians can be just about anybody – they don’t have to be economists with a university degree to be classed as such. In fact, contrarians can be just as wildly inept and clueless as I was when I first started trading.

Sometimes they can just be so stubborn that they will go against the crowd, and, contrary to popular opinion, they don’t always get it right.

FINAL Trading Update: Progress Summary and what I have learnt

I have made, in total, a 50% return on my investment, which I’m really quite proud of! During my journey of 5 days of trading, I have learnt quite a lot of things which could be applied to the next time that I trade, the first being the re-assertion, if you will, of the (sorry to repeat this over and over!) importance of emotion in trading. How your day of trading goes largely depends on your mindset. On one day, Day 4 I think it was, I came into trading thinking that “the past two days have been good, it’s probably time for me to have a bad day”. This negative and fixed mindset hindered my trading from my first trade, to be honest, where I lost a small amount of money. After this, it was simply a downward spiral for me, and I placed one frankly stupid trade on EUR/USD.

Contrast this with Day 1, 2, 3 and 5 of my trading where I came in roaring with a growth mindset and achieved substantial gains each day. This is exemplified, most particularly, in Day 5 (today), where, even though I lost quite a substantial amount in the beginning, I persevered and increased my returns by another 10%. That brings me nicely on to my next learning point, the importance of perseverance.

Many a man will get scared and close a trade based on the most minor of fluctuations. To be fair, it was more recklessness more than anything else in the beginning, but, as my trading journey zoomed on, I realised that holding a position for a longer time can have substantial benefits. This could be best shown in Day 3, where I had many positions losing me substantial amounts of money, however, I persevered (you must be getting tired of that word now!) and the losses reversed into substantial gains by the end of the day.

You don’t, moreover, need to make lots of trades during the day in order to make a profit, in fact, one day when I had to go out with my friends for most of it and had only an hour or two at best to trade, I made some of the most profits! The important thing here is to think qualitatively, not quantitatively. I also learned that adding to your position is vital if you want to make large returns. Previously, I was scared to put more money on to a position, thinking that “if it goes wrong, I’ll be wiped out”. As I progressed on my journey, however, I realised that adding to positions can be invaluable if you want to make a profit, and, more importantly, snuff out the losses of previous trades. The penultimate thing that I learned was the importance of technical analysis when trading. Even with my limited knowledge of technical analysis, I feel that I was able to spot the trends of a stock and go long or go short depending on which direction I thought the stock would go to.

A great man once said “one of the great paradoxes of the stock market is that what seems too high, usually goes higher, and what seems too low, usually goes lower.” This only exemplifies and exacerbates the importance of charting, so that you know what direction a stock is going to go in, and, can make profits off of your technical analysis.

Finally, I learned that it is somewhat good to be greedy when trading. There were many occasions in which I had a small profit and could have “wimped out” and taken my small profit, but I stuck with my faith in the direction of the stock and my gains often gained strength exponentially.

Thanks for following me throughout my trading journey, guys! I really appreciate it, and (there’s a bit of shameless advertising here), please like my Facebook page, follow me on Twitter and read my subreddit Stay tuned for my next articles while I learn more and more each day! 🙂

Trading update

To be honest, I can’t write much here because not much went on. I closed one trade for a small loss, but that’s it, I guess. All I can really say is that the volatility of the financial markets astounds me every time. I have now made around a 40% return on my investment, which is pretty cool, I guess. All in all, a good day.

Today’s trading update :)

My day was uneventful for the most part, but I saw quite a large gain in a matter of about 2 minutes. The trade I was talking about yesterday on EUR/USD closed at about 5pm today at a profit, after which I made several small trades getting me small gains. Until the picture above happened. One of the “small trades” I had put on EUR/USD rocketed up I don’t know why, and I suddenly pocketed about 15% of my deposit as profits! This was more luck than anything else, to be honest. I doubt it will happen again. Stay tuned for my next update! 🙂

Trading update for today

Right now, I’m sitting with quite a large loss to my name on EUR/USD which I have traded on. Why, oh why, did I have to short it. 😦 The most important thing that I learned today was that losses are relative. I found myself feeling happy that my position was in quite a big loss, only because it was higher previously and I was very lucky not to stay with it.

My biggest mistake today, was by far not putting a stop loss. My first ever post was about the importance of emotion in trading, and, at least today, I haven’t heeded my own advice.

I hope it gets better tomorrow.

Is short selling unethical?

Let me start by stating what short selling is. Straight from Investopedia, it is “the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit.” I’m pretty sure that all of you can already see the ethical qualms which people might have about this, and you’re not wrong, either.

A number of countries have outlawed this, including countries such as France, Italy, Spain and Belgium. The reason that they have outlawed this is that their governments feel that short selling accelerates the decline of a stock, thereby “kicking them while they’re down”, if you will.

Another reason why people believe that short selling is unethical is that it promotes the spreading of false information in order to artificially engineer the downturn of a stock, so that they can make a quick buck. Regulatory authorities have been trying to stop this false spreading of information for ages, so I completely understand this. However, in this technological age, people know which information is trustworthy and from a reliable source and which information isn’t.

It’s like those fake “celebrity death notices” that you see. Nobody really believes them or cares about them anymore. What I believe is that, yes, short selling could be construed, and rightly construed, as unethical as it puts companies further into the red, but some of the disadvantages to a country and to its economy are grossly exacerbated, and have given short selling a negative image when, really, that shouldn’t be the case at all. Isn’t all trading a bit unethical anyways?