Trading Futures Options
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http://www.profitableinvestingtips.com/investing-trading/trading-futures-options Trading Futures Options There are many profitable day trading strategies that can be applied to trading commodities. Markets move up and down and speculators on the evolving prices of commodity futures use both fundamental and technical analysis in order to gain a profit. A means of limiting risk and leveraging capital when trading commodities is trading futures options. A trader can buy puts or calls on a commodity futures contract just as he or she can buy puts or calls on a stock. In trading futures or trading futures options one is not buying or selling the commodity. Both futures contracts and options contracts are derivative instruments. In this the base equity could be crude oil. A trader can engage in oil futures trading or trading futures options on crude oil. The same applies to live cattle, winter wheat, gold bullion, and many other tradable commodity futures. The Commodity Futures Market The commodity futures market is used by two groups of traders. The first group includes companies and individuals that buy and sell commodities such as gold bullion, crude oil, or soybeans. These folks buy and sell futures or engage in trading futures options to hedge business risk. Let’s say that an agricultural cooperative sells winter wheat produced by its members. The price of winter wheat may fluctuate greatly as there is a drought in North Dakota and heavy rains in the Ukraine, both major wheat growing areas. If these conditions continue wheat prices will be very high by the time that harvest comes. But, if the weather improves in one or both areas the price of wheat may fall dramatically. Obviously the cooperative would prefer to be paid well for the coming harvest. One way to insure this is to sell futures on winter wheat. The price is currently high (in this hypothetical example). In selling futures on wheat the cooperative is obligating itself to sell at the current price. However, what if the weather in North Dakota and the Ukraine gets worse and there are hailstorms in Kansas further decreasing the total harvest? By trading futures options the cooperative retains the right to sell at the contract price if the market price falls. It also preserves the right to not execute the option and not sell at the contract price if, in fact, the market price climbs higher. By not ever entering a futures contract but rather buying options, the trader does not need to tie up money in a margin account for the futures contract. The other group of traders is composed of speculators. They pick and choose which commodities they wish to trade and engage in trading futures options on a wide range of commodities, depending on where there is market volatility and the chance for a profit. These traders may use tools such as trend following in day trading or scalping in day trading in order to gain incremental profits as the market moves up and down.
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How to Trade Stocks
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As the stock market rises in value new investors and potential traders become interested in how to trade stocks. How to trade stocks successfully is not just a matter of acting on a stock tip from your friend. It is a matter of learning both fundamental as well as technical analysis of stocks, market sectors, and the market in general. How to trade stocks successfully starts with learning the basic terms and then the skills sets necessary to trade online.
Where the Money Is
Stock traders make money buying low and selling high or by shorting a stock and then repurchasing it after it has fallen. This approach has to do with bull and bear markets, trends, trading channels, and scalping in day trading. First of all what are bull and bear markets? A bull market is one in which prices are rising on an ongoing basis. A so called bear market is one in which prices are falling. These are market trends and not day to day price changes.
Secular trend: lasts more than five years.
Primary trend: lasts for more than a year but less than five.
Secondary trend: lasts for a few weeks or months but less than a year.
Understanding these terms is important for successful stock trading. If you engage in range trading (repeatedly buying at the bottom and selling at the top of the market for a stock whose price cycles up and down) you need to successfully anticipate when a stock will hit its peak and when it will bottom out and reverse course. In a long term bull market the general range will steadily head upwards causing you to continually adjust the channel in which you trade. Anticipating when the market will turn requires analysis of evolving market sentiment.
Forex trading strategies
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Foreign exchange market-final ppt(my)
The foreign exchange market or forex market as it is often called is the market in which currencies are traded.
Currency Trading is the world’s largest market consisting of almost trillion in daily volumes
The market continues to rapidly grow. Not only is the forex market the largest market in the world, but it is also the most liquid, differentiating it from the other markets.
There is no central marketplace for the exchange of currency, but instead the trading is conducted over-the-counter.
This decentralization of the market allows traders to choose from a number of different dealers to make trades with and allows for comparison of prices. Typically, the larger a dealer is the better access they have to pricing at the largest banks in the world, and are able to pass that on to their clients.
The spot currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers.
All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency.
The first currency of a currency pair is called the “base currency,” while the second currency is called the counter currency. The currency pair shows how much of the counter currency is needed to purchase one unit of the base currency.
Currency pairs can be thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold.
Forex Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market.
It allows you to experience every step of currency trading including choosing currency pairs, deciding how much risk to take, tracking the time and dates of placed trades, deciding how long to stay in the trade, and when to exit the trade. It also allows the placing of stop and limit orders on trades.
Information about trading and specifically about how to use the online trading platform can be found on the FXCM webpage. In addition, FXCM offers FREE interactive online seminars that are extremely useful to both new and experienced currency traders.
Characteristics of foreign exchange
Its huge trading volume representing the largest asset class in the world leading to high liquidity;
Its geographical dispersion;
Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
The variety of factors that affect exchange rates;
The low margins of relative profit compared with other markets of fixed income;
The use of leverage to enhance profit and loss margins and with respect to account size.
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Where the Money Is
Stock traders make money buying low and selling high or by shorting a stock and then repurchasing it after it has fallen. This approach has to do with bull and bear markets, trends, trading channels, and scalping in day trading. First of all what are bull and bear markets? A bull market is one in which prices are rising on an ongoing basis. A so called bear market is one in which prices are falling. These are market trends and not day to day price changes.
Secular trend: lasts more than five years.
Primary trend: lasts for more than a year but less than five.
Secondary trend: lasts for a few weeks or months but less than a year.
Understanding these terms is important for successful stock trading. If you engage in range trading (repeatedly buying at the bottom and selling at the top of the market for a stock whose price cycles up and down) you need to successfully anticipate when a stock will hit its peak and when it will bottom out and reverse course. In a long term bull market the general range will steadily head upwards causing you to continually adjust the channel in which you trade. Anticipating when the market will turn requires analysis of evolving market sentiment.
Forex trading strategies
“Forex Trading Strategies” is a complete guide of most popular and widely used strategies in Forex trade. You can read about day trading and its main types, understand the strategies based on market analysis, learn about portfolio and algorithmic trading, and many more. The book represents the ins and outs of each strategy - why and how it is used and how to get profit from trade. It is suitable for all traders who are novice in trade or want to improve their skills. All the strategies classified and explained here are for educational purposes and can be applied by each trader in a different way.
Foreign exchange market-final ppt(my)
The foreign exchange market or forex market as it is often called is the market in which currencies are traded.
Currency Trading is the world’s largest market consisting of almost trillion in daily volumes
The market continues to rapidly grow. Not only is the forex market the largest market in the world, but it is also the most liquid, differentiating it from the other markets.
There is no central marketplace for the exchange of currency, but instead the trading is conducted over-the-counter.
This decentralization of the market allows traders to choose from a number of different dealers to make trades with and allows for comparison of prices. Typically, the larger a dealer is the better access they have to pricing at the largest banks in the world, and are able to pass that on to their clients.
The spot currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers.
All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency.
The first currency of a currency pair is called the “base currency,” while the second currency is called the counter currency. The currency pair shows how much of the counter currency is needed to purchase one unit of the base currency.
Currency pairs can be thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold.
Forex Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market.
It allows you to experience every step of currency trading including choosing currency pairs, deciding how much risk to take, tracking the time and dates of placed trades, deciding how long to stay in the trade, and when to exit the trade. It also allows the placing of stop and limit orders on trades.
Information about trading and specifically about how to use the online trading platform can be found on the FXCM webpage. In addition, FXCM offers FREE interactive online seminars that are extremely useful to both new and experienced currency traders.
Characteristics of foreign exchange
Its huge trading volume representing the largest asset class in the world leading to high liquidity;
Its geographical dispersion;
Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
The variety of factors that affect exchange rates;
The low margins of relative profit compared with other markets of fixed income;
The use of leverage to enhance profit and loss margins and with respect to account size.
Profitable Commodities Trader
http://profitabletradingtips.com/trading-investing/profitable-commodities-trader
Profitable Commodities Trader
What does it take to make money trading wheat, corn, crude oil, or gold bullion? What are the ingredients that make a profitable commodities trader? This discussion is about traders who pick and choose the commodity they want to trade, follow the markets closely, and place trades based on opportunity. This is not about companies trading commodity futures in order to hedge risk. Producers and buyers of wheat, corn, crude oil or gold bullion buy and sell futures contracts or options on the same. They limit themselves to the commodities that they deal with. The profitable commodities trader, on the other hand surveys the markets and latches on to opportunity when it arises.
