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Stock Market Wisdom-learning to Trade Like The Legends, Part 7

Top traders and investors know the most money will be made by following the main trend. Jumping in and out of the market trying to scalp it, is generally not a good idea. The big money is made playing the long swing. The key is to stay with your winning trade, until you get a definite indication the trend has changed. This is called, letting your profits run. I use a weekly chart to determine the main or major trend. It is never a good idea to trade against a major trend. Stay in sync with the market, and always trade in the direction of the major trend.

Diversification is a crutch for ignorance. You are much better off only trading when the odds are strongly in your favor. Gerald Loeb stated, “The greatest safety lies in putting all your eggs in one basket, and watching that basket”. I totally agree. If you want mediocre results, at best, diversify. If you want superior trading results, you must only trade the very best opportunities. Top traders know you are much better off with one great stock, instead of ten average stocks, spread across ten different sectors. It is amazing, listening to some of the so-called experts who preach diversification. They simply do not have a clue on how to attain superior trading results.

Conventional wisdom tends to be a disaster for a trading account. This includes the stock market, and the futures market. The majority of traders blindly follow this way of thinking, and doing things. They are usually not very happy with their trading results. Examples of conventional wisdom include, buying cheap stocks, thinking it is a great deal. Most cheap stocks are cheap for a good reason, and usually just keep getting cheaper and cheaper. A great example is listening to so-called experts like Jim Cramer. The Cramers of the world will lead you on a path, to not only monetary failure, but will strip you of your psychological capital also.

The world’s best traders and investors know that conventional wisdom is mostly hogwash. It is put out there to fool most of the people, most of the time. It works only too well. Elite traders do not follow the crowd. They implement historically proven methods and principles, which are considered unconventional by the vast majority. Elite traders think and act differently. That is why their trading results are superior, and they make vast fortunes trading the various markets.

Commodity Futures Market And Its Mechanisms

The general understanding about the commodity trading futures market is that it is a very complex and difficult to analyze market. However on the other hand it is not so! Infact there are a few basic facts that people need to know of which will change their perception about what the commodity trading futures market is and how they work.

The basic knowledge is that the commodity trading futures market or the exchange market as it is known is a public marketplace where the sale or purchase of commodities takes place. These sales and purchases are done at an agreed price so that commodities are delivered at a specified date. The broker is a person who needs to do the purchase or sales of the commodities. The broker is also a part of the organized exchange and the deal is completed according to the terms and conditions as given in the standardized futures contract.

The main thing that distinguishes the futures commodity trading market and a commodity market where commodities are bought and sold is that the futures market works with the help of contract agreements that follow a standard procedure. These agreements are responsible for delivery of a particular commodity at an amount as specified for a future month. It does not include the immediate transfer of commodities ownership.

In short the buying and selling in the commodity trading futures market does not need the buyer or the seller to be the owner of the particular commodity that they are trading for. With futures the main concern is receiving the delivery or making the delivery of the commodity, however the futures should not be bought or sold during the month of delivery. The previous sale also can be cancelled at any time with respect to the equal offsetting sale. If the sale is cancelled before the commodities delivery month then the trade cancels out completely. In this case the commodity is not received by the buyer or delivered by the seller.

In reality there is only a very small percentage very specifically less than 2% of the total of all futures commodity trading contracts that are settled or entered into through the deliveries. A larger part shows that there is a lot of cancellation of deliveries of commodities even before the delivery month in the manner that is described above.

This forms the basic mechanics or the functioning of the commodity trading futures market.

