Investing In Futures Market or Forex Market
Feb0
Future’s trading and market was founded back in the 19th century by the agriculture markets owners. At that point, farmers started selling contracts to supply agricultural products at a later date. This was done to forecast market wishes and stabilise demand and supply during off seasons. The prevailing commodity market includes way more than rural products.
Now, future’s and commodity are an international market for all kinds of commodities including manufactured products, rural products, and monetary instruments like currencies and treasury bonds. A futures contract states what price will be paid for a product at a stated end date. Rather, it’s the futures contract itself that’s traded as the value of that contract changes daily according the stock market price of the commodity. In each futures contract there’s a customer and a seller. The vendor takes the short position and the purchaser takes the long position. The futures contract cites a purchasing price, a quantity and a finish date. As an example : A farmer agrees to supply one thousand bushels of wheat to a baker at a cost of $5.00 a bushel. If the daily cost of wheat futures falls to $4.00 a bushel, the farmer’s account is credited with $1000 ( $5.00 – $4.00 X one thousand bushels ) and the baker’s account is debited by the same quantity. Futures accounts are settled each trading day. At the end of the contract period, the contract is settled. If the cost of wheat futures is still at $4.00 the farmer will have made $1000 on the futures contract and the baker will have lost an identical quantity. Likewise, the farmer must sell his wheat on the market for $4.00 a bushel, less than what he expected when entering the futures contract, but the profit generated by the futures contract makes up the difference. Investors hope to profit by the daily variations in the commodity market by purchasing long ( from the purchaser ) if they are expecting prices to rise or by purchasing short ( from the vendor ) if they anticipate costs to fall. The currency exchange market has one or two benefits over the commodity market.
The Currency exchange is open twenty-four hours per day, five days each week. Most futures exchanges are open seven hours a day. This makes foreign exchange more liquid and permits foreign exchange traders to use trading opportunities as they arise instead of waiting for the market to open. Foreign exchange transactions are commission-free. Brokers earn cash by setting a spread the difference between what a currency can be acquired at and what it can be sold at. Against this, traders must pay a commission or brokerage charge for each futures exchange they enter into. This minimizes slippage and increases price certainty.
Brokers in the commodity market frequently quote costs reflecting the last trade not always the cost of your exchange. Debits in futures are generally a possiblility due to stock market opening and slippage.
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The Daily Stock Report Intermediate Trade Positions
Sep0
The Daily Stock Report Mitch King
December 14, 2008, Sunday Evening www.TradeStocksAmerica.com
The Dow 30 opened down on Friday morning and rebounded right from the open. This is clearly a bullish sign and the fact that the futures are up tonight along with the Asian markets even with the news that the White House says deal with automakers is not imminent. Just a couple of weeks ago, this headline would have the S&P futures down sharply so the market is getting immune to bad news and appears to be moving up in spite of such negative economic headlines.
Most stocks opened down at the open Friday and surged up sharply with some moving over 20% off that bottom on the news that the White House is considering extending bridge loans to the US automakers until the Senate gets a package deal they can agree on. They didn’t sell off much as they used to in past weeks and this is another sign that the market wants to go up.
The financials corrected nicely at the open and WFC and JPM dropped further than expected and didn’t rebound as much as other stocks. This swing short position is over, no further benefit.
The ag-chemical stocks MON corrected hard with no bounce and MOS had a lesser correction. These swing short positions have been completed and have no further benefit.
We are at a point in the market where the odds no longer favor short position and that we are entering “no man’s land” lasting at this week but at some point, the market is going to try to come to grips with further negative economic news and headlines like unemployment rising, more earnings forecasts being lowered, a new topic of economic fear like credit card losses, or the Fed panicking with lowering interest rates to .50%, or whatever. It is still not convincing that the market can have a sustained uptrend for a couple of months that may be starting now, in light of the overwhelming negative global economic situation.
Intermediate Trade Positions: These three intermediate long positions are still looking good, FXI, Xinhua 25 etf, PTR and SNP. Even though oil dropped, these stocks rebounded strongly off their Friday morning opening prices and are holding the uptrending technical indicators including the most important indicator, the fast moving average.
The steel sector has been very strong lately and should be noted that there may be a possible opportunity to go long this sector after a substantial pullback in the coming week or two. Start setting alarms for prices to alert you after a 15% pull back from here on X, SCHN, and AKS.
Swing Trades: The shipping stocks DRYS, Dryships, EGLE-Eagle Bulk Shippers, and DSX, Diana Shipping corrected nicely at the market open on Friday and that was the low price of the day. If you didn’t cover at Friday morning’s opening prices and are still short, these are likely to open higher slightly on Monday and they could go either way with a slight bias toward the downside.