In Search of Volatility
A profitable commodities trader starts by finding where price action will be, whether in agricultural commodities, energy commodities, or precious metals. This requires a combination of fundamental and technical analysis. Many times a profitable commodities trader will subscribe to an alert service in order to more efficiently spot trading opportunities. A drought in the Ukraine may drive up wheat prices while the threat of civil unrest in the Middle East tends to drive oil and natural gas prices higher. To the extent that the profitable commodities trader has special insight into supply and demand for a given commodity he or she has a good head start. Then the issue is to successfully read market sentiment with technical analysis tools
Keeping Your Head while All About You Are Losing Theirs
Many times news that shakes the commodities markets occurs when markets are closed. The commodity that is affected will gap up or down at the open and then exhibit a degree of market inefficiency for minutes, hours, or even days as a market consensus is reestablished. It is this period of market inefficiency that makes a profitable commodity trader. The smart trader has done his homework and knows how to interpret the news. He has a clear idea of the range in which the commodity ought to trade, based upon fundamentals and his analysis. When market psychology, the twin demons of fear and greed drive prices higher or lower than fundamentals warrant the profitable commodity trader takes a contrarian approach to day trading and trades accordingly. He may do this in standard commodities trading, buying or selling futures. Or he may choose to buy or sell options on commodity futures. Using this route helps him or her limit risk and leverage trading capital.
You Don’t Lose if You Don’t Trade
The famous baseball pitcher Satchel Page was criticized for holding the ball in his hand and not pitching immediately in tough situations. His comment was that when the ball was in his hand the batter could not hit it. If you approach commodity trading like a trip to the casino you will not be a profitable commodities trader.
When Should Investors Trade Options?
Here is where options traders will remind you that by trading options you can make money as the market falls and not just when it is going up. So, when should investors trade options?
https://youtu.be/xgoOVxDLdLc
Profitable Futures Markets
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Profitable Futures Markets
In trading futures, success commonly comes from choosing volatile markets for trading, learning and staying abreast of market fundamentals and developing skills for technical analysis of stocks, commodities, or currencies. Profitable futures markets are a mix of promising fundamentals and technical cues. Profitable futures markets are also those for which a trader’s skills are most adapted. A trader with expert knowledge of stocks in the bio tech sector will often find profitable futures markets in this sector. On the other hand a trader with expert technical skills may be able to trade any sector and will find the most profitable futures markets to simply be those that are most volatile.
Profitable Futures Markets in Foreign Currencies
Trading Forex futures is a common means of hedging risk in foreign transactions. There are also profitable futures markets for speculators in Forex trading. A basic decision that a trader often needs to make in trading currencies is to trade majors, minors, or a mix. Major currencies trade at high volume and liquidity. These currencies are more adaptable to a technical trading style than minor currencies that trade at low volumes and often times poor liquidity. However, the most dramatic price action often occurs in trading minor currencies making these the potentially most profitable futures markets.
Trading with an Informational Edge
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Trading with an Informational Edge
Trading with an Informational Edge
Stock traders commonly use technical analysis tools to trade large cap stocks. These stocks are covered by many analysts and there is little that you know about the stock that others do not. On the other hand many cheap small stocks are not followed by anyone. Here is where you can be trading with an informational edge as noted in a useful article in barrons.
because large-cap stocks are extremely well covered by wall street, it’s hard to gain an informational edge on them. however, smaller stocks can provide big upside to intrepid investors capable of navigating the riskier terrain.
one such money manager is david daglio who has ventured off the beaten track and established a record of unearthing attractive small- and mid-cap value stocks that beat the market. he has done so by focusing on the long-term value of businesses and calculating their intrinsic value.
as head of dreyfus’ opportunistic value team, which runs the $985 million dreyfus opportunistic small cap fund (ticker: dscvx ) and the $2.4 billion dreyfus opportunistic midcap value ( dmcvx ) fund, daglio digs deep into businesses he believes haven’t been well covered by wall street. he and the core of his 10-person team have been with the funds for a decade.
results have been strong for both funds. the small-cap fund returned an annualized 22.1% over three years, versus 18.2% for the russell 2000 value index, and an annualized 10.9% over 10 years, compared with 8% for the benchmark.
The point of this being that you can make money trading with an informational edge.
Commodity Trading Profits in a Recession
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Commodity Trading Profits in a Recession
The US markets have been focused on two issues. One is the prospect of more bailouts of the European economies and the other is the falloff in Chinese exports. Europe may be headed back into a recession due to excessively strict austerity measures. Europe is China’s biggest customer. A recession in Europe affects trade with Asia as well as the Americas. A weak Chinese manufacturing report also has implications for commodity consumption and does not just have to do with trading a Chinese stock decline . Here our interest is in gaining commodity trading profits in a recession. In trading commodities there are profits to be made in both up and down markets. Traders can find commodity trading profits in a recession both as it worsens and as it recovers.
Timing an Economic Downturn
Traditional thinking has been that stocks and commodities fall during the first half of a recession and start to recover at the midpoint. Stocks recover on the promise of future profits and commodities recover based on high anticipated consumption. Commodity trading profits in a recession come from successfully reading the fundamentals and market sentiment. Traders use fundamental analysis to successfully anticipate where commodity prices will be in the coming weeks and months. They use technical analysis of market sentiment to time their trades.
Which Commodities to Trade and How
In the current situation stocks pop up every time that the Euro Zone puts some money aside to rescue failing banks or economies. Then they fall on the next dismal economic report. Industrial and energy commodities react similarly. However, agricultural commodities may act differently. Prices of industrial metals are down because of reduced global demand. Oil futures are falling on the prospect of falling energy needs. But crops and livestock are still in demand as people need to eat. Supply is a stronger factor in agricultural commodities. A drought in Eurasia, Latin America, or the American Great Plains threatens a fall in wheat, soybean, and corn harvests. This sort of news drives prices up regardless of the state of the global economy. A short rule of thumb for how to trade commodities is to watch global demand when trading energy and industrial commodities and watch supply when trading products in the food chain.
Methods for Commodity Trading Profits in a Recession
In a fast moving market with clear trends, traders may buy and sell, scalping, in small increments to make daily profits. In an extremely volatile market without any well-established trend many traders prefer buying options. Buying puts on commodity futures gives the trader the right to sell a futures contract at a set price, the strike price, no matter how low the market price might fall.
Diversify Your Investment Portfolio
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Diversify Your Investment Portfolio
Diversification is a means of reducing risk and increasing opportunity in investing. The chances of having a stock in your portfolio rise significantly in price goes up when you have five well-chosen stocks instead of one. The chances of losing all of your investment capital also go down when you diversify your investment portfolio among several stocks in several market sectors. Likewise, if a part of your investments is in property, a part is in stocks, a part is in bonds, and a part is in offshore investments you can reduce risk and increase the opportunity for profits. When suggesting offshore investment opportunities we wrote about Three Good Offshore Investment Ideas, for example.
Diversify Your Investment Portfolio to Gain Variety and Opportunity
When you diversify your investment portfolio you invest in a variety of assets. Because the value of each investment does not go up or down in perfect harmony, diversification averages out risk, as well as gain. To the extent that one is looking to a big gainer, having more stocks, real estate, or other assets may serve to increase the odds of success. In their book A Random Walk Down Wall Street the authors note that the best return in stocks is often a basket of about forty small cap stocks. These stocks are priced low because of the risk inherent in small companies. However, if you diversify your investment portfolio with a large number of these stocks, you increase the chances of finding a huge winner which will negate the effects on the portfolio of a handful of losers.
Trading Oil Futures
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Trading Oil Futures
Oil futures trading has been active as prices have fallen over the last months. Factors driving oil prices down are the continuing US oil fracking boom, continued high OPEC production and slowing economies in Japan, Europe and China. The US Federal Reserve says that shale production is steady despite the global excess and the OPEC decision to keep production high was recently in the news.
“in early november, oil and gas exploration activity decreased in north dakota and increased in montana relative to a month earlier; production remained at record levels,” the fed said. “despite recent declines in oil prices, officials in north dakota expect oil production to continue increasing over the next two years.”
oil prices have declined since june and touched a five-year low early this week, reflecting in part slowing global economic growth and increased domestic production in the united states.
Oil prices respond to supply and demand and while production remains high, demand is falling due to economic slowdowns across the globe. Trading oil futures depends on careful analysis of these fundamentals as well as the sentiment of the market. With traders expecting that the market has overshot many have bet on a recovery of oil prices.
Up and Down
Markets tend to be inefficient and successful traders take advantage of that fact. Trading oil futures is no different. Morningstar notes that oil futures markets remain jittery despite a recent small up tic.
crude-oil futures rose in asian trade wednesday but analysts expect prices to remain volatile and market sentiment is still largely bearish.
on the new york mercantile exchange, light, sweet crude futures for delivery in january (clf5) traded at $67.10 a barrel, up $0.35, or 0.5% in the globex electronic session. january brent crude on london’s ice futures exchange rose $0.29, or 0.4%, to $70.72 a barrel.
“if the market is looking to u.s. shale for a [price] floor, citi thinks that floor is nearer to $50 a barrel [for] wti than the $90 a barrel level frequently cited by senior saudis in recent weeks,” edward morse, head of commodities research at citigroup, said in a report.