Mastering Futures Trading

Product Description
A Clear-Eyed Look at How to Win—and More Important, Keep From Losing—In the Futures Trading ArenaFutures trading is among today’s most highly leveraged, potentially profitable financial pursuits. It can also be one of the most frustrating. Mastering Futures Trading is a short course for minimizing that frustration—by learning the rules, discovering how to profit from those rules, and consistently using futures market cycles to your advantage…. More >>

Mastering Futures Trading

Futures Trading Roadmap For The Newbie ? Critical Points To Remember

Futures trading have always been Complex criteria to follow for several investors; however, they are always attracted by its enormous profit in a quick path, same goes for experienced ones also.With the proper approach, there are enormous profits that await investors in futures markets. This means that you need to familiarize yourself with the dynamics and nuances of futures trading in order to draw in profits on a consistent basis.
To become successful in the future trading business, one needs to have good speculation power, which are the most important criteria in future trading as everybody here speculate about future price of commodities, apparels, jewelries, coins etc. They predict the future price and they win or lose depending upon the real price, which can be higher or lower than the speculated one.
Just like with the traditional markets, the futures market exposes traders to risks. However, the lure of enormous profits is enough to bring in a great number of traders.The potential windfall earnings brought about by the volatility of the market is so hard to resist that even savvy and seasoned traders will grab the opportunity to trade futures.
To get started properly, one has to gain knowledge about the various ways and strategies taken in the future market in his own sake to increase possibility of earning in the future market.
Commodity Trading in Future Market:
At the starting of Trade, the value of any commodity is decided by the energy or force of the Market, which also involves a centralized marketing system. The future Prediction of Prices is based on the things related to that particular commodity like metal, energy, gains etc.One of the more common strategies used in commodities futures trading is straddle. This involves the holding of the same amount of calls and puts with the same expiration date and strike price.
Currency Trading in Future Market:
Quite same like commodity, the speculation of currency rate also done depending on the up and down of price of a particular currency. The future price is taken into consideration depending many factors affecting that currency.One of the strategies used in this kind of futures trading is known as scalping. Scalping involves the deliberate action of taking on short-term profits out of the incremental changes in the value of a particular currency. This is done on a continuing basis, and the generated profit over time becomes significant.
Interest Rate & Indexes:
Many strategies that are used while dealing with interest rates and index related market. Timing strategy is generally used as trading strategy, for index futures such as S&P 500 index contracts.There are two timing-based futures strategies for trading this kind of indices futures. These are the seasonal and the cycle futures trading.
The cycle trading is used by examining the historical data and identifying potential up- and down-cycles for a particular asset. On the other hand, seasonal trading is involved when there is an attempt by the trader to take into account the seasonal fluctuations within the futures market.
The trading in different futures market is both rewarding and challenging. For beginning investors, proper understanding at how the different markets behave is extremely important. Homework, study of previous records and research is must for this future market trading system.

Understanding the Different Futures Trading Order Types

Essential Futures Trading Order Types

It is generally understood that trading in the futures market can produce vast gains; but just as importantly, it can result in sharp losses – even in the short term. One of the things that separates the marginally-profitable amateur trader from the successful pro is a keen knowledge of established risk-limiting techniques.

Although rudimentary, a grasp of the advantages to each type of market order (Market, Limit, Stop and their subtypes) is fundamental.

Market

In this case the trader places an order with a broker who, in turn, makes an effort to fill it at the current market price. While it is the type of order any investor will be acquainted with, its pitfall lies in its simplicity: Because it lacks provisions for the timeframe in which the order should be completed there is no assurance that it will be done so promptly.

In fact, it may, in some cases, during times of low liquidity it may take until the following day for an order to be filled. Because of the large scale of the futures markets these transactions usually take place in minutes, if not seconds.

Variants of the market order include the MOC (Market On Close), MOO (Market On Opening), and MIT (Market If Touched), among others.

Market on opening and market on closing work as their names suggest. In the former the broker executes the order when the market opens, and the latter is an instruction to do the same at the close.

Market If Touched orders are related to limit orders, which are discussed below. Orders are to be filled when the price of a commodity reaches a certain level, and continue to be filled as the price proceeds away from that “limit” price.

Limit

A limit order is employed with the intention that a commodity be bought or sold only when the market price hits a specific target point.

