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This shock event caused an almost immediate 25 percent leap in the Swiss franc’s value on January 15, 2015. Although this price surge was largely reversed over the subsequent two months, the sudden market move had a devastating impact on currency traders with short positions in the Swiss franc. Surprises in government reports, which can trigger sharp price reactions, are a common source of unexpected developments. Sometimes, however, a report that does not typically trigger a major price impact may do so. Department of Agriculture’s quarterly corn stocks report released on March 28, 2013.

As in the case of the continuation pattern, the key consideration is the direction of the breakout from the triangle. ■ Trend Lines, Channels, and Internal Trend Lines The concept that trend lines, channel lines, and internal trend lines indicate areas of potential support and resistance was detailed in Chapter 6. Again, as previously discussed, based on personal experience, I believe that internal trend copy trading videforex lines are more reliable in this regard than conventional trend lines. However, the question of which type of trend line is a better indicator is a highly subjective matter, and some readers may well reach the opposite conclusion. In fact, there is not even a mathematically precise definition of a trend line or an internal trend line, and how these lines are drawn will vary from individual to individual.

Thus, a euro/British pound spread consisting of one long contract could vary even if the price difference between the two markets remained unchanged. The difference in price levels is another important factor relevant to contract ratios for intercommodity spreads. The criteria and methodology for determining appropriate contract ratios for intercommodity spreads are discussed in the next chapter.

a complete guide to the futures market

The trader’s diary should be reviewed periodically to help reinforce these observations. Speaking from personal experience, this approach can be instrumental in eradicating frequently repeated mistakes. This strategy provides an interesting alternative method of pyramiding—that is, increasing the size of a winning position. Figure 35.9 compares the alternative strategies of buying two futures versus buying a futures contract and a call. The difference in losses between the two strategies will widen as larger price declines are considered. The short in-the-money put will lose modestly less than the long futures position in a declining market because the loss will be partially offset by the premium received for the put.

Rolling charts can also be used to depict other statistics besides return. For example, a rolling chart of annualized volatility can be used as a tool to monitor both managers and portfolios for early evidence of a possible increase in risk. In the blind simulation approach the system is optimized using data for a time period that deliberately excludes the most recent years. The performance of the system is then tested using the selected parameter sets for subsequent years. Note that the error of fitting results is avoided because the parameter sets used to measure performance in any given period are selected entirely on the basis of prior rather than concurrent data. In a sense, this testing approach mimics real life (i.e., one must decide which parameter sets to trade on the basis of past data).

Spread Trading

The simplest way to trade is to buy a call option if you forecast a given market to rise, or to buy a put if you think a market will fall. Options trading is a very specialized approach, yet it can pay off well if such an approach suits your financial goals, capital resources, and risk tolerance. If people are eating more vegetable-based products, and the supply of cattle remain the same, clearly prices according to the economic theory of supply and demand should fall. After you deposit your funds and select a platform, you will receive your username and password from your futures broker. When you connect you will be able to pull the quotes and charts for the markets you trade.

Practically speaking, delayed data is relatively “false” depending on the importance of time in your trades. Time delay for one trader can give other traders a timing advantage. Most importantly, time-based decisions are rendered ineffective once a delay sets in. Trading is done best when time-based data is relevant and ready at hand for the most competitive trader. Today’s commissions are also very low relative to the leverage that you get as a trader.

a complete guide to the futures market

Further assume this analyst interpreted the reversal in the Case-Shiller Home Price Index in mid-2006 and the concurrent emerging uptrend in subprime mortgage delinquencies as early evidence that the housing bubble was unraveling—another correct assessment. Now consider the outcome if the analyst acted on this market assessment by implementing a short position in stock index futures in September 2006—the month after subprime delinquencies reached a new multiyear high. A short S&P position initiated at the median price in September 2006 would have been exposed to a 20 percent rise in the index before the stock market ultimately peaked in October 2007. Although the stock market subsequently collapsed, it is highly unlikely the analyst could have survived such a large adverse price move before giving up and liquidating the position at a large loss. Rather, the point is that even accurate fundamental analysis can lead to poor trading results if fundamentals are used for timing.

The problems and the possible solutions are summarized in Table 16.2. Table 16.2 Problems with Standard Trend-Following Systems and Possible Solutions Problems fxdd review with Standard TrendFollowing Systems 1. I simply find the following approach clearer and more succinct than DeMark’s presentation of the same concept.

Most futures and commodity brokers will attempt to send you an email alert or phone call or may have to exit you from the market. Make sure you discuss the exits dates with your brokers and methods he uses to roll over to the next month. When a commercial seller is going “short” a position , they actually intend to sell the physical commodity at a specified delivery date, using the short position as a means to “lock in” a sales price. Optimus Futures gives you access to a huge database of automated trading systems where you can have the trades placed automatically in your brokerage account.

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The “Brexit” issue has tremendously affected not only GBP , but also other currencies such as the euro, swiss franc and others. Flow of “good news” and “bad news” move the currency markets. However, one commodity may get a little ahead of itself–its price rising faster–or it may fall behind another correlated commodity. On the supply side, we can look for example at producers of ag products. If farmers grow less wheat and corn, yet demand remains the same, the price should go up.

During what was perceived to be an exceptionally tight corn market (as a result of the drought referenced by Figure 29.2), the report indicated corn stocks were nearly 8 percent higher than previously estimated. In response, corn futures dropped more than 5 percent the next trading day, and more than 8 percent the day after that (see Figure 29.6). Unfortunately, the approaches we have enumerated for dealing with the elusiveness of demand do not encompass all cases. For some markets, not only is demand highly erratic, it is also difficult or nearly impossible to define a stable relationship that describes the precise dependence of demand on other variables. The problem of specifying gold demand is further complicated by the fact that the relative importance of any of these factors in influencing gold demand is subject to considerable variation.