If the Citi analysis is correct there is a greater downside to the oil market that many thought
Who Suffers
Many US companies have invested heavily in looking for shale oil and using high tech fracking technology to extract it. These companies carry a high debt load. So long as they were getting $100 a barrel many could profit but as prices fall there are oil companies in trouble. Some could simply fold and quit producing oil. For those trading oil futures this could mean lower supply and higher prices. MarketWatch refers to the survival of the fittest in the oil fields.
companies are dusting off contingency plans that may have seemed far-fetched when oil was trading above $100 a barrel in the s
When to Short Stocks
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When to Short Stocks
An often effective means of profiting from a falling stock is to short it. Shorting is when a trader sells a stock that he does not own. Essentially he borrows the stock from his stock broker and has to have money in a trading account to cover potential losses. In addition the trader who shorts a stock pays interest on the loan of the stock for the duration of the short. When to short stocks is when you expect the stock to fall in price. When to short stocks is when the trader seeks to leverage his or her trading capital. Shorting stocks is a little like buying options in that the trader enters into a position with a lower capital investment than when he buys a stock and can often gain multiples of the cost of engaging in a short. Unlike options trading, the trader is obligated to buy back the stock at some point in time. Although he can stay in the short position indefinitely, there comes a time when the cost of the position becomes prohibitive. What is a realistic profit when trading stocks by this route? Although profit can be substantial in a well-placed trade, traders are well advised to do diligent technical analysis of the market in order to enter and exit at trade in the most profitable manner.
The Problems Related to Borrowing Stock
To a degree, when to short stocks is not when you expect there to be a stock split or a dividend payment. Because you have just borrowed the stock you will need to return twice the number of shares after a split and give dividend payments to the brokerage whose stock it still is. And, if the stock price rises greatly, and you do not have sufficient capital in your trading account you may be required to replenish your account or the brokerage may simply sell your shares and expect you to come up with the rest of the cash. Many times a brokerage retains the right to take the stock back (call it away) as when many traders are shorting a stock and the brokerage house only has so many shares to offer.
Trading Stock Options
http://profitabletradingtips.com/trading-investing/trading-stock-options
Trading Stock Options
Trading stock options holds two definite advantages over trading stocks directly. A smart trader can certainly make money trading stocks. But by trading stock options the same trader can limit risk and leverage his trading capital.
What Are Options?
Options are contracts that give their buyers the right, not the obligation, to sell or purchase the underlying assets at a future date, within the term of the contract. Whether it is in stock options trading or in trading commodities like corn futures, trading options allows the investor to invest trading capital using a variety of strategies. A call option gives the buyer the right to buy and a put option gives the buyer the right to sell the underlying stock. Sellers are paid a premium for taking on the risk of having to buy or sell at a loss when the buyer chooses to execute his contract. Options are used to both hedge risk and to leverage trading capital.
Hedging Risk and Leveraging Capital
In trading stock options a buyer limits his risk to the premium paid. Let us say that your fundamental and technical analysis of ABC stock indicates that it will soon rise in price. You can buy a hundred share of ABC for $100 a share or $10,000. Or you may see that you can buy a $102 option on ABC for $1. A $102 option means that you can buy to stock for $102 a share at any time up until the end of the contract. Obviously the stock is currently worth $100 a share and you would not want to execute the contract. But, if your analysis is correct the stock price will go up. Let us say that the stock goes up to $110 a share. If you purchased the stock you make $1000 minus fees and commissions. That is a ten percent return on investment. And if the stock price falls to $90 a share you lose $1000, ten percent of your trading capital. But in trading stock options on ABC you pay $100 for a $102 call option on 100 shares. The stock goes up to $110. You execute the contract and purchase the stock for $102 a share and then sell for $110 a share. You make $8 a share or $800 which is a $700 profit or 700% return on invested capital. And, if the stock price falls to $90 you lose your initial $100 and no more.
Short and Long Term
Trading stock options is not just for short term profits. Let us say that you have purchased a hot growth stock. It has multiplied in value
Basics of Commodity Trading
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Basics of Commodity Trading
To trade commodities successfully traders ought to start by learning the basics of commodity trading. Trading commodities is really commodities futures trading. Producers and processors of commodities buy and sell futures contracts for delivery on a specific date during any of the next months or years. Producers and processors are typically hedging their investment risk and helping to provide a stable market for the commodity in question. Speculators can trade the samecommodity futures contracts by buying and selling futures or they can buy options and sell options on futures contracts. Commodity and futures training is a good place to start learning the basics of commodity trading. For those interested options trading in commodities markets, Options Training with Stephen Bigalow will provide basic knowledge as well as the deeper insight gained from experience trading options in commodity futures.
Investing in Value Stocks
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Investing in Value Stocks
A good way to make a profit in the stock market is by investing in value stocks. Value stocks are actually undervalued stocks such as in today’s energy sector. Investopedia defines a value stock.
A stock that tends to trade at a lower price relative to it’s fundamentals (i.e. dividends, earnings, sales, etc.) and thus considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio.
A value investor believes that the market isn’t always efficient and that it’s possible to find companies trading for less than they are worth. An easy way to attempt to find value stocks is to use the “Dogs of the Dow” investing strategy – buying of the 10 highest dividend-yielding stocks on the Dow Jones at the beginning of each year and adjusting it every year thereafter.
Investing in value stocks is not just investing in cheap stocks. Good value stocks pay dividends and/or have high growth potential. These stocks commonly have a very sound business plan and return profits year after year. When there is a market rally value stocks often get left behind as investors follow rapidly growing stocks. However, when the rally corrects or the market reverses value stocks do, in fact, retain their value. Value stocks tend to outperform the overall market over the long term.
Picking Value Stocks
Investing in value stocks requires that you pay attention to the market. Using stock screens to find low profit to earnings ratio stocks is useful. However, investing in value stocks also requires that you understand just how it is that a company makes its money and how it will continue to do so. Often times this requires an outside the box view of stocks and the market in order to understand how global events and other factors will tend to drive stock prices in the near and midterm future. Forbes provides an example of how to do this in their article about the top ten value stocks that they see in emerging markets.
A weak recovery in the U.S. and Europe has helped reduce the price to earnings ratios on a number of large cap stocks in the big emerging markets. Value investors take notice. Here are the top 10 recommendations by stock forecasters at ValuEngine.com.
Examples given include AsiaInfo Linkage (ASIA) which is referred to as the backbone of China’s mobile telecom system. A second stock mentioned is the Brazil petroleum giant, Petrobas. And a third is Brasil Foods, the largest food company in Brazil. Each of the ten suggestions in the article is a solid company that is situated in a country with economic issues. The working assumption is that economies will recover and investing in value stocks in Brazil, China, India, etc. will be profitable in the long term as you are picking up deals on what in the long run will be c
Commodity Market Liquidity
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Commodity Market Liquidity
Commodity market liquidity often correlates very well with commodity market trading profits. There are three benefits to traders in high commodity market liquidity. The first is that it is easier to enter and exit trades. The second is that bid and ask prices are commonly closer. The third is that with high trading volume and liquidity the statistics of online trading software as well as the predictive ability of time honored tools such as Candlestick pattern formations tend to be more precise. Traders can find reports of the previous day’s trading volume online as well as updates during the trading day. A useful measure of trading volume and a useful predictor of trading volume is open interest. This measure is the number of open contracts between buyers and sellers in commodity futures trading. To learn to use commodity market liquidity to the maximum advantage in profiting from commodity trading, traders are wise to take Commodity and Futures Training and to develop their skills in Candlestick analysis of commodity prices.
Commodities that can offer good commodity market liquidity include trading in corn futures, oil futures, and gold futures. Each of these is a commodity that trades at high volume and high liquidity. In the case of each commodity both fundamental and technical analysis are necessary to understand the scope of trading and the day by day or minute by minute changes in commodity price. Candlestick charts of these commodities will help predict price movement and allow traders to buy or sell commodity futures contracts with the reasonable expectation of making a profit with anticipated market moves. The tight spreads between bid and ask prices on commodity futures contracts will allow the trader to profit by buying and selling at smaller intervals in a market trend than when the market is less liquid and the spread is greater. Understanding the fundamental analysis of gold, oil, or corn futures will give the trader an overall perspective of the market. However, it is technical analysis that predicts the next price move. The use of Candlestick chart patterns will predict market moves within the trading range dictated by commodity fundamentals.
Purchase Commodities
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Purchase Commodities
Traders will often purchase commodities because of the potential for wide commodity price variation. Especially in agricultural commodities, prices can fluctuate fifty percent or more in a year. Producers and processors of commodities will often engage in hedging commodities in order to guarantee a stable price structure for their business operations. The hedging by producers and processors of commodities provides a base market in which the trader can profit in commodities trading. In order to purchase commodities, traders will post a margin. Margin requirements to purchase commodities include the maintenance margin which is what the trader must maintain in his account in order to trade. A performance bond margin is monies deposited by both buyer and sells of commodity futures contracts to guarantee performance of the contract. This is essentially a security deposit. To purchase commodities the trader will want to track return on investment. Return on margin is typically used as a measure of success for those who purchase commodities. This is the gain or loss in trading compared to money invested. It should be noted that this is not return on money per commodity purchased or sold but return on the amount of money dedicated to the margin account in order to purchase commodity futures and sell commodity futures. To learn to effectively trade commodities a good place to start is Commodity and Futures Training.
