Trading Commodity Futures – Intuitively Day Trading The S&p 500 And E-mini – Part 4

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Every trading market has its own special patterns and oddities that will communicate its intentions. Patterns don’t always work every time of course, but even that can be a clue of underlying extreme weakness or strength. Just like knowing a spouse well, learning to read your special market can pay dividends. Read on to learn more…

More Observations From My Trading Notes:

“After a BIG, major e-mini decline, wait for the secondary test ? the first spike is TOO EARLY ? the second test pays off faster and may even be a better buy. It?s also a chance to see if the ticks confirm a higher bottom, volume comes in and price action looks like the market is going much lower to scare the sheep. If this scary secondary low does not hold, then something is definitely wrong and the market is likely going MUCH lower afterwards.”

Yes, the old panic and double bottom. ?Scaring the sheep? is one of my favorite sayings with the e-mini market. The sheep usually herd themselves into the middle ranges. They love to buy and sell there to feel comfortable.

The middle is a nice place to enter at first, but actually, the risk is higher later. When the e-mini market swings hard to the rails, it always dumps some of the sheep out of the truck onto the road for the wolves to get. The other sheep are watching and hoping it won’t happen to them, also. They hold on tighter but some of them jump to their deaths anyway. That?s what you want to see. If you train yourself to be an extreme range commodity futures buyer and seller despite feeling this fear, then you are progressing. It’s an unnatural thing to do. That’s a good thing.

This fear is a good indication of an intermediate pivot point. It’s nice to be on the sidelines ready to enter. This is a great position in itself. You want to feel scared without even having your money in yet – that?s what you’re looking for. Feeling comfortable about entering an e-mini futures trade is a red flag, believe me. You want a ?shaky hand? on the mouse when it clicks. No one is so good and confident in their forecast not to feel fear, unless they are a market psychic (unlikely) or have nothing personal to lose. (more likely)

Observation:

?Much patience is needed for a move to evolve, once entered.?
?
We?ve talked about this before. I guess I kept writing it down throughout my notes because I often violate it. In fact, if I read over the full fifty-five pages, I see themes that emerge. To become a better e-mini futures trader than you are now, you need to write this stuff down and constantly review it. I?m always amazed at how much I forget, even after reading it over and over.

But after a long time of reviewing, it becomes second nature and part of your instinctive intuition. That?s your goal. You want the lessons and rules you have observed over time to trigger something inside your body whenever an e-mini turning point is taking place. When it happens with me I feel this funny swinging of my head, like I?m getting into balance. I also get a fearful feeling knowing that I soon need to put myself at risk. Your own trading trigger will probably be different.

Effective, intuitive, discretionary, e-mini commodity futures trading is acting on your own internal signals when they occur in real time. (read that again) It’s not easy. If it was easy for everyone to learn, the market would not pay much for this skill now, would it?

Good Trading!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

Online Stock Brokers

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ONLINE stock brokers: the experts of ideas

Oh! So you have heard about online trading. But are you aware of aviate experience of online brokerage. Well it?s not your fault if it sounds only faintly familiar. Technology has ensured that one is well acquainted and familiar with traditions of increasing technology while other may be left totally ignorant over the scene. Let me clear this concept.

Online brokerage is the amount charged from online traders to trade online in return of better assistance to deal in stocks. This brokerage is paid to brokers who act as facilitators of trading in stock exchange. Unlike, traditional way of trading, here a trader may trade directly but the firm or individual he is associated with has to be paid off. Obviously not every investor can afford the heavy duty direct licenses to trade in stocks.

Hence, these brokers are mediators to sort out that trading. They are not only mediators; they act as supporters for traders. They guide day trading concepts to ad up to better understanding and get optimized profits. They are experienced and provide their expertise to beginners and experts too.

Now the question arises from where these stock brokers can be contacted from. The answer lies in the laps of technology. Yes, they are available online. Most of today?s share brokerage firm posses their websites from where the details regarding their brokerage terms and past records are available.

Being a competitive brokerage, the situation gets biased to the investors. The brokerages offered are as low as $3 for each transaction. Deep discount brokerages serve a decent opportunity to grab to. A low as $1 and so is charged per trade that allows investor to cut off the brokerage expenses. These opportunities tend to increase the trading in stock market at low bites from the investments made.

Apart being acting as catalyst these firms provide useful tips to trade in stocks. These tips may include the forecasted mood of share markets and the expected fluctuation in the price of a share, hence, catering to the need of clearing the cloudy environment while investments.