Risk management is key, not only to surviving but thriving

Thus, fundamentals are not bullish or bearish in themselves; they are only bullish or bearish relative to price. The failure of many analysts to realize or acknowledge this fact is the reason why the fundamentals are so often termed bullish at market tops and bearish at market bottoms. Scene 3 You’ve been long corn for three weeks and it’s been one of your best trades ever. The market has moved steadily and sharply higher with export rumors flying in all directions.

Inthe-money options have high deltas because there is a high probability that a one-point change in the futures price will mean a one-point change in the option value at expiration. However, since this probability must always be equal to less than one, the delta value will also always be equal to less than one. Since there is a 50/50 chance that an at-the-money option will expire in-the-money, there will be an approximately 50/50 chance that a one-point increase in the price of futures will result in a one-point increase in the option value at expiration. Delta values for out-of-the-money options will increase as time to expiration increases. A longer time to expiration will increase the probability that a price increase in futures will make a difference in the option value at expiration, since there is more time for futures to reach the strike price.

However, this problem would exist in any kind of linked series. Check whether the trading day N1 days prior to the current day can be defined as an up or a down run day. (Recall that a run day cannot be defined until the close N1 days after the run day.) If the day is an up run day, increase the buy count by one if the buy count is active (i.e., if the current position is short); otherwise, reset the sell count to zero. If the buy count is active, check whether it is equal to N2 after step 1. If it is, cover short, go long, close buy count, and activate sell count. If the sell count is active, check whether it is equal to N2 after step 1.

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See the section, Why Traditional Fundamental Analysis Doesn’t Work in the Gold Market, at the end of this chapter. The number of consecutive run days required for a signal. By employing diversification, the trader can allocate some funds to a high-profit-potential system that is too risky to trade on its own. A thrust day, which coinarketcap was originally defined in chapter 9, is a day with a close above the previous day’s high or below the previous day’s low. ■■ Bull and Bear Traps Bull and bear traps are major breakouts that are soon followed by abrupt, sharp price reversals, in stark contrast to the price follow-through that is expected to follow breakouts.

Terms of Sale

Specifically, how great must the difference be between a day’s high and the highs of the preceding and succeeding days in order for it to qualify as a spike high ? How close must the close be to the low for a day to be considered a spike high ? How large must a preceding advance be for a day to be viewed as a possible spike high ? The answer to these questions is that there are no precise specifications; in each case, the choice of a qualifying condition is a subjective one.

A Complete Guide to the Futures Market

Traders who are already familiar with futures markets should proceed directly to Chapter 2. The introductory discussion provided by this chapter is deliberately brief and does not purport to cover all background subjects. Topics such as the history of exchanges, choosing a broker, and operation of the clearinghouse are not covered because a familiarity with these subjects is unnecessary for the analysis and trading of futures markets. Readers who desire a more detailed discussion of commodity market basics can refer to a wide range of introductory commodity texts.

What is the difference between day trading margins and overnight margins? Are they different?

In a sense, this type of trade can be thought of as a short at-the-money call position with built-in stop-loss protection. This trade-off between risk exposure and the amount of net premium received is illustrated in Figure 35.19b, which compares the outright short at-the-money call position to the above spread strategy. The short straddle position will be profitable over a wide range of prices. The best outcome for a seller of a straddle is a totally unchanged market. In this circumstance, the seller will realize his maximum profit, which is equal to the total premium received for the sale of the call and put. This strategy is appropriate if the speculator expects prices to trade within a moderate range, but has no opinion regarding the probable market direction.

As a result, no single indicator or parameter input (such as the look-back period) can be expected to perform consistently well across multiple markets and time frames. ■■ Defining Trends by Highs and Lows One standard definition of an uptrend is a succession of higher highs and higher lows. For example, during the May 2014–March 2015 period in Figure 6.1, each relative high is higher than the preceding high, and each relative low is higher than the preceding low. In essence, an uptrend can be considered intact until a previous reaction low point is broken. A violation of this condition serves as a warning signal that the trend may be over.

Even if the trade is still good, doubling up in this manner will jeopardize holding power due to overtrading. 564 the use of objectives is a matter of individual preference. Although in some cases the use of objectives will permit a better exit price, in other circumstances objectives will result in the premature liquidation of a trade. Consequently, some traders may prefer to forgo the use of objectives, allowing the timing of liquidation to be determined by either a trailing stop or a change of opinion. Liquidation information is contained in columns 13 through 15. The reason for maintaining the exit date is that it can be used to calculate the duration of the trade, information that may be useful in trade analysis.

The Concepts and Mechanics of Spread Trading 439 There was a one-lot trader named Fred, who tried to reduce risk with a spread. But the spread was his demise— He overdid position size, trading not 1 but 10 instead. Apparently was recorded at the moment of the market event being described, provides a good reallife illustration of how market response to fundamental news can be utilized as an aid in making trading decisions. Regression analysis is probably the single most useful analytical tool in fundamental analysis. Appendices A through F provide an in-depth discussion of regression analysis.

The synthetic futures position will involve greater commission costs. The dollar premium paid for the call ($7,010) exceeds the dollar premium received for the put ($1,990). Thus, the synthetic futures position will involve an interest income loss on the difference between these two premium payments ($5,020).

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