Because of the potential for rapid changes in commodity futures price there is the potential for substantial commodity futures profits. When a trader decides to purchase commodities he or she will decide on the commodity and the delivery date. Commodity delivery dates can be next month, next year, or several years hence depending upon the commodity traded. However, the trader need not hold the commodity contract for its duration. He or she can make the opposite trade to exit the contract. That is the trader can sell the same commodity with the same delivery date. If market fundamentals change or technical factors lead to a substantial market change the trader can exit the trade with a profit long before the contract expires. Traders will follow both fundamental and technical analysis in order to profitably anticipate commodity price movement. The use of Candlestick analysis can help the trader see potentially profitable market patterns and market trends allowing them to purchase commodities and sell commodities in a timely and profitable fashion.
Trade binary options
This book covers basics of binary options trading and how to trade profitably. Moreover the book also includes basics of different trading concepts including technical analysis, fundamental analysis, money management and much more. www.BinaryOptionsGain.com
Commodity Futures
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Commodity Futures
In the world of online trading, one trades, stocks, currencies, and commodities. Commodities are certainly bought and sold directly but commodity futures are a different matter and fall into the world of the online trader. The point of commodity futures is to stabilize prices and give producers and buyers of commodities an opportunity to hedge their investment risk. Commodity futures can be traded directly or by way of options. What commodities can be traded as futures? Precious metals such as gold bullion, agricultural products such as wheat, or energy products such as crude oil are all available as commodities futures. Where does one trade commodity futures? Knowing how to trade commodities starts with the basics.
The following is a list of United States Futures exchanges:
CBOE Futures Exchange (CFE)
Chicago Mercantile Exchange (CME)
Chicago Board of Trade (CBOT)
Chicago Climate Exchange (CCE)
ELX Futures (Electronic Liquidity Exchange)
ICE Futures U.S.
Kansas City Board of Trade (KCBT)
Minneapolis Grain Exchange (MGEX)
Nadex (formerly HedgeStreet)
NASDAQ OMX Futures Exchange (NFX)
New York Mercantile Exchange (NYMEX) and (COMEX)
NYSE Liffe US
OneChicago, LLC (Single-stock futures (SSF’s) and Futures on ETFs)
The CME group owns CME, CBOT, NYMEX, and COMEX.
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Commodity is the generic term for any marketable item that people produce, dig up, or refine for in order to sell to satisfy demand. Trading of commodity futures is possible because tradable commodities are standardized. For example, one can buy or sell a futures contract for a specific grade of crude oil. Refined gold bullion is standardized as are pork bellies, varieties of corn, soybeans, and much, much, more. Thus a soybean contract can be satisfied by crops from Brazil or Iowa. A corn contract can be satisfied by shipments from Nebraska or the Ukraine. For the commodity futures trader it may make little difference who is going to eventually sell or pay for a specific contracted lot of a commodity. The trader will most commonly exit his contract by making an opposite trade one he has made a profit or minimized a loss.
What Determines Commodity Futures Prices?
The price of a bushel of corn, ounce of gold, or barrel of oil is determined by market forces, supply and demand. Commodity prices have to do with what is on hand, what is in transit, and what is likely to be available in the foreseeable future. For example, known oil reserves have the effect of reducing today’s oil prices. Excellent weather raises crop forecasts and depresses the price of corn, soybeans, or wheat. The threat of war and disruption of crude oil transport raises the price of oil.
Agricultural Commodities
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Agricultural commodities
Trading agricultural commodities is the province of agricultural producers and the likes of multinational grain companies. It is also the province of traders speculating on movements in the agricultural commodities markets. Both groups trading commodities rely upon fundamental analysis of the commodity in question and engage in technical analysis using technical analysis tools such as Candlestick chart formations in order to judge when to stay with a market trend and when to expect a market reversal. The world needs food but growing conditions, food transport and storage, and diversion of food stuffs into energy all affect availability and, therefore, commodity price. This mixture of facts and conditions drives pricing in the futures markets in agricultural commodities. Whether you are interested in trading corn futures or live cattle Commodities and Futures Training will be a good place to start.
The Traders
When you start commodity trading you will be up against the likes of traders working for companies like Cargill and Archer Daniels Midland. These multinational food companies know the fundamentals of the agricultural commodities markets as it is their business. They will, in fact, know fundamentals before you do. Although their advantage may only be minutes or even seconds they will cause market movement to which you will have to react. They are typically the drivers of the commodities markets in wheat, corn, soybeans and other products. You will be in the pack with other traders doing Candlestick analysis to predict market reaction to the trades made by the big money.
Why They Trade
There are two types of traders in agricultural commodities. There are the producers and the buyers who are hedging commodities and their investment risk. There are traders looking to profit on market movement. Farm cooperatives growing sugar beets and sugar producers who buy sugar beets or cane each buy or sell commodities futures contacts to lock in price at a future date. Because these folks know the market in their commodity they may well also trade for profit but their primary motive is to maintain a stable price for their product. The trader speculates on market movement and market reversal in looking to profit. The producers and buyers want a stable market. The pure trader would like to see lots of market volatility.
Is the Forex Market Dangerous?
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Is the Forex Market Dangerous?
A concern was raised in an article in the Financial Times; Fast forex moves raise liquidity worries.
In recent months a series of dramatic and unforeseen intraday fluctuations -even in popular and widely traded currencies -has led forex investors, bank traders and analysts to question the mechanics of the market.
The broader concern is that declining liquidity will fuel more sudden forex moves and destabilize the market. According to Standard Bank’s G10 currency strategist Steven Barrow, “volatility and spikes borne out of aggressive reactions to perhaps not very startling moves can drive currencies away from fundamentals”.
Is the Forex market dangerous? Traditional thinking is that when one trades two major currencies there is so much trading volume and liquidity that there are no unexpected jumps in prices and no risk of getting trapped in a trade with no way out. If the Forex market is becoming illiquid it may become dangerous.
Liquidity
Investopedia defines liquidity.
The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.
The ability to convert an asset to cash quickly – also known as “marketability.”
There is no specific liquidity formula; however, liquidity is often calculated by using liquidity ratios.
Commodities Research
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Commodities Research
Commodities research is a basic part of commodities trading. Commodities research may be as simple as looking at commodity news reports on Bloomberg, Yahoo Finance, Google News, or your daily newspaper before starting commodity trading. More basic and timely commodities research information comes from the US Department of Agriculture via its Agricultural Market News. This information can be found online and is often what the news services pick up and report. Within the Agricultural Market News traders can find specific reports including daily updates including the Daily National Grain Market Summary.
What traders read about commodities is for fundamental analysis. However, both fundamental and technical analysis are important for successful commodity trading. Reviewing recent and long term commodity price patterns will give guidance about future movement in commodities markets. The use of Candlestick charting can give the trader an advantage in trading commodities. A good place to start learning about trading commodities is with Commodity and Futures training.
Fundamental commodity analysis is the basis of what drives futures prices. However, as soon as the first trader has acted on new market fundamentals the market has changed. As traders buy futures or sell futures the commodity price changes. Options traders buying calls, buying puts, selling calls, or selling puts all change the market with the sum of their trading activity. Although the trader will have a firm grasp of his or her commodities research it is market fundamentals that drive day to day trading.
Rice traders in Japan during the days of the Samurai learned that price patterns repeated themselves and were predictive of subsequent market movement. The same principles that worked three hundred years ago work today with the application of Candlestick pattern formations and Candlestick trading tactics to help the trader profit from commodity price fluctuations. Commodities research helps the trader anticipate futures prices but understanding market principles helps the trader execute profitable trades.
Online Futures Trading
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Online Futures Trading
To some, online futures trading may seem a little strange. After all, what is the point of hurrying to buy or sell a futures contract on December 2021 Light Sweet Crude futures? There are two aspects of online futures trading that make sense of such a situation. One is that the internet makes it easy to trade equities in general and specifically futures online. One no longer needs to call a broker as request a trade but rather can open an online trading account and execute trades from a personal computer. The other reason that online futures trading of contracts the expire years hence is that the value of even a contract for 2021 delivery can change value in a moment due to changes in supply and demand. For example, the dramatic increase in oil production in the United States due to fracking technology makes it likely that played out oil fields the world over may be able to resume production for many years to come. This changes the long term supply and demand issue and can dramatically change the price of oil for delivery years hence or change the face of trading agricultural commodities such as the advent of the Green Revolution.