For all these benefits, all you have to do is to go to the chosen firm?s website and get an account opened there. With in few clicks you can open your account to trade as enjoy the services provided by online brokers. Opening an account with a firm provides you to access the stock exchange on your PC as the relative software is uploaded by the members of those firm. For beginners, they generally provide guidelines of how to trade and how to use trade persisting software?s. The benefits of online brokers? lies in the fact that the useful tips are received sitting at your laptop trading from home.

However, few cautions have to be considered before opening an account with any firm. The past records and the brokerage rates are the most important to be analyzed. The amount of brokerage has to be paid with each transaction; hence, lower brokerage favors the traders. Moreover, the facilities and mode of transferring payments should also be checked so as to avoid any confusion in relative future.

As such, discount brokerages provided by the firm act as sheer combination of meaningful trade at low rates, however, these are generally offered to people with large turnovers, but no more grievance to this clause as increasing competition is letting the brokerage rates fall every time and letting even small investors enjoy the benefits of low commission rate online brokerages.

Commodity Futures Trading – What Is Your Trading Edge? – Part 3

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Finding your very own unique commodity trading edge is a worthwhile goal. Without one you are lost in the masses, struggling to push your head above the sea of expenses. Trading edges do exist, though for short periods of time. Psychological edges are more permanent. You need many. Read on to find how to go about finding yours.

It?s breathtaking to watch a certain trading method working well and then see the market find a way to destroy these same participants in one sharp move. An example is when commodity option traders are writing (selling) options over an extended period of time. They?re taking in premiums like fat cats. Happy. Quiet market. The percentages can be upwards of 90% accuracy selling way out-of-the-money futures options in a dull or choppy market. The profits are small, but consistent.

Then the day of reckoning arrives and a move way out of the standard deviation spikes like a lightning bolt. They drag some option writers out by their boots. A well known example was in 1998 when a famous money manager was selling thousands of out-of-the-money S&P 500 puts. The market took a free fall dive. He lost a big chunk of his $100 million+ managed commodity fund in a few days. I remember it well because a partner and I were long an eighty-lot of put options on the other side of his trade. We made the biggest score of our lives. But it had much to do with luck and being there at the right time. It happens at least once to everyone. Heck, just being born is the longest shot going.

Right now I love the S&P 500 futures contract (e-mini) day-trading game. I?ve traded it actively for the last twelve years. It pays to focus on one or two commodity futures markets and learn it well. This is the key to getting an edge when day-trading. Some day-traders can spread themselves out and apply similar techniques to many commodity markets. God bless them. But I find I need to learn all the patterns, habits, and idiosyncrasies of one market to be competitive. Just like doctors who specialize.

Can you imagine a heart surgeon trying brain surgery, or even doing plastic surgery? It?s the same with markets. The more you focus and specialize, the better job you can do competing against the best minds in the commodity world out there. I have some methods I will suggest in later articles to focus and better learn your favorite futures market. This doesn’t mean you can’t hold long-term positions of other commodities while day trading. You can do both, but for day trading itself, you should focus on only one or two markets.

As I?ve said before, it’s so important to train your brain to intuitively and subconsciously identify likely turning points as they occur. With practice, you will find signals going off in your body. It?s different for everyone. Your body will let you know when it?s time to put on or take off a commodity trade. But, it takes training and looking at the right indications with a trained mind. More to come in future articles.

Good Trading!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

The Australian Share Market A Brief Summary of a Global Economy

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The Australian Share Market A Brief Summary of a Global Economy
But, it can also be very rewarding to the patient investor who is willing to learn the skills necessary to cash in on the markets.Remember that investing in whatever global stock market can be a risky task. Based on the Global Stock Market Review by Standard and Poor’s, Australia’s stock exchange is the 9th largest worldwide in total market capitalisation terms and the 2nd largest in the Asia-Pacific region, after Japan’s.Strategies and outlook as of April 2010, the Australian share market is now 1 year on from the turn in the markets as the potential financial disaster was averted as well as domestic economy started its recovery. Certainly, Australia has one of the strongest economies across the world in keeping with the present major players. Stock Analysts possess the experience and training to more accurately predict likely activity on the Australian share market. The market has re-rated back to its long-term valuation, contingent on a recovery in earnings of 20% in the 2011 financial year.