Market conditions and the chosen limit price can well result in the order going unfilled. With a multitude of other traders jockeying for the same commodity at any point in time, one may be beaten to the punch and end up disappointed.

Stop

Short for ‘stop loss,’ this tactic is used to place a boundary against loss on either a long or short position as well as to enter into a position. When placing a buy stop, the speculator will instruct the broker to act when a price above the current one is attained. When placing a sell stop, a sell price will be set below the current price.

Stop limit, stop close, and other variants are examples of more advanced tools.

The first of these requires the designation of two prices. One of these is decided in the same way as the basic stop order. The second takes the form of a designated limit. When the market price aligns with the former, the latter becomes null.

Protection from intraday price fluctuation in often-volatile markets is achieved when stop close orders are placed as the trading day comes to a close. It is an instruction to buy or sell only if the market price meets the designated stop price during this window of time.

OCO (One Cancels The Other or Order Cancels Order)

A dual-specification, “the one cancels the other” commands the floor trader to fill one or the other of two orders. When the market allows for one these two to be executed the transaction is complete and the second order is then canceled.

Fill or Kill

The type of order is canceled in the event that circumstances prevent the desired trade from taking place.

Futures Trading: How Fortunes Are Made

If there ever was one business that has made a lot of people a lot of money it is futures trading, also known as commodity futures. This is one business that has made millionaires and multi-millionaires in a very short time while starting up with relatively small capital investments.

Just what is a “futures trading”? Loosely defined, a future is an agreement to buy or sell a given quantity of a particular commodity at specified future date at a pre-arranged price. You “speculate” the direction prices will take and decide to buy or sell based on that. Prices are, to a degree, predictable.

The money-making potential in futures trading is astounding. Examples; John Henry started with $16,000 and amassed a wealth worth more than $1.5 billion. Richard Dennis borrowed $1600 and made $200 million in about ten years. Granted, these examples are atypical. But you can see the potential.

Unlike other forms of business and trading such as real estate, stocks, brick-and-mortar etc., where you have to wait years to see any substantial returns, futures market is immediate.

Better still, you can start from your kitchen table, you never physically handle or deliver the commodities, nor market or advertise, and you can buy or sell large or small quantities.

You also have choice of a wide range of commodities from gold, grains, crude oil, gasoline, currencies, and agricultural products and many more to choose from.

As with any business where you can make lots of money fast, you can also loose lots of money fast. This is one reason why this business is not for everyone. It is certainly not for those who tend to get emotional when things seem not go as intended.

Actually, the more you’re able to keep your emotions in check, the more money you can make as panic and hysteria are commodity traders’ best friend.

When starting out, you might make losses. This is expected and may be a good thing as early success can give you a false impression about your own abilities, and lead to disaster. Loss should be treated as part of business and learning process. The key is to limit your losses by learning to trade like a professional. How?

Professionals approach futures as a business, as opposed to the slot-machine, hit-or-miss approach most people make. And, as with any business you need to understand how the market works.

This means learning as much as you can about the business. And no, you don’t have to pay $2500 to attend some seminar to learn “insider secrets”. You would be better off if you could take a trip to Chicago or New York Board of Trade and observe professionals at it. You’ll learn more this way than in any seminar.

Back to limiting losses. One way of limiting loss (risk management) is placing a stop-loss order on a trade. You pre-determine the amount of risk you are going to take, and stick to it. Successful traders always have a stop-loss order before initiating a trade.

Trading without a stop loss order can have catastrophic effects, especially to the inexperienced trader as they can find themselves unable to pull the plug until it’s too late.

Another key is diversification. As they say “never put all your eggs in the same basket”. A rule of thumb is not to risk more than ten percent of your equity in any one trade, thus preventing losing all your money in one or two bad trades.

Amateurs also make the mistake of re-investing all their earnings, and then loosing it all down the road. Professionals pull their profits and start small again, making small capital increments to facilitate growth.

Good record keeping is also important in that it shows you what is working and what is not, as well as the patterns.