Available Futures Contracts
The CME Group offers futures contracts for a broad range of agricultural commodities, energy products, industrial and precious metals, foreign exchange, stocks, interest rates and even the weather. In each case traders can use online futures trading to buy or sell a variety of contracts deliverable in the coming months or years. Much of the futures market has to do with hedging investment risk. For example, a gold mining company or sugar beet producer may choose to establish a sell position a year from now. The company may believe that the price of their product may fall and they can guarantee what they believe to be a fair price by entering into a futures contract. The company may actually make delivery of the product in question or it may simply exit the contract by executing a buy contract prior to expiration. In either case the company accomplishes its goal of hedging risk. On the other hand, a speculator uses online futures trading in search of profits in whichever commodity, equity, or currency there is sufficient volatility. Unlike a company which is tied to a specific product, a speculator can survey the market and trade the futures contracts of his or her choice. In each case, fundamental and technical analysis are essential to profitable online futures trading.
Successful Commodities Trading
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Successful Commodities Trading
Even the beginner can engage in successful commodities trading. Traders can make money in successful commodities trading by choosing commodities that they have an interest in and knowledge of. Commodities traders can use technical analysis tools such as Candlestick chart analysis to track and predict price changes in a given commodity. Successful commodities trading comes down to combining technical analysis with fundamental analysis. A good place to gain a firm knowledge of the fundamentals of commodities trading is with Commodity and Futures Training. Once traders have learned the fundamentals of trading commodities they will choose a commodity to trade such as oil futures or gold futures. Those with an agricultural background or interest may consider live cattle commodity trading or corn futures. Discipline, a trading strategy, and attention to detail will convert knowledge and commodity price patterns into profits for the hard working trader.
The list of commodities to trade is long. Corn, mini-corn, corn swaps, corn calendar spread options, distiller’s dried grain futures, wheat, mini-wheat, wheat swaps, wheat calendar spread, soybean, min—soybean, soybean swaps and so forth is how the Nymex list of commodities products starts. Metals traded include industrial metals such as copper futures and precious metals with some industrial use such as gold and platinum. Energy products include crude oil futures as well as natural gas futures, coal futures, and energy credits. For successful commodities trading it is important to have a strong working knowledge of ones own traded commodities. It is always important to remember that the biggest traders in the commodities markets include the producers, processors, and commercial and industrial buyers of commodities. These companies are hedging their investment risk in buying and selling commodities. Having only a passing knowledge of a commodity that you are trading puts you at a distinct disadvantage compared to someone with a background in the industry in question and decades of trading experience.
When to Buy and When to Sell Bitcoin
Investment advisors use the word outperform to describe how Bitcoin and altcoins Solana and Cardano have been doing. This is a way of saying that an investment is doing well while withholding judgment as to why, how, or any future performance. It does give any in terms of when to buy and when to sell Bitcoin.
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Dangers of Investment Leverage
The rewards of using investment leverage can be impressive. However, the dangers of investment leverage are such that one needs to proceed with caution.
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More Related Content
Similar to Trading Futures Options
Profitable Commodities Trader
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Profitable Commodities Trader
What does it take to make money trading wheat, corn, crude oil, or gold bullion? What are the ingredients that make a profitable commodities trader? This discussion is about traders who pick and choose the commodity they want to trade, follow the markets closely, and place trades based on opportunity. This is not about companies trading commodity futures in order to hedge risk. Producers and buyers of wheat, corn, crude oil or gold bullion buy and sell futures contracts or options on the same. They limit themselves to the commodities that they deal with. The profitable commodities trader, on the other hand surveys the markets and latches on to opportunity when it arises.
In Search of Volatility
A profitable commodities trader starts by finding where price action will be, whether in agricultural commodities, energy commodities, or precious metals. This requires a combination of fundamental and technical analysis. Many times a profitable commodities trader will subscribe to an alert service in order to more efficiently spot trading opportunities. A drought in the Ukraine may drive up wheat prices while the threat of civil unrest in the Middle East tends to drive oil and natural gas prices higher. To the extent that the profitable commodities trader has special insight into supply and demand for a given commodity he or she has a good head start. Then the issue is to successfully read market sentiment with technical analysis tools
Keeping Your Head while All About You Are Losing Theirs
Many times news that shakes the commodities markets occurs when markets are closed. The commodity that is affected will gap up or down at the open and then exhibit a degree of market inefficiency for minutes, hours, or even days as a market consensus is reestablished. It is this period of market inefficiency that makes a profitable commodity trader. The smart trader has done his homework and knows how to interpret the news. He has a clear idea of the range in which the commodity ought to trade, based upon fundamentals and his analysis. When market psychology, the twin demons of fear and greed drive prices higher or lower than fundamentals warrant the profitable commodity trader takes a contrarian approach to day trading and trades accordingly. He may do this in standard commodities trading, buying or selling futures. Or he may choose to buy or sell options on commodity futures. Using this route helps him or her limit risk and leverage trading capital.
You Don’t Lose if You Don’t Trade
The famous baseball pitcher Satchel Page was criticized for holding the ball in his hand and not pitching immediately in tough situations. His comment was that when the ball was in his hand the batter could not hit it. If you approach commodity trading like a trip to the casino you will not be a profitable commodities trader.
When Should Investors Trade Options?
Here is where options traders will remind you that by trading options you can make money as the market falls and not just when it is going up. So, when should investors trade options?
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Profitable Futures Markets
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Profitable Futures Markets
In trading futures, success commonly comes from choosing volatile markets for trading, learning and staying abreast of market fundamentals and developing skills for technical analysis of stocks, commodities, or currencies. Profitable futures markets are a mix of promising fundamentals and technical cues. Profitable futures markets are also those for which a trader’s skills are most adapted. A trader with expert knowledge of stocks in the bio tech sector will often find profitable futures markets in this sector. On the other hand a trader with expert technical skills may be able to trade any sector and will find the most profitable futures markets to simply be those that are most volatile.
Profitable Futures Markets in Foreign Currencies
Trading Forex futures is a common means of hedging risk in foreign transactions. There are also profitable futures markets for speculators in Forex trading. A basic decision that a trader often needs to make in trading currencies is to trade majors, minors, or a mix. Major currencies trade at high volume and liquidity. These currencies are more adaptable to a technical trading style than minor currencies that trade at low volumes and often times poor liquidity. However, the most dramatic price action often occurs in trading minor currencies making these the potentially most profitable futures markets.
Trading with an Informational Edge
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Trading with an Informational Edge
Trading with an Informational Edge
Stock traders commonly use technical analysis tools to trade large cap stocks. These stocks are covered by many analysts and there is little that you know about the stock that others do not. On the other hand many cheap small stocks are not followed by anyone. Here is where you can be trading with an informational edge as noted in a useful article in barrons.
because large-cap stocks are extremely well covered by wall street, it’s hard to gain an informational edge on them. however, smaller stocks can provide big upside to intrepid investors capable of navigating the riskier terrain.
one such money manager is david daglio who has ventured off the beaten track and established a record of unearthing attractive small- and mid-cap value stocks that beat the market. he has done so by focusing on the long-term value of businesses and calculating their intrinsic value.
as head of dreyfus’ opportunistic value team, which runs the $985 million dreyfus opportunistic small cap fund (ticker: dscvx ) and the $2.4 billion dreyfus opportunistic midcap value ( dmcvx ) fund, daglio digs deep into businesses he believes haven’t been well covered by wall street. he and the core of his 10-person team have been with the funds for a decade.
results have been strong for both funds. the small-cap fund returned an annualized 22.1% over three years, versus 18.2% for the russell 2000 value index, and an annualized 10.9% over 10 years, compared with 8% for the benchmark.
The point of this being that you can make money trading with an informational edge.
Commodity Trading Profits in a Recession
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Commodity Trading Profits in a Recession
The US markets have been focused on two issues. One is the prospect of more bailouts of the European economies and the other is the falloff in Chinese exports. Europe may be headed back into a recession due to excessively strict austerity measures. Europe is China’s biggest customer. A recession in Europe affects trade with Asia as well as the Americas. A weak Chinese manufacturing report also has implications for commodity consumption and does not just have to do with trading a Chinese stock decline . Here our interest is in gaining commodity trading profits in a recession. In trading commodities there are profits to be made in both up and down markets. Traders can find commodity trading profits in a recession both as it worsens and as it recovers.
Timing an Economic Downturn
Traditional thinking has been that stocks and commodities fall during the first half of a recession and start to recover at the midpoint. Stocks recover on the promise of future profits and commodities recover based on high anticipated consumption. Commodity trading profits in a recession come from successfully reading the fundamentals and market sentiment. Traders use fundamental analysis to successfully anticipate where commodity prices will be in the coming weeks and months. They use technical analysis of market sentiment to time their trades.