Sydney’s timezone offers companies the unique opportunity to make the most of the full trading day in Asia while also bridging the closing in the American markets and the opening of the European markets. Since the 6 March 2009, the Australian share market rose by 27.3% through June 30, and the US share market by 34.9% in local currency terms. The Australian Securities Exchange (ASX) based in Sydney is the first major market to open internationally each day. Its ability to withstand quite a lot of external and internal events, including a major drought, a housing boom and the Asian financial and economic crises also demonstrate the depth and liquidity of the Australian share market.Comprehending the Australian Share Market

Sensex 12000?12800?13000… What To Do?

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Sensex 12000?12800?13000… What To Do?
It is time for review when we see an all time high in the market. There is fear that the market will collapse, is this rally genuine? There is lurking desire that the best is yet to come. Then there are those who never invested in the market, seeing the prosperity of the market they would wish to be part of the action. The question that is posed by most investors is what do I do?

Let us first understand what the rise in index signifies. Index as a statistical formula is the weighted average of the market capitalization of selected stocks. Stocks are selected on basis of certain criteria such as liquidity i.e. number of shares traded per day, number of shareholders, company performance i.e. profits and divided payment, corporate governance, size of capital etc. Care is taken to ensure that majority of the industries are represented in the index. Market capitalization (cap) is nothing but the total shares the company has issued multiplied by the current price of the share. For eg if a company has issued 100,000 shares and the current price per share is Rs. 1,000 then the market cap is 100,000 x 1,000 i.e. 10,00,00,000 ie Rs.10 crores.

Taking a simple average of the share prices is not enough, since the market cap varies of each company (depending of size of capital) it is necessary to assign weights, i.e. company with higher issued capital will get a higher weight. Hence weighted average price of all shares is taken for the purpose of calculation. Obviously, increase in price of Reliance will impact the index more than say a smaller company such as Cipla. Another important concept is free float index. Since not all shares are available for trading, to the extent that the shares are in lock-in or held by promoters, the share capital is reduced by such number of shares. This thus makes the index totally liquid. It should not so happen that the index keeps going up or down without trading or liquidity.

Index is always computed with reference to a base year. The change in share prices is as compared to share prices prevailing at a particular point of time. In case of Sensex the base year is 1978 and in case of Nifty it is 1995. The base index was 100 for Sensex and 1000 for Nifty. Adjustment is made in the share price for corporate actions such as splits, bonus dividends etc. Companies such as Tisco, ACC and Grasim have been part of index since inception. Prices of these shares have grown by about 128 times since inception during last 28 years, since the Sensex has grown from 100 to 12800.

The Sensex which is the most popular index is owned by BSE Ltd and has 30 stocks in it, whereas the most frequently traded index, Nifty 50 tracked on National Stock Exchange has 50 stocks. There are many more indices such as BSE 100, BSE 500, Tech Index, Mid cap index etc. Newspapers also have identified certain stocks and they are also have devised certain indices and are regularly computed. Index is computed every few seconds when the share prices keep changing. The companies that form part of index are also reviewed periodically and advance notice is given when a company is removed or added to the list. Sectoral indices indicate how a particular sector performs on the market.

Some people ask as to what happens to all the wealth that is created when it goes up and vice versa! Well, both the creation and destruction of so called wealth with market movements is only notional till someone actually encashes it, and no body can buy or sell the whole market at one shot. Your wealth will increase proportionately only if you own shares that are part of the index in same proportion. Further even if you own other share it may not go up in same proportion as index. A 10% appreciation in index does not translate to 10% increase in each and every stock. The increase will be determined by weightage. Some shares will appreciate more than the others.

Index is said to be an indicator of the economic health of the country. Unfortunately since very few industries are represented on the exchange this statement is not true. Important sectors that contribute to the GDP of the country are not listed. Transport sector companies such as Indian Railways, Air India, Indian Airlines, National Highway authority ports etc are not traded on the exchanges. Insurance companies such as LIC, GIC and its subsidiaries are not listed. Mineral sector is not represented. Banks continue to have a large shareholding by Reserve Bank and Government of India. The list goes on. Hence Index can at best represent the collective sentiment of Indian investors towards the economy.

A review should happen when the market reaches all time high. The sentiment is most positive at such times, hence you may get a good price for your share if the growth story associated with your share has been achieved and you have reached your targets. It is not advisable to sell off just because the index is all time high, your share may still be under valued. At the same time despite a sustained increase if your company share has failed to appreciate, then a hard look at company performance is warranted. If the share cannot perform in a very positive environment then it is difficult to do so in normal times.

For newcomers it is a good strategy to stick to index stocks since there is a reasonable certainty about the liquidity, quality of management and financial performance of the company. However entry into such shares should always be in correction phase. An all time high index is not an entry point. A correction is a good time to enter. There is nothing like missed opportunity. The zigzag graph that we see of index signifies that there are constant corrections in the market and straight lines are few and far between.