The housing stocks such as DHI, CTX, TOL, PHM, LEN, are still in a corrective phase. Look for another 10% in this group on the short side.
The life insurance sector (HIG, PRU, MET, LNC, PFG) should continue the selling for several days or more but watch for any bullishness that may tell you this group may want to stay up and move to higher highs.
The coal sector stocks (FCL, ACI, JRCC, MEE, CNX) really acted strong Friday and could be another commodity sector starting to show signs of at least a countertrend rally within a bear market. Normally we would look for the oil to lead us out of the historic commodity sell-off since mid July 2008 but that seems to be on its own track.
FCX, Freeport McMoran still looks weak and the odds are good that FCX continues to sell off.
AMZN, Amazon.com didn’t correct much on Friday at all and responded very strongly to the buying we saw after Fridays open. AMZN has been very responsive to any buying so this one still belongs in the intraday long category as a “perky” stock along with AAPL, and FSLR.
Repeat from above: JPM and WFC corrected nicely and this short position is over with no further benefit.
SKF, Ultrashort Financials ETF peaked at $141.05 on Friday which it reached shortly after the open when stocks were down (Remember when you buy SKF, you are short the financial sector stocks). SKF capitulated by moving up sharply and reversed sharply. No further trade in SKF now.
Day Traders/Intraday stock ideas: Continue the drop and pop stocks like AMZN, FSLR, RIMM and AAPL. There may be a shallow pullback with a strong move upward on the pop.
Concluding thoughts: The stock market is looking like it is responding to more good news than it is reacting to bad news making the bias with our trades toward the long side. We could be starting a longer trend up with sectors that were badly hurt related to commodities. Steel, metals, mining, building materials, heavy construction stocks are acting surprisingly strong, considering how negative the news still is with the economy, housing and credit problems. The next couple of days may be a good time to take a rest from the market as we are entering a point where the odds do not heavily favor either way.
Thoughts: Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell. You will find that will make you more money on your trades. Trade what you see, not what you hope for.
Don’t trade unless the setup is there for you, then use the charts to tell you when the odds are heavily in your favor. I recommend wide stop losses when using this technique otherwise you get stopped out frequently which is expensive, frustrating and distracts you from the bigger picture of making a successful trade. Don’t force anything to work for you tomorrow, let the setups develop and then take advantage of that. Be patient the next couple of days. Stay in position sizes without letting any intraday trade represent more than 10-15% of your total account value. As you build your account, your position size percentage should get smaller and smaller to lower your risk.
Have a great day and I’ll talk to you tomorrow.
Mitch King
www.TradeStocksAmerica.com
Contents: stock trading, trading strategies, stock picks, stock market education, stock market investing course and educational stock trading videos.
Mitch King is the founder of TradeStocksAmerica.com. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Mitch King. Investment recommendations may change without notice and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. Mitch King and/or the staff at TradeStocksAmerica.com may or may not have investments in any stocks cited above before or after this newsletter is prepared. Opinions expressed in these reports may change without prior notice.
Disclaimer – Stock investing or stock trading has large potential rewards, but also large potential risk. There is risk of loss as well as the opportunity for gain when buying or selling stocks, bonds, option contracts or engaging in any strategy listed in the Daily Stock Report, The Wizard Training Course, The Trading Room and our seminar or workshops. You must be aware of the risks and be willing to accept the risks when investing or trading in any financial markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell stocks. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.
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The Daily Stock Report Housing stocks and life insurance sector
Sep0
A little fear returned and it won’t take massive selling in stocks to get the housing stocks and life insurance sector to sell off again. It would be ideal to see an uptrend resume after another day or two of mild selling but the above sectors should continue to sell off as a general trend in the coming week or so.
Oil prices had no follow through on the upside and sold down 3.75% today. Any long positions in the independent oil and gas stocks’ swing trade should have been sold today.
All eyes are on the bailout of the automakers. Any delay in approval would likely be a reason for selling to occur the next few days.
Intermediate Trade Positions: FXI, Xinhua 25 ETF dropped 4% today but is still within an uptrending pattern. This should be a shallow and short-lived correction and could give people an opportunity to go long the next few days. All indicators are still pointing upward for both FXI and PTR, Petro China.
Swing Trades: The independent oil and gas producers XTO, COG, EOG, or NBL (and many others), peaked today on that 2 day swing trade long. Short term, it doesn’t look like much upside with this group. The housing stocks such as DHI, CTX, TOL, PHM, LEN, started to turn over today and is likely to have a downtrend for the coming several weeks. Any one of these stocks looks attractive on the short side with CTX and TOL the most potential.
The life insurance sector (HIG, PRU, MET, LNC, PFG) gave really nice profits on intraday long and short, especially PRU after a slight drop to $29.70 on the low and rebounding up $5 or 17% to $34.7, then selling off over $3 the following several hours. This whole group of life insurance companies should be selling off for several more days.