Contrary to what you may have heard you don’t need a lot of money to get started in commodity trading. A good brokerage firm can help you get started without spending a fortune.

Details of running a successful futures trading business are beyond the scope of this article. The best investment you can make is to spend time learning how the business works, starting with the basics.

Emini Future Trading Explained For Beginners

Emini contracts have experienced a boom in new market participants since their introduction mainly because of their lower margin requirements which allows traders that don’t have unlimited funds to participate in the index futures markets. Emini contracts are available to trade on all three major indexes including the S&P 500, NASDAQ and the DOW and are widely utilized by traders for both day trading and scalp trading.

The S&P emini contract is one-fifth the size of the large contract which makes it appealing to traders with smaller brokerage accounts. Because the emini futures market is fluid, volatility creates opportunities for traders to profit everyday. Stagnant and sideways markets that so often are a part of the stock market is virtually non-existent in the index futures market. The New York lunch hour is usually the only slow time during any given daily session since floor traders and other market participants break for lunch, with action quickly resuming once the lunch hour is over.

Some traders only trade the first hour to hour and half each day, taking their profit and doing whatever they wish for the rest of the day, while others will trade only during the first and last hours of the day. The opening and closing hours of the day often see the most volatility and market moves, although many opportunities to profit are available throughout the day.

One of the most exciting features of the index futures markets and what attracts traders is that market direction is not a concern. Traders can profit by executing trades both long or short and only care about being on the right side of the trade. Unlike stock trading, hours of research and chart scanning for potential stocks to trade is eliminated with emini index futures trading. Since the same contract will be traded each day, there is no need to look over hundreds of charts each night.

Emini future trading offers and opportunity for traders to profit on volatility within the market on a daily basis. Although the futures market is influenced by financial news reports and geo-political events, the emini trader can usually sit on the sidelines when financial reports are scheduled to be released. Almost all financial reports have specified release times which allow the trader to plan his strategy around these reports. There is no need to worry about stock analyst downgrades or unexpected news events that are so common on the stock exchanges, which can adversely affect a trader’s positions.

12 Features Of Online Commodity Trading And Futures Trading

Online commodity trading and futures trading are by-words today. But this was not the scene always. The original marketers belonged to the 1800s. They were just farmers who wanted to sell what they had grown on their agricultural lands. Crops would be harvested, and produce brought to the market for sale.

Not having the educational services available in modern times, they were not able to judge whether the goods that they had brought were sufficient or less in quantity. If the quantity was not sufficient for the buyers, the farmers lost an opportunity to make more money. If there was excess quantity, produce like crop products, meats and dairy products would have to be carted back home. In time, they would rot and spoil. Either way, whether there was a surplus or a deficiency, the farmer suffered losses.

Sometimes, a certain produce would be available off season, but not in as large a quantity as it would be if available during the regular season. Naturally, the products made from this were sold at high prices.

Ultimately, many heads got together to come up with the idea of a common or central marketplace. Farmers would bring their harvests here on certain days and sell them. The buyer could take them as immediate delivery (today, it is called spot cash) or order them as a future delivery (today, known as futures market).

The result of this endeavor was setting of standard prices for different commodities (in season and off season), plus giving an indication to farmers about demand and supply. Thus, spoilage of produce was brought to a halt and farmers no longer incurred huge losses. This can be seen as the stepping stone to the online commodity trading and futures trade that exists today!

Foregoing all that happened between now and then, looking at online commodity trading now as it exists, what are the considerations to be kept in mind if someone wants to go in for it?

(1) The first and foremost point regarding online commodity trading is having an intelligent grasp of how markets function (physical or online) and how contracts are drawn up for futures trade.

(2) Whether involved in online commodity trading or futures trading, there has to be a manufacturer of goods and a consumer of the same goods. One is the seller and the other is the buyer in the contract.

(3) Trade today has gone from agricultural produce and food products to much more, including financial instruments. So the trader has plenty of business options.