Which Commodities to Trade and How
In the current situation stocks pop up every time that the Euro Zone puts some money aside to rescue failing banks or economies. Then they fall on the next dismal economic report. Industrial and energy commodities react similarly. However, agricultural commodities may act differently. Prices of industrial metals are down because of reduced global demand. Oil futures are falling on the prospect of falling energy needs. But crops and livestock are still in demand as people need to eat. Supply is a stronger factor in agricultural commodities. A drought in Eurasia, Latin America, or the American Great Plains threatens a fall in wheat, soybean, and corn harvests. This sort of news drives prices up regardless of the state of the global economy. A short rule of thumb for how to trade commodities is to watch global demand when trading energy and industrial commodities and watch supply when trading products in the food chain.
Methods for Commodity Trading Profits in a Recession
In a fast moving market with clear trends, traders may buy and sell, scalping, in small increments to make daily profits. In an extremely volatile market without any well-established trend many traders prefer buying options. Buying puts on commodity futures gives the trader the right to sell a futures contract at a set price, the strike price, no matter how low the market price might fall.
Diversify Your Investment Portfolio
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Diversify Your Investment Portfolio
Diversification is a means of reducing risk and increasing opportunity in investing. The chances of having a stock in your portfolio rise significantly in price goes up when you have five well-chosen stocks instead of one. The chances of losing all of your investment capital also go down when you diversify your investment portfolio among several stocks in several market sectors. Likewise, if a part of your investments is in property, a part is in stocks, a part is in bonds, and a part is in offshore investments you can reduce risk and increase the opportunity for profits. When suggesting offshore investment opportunities we wrote about Three Good Offshore Investment Ideas, for example.
Diversify Your Investment Portfolio to Gain Variety and Opportunity
When you diversify your investment portfolio you invest in a variety of assets. Because the value of each investment does not go up or down in perfect harmony, diversification averages out risk, as well as gain. To the extent that one is looking to a big gainer, having more stocks, real estate, or other assets may serve to increase the odds of success. In their book A Random Walk Down Wall Street the authors note that the best return in stocks is often a basket of about forty small cap stocks. These stocks are priced low because of the risk inherent in small companies. However, if you diversify your investment portfolio with a large number of these stocks, you increase the chances of finding a huge winner which will negate the effects on the portfolio of a handful of losers.
Trading Oil Futures
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Trading Oil Futures
Oil futures trading has been active as prices have fallen over the last months. Factors driving oil prices down are the continuing US oil fracking boom, continued high OPEC production and slowing economies in Japan, Europe and China. The US Federal Reserve says that shale production is steady despite the global excess and the OPEC decision to keep production high was recently in the news.
“in early november, oil and gas exploration activity decreased in north dakota and increased in montana relative to a month earlier; production remained at record levels,” the fed said. “despite recent declines in oil prices, officials in north dakota expect oil production to continue increasing over the next two years.”
oil prices have declined since june and touched a five-year low early this week, reflecting in part slowing global economic growth and increased domestic production in the united states.
Oil prices respond to supply and demand and while production remains high, demand is falling due to economic slowdowns across the globe. Trading oil futures depends on careful analysis of these fundamentals as well as the sentiment of the market. With traders expecting that the market has overshot many have bet on a recovery of oil prices.
Up and Down
Markets tend to be inefficient and successful traders take advantage of that fact. Trading oil futures is no different. Morningstar notes that oil futures markets remain jittery despite a recent small up tic.
crude-oil futures rose in asian trade wednesday but analysts expect prices to remain volatile and market sentiment is still largely bearish.
on the new york mercantile exchange, light, sweet crude futures for delivery in january (clf5) traded at $67.10 a barrel, up $0.35, or 0.5% in the globex electronic session. january brent crude on london’s ice futures exchange rose $0.29, or 0.4%, to $70.72 a barrel.
“if the market is looking to u.s. shale for a [price] floor, citi thinks that floor is nearer to $50 a barrel [for] wti than the $90 a barrel level frequently cited by senior saudis in recent weeks,” edward morse, head of commodities research at citigroup, said in a report.
If the Citi analysis is correct there is a greater downside to the oil market that many thought
Who Suffers
Many US companies have invested heavily in looking for shale oil and using high tech fracking technology to extract it. These companies carry a high debt load. So long as they were getting $100 a barrel many could profit but as prices fall there are oil companies in trouble. Some could simply fold and quit producing oil. For those trading oil futures this could mean lower supply and higher prices. MarketWatch refers to the survival of the fittest in the oil fields.
companies are dusting off contingency plans that may have seemed far-fetched when oil was trading above $100 a barrel in the s
When to Short Stocks
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When to Short Stocks
An often effective means of profiting from a falling stock is to short it. Shorting is when a trader sells a stock that he does not own. Essentially he borrows the stock from his stock broker and has to have money in a trading account to cover potential losses. In addition the trader who shorts a stock pays interest on the loan of the stock for the duration of the short. When to short stocks is when you expect the stock to fall in price. When to short stocks is when the trader seeks to leverage his or her trading capital. Shorting stocks is a little like buying options in that the trader enters into a position with a lower capital investment than when he buys a stock and can often gain multiples of the cost of engaging in a short. Unlike options trading, the trader is obligated to buy back the stock at some point in time. Although he can stay in the short position indefinitely, there comes a time when the cost of the position becomes prohibitive. What is a realistic profit when trading stocks by this route? Although profit can be substantial in a well-placed trade, traders are well advised to do diligent technical analysis of the market in order to enter and exit at trade in the most profitable manner.
The Problems Related to Borrowing Stock
To a degree, when to short stocks is not when you expect there to be a stock split or a dividend payment. Because you have just borrowed the stock you will need to return twice the number of shares after a split and give dividend payments to the brokerage whose stock it still is. And, if the stock price rises greatly, and you do not have sufficient capital in your trading account you may be required to replenish your account or the brokerage may simply sell your shares and expect you to come up with the rest of the cash. Many times a brokerage retains the right to take the stock back (call it away) as when many traders are shorting a stock and the brokerage house only has so many shares to offer.
Trading Stock Options
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Trading Stock Options
Trading stock options holds two definite advantages over trading stocks directly. A smart trader can certainly make money trading stocks. But by trading stock options the same trader can limit risk and leverage his trading capital.
What Are Options?
Options are contracts that give their buyers the right, not the obligation, to sell or purchase the underlying assets at a future date, within the term of the contract. Whether it is in stock options trading or in trading commodities like corn futures, trading options allows the investor to invest trading capital using a variety of strategies. A call option gives the buyer the right to buy and a put option gives the buyer the right to sell the underlying stock. Sellers are paid a premium for taking on the risk of having to buy or sell at a loss when the buyer chooses to execute his contract. Options are used to both hedge risk and to leverage trading capital.
Hedging Risk and Leveraging Capital
In trading stock options a buyer limits his risk to the premium paid. Let us say that your fundamental and technical analysis of ABC stock indicates that it will soon rise in price. You can buy a hundred share of ABC for $100 a share or $10,000. Or you may see that you can buy a $102 option on ABC for $1. A $102 option means that you can buy to stock for $102 a share at any time up until the end of the contract. Obviously the stock is currently worth $100 a share and you would not want to execute the contract. But, if your analysis is correct the stock price will go up. Let us say that the stock goes up to $110 a share. If you purchased the stock you make $1000 minus fees and commissions. That is a ten percent return on investment. And if the stock price falls to $90 a share you lose $1000, ten percent of your trading capital. But in trading stock options on ABC you pay $100 for a $102 call option on 100 shares. The stock goes up to $110. You execute the contract and purchase the stock for $102 a share and then sell for $110 a share. You make $8 a share or $800 which is a $700 profit or 700% return on invested capital. And, if the stock price falls to $90 you lose your initial $100 and no more.
Short and Long Term
Trading stock options is not just for short term profits. Let us say that you have purchased a hot growth stock. It has multiplied in value
Basics of Commodity Trading
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Basics of Commodity Trading
To trade commodities successfully traders ought to start by learning the basics of commodity trading. Trading commodities is really commodities futures trading. Producers and processors of commodities buy and sell futures contracts for delivery on a specific date during any of the next months or years. Producers and processors are typically hedging their investment risk and helping to provide a stable market for the commodity in question. Speculators can trade the samecommodity futures contracts by buying and selling futures or they can buy options and sell options on futures contracts. Commodity and futures training is a good place to start learning the basics of commodity trading. For those interested options trading in commodities markets, Options Training with Stephen Bigalow will provide basic knowledge as well as the deeper insight gained from experience trading options in commodity futures.
Investing in Value Stocks
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Investing in Value Stocks
A good way to make a profit in the stock market is by investing in value stocks. Value stocks are actually undervalued stocks such as in today’s energy sector. Investopedia defines a value stock.
A stock that tends to trade at a lower price relative to it’s fundamentals (i.e. dividends, earnings, sales, etc.) and thus considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio.
A value investor believes that the market isn’t always efficient and that it’s possible to find companies trading for less than they are worth. An easy way to attempt to find value stocks is to use the “Dogs of the Dow” investing strategy – buying of the 10 highest dividend-yielding stocks on the Dow Jones at the beginning of each year and adjusting it every year thereafter.