The coal sector stocks (FCL, ACI, MEE, CNX) are likely to sell off in a mild manner these coming days. This group is worth a small swing short position .
AMZN, Amazon.com peaked today at $54.48 and sold off $3.23 to close at $51.25. This is a decent swing short to $44-$46. JPM, JP Morgan Chase and GS also look like good swing short positions. GS has been weaker than the whole financial stock group. SKF, Ultrashort Financials ETF is worth a small long position (which means you are really short this sector). SKF could easily get to $130 if financials continue to sell off the next 4-5 days. Keep position sizes small, especially if you are new to selling short. This allows you to have staying power with your positions and not create such high emotions for you.
Day Traders/Intraday stock ideas: Intraday trading pattern has changed to “no drop, and no obvious pop but just a steady climb upward.” The bullish sentiment covered over any drop and pops in the intraday chart but it is likely we see a drop and pop re-appear tomorrow morning but nothing close to the big drops we have seen in the past. We probably will see shallower drops followed by big pops and LONG is the smart way to use this technique now. We might see a slight sell-off tomorrow anyhow so the drop and pop could coincide well with the market. The insurance companies should be a group to watch for short scalps tomorrow followed by long scalps but give it a lot of time before going long. Notice how long PRU took to hit bottom at 10:42am Pacific time before bouncing 10% in the following 90 minutes. This is an excellent group of stocks (HIG, PRU, MET, LNC, PFG) to trade tomorrow using intraday trades short and long OR swing trades short for a 2 or 3 days.
Concluding thoughts: The market probably doesn’t sell off into a spiral nosedive but anything is possible. I’d be looking for a day or two of selling and look for any catalyst to see buying again, perhaps the auto bailout getting voted through could cause some buying again. The old saying, trade what you see, not what you hope for is still valid. Hold your intermediate and swing trades longer than before.
Thoughts: Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell. You will find that will make you more money on your trades. Trade what you see, not what you hope for.
Don’t trade unless the setup is there for you, then use the charts to tell you when the odds are heavily in your favor. I recommend wide stop losses when using this technique otherwise you get stopped out frequently which is expensive, frustrating and distracts you from the bigger picture of making a successful trade. Don’t force anything to work for you tomorrow, let the setups develop and then take advantage of that. Be patient the next couple of days. Stay in position sizes without letting any intraday trade represent more than 10-15% of your total account value. As you build your account, your position size percentage should get smaller and smaller to lower your risk.
Have a great day and I’ll talk to you tomorrow.
Mitch King
www.TradeStocksAmerica.com
Contents: stock trading, trading strategies, stock picks, stock market education, stock market investing course and educational stock trading videos.
Mitch King is the founder of TradeStocksAmerica.com. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Mitch King. Investment recommendations may change without notice and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. Mitch King and/or the staff at TradeStocksAmerica.com may or may not have investments in any stocks cited above before or after this newsletter is prepared. Opinions expressed in these reports may change without prior notice.
Disclaimer – Stock investing or stock trading has large potential rewards, but also large potential risk. There is risk of loss as well as the opportunity for gain when buying or selling stocks, bonds, option contracts or engaging in any strategy listed in the Daily Stock Report, The Wizard Training Course, The Trading Room and our seminar or workshops. You must be aware of the risks and be willing to accept the risks when investing or trading in any financial markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell stocks. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.
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Futures Trading – What You Should Know
Jun0
Futures contracts as they relate to finance is a simple contract devised to allow someone to ultimately purchase or sell specific commodities that will be delivered at some future time. Generally there are certain dates and time frames which must be met in order to be a valid contract.
These types of transactions are never offered on the usual stock market but you would find them on what is commonly known as the futures exchange. They are not considered to be securities in the strictest sense of the word as stocks or bonds may be. They are a type of derivative.A futures options contract or a commodity option is a derivative as well.
The actual prices associated with the various commodities vary according to the supply and demand. If the pork belly crop is bad this year the prices will likely be high while an over abundance of coco would result in a lower than normal price. The future date is known as the delivery date while the daily bid on the exchange would be the settlement price.
In a nutshell in futures trading, what a contract states is that the holder can take delivery of the commodity at some future date however the futures must be complied with by the settlement date. At the settlement date the seller will deliver the asset to the buyer whether it is coco or pork bellies or whatever. In order to fulfill your obligation prior to the established settlement date you must offset your position by selling if you purchased the futures or buying back if you had a previous short position which ultimately allows you to balance everything out.
An interesting side note here is that if you purchased a futures contract and do nothing what so ever and the settlement date arrives you could end up with a yard full of assets that you really did not want. Unlike stocks and bonds we are talking real time products here.
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