(4) Online commodity trading differs from futures trading in that goods may have to be handed over physically. A receipt is issued to the customer, enabling him/her to go to the warehouse and pick up the products.

(5) Another type of contract that has come into being is the futures contract. This has evolved from a forward contract, which is nothing but a buyer signing an agreement to pay for and purchase goods at a specified date some time in the future (generally, the time limit is three months from the date set on the contract). The goods will be delivered on that future date.

(6) According to the agreement, the buyer is getting a commodity not yet available. The price is of course, decided beforehand. Sometimes, the commodities are priced according to future values; stock market indices act as decision-makers for the value set on a particular commodity.

(7) Another aspect of futures trading is that neither the seller is the actual supplier of commodities, nor the buyer the actual user of the goods purchased. Only if the person is personally involved with the actual commodity purchased, will he/she provide and use it.

(8) Futures contracts are useful for both sellers and buyers because risks are minimized, plus the parties get the opportunity to indulge in a little bit of speculation. There is no exchange of physical goods.

(9) Different strategies are available for spot traders as well as future traders, to make use of rising and falling prices to their best advantage. These strategies can be classified as–spread, going short and going long.

(10) For the same commodity, the prices specified in two different contracts may not be the same. The businessman tries to use the price difference to his advantage. This is called a spread.

(11) Going short indicates that the trader is wondering if he/she can gain a profit from falling prices. The contract is therefore sold at a high price now, to be re-purchased at a lower rate in the future.

(12) The last strategy for online commodity trading or futures trading is going long. Here, the investor and the speculator sign an agreement where the buyer is ready to purchase the product at a pre-set price. He/she is anticipating that the price may rise in future, yielding further profits.

How Online Future Trading Works

A contract, which is usually an agreement between two parties to buy and sell an asset at a specified time at a specified price, is known as future trading. Future trading is generally carried out on a futures exchange. A futures contract has a standardized date and month of delivery, price and quantity.

Futures are different from forwards in the sense that margin and delivery requirements are different. The futures exchange gives certain standard features for a contract to facilitate liquidity in futures trading. A futures contract may be set before maturity by having an equal and opposite transaction, which is the way majority of the transactions are held.

Expiration date is the date specified in the options or futures contract. The price at which the futures contract trades in the futures market is the futures price and the expiration date is usually the last Thursday of the respective month. Futures contractors are available in three series, having one month, two months and three months expiry cycles. A new contract of three-month expiry is introduced for trading on the Friday following the last Thursday.

Since many types of players are involved in trading futures, it helps in the process of proper price discovery. Apart from this, futures contracts also help in hedging of price risk commodity. Futures contracts are highly useful for the producer due to the fact that he gets an idea of the price that may prevail, which in turn helps him quote a realistic price.

On line future trading assists people to trade and exchange on the futures market and online futures trading allows the traders to scan the most recent exchange offers. The trader can send an order straight away into the exchange trading engine and also get the feed back or confirmation of the contracts instantaneously through on line futures trading.

In this way the trader is able to view a live market on the screen and interact with it.

On line future trading has a lot of advantages. The prices of the derivatives traded on the futures market are updated immediately and in real time through online future trading. Due to this interactivity the individual trader gets transparency of the market and good trade speed .It is possible to access the futures market from any computer with an Internet connection through online futures trading and trade on the important electronic futures exchange, around the globe.

To ensure smooth functioning of the futures trading done at the exchange there are certain inherent systems like the futures rolling settlement. Under the futures rolling system, all the trades that are unfinished at the end of the day are settled. The buyer has to necessarily make payments for the securities bought by him and the seller has to deliver the securities sold by him.

Another system that is in vogue is the weekly settlement system cycle wherein the transactions done during the week are squared off on the last day of the cycle, which means that a trader gets a longer time to speculate. When it comes to the question of trading futures for a living, trading futures is certainly a better choice than investing in equities.

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