Investing in value stocks is not just investing in cheap stocks. Good value stocks pay dividends and/or have high growth potential. These stocks commonly have a very sound business plan and return profits year after year. When there is a market rally value stocks often get left behind as investors follow rapidly growing stocks. However, when the rally corrects or the market reverses value stocks do, in fact, retain their value. Value stocks tend to outperform the overall market over the long term.
Picking Value Stocks
Investing in value stocks requires that you pay attention to the market. Using stock screens to find low profit to earnings ratio stocks is useful. However, investing in value stocks also requires that you understand just how it is that a company makes its money and how it will continue to do so. Often times this requires an outside the box view of stocks and the market in order to understand how global events and other factors will tend to drive stock prices in the near and midterm future. Forbes provides an example of how to do this in their article about the top ten value stocks that they see in emerging markets.
A weak recovery in the U.S. and Europe has helped reduce the price to earnings ratios on a number of large cap stocks in the big emerging markets. Value investors take notice. Here are the top 10 recommendations by stock forecasters at ValuEngine.com.
Examples given include AsiaInfo Linkage (ASIA) which is referred to as the backbone of China’s mobile telecom system. A second stock mentioned is the Brazil petroleum giant, Petrobas. And a third is Brasil Foods, the largest food company in Brazil. Each of the ten suggestions in the article is a solid company that is situated in a country with economic issues. The working assumption is that economies will recover and investing in value stocks in Brazil, China, India, etc. will be profitable in the long term as you are picking up deals on what in the long run will be c
Commodity Market Liquidity
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Commodity Market Liquidity
Commodity market liquidity often correlates very well with commodity market trading profits. There are three benefits to traders in high commodity market liquidity. The first is that it is easier to enter and exit trades. The second is that bid and ask prices are commonly closer. The third is that with high trading volume and liquidity the statistics of online trading software as well as the predictive ability of time honored tools such as Candlestick pattern formations tend to be more precise. Traders can find reports of the previous day’s trading volume online as well as updates during the trading day. A useful measure of trading volume and a useful predictor of trading volume is open interest. This measure is the number of open contracts between buyers and sellers in commodity futures trading. To learn to use commodity market liquidity to the maximum advantage in profiting from commodity trading, traders are wise to take Commodity and Futures Training and to develop their skills in Candlestick analysis of commodity prices.
Commodities that can offer good commodity market liquidity include trading in corn futures, oil futures, and gold futures. Each of these is a commodity that trades at high volume and high liquidity. In the case of each commodity both fundamental and technical analysis are necessary to understand the scope of trading and the day by day or minute by minute changes in commodity price. Candlestick charts of these commodities will help predict price movement and allow traders to buy or sell commodity futures contracts with the reasonable expectation of making a profit with anticipated market moves. The tight spreads between bid and ask prices on commodity futures contracts will allow the trader to profit by buying and selling at smaller intervals in a market trend than when the market is less liquid and the spread is greater. Understanding the fundamental analysis of gold, oil, or corn futures will give the trader an overall perspective of the market. However, it is technical analysis that predicts the next price move. The use of Candlestick chart patterns will predict market moves within the trading range dictated by commodity fundamentals.
Purchase Commodities
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Purchase Commodities
Traders will often purchase commodities because of the potential for wide commodity price variation. Especially in agricultural commodities, prices can fluctuate fifty percent or more in a year. Producers and processors of commodities will often engage in hedging commodities in order to guarantee a stable price structure for their business operations. The hedging by producers and processors of commodities provides a base market in which the trader can profit in commodities trading. In order to purchase commodities, traders will post a margin. Margin requirements to purchase commodities include the maintenance margin which is what the trader must maintain in his account in order to trade. A performance bond margin is monies deposited by both buyer and sells of commodity futures contracts to guarantee performance of the contract. This is essentially a security deposit. To purchase commodities the trader will want to track return on investment. Return on margin is typically used as a measure of success for those who purchase commodities. This is the gain or loss in trading compared to money invested. It should be noted that this is not return on money per commodity purchased or sold but return on the amount of money dedicated to the margin account in order to purchase commodity futures and sell commodity futures. To learn to effectively trade commodities a good place to start is Commodity and Futures Training.
Because of the potential for rapid changes in commodity futures price there is the potential for substantial commodity futures profits. When a trader decides to purchase commodities he or she will decide on the commodity and the delivery date. Commodity delivery dates can be next month, next year, or several years hence depending upon the commodity traded. However, the trader need not hold the commodity contract for its duration. He or she can make the opposite trade to exit the contract. That is the trader can sell the same commodity with the same delivery date. If market fundamentals change or technical factors lead to a substantial market change the trader can exit the trade with a profit long before the contract expires. Traders will follow both fundamental and technical analysis in order to profitably anticipate commodity price movement. The use of Candlestick analysis can help the trader see potentially profitable market patterns and market trends allowing them to purchase commodities and sell commodities in a timely and profitable fashion.
Trade binary options
This book covers basics of binary options trading and how to trade profitably. Moreover the book also includes basics of different trading concepts including technical analysis, fundamental analysis, money management and much more. www.BinaryOptionsGain.com
Commodity Futures
http://profitabletradingtips.com/trading-investing/commodity-futures
Commodity Futures
In the world of online trading, one trades, stocks, currencies, and commodities. Commodities are certainly bought and sold directly but commodity futures are a different matter and fall into the world of the online trader. The point of commodity futures is to stabilize prices and give producers and buyers of commodities an opportunity to hedge their investment risk. Commodity futures can be traded directly or by way of options. What commodities can be traded as futures? Precious metals such as gold bullion, agricultural products such as wheat, or energy products such as crude oil are all available as commodities futures. Where does one trade commodity futures? Knowing how to trade commodities starts with the basics.
The following is a list of United States Futures exchanges:
CBOE Futures Exchange (CFE)
Chicago Mercantile Exchange (CME)
Chicago Board of Trade (CBOT)
Chicago Climate Exchange (CCE)
ELX Futures (Electronic Liquidity Exchange)
ICE Futures U.S.
Kansas City Board of Trade (KCBT)
Minneapolis Grain Exchange (MGEX)
Nadex (formerly HedgeStreet)
NASDAQ OMX Futures Exchange (NFX)
New York Mercantile Exchange (NYMEX) and (COMEX)
NYSE Liffe US
OneChicago, LLC (Single-stock futures (SSF’s) and Futures on ETFs)
The CME group owns CME, CBOT, NYMEX, and COMEX.
http://profitabletradingtips.com/trading-investing/commodities-trading
Commodity is the generic term for any marketable item that people produce, dig up, or refine for in order to sell to satisfy demand. Trading of commodity futures is possible because tradable commodities are standardized. For example, one can buy or sell a futures contract for a specific grade of crude oil. Refined gold bullion is standardized as are pork bellies, varieties of corn, soybeans, and much, much, more. Thus a soybean contract can be satisfied by crops from Brazil or Iowa. A corn contract can be satisfied by shipments from Nebraska or the Ukraine. For the commodity futures trader it may make little difference who is going to eventually sell or pay for a specific contracted lot of a commodity. The trader will most commonly exit his contract by making an opposite trade one he has made a profit or minimized a loss.
What Determines Commodity Futures Prices?
The price of a bushel of corn, ounce of gold, or barrel of oil is determined by market forces, supply and demand. Commodity prices have to do with what is on hand, what is in transit, and what is likely to be available in the foreseeable future. For example, known oil reserves have the effect of reducing today’s oil prices. Excellent weather raises crop forecasts and depresses the price of corn, soybeans, or wheat. The threat of war and disruption of crude oil transport raises the price of oil.
Agricultural Commodities
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Agricultural commodities
Trading agricultural commodities is the province of agricultural producers and the likes of multinational grain companies. It is also the province of traders speculating on movements in the agricultural commodities markets. Both groups trading commodities rely upon fundamental analysis of the commodity in question and engage in technical analysis using technical analysis tools such as Candlestick chart formations in order to judge when to stay with a market trend and when to expect a market reversal. The world needs food but growing conditions, food transport and storage, and diversion of food stuffs into energy all affect availability and, therefore, commodity price. This mixture of facts and conditions drives pricing in the futures markets in agricultural commodities. Whether you are interested in trading corn futures or live cattle Commodities and Futures Training will be a good place to start.
The Traders
When you start commodity trading you will be up against the likes of traders working for companies like Cargill and Archer Daniels Midland. These multinational food companies know the fundamentals of the agricultural commodities markets as it is their business. They will, in fact, know fundamentals before you do. Although their advantage may only be minutes or even seconds they will cause market movement to which you will have to react. They are typically the drivers of the commodities markets in wheat, corn, soybeans and other products. You will be in the pack with other traders doing Candlestick analysis to predict market reaction to the trades made by the big money.