If you are unclear which stocks to buy then index is a good bet. You can buy index in derivatives market. Index futures as well as options are available. Nifty Futures is a highly liquid instrument that is available on National Stock Exchange. If you expect the market to go up then you can buy nifty in futures or a call option on nifty. If you expect the market to go down then a nifty can be sold in future or you can buy a put option. But to revert to the first point of review when the market is all time high, what do I do? Well it is an occasion to celebrate, but any action taken of buy or sell should be based on review of company valuations and future prospects.

Trading Stocks Using The Rsi Indicator

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The RSI (short for Relative Strength Index) is a popular technical indicator with traders and investors because it is quite effective at showing overbought and oversold positions in a particular security. But how effective is it in reality and can it really be relied upon to trade stocks with any accuracy?

Well as with any technical indicator it should not really be used in isolation because it is only one indicator, but on the whole the RSI indicator is quite effective at indicating both overvalued and undervalued stock positions. There are, however, times when it is more effective than others.

For example, from an investment point of view an RSI that is indicating an overbought position, ie over the 70 level, doesn’t really mean too much when a share is strongly trending upwards because it could easily pull back slightly before accelerating even further ahead and becoming even more overbought. However an oversold RSI, ie below 30, on a bullish share that’s trending strongly upwards often acts as an excellent entry point.

Similarly when a stock is trending downwards you should be very careful about oversold RSI signals because just look at the recent market and you will see that prices have dropped substantially despite all the oversold RSI signals we saw on the way down. In a bearish market it’s a better strategy to look for overbought positions in weak stocks that are in a strong downwards trend and take short positions.

Overall I think RSI is a very useful technical indicator in general but it can be rendered useless in the face of a strong trend. If you are looking to catch the bottom of a stock you’re interested in buying that’s in a strong downwards trend, your best bet is probably to consult the longer term weekly or monthly charts. That’s because if the RSI is oversold on these time frames, then it’s a better more reliable signal than an oversold position on the daily charts. It also provides a better entry point for anyone looking to invest in a company for the long-term rather than a few weeks or months.

Of course you should also look at the fundamentals of the company in question as well including the financial accounts and earnings forecasts, PE ratios, etc, because you may find the RSI is oversold because the company is going bust so the price will fall even further. However once you’ve identified a good quality profit-enhancing company, the RSI can provide you with a strong entry point when in oversold territory, particularly if the stock is in an upwards trend.

Retail Is For Stockpickers

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Since September 2004, the S&P Retail Index has been caught in a sideways consolidation channel at between 400 and 500, unable to establish a sustainable trend in one direction or the other. During that time, the monthly retail numbers have been largely mixed. But in January, the retail data (excluding auto) was impressive, showing growth of 2.20% versus the estimate of 0.8%. It was the strongest reading in years.

Yet the initial optimism appears to be fading after seeing mixed reports from the nation?s retailers on Thursday. The early data suggests that same-store sales growth will be sub par compared to what we saw in January.

The reading in January may have been an aberration because of warmer than expected temperatures. The surfacing of cold weather in February apparently sent a chill through the pocketbooks of consumers. Also, the strong January sales may have taken away from spending in February.

The reality is the absence of a positive trend in retail makes investing in retail stocks more of a risk. You need to pick the right company. Even bellwether stocks such as Wal-Mart Stores (WMT) are struggling as far as its share price in spite of some decent sales results and same-store sales growth. But the current valuation deserves a look.

Youth oriented clothes retailer Gap (GPS) is a company that is clearly struggling at the cash register. Its February same-store sales crashed 11% year-over-year, well above the Street estimate calling for a decline of 6.80%. This followed on the heels of an 11% decline in the company?s Q4 earnings along with a FY07 forecast that was short of Wall Street expectations.

GAP expects comparable-store sales to be negative in the first half and turn moderately positive for the remainder of the year. Same-store sales are widely viewed as the best indicator of a retailer’s health.

For investors, GAP is clearly a turnaround play that could pay off if it can somehow figure out how to attract shoppers. The fact is the company has great brand awareness and this counts for something in this brand conscious world we live in.

On the upside, you have a company like Best Buy (BBY), a dominant market leader in consumer electronics. The stock is just below its 52-week high, up 69% from its yearly low.

The reality is retail spending may be impacted by the higher financing costs associated with the rising debt loads across America. The personal savings rate is declining and was negative in January. Consumers are eating into their savings and you know this cannot be good for retail.

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