Friday, April 20, 2007

Can Uranium Make You Rich In The Stock Market

To put it bluntly, the uranium bull market is on the rise. The nuclear fuel cycle is always being closely monitored, especially the price of uranium and uranium mines. It's easy to see how much the mineral's stock has lifted recently, and by taking a look at a few "unconventional" indicators, you'll be able to see that there's plenty of money to be made with uranium stocks.

There is a steady stream of "uranium only" websites and blogs popping up around the internet since Cameco Corp announced the Cigar Lake uranium mine flooded. Although this news hasn't exactly found its way into American mainstream media, if you do a little research it won't be hard to see that many international investors are anticipating the uranium stock price to jump from the demand.

Canadian institutions are the primary financers of the newest uranium companies. Canada looks heavily at our stock market to determine many financial aspects of her own businesses. As soon as the US uranium stocks jump our neighbor's stocks will too. For all of those international traders out there: another plus for you!

Yet there is even something still for the domestic trader. If you look around, more and more financial institutions and fund managers have information on the uranium market. Does that tell you something? Brokers are informing themselves and are getting ready to spread the word to you because SOMETHING BIG is about to happen. Uranium prices must be on the rise and are about to jump.

Also, StockInterview's book, "Investing in the Great Uranium Bull Market," was featured in the February 26th issue of Publishers Weekly magazine. Now, this is the Bible of the bookstore industry. Each major U.S. bookstore chain reads this magazine, cover to cover, every week. Ring any bells? The news is already spreading about the soon-to-be dramatic uranium rise. What makes it great for you is that there is already plenty of literature to fill you in on the details, so there should be no hesitation on your part to get involved in the uranium rise!
To put it bluntly, the uranium bull market is on the rise. The nuclear fuel cycle is always being closely monitored, especially the price of uranium and uranium mines. It's easy to see how much the mineral's stock has lifted recently, and by taking a look at a few "unconventional" indicators, you'll be able to see that there's plenty of money to be made with uranium stocks.

There is a steady stream of "uranium only" websites and blogs popping up around the internet since Cameco Corp announced the Cigar Lake uranium mine flooded. Although this news hasn't exactly found its way into American mainstream media, if you do a little research it won't be hard to see that many international investors are anticipating the uranium stock price to jump from the demand.

Canadian institutions are the primary financers of the newest uranium companies. Canada looks heavily at our stock market to determine many financial aspects of her own businesses. As soon as the US uranium stocks jump our neighbor's stocks will too. For all of those international traders out there: another plus for you!

Yet there is even something still for the domestic trader. If you look around, more and more financial institutions and fund managers have information on the uranium market. Does that tell you something? Brokers are informing themselves and are getting ready to spread the word to you because SOMETHING BIG is about to happen. Uranium prices must be on the rise and are about to jump.

Also, StockInterview's book, "Investing in the Great Uranium Bull Market," was featured in the February 26th issue of Publishers Weekly magazine. Now, this is the Bible of the bookstore industry. Each major U.S. bookstore chain reads this magazine, cover to cover, every week. Ring any bells? The news is already spreading about the soon-to-be dramatic uranium rise. What makes it great for you is that there is already plenty of literature to fill you in on the details, so there should be no hesitation on your part to get involved in the uranium rise!

posted by zzzzzzzzzzz at 2:11 AM

Trading Commodity Futures - Intuitively Day Trading The S&P 500 and E-Mini - PART 2

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

More Observations From My Trading Notes:

“No chasing – buy only into panics or corrections and with the main trend.”

I find if I cannot get in within one-half point of the high or low, I should let it go. I'm talking about a retracement back to the high or low. Too often I have regretted chasing the market, even for less than a full point. These expenses add up when getting in and out. Most good moves with the trend last about three to four points or so before a minor correction.

If you give up a point getting in and a point getting out and add in commissions for e-minis future contracts [which are high for contract size anyway] then you are left with a little under two points net profit. Factor in the losing trades and you are going to be a break-even trader. There are many break-even e-mini futures traders out there. You must learn to stick your hand in the fire at the price extremes to get an edge on the competition.

Observation:

"Day trade only while watching the action.” There was a time in the mid 90's when I couldn’t take the pressure of watching the futures market after I got in. I would sometimes do emotional things that sabotaged the trade, even if it was a winner. The first correction, even when still profitable would get me out often at break-even after expenses. Of course, the market would continue on favorably without me.

I then tried putting in a stop below my entry by 2-3 points and take a walk in the woods for the expected duration of the trend. I would come back 45 minutes later and sometimes see tremendous profits. And other times I would see that I had a great profit, but the market had reversed and came all the way back down to entry. Bottom line is that I decided I needed to find a way to sit on my hands and take the heat in real time.

Having TIME objectives helps a lot here. Price action is what everyone watches and it will make you crazy. E-mini price action is only “accurate” and means something at the tops and bottoms. During the move there are many fake outs. Probability will reward you over time if you can milk the trend for it’s maximum potential.

Try not to trade in and out too often. It's difficult to enter the market with low risk. Once in, you might as well as make it count. When thinking about taking a profit, make sure the market shows definite signals that the trend is about to turn. A futures price panic is one of the most reliable indications that the move is over. Heavy volume and banging into major support/ resistance helps too.

At one time I used Fibonacci retracements, but have discarded them in favor of simpler, horizontal lines from recent price action. The only Fibonacci retracement that seems to be reliable these days is the 78% retracement. This almost takes out the complete previous move. This is a good thing, since you want a clean-out. The 61.8% retracement seems too pat for me and gets cleaned out as often as not. But this changes over time. You just have to see what’s currently working and use it.
Every trading market has its own special patterns and oddities that will communicate its intentions. Patterns don't always work every time of course, but even that can be a clue of underlying extreme weakness or strength. Just like knowing a spouse well, learning to read your special market can pay dividends. Read on to learn more...

More Observations From My Trading Notes:

“No chasing – buy only into panics or corrections and with the main trend.”

I find if I cannot get in within one-half point of the high or low, I should let it go. I'm talking about a retracement back to the high or low. Too often I have regretted chasing the market, even for less than a full point. These expenses add up when getting in and out. Most good moves with the trend last about three to four points or so before a minor correction.

If you give up a point getting in and a point getting out and add in commissions for e-minis future contracts [which are high for contract size anyway] then you are left with a little under two points net profit. Factor in the losing trades and you are going to be a break-even trader. There are many break-even e-mini futures traders out there. You must learn to stick your hand in the fire at the price extremes to get an edge on the competition.

Observation:

"Day trade only while watching the action.” There was a time in the mid 90's when I couldn’t take the pressure of watching the futures market after I got in. I would sometimes do emotional things that sabotaged the trade, even if it was a winner. The first correction, even when still profitable would get me out often at break-even after expenses. Of course, the market would continue on favorably without me.

I then tried putting in a stop below my entry by 2-3 points and take a walk in the woods for the expected duration of the trend. I would come back 45 minutes later and sometimes see tremendous profits. And other times I would see that I had a great profit, but the market had reversed and came all the way back down to entry. Bottom line is that I decided I needed to find a way to sit on my hands and take the heat in real time.

Having TIME objectives helps a lot here. Price action is what everyone watches and it will make you crazy. E-mini price action is only “accurate” and means something at the tops and bottoms. During the move there are many fake outs. Probability will reward you over time if you can milk the trend for it’s maximum potential.

Try not to trade in and out too often. It's difficult to enter the market with low risk. Once in, you might as well as make it count. When thinking about taking a profit, make sure the market shows definite signals that the trend is about to turn. A futures price panic is one of the most reliable indications that the move is over. Heavy volume and banging into major support/ resistance helps too.

At one time I used Fibonacci retracements, but have discarded them in favor of simpler, horizontal lines from recent price action. The only Fibonacci retracement that seems to be reliable these days is the 78% retracement. This almost takes out the complete previous move. This is a good thing, since you want a clean-out. The 61.8% retracement seems too pat for me and gets cleaned out as often as not. But this changes over time. You just have to see what’s currently working and use it.

posted by zzzzzzzzzzz at 2:11 AM

Trading Commodity Futures - Intuitively Day Trading The S&P 500 and E-Mini - PART 1

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

More Observations From My Trading Notes:

"Each day is different – don’t expect scenarios. One exception is to watch when the previous day had big buying or selling at a stalled out area. The old tops are sometimes spiked the next day and then a long decline occurs. Also watch for signs of a pattern I call 'stilting'. This is a bearish formation where the futures market chops in big swings within a rectangle. It forms below a spiked high panic area. A big, long decline to the end of the day usually follows this type action with little chance to get on board after the last anemic volatility rally."

Yes, each day IS different. We get accustomed to the previous session or trend. Then when the change comes, it takes us time to change gears. The problem is that when the trend turns, it is sharp and catches the majority off guard. Being wrong at these sharp turning points is expensive compared to being wrong in the middle of a trend. Try to come into each day of trading with a blank mind. Carry over no “pre-programming” from the last session about what worked and what didn’t. The only information to bring over from the previous day concerns major highs or bottoms tested with active price action and volatility.

Back to "stilting." This formation is the FIRST correction in a new downtrend. Usually, legitimate subsequent trending corrections are more orderly and quieter affairs. But the nasty, swinging stilting formations more often than not break into new lows and become all-day one-way streets. This is where many of the counter-trend pit commodity traders have a bad day as they buy all the way down.

The signal to get on board after these stilting formations is when price breaks the rectangle lows and then has an anemic, dull rally back into these same stilting lows. The market can be sold here with confidence for a long ride down. Of course, be ready to bail out if wrong. It’s all about taking these high probability commodity trades and letting the odds work for you over time.

Observation:

"Trade in the direction of the A-D line only. Over time the odds favor it." Absolutely. It’s a losing battle always going against the A-D line. It can be done in certain situations, but you had better be nimble to get out with a fast profit. There are so many other good trades going with the trend and A-D line. Remember that you only need one or two carefully picked trades each day to do well.

Observation:

"No overnight futures day trades." This is an important commodity futures day-trader’s rule. Of course, day-trading means daytime-only trades, but it doesn't always work out that way. I made this rule for my futures trading after being “sure” of the market’s direction on the close and then holding overnight. But the next morning I'd often find the market 6-10 points against me. It’s happened too many times. I feel that I can make forecasts for up to an hour or two, but overnight is way out of my comfort zone.

If you follow various time cycles like I do, you will find the short ones for day trading futures will have come and gone many times overnight. So, why hold a position when time is totally out of your control? Time is one-half of the total equation. The other half is price. The only control you have overnight is using a fixed stop loss order. Much of your control edge is gone, unless you stay up all night. (no, thanks)
Every trading market has its own special patterns and oddities that will communicate its intentions. Patterns don't always work every time of course, but even that can be a clue of underlying extreme weakness or strength. Just like knowing a spouse well, learning to read your special market can pay dividends. Read on to learn more...

More Observations From My Trading Notes:

"Each day is different – don’t expect scenarios. One exception is to watch when the previous day had big buying or selling at a stalled out area. The old tops are sometimes spiked the next day and then a long decline occurs. Also watch for signs of a pattern I call 'stilting'. This is a bearish formation where the futures market chops in big swings within a rectangle. It forms below a spiked high panic area. A big, long decline to the end of the day usually follows this type action with little chance to get on board after the last anemic volatility rally."

Yes, each day IS different. We get accustomed to the previous session or trend. Then when the change comes, it takes us time to change gears. The problem is that when the trend turns, it is sharp and catches the majority off guard. Being wrong at these sharp turning points is expensive compared to being wrong in the middle of a trend. Try to come into each day of trading with a blank mind. Carry over no “pre-programming” from the last session about what worked and what didn’t. The only information to bring over from the previous day concerns major highs or bottoms tested with active price action and volatility.

Back to "stilting." This formation is the FIRST correction in a new downtrend. Usually, legitimate subsequent trending corrections are more orderly and quieter affairs. But the nasty, swinging stilting formations more often than not break into new lows and become all-day one-way streets. This is where many of the counter-trend pit commodity traders have a bad day as they buy all the way down.

The signal to get on board after these stilting formations is when price breaks the rectangle lows and then has an anemic, dull rally back into these same stilting lows. The market can be sold here with confidence for a long ride down. Of course, be ready to bail out if wrong. It’s all about taking these high probability commodity trades and letting the odds work for you over time.

Observation:

"Trade in the direction of the A-D line only. Over time the odds favor it." Absolutely. It’s a losing battle always going against the A-D line. It can be done in certain situations, but you had better be nimble to get out with a fast profit. There are so many other good trades going with the trend and A-D line. Remember that you only need one or two carefully picked trades each day to do well.

Observation:

"No overnight futures day trades." This is an important commodity futures day-trader’s rule. Of course, day-trading means daytime-only trades, but it doesn't always work out that way. I made this rule for my futures trading after being “sure” of the market’s direction on the close and then holding overnight. But the next morning I'd often find the market 6-10 points against me. It’s happened too many times. I feel that I can make forecasts for up to an hour or two, but overnight is way out of my comfort zone.

If you follow various time cycles like I do, you will find the short ones for day trading futures will have come and gone many times overnight. So, why hold a position when time is totally out of your control? Time is one-half of the total equation. The other half is price. The only control you have overnight is using a fixed stop loss order. Much of your control edge is gone, unless you stay up all night. (no, thanks)

posted by zzzzzzzzzzz at 2:10 AM

Trading Commodity Futures - Intuitively Day Trading The S&P 500 And E-Mini - PART 4

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

More Observations From My Trading Notes:

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

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

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

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

Observation:

“Much patience is needed for a move to evolve, once entered.”

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

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

Effective, intuitive, discretionary, e-mini commodity futures trading is acting on your own internal signals when they occur in real time. (read that again) It's not easy. If it was easy for everyone to learn, the market would not pay much for this skill now, would it?
Every trading market has its own special patterns and oddities that will communicate its intentions. Patterns don't always work every time of course, but even that can be a clue of underlying extreme weakness or strength. Just like knowing a spouse well, learning to read your special market can pay dividends. Read on to learn more...

More Observations From My Trading Notes:

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

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

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

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

Observation:

“Much patience is needed for a move to evolve, once entered.”

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

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

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

posted by zzzzzzzzzzz at 2:10 AM

Trading Commodity Futures - Intuitively Day Trading The S&P 500 And E-Mini - PART 3

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

More Observations From My Trading Notes:

“When entering with the main trend, have patience for the move to occur. Average in a second lot if needed and don’t get faked out easily.”

Amen. S&P 500 futures contract price action will do everything it can to get you out. Remember that. Averaging down ONE time, once in a while, works for me when I’m confident of a turning point. I might even do it twice, but that's it. Doing it all the time, to feel good, hoping for a turn, is the eventual road to big losses. When they carry traders out by their feet, it's high probability he averaged himself there.

Observation:

“When holding a position with the trend, use patience to let the move climax for profit.” Amen and Praise the Lord! As someone once said, "Don't sell your wheat until it boils!" This applies to all markets.

Observation:

“Remember that doing the right thing over a large number of trades is what makes money long-term and consistently in commodity futures trading.” The same principle applies to owning a casino. You don’t see the casino owners worrying. They may lose in the short-term, but over a long series of events they must do well. They have the odds in their favor. You can do this in commodity trading with a decent method too, as long as you keep the losses from getting out of hand and you keep control of yourself.

There’s so many ways to blow it. We get a few winners and get cocky. We take marginal futures trades and give back a good portion of our profits. Or we have a bad day and try to make it all back on one trade. Run for the hills after you have 2-3 bad trades. There is always a reason for losers, and sometimes yours is not to know the reason why. Just accept it and test the waters carefully the next day.

Observation:

“You can handle any market.” This is a confidence building statement. What I mean here is that it doesn’t matter if the e-mini futures market trends up, trends down, chops, goes quiet or whatever, I can handle any market with confidence. I have a plan for each market activity. If it’s dull, I do nothing but wait. If it’s trending up with a positive A-D line, I buy only. If it’s trending down with a negative A-D line, I sell short only. If it’s swinging wildly and I can’t figure out what’s happening, I watch and wait. If the e-mini is chopping and my "chop system" is working well, I toggle it on and take the signals.

When things get tough, it pays to have faith that the market will start talking to us again. Meanwhile, our competition is in there slugging it out, giving back their cash. We must learn to conserve our mental as well as financial energy during uncertain times.
Every trading market has its own special patterns and oddities that will communicate its intentions. Patterns don't always work every time of course, but even that can be a clue of underlying extreme weakness or strength. Just like knowing a spouse well, learning to read your special market can pay dividends. Read on to learn more...

More Observations From My Trading Notes:

“When entering with the main trend, have patience for the move to occur. Average in a second lot if needed and don’t get faked out easily.”

Amen. S&P 500 futures contract price action will do everything it can to get you out. Remember that. Averaging down ONE time, once in a while, works for me when I’m confident of a turning point. I might even do it twice, but that's it. Doing it all the time, to feel good, hoping for a turn, is the eventual road to big losses. When they carry traders out by their feet, it's high probability he averaged himself there.

Observation:

“When holding a position with the trend, use patience to let the move climax for profit.” Amen and Praise the Lord! As someone once said, "Don't sell your wheat until it boils!" This applies to all markets.

Observation:

“Remember that doing the right thing over a large number of trades is what makes money long-term and consistently in commodity futures trading.” The same principle applies to owning a casino. You don’t see the casino owners worrying. They may lose in the short-term, but over a long series of events they must do well. They have the odds in their favor. You can do this in commodity trading with a decent method too, as long as you keep the losses from getting out of hand and you keep control of yourself.

There’s so many ways to blow it. We get a few winners and get cocky. We take marginal futures trades and give back a good portion of our profits. Or we have a bad day and try to make it all back on one trade. Run for the hills after you have 2-3 bad trades. There is always a reason for losers, and sometimes yours is not to know the reason why. Just accept it and test the waters carefully the next day.

Observation:

“You can handle any market.” This is a confidence building statement. What I mean here is that it doesn’t matter if the e-mini futures market trends up, trends down, chops, goes quiet or whatever, I can handle any market with confidence. I have a plan for each market activity. If it’s dull, I do nothing but wait. If it’s trending up with a positive A-D line, I buy only. If it’s trending down with a negative A-D line, I sell short only. If it’s swinging wildly and I can’t figure out what’s happening, I watch and wait. If the e-mini is chopping and my "chop system" is working well, I toggle it on and take the signals.

When things get tough, it pays to have faith that the market will start talking to us again. Meanwhile, our competition is in there slugging it out, giving back their cash. We must learn to conserve our mental as well as financial energy during uncertain times.

posted by zzzzzzzzzzz at 2:09 AM

Wednesday, April 18, 2007

Trading After A Stock Market Crash - Knowing The Next Trend And Switching To Defensive Stocks

After a stock market crash, most traders would become cautious especially those who have been unfortunate to be caught in the crash and have seen a drastic drawdown on their portfolio values.

The traders reaction is almost instantaneous - many will sell or stop loss, some will hold on to their stocks with the hope of the market rebounding soon, while others may just be too bewildered to do anything at all.

The principle of personal wealth management in the aftermath of a stock market crash hinges on the personal financial plan you have established earlier in your wealth management process. I strongly suggest you to start to establish or create a personal financial plan that will outline your entire wealth accumulation processes. Irregardless of whether you are young or old, there is never a better time for you to get your finances in order than to create your personal financial plan. Simply put, start to prepare your retirement plan even if its your first day at work and earning an income!

Returns from stocks and shares are just one component of your financial resources that constitute your income stream. Needless to say, a comprehensive financial plan will encompasses other income streams such as investment into properties, such as residential property, either directly through ownership of residential property or through property trusts. What is more important in the light of the mini crashes of February and March 2007 is that there are powerful relationships between the property slump and financial institutions such as subprime mortgage institutions and bank lending that will impact upon property and housing related stocks and also lending banks and mortgage houses, and these are some sectors that you will want to stay out and wait for the entire corrective process to play out before looking at these sectors. Be aware that there will likely be more failures in mortgage companies, housing developers and lending institutions.

Rather within your portfolio, you will be looking at a switch to defensive stocks. Stocks that are staple in nature, such as food related stocks, and utilities such as energy, power, telecommunications are some examples of defensive stocks. Gaming stocks related to casinoes, horse racing and others are also some stocks that will feature. When the feel good factor is lost in the aftermath of a crash, the buying power or consumer spending will be less.

In looking at these stocks, go for quality - because in the aftermath of a stock market crash, most stocks would be affected. This means quality stocks would also have stumbled somewhat in price along with all the stocks across the board together with the lesser quality ones. The difference is that the quality stocks will rebound faster, whereas poorer quality stocks will linger at low levels.

The main question next is when should you perform the switch over to these stocks? Some will take comparative price-earning ratios after similar market crashes to provide guidance. A more creative way is to look at historical PSR or Price-Sales ratio as a guide. But for accurate timing, traders can use technical analysis or charting to help in determining the next trend.

Your personal financial plan needs to be fine tuned and monitored along the way especially in the light of a market crash where stock market returns is one of the major income streams within your financial plan. Switching into defensive stocks might be good, but it is knowing the timing of the next trend when stock prices have bottomed that you can then perform the switching to lead to maximum profits.
After a stock market crash, most traders would become cautious especially those who have been unfortunate to be caught in the crash and have seen a drastic drawdown on their portfolio values.

The traders reaction is almost instantaneous - many will sell or stop loss, some will hold on to their stocks with the hope of the market rebounding soon, while others may just be too bewildered to do anything at all.

The principle of personal wealth management in the aftermath of a stock market crash hinges on the personal financial plan you have established earlier in your wealth management process. I strongly suggest you to start to establish or create a personal financial plan that will outline your entire wealth accumulation processes. Irregardless of whether you are young or old, there is never a better time for you to get your finances in order than to create your personal financial plan. Simply put, start to prepare your retirement plan even if its your first day at work and earning an income!

Returns from stocks and shares are just one component of your financial resources that constitute your income stream. Needless to say, a comprehensive financial plan will encompasses other income streams such as investment into properties, such as residential property, either directly through ownership of residential property or through property trusts. What is more important in the light of the mini crashes of February and March 2007 is that there are powerful relationships between the property slump and financial institutions such as subprime mortgage institutions and bank lending that will impact upon property and housing related stocks and also lending banks and mortgage houses, and these are some sectors that you will want to stay out and wait for the entire corrective process to play out before looking at these sectors. Be aware that there will likely be more failures in mortgage companies, housing developers and lending institutions.

Rather within your portfolio, you will be looking at a switch to defensive stocks. Stocks that are staple in nature, such as food related stocks, and utilities such as energy, power, telecommunications are some examples of defensive stocks. Gaming stocks related to casinoes, horse racing and others are also some stocks that will feature. When the feel good factor is lost in the aftermath of a crash, the buying power or consumer spending will be less.

In looking at these stocks, go for quality - because in the aftermath of a stock market crash, most stocks would be affected. This means quality stocks would also have stumbled somewhat in price along with all the stocks across the board together with the lesser quality ones. The difference is that the quality stocks will rebound faster, whereas poorer quality stocks will linger at low levels.

The main question next is when should you perform the switch over to these stocks? Some will take comparative price-earning ratios after similar market crashes to provide guidance. A more creative way is to look at historical PSR or Price-