Why They Trade
There are two types of traders in agricultural commodities. There are the producers and the buyers who are hedging commodities and their investment risk. There are traders looking to profit on market movement. Farm cooperatives growing sugar beets and sugar producers who buy sugar beets or cane each buy or sell commodities futures contacts to lock in price at a future date. Because these folks know the market in their commodity they may well also trade for profit but their primary motive is to maintain a stable price for their product. The trader speculates on market movement and market reversal in looking to profit. The producers and buyers want a stable market. The pure trader would like to see lots of market volatility.
Is the Forex Market Dangerous?
http://www.forexconspiracyreport.com/is-the-forex-market-dangerous/
Is the Forex Market Dangerous?
A concern was raised in an article in the Financial Times; Fast forex moves raise liquidity worries.
In recent months a series of dramatic and unforeseen intraday fluctuations -even in popular and widely traded currencies -has led forex investors, bank traders and analysts to question the mechanics of the market.
The broader concern is that declining liquidity will fuel more sudden forex moves and destabilize the market. According to Standard Bank’s G10 currency strategist Steven Barrow, “volatility and spikes borne out of aggressive reactions to perhaps not very startling moves can drive currencies away from fundamentals”.
Is the Forex market dangerous? Traditional thinking is that when one trades two major currencies there is so much trading volume and liquidity that there are no unexpected jumps in prices and no risk of getting trapped in a trade with no way out. If the Forex market is becoming illiquid it may become dangerous.
Liquidity
Investopedia defines liquidity.
The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.
The ability to convert an asset to cash quickly – also known as “marketability.”
There is no specific liquidity formula; however, liquidity is often calculated by using liquidity ratios.
Commodities Research
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Commodities Research
Commodities research is a basic part of commodities trading. Commodities research may be as simple as looking at commodity news reports on Bloomberg, Yahoo Finance, Google News, or your daily newspaper before starting commodity trading. More basic and timely commodities research information comes from the US Department of Agriculture via its Agricultural Market News. This information can be found online and is often what the news services pick up and report. Within the Agricultural Market News traders can find specific reports including daily updates including the Daily National Grain Market Summary.
What traders read about commodities is for fundamental analysis. However, both fundamental and technical analysis are important for successful commodity trading. Reviewing recent and long term commodity price patterns will give guidance about future movement in commodities markets. The use of Candlestick charting can give the trader an advantage in trading commodities. A good place to start learning about trading commodities is with Commodity and Futures training.
Fundamental commodity analysis is the basis of what drives futures prices. However, as soon as the first trader has acted on new market fundamentals the market has changed. As traders buy futures or sell futures the commodity price changes. Options traders buying calls, buying puts, selling calls, or selling puts all change the market with the sum of their trading activity. Although the trader will have a firm grasp of his or her commodities research it is market fundamentals that drive day to day trading.
Rice traders in Japan during the days of the Samurai learned that price patterns repeated themselves and were predictive of subsequent market movement. The same principles that worked three hundred years ago work today with the application of Candlestick pattern formations and Candlestick trading tactics to help the trader profit from commodity price fluctuations. Commodities research helps the trader anticipate futures prices but understanding market principles helps the trader execute profitable trades.
Online Futures Trading
http://profitabletradingtips.com/trading-investing/online-futures-trading
Online Futures Trading
To some, online futures trading may seem a little strange. After all, what is the point of hurrying to buy or sell a futures contract on December 2021 Light Sweet Crude futures? There are two aspects of online futures trading that make sense of such a situation. One is that the internet makes it easy to trade equities in general and specifically futures online. One no longer needs to call a broker as request a trade but rather can open an online trading account and execute trades from a personal computer. The other reason that online futures trading of contracts the expire years hence is that the value of even a contract for 2021 delivery can change value in a moment due to changes in supply and demand. For example, the dramatic increase in oil production in the United States due to fracking technology makes it likely that played out oil fields the world over may be able to resume production for many years to come. This changes the long term supply and demand issue and can dramatically change the price of oil for delivery years hence or change the face of trading agricultural commodities such as the advent of the Green Revolution.
Available Futures Contracts
The CME Group offers futures contracts for a broad range of agricultural commodities, energy products, industrial and precious metals, foreign exchange, stocks, interest rates and even the weather. In each case traders can use online futures trading to buy or sell a variety of contracts deliverable in the coming months or years. Much of the futures market has to do with hedging investment risk. For example, a gold mining company or sugar beet producer may choose to establish a sell position a year from now. The company may believe that the price of their product may fall and they can guarantee what they believe to be a fair price by entering into a futures contract. The company may actually make delivery of the product in question or it may simply exit the contract by executing a buy contract prior to expiration. In either case the company accomplishes its goal of hedging risk. On the other hand, a speculator uses online futures trading in search of profits in whichever commodity, equity, or currency there is sufficient volatility. Unlike a company which is tied to a specific product, a speculator can survey the market and trade the futures contracts of his or her choice. In each case, fundamental and technical analysis are essential to profitable online futures trading.
Successful Commodities Trading
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Successful Commodities Trading
Even the beginner can engage in successful commodities trading. Traders can make money in successful commodities trading by choosing commodities that they have an interest in and knowledge of. Commodities traders can use technical analysis tools such as Candlestick chart analysis to track and predict price changes in a given commodity. Successful commodities trading comes down to combining technical analysis with fundamental analysis. A good place to gain a firm knowledge of the fundamentals of commodities trading is with Commodity and Futures Training. Once traders have learned the fundamentals of trading commodities they will choose a commodity to trade such as oil futures or gold futures. Those with an agricultural background or interest may consider live cattle commodity trading or corn futures. Discipline, a trading strategy, and attention to detail will convert knowledge and commodity price patterns into profits for the hard working trader.
The list of commodities to trade is long. Corn, mini-corn, corn swaps, corn calendar spread options, distiller’s dried grain futures, wheat, mini-wheat, wheat swaps, wheat calendar spread, soybean, min—soybean, soybean swaps and so forth is how the Nymex list of commodities products starts. Metals traded include industrial metals such as copper futures and precious metals with some industrial use such as gold and platinum. Energy products include crude oil futures as well as natural gas futures, coal futures, and energy credits. For successful commodities trading it is important to have a strong working knowledge of ones own traded commodities. It is always important to remember that the biggest traders in the commodities markets include the producers, processors, and commercial and industrial buyers of commodities. These companies are hedging their investment risk in buying and selling commodities. Having only a passing knowledge of a commodity that you are trading puts you at a distinct disadvantage compared to someone with a background in the industry in question and decades of trading experience.
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Trading Futures Options
- 2. There are many profitable day trading strategies that can be applied to trading commodities. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 3. Markets move up and down and speculators on the evolving prices of commodity futures use both fundamental and technical analysis in order to gain a profit. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 4. A means of limiting risk and leveraging capital when trading commodities is trading futures options. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 5. A trader can buy puts or calls on a commodity futures contract just as he or she can buy puts or calls on a stock. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 6. In trading futures or trading futures options one is not buying or selling the commodity. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 7. Both futures contracts and options contracts are derivative instruments. In this the base equity could be crude oil. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 8. A trader can engage in oil futures trading or trading futures options on crude oil. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 9. The same applies to live cattle, winter wheat, gold bullion, and many other tradable commodity futures. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 10. The commodity futures market is used by two groups of traders. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 11. The first group includes companies and individuals that buy and sell commodities such as gold bullion, crude oil, or soybeans. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 12. These folks buy and sell futures or engage in trading futures options to hedge business risk. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 13. Let’s say that an agricultural cooperative sells winter wheat produced by its members. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 14. The price of winter wheat may fluctuate greatly as there is a drought in North Dakota and heavy rains in the Ukraine, both major wheat growing areas. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 15. If these conditions continue wheat prices will be very high by the time that harvest comes. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 16. But, if the weather improves in one or both areas the price of wheat may fall dramatically. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 17. Obviously the cooperative would prefer to be paid well for the coming harvest. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 18. One way to insure this is to sell futures on winter wheat. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 19. The price is currently high (in this hypothetical example). http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 20. However, what if the weather in North Dakota and the Ukraine gets worse and there are hailstorms in Kansas further decreasing the total harvest? http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 21. By trading futures options the cooperative retains the right to sell at the contract price if the market price falls. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 22. It also preserves the right to not execute the option and not sell at the contract price if, in fact, the market price climbs higher. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 23. By not ever entering a futures contract but rather buying options, the trader does not need to tie up money in a margin account for the futures contract. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 24. The other group of traders is composed of speculators. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 25. They pick and choose which commodities they wish to trade and engage in trading futures options on a wide range of commodities, http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 26. depending on where there is market volatility and the chance for a profit. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 27. These traders may use tools such as trend following in day trading or scalping in day trading in order to gain incremental profits as the market moves up and down. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 28. Because a market speculator does not need to hedge risk on a specific commodity he can profit from trading futures options http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 29. on a variety of commodities, moving in and out of trades as opportunity and profits dictate. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options
- 30. For more insights and useful information about trading stocks, commodities, currencies, and options, visit www.ProfitableTradingTips.com. http://www.profitableinvestingtips.com/investing-trading/trading-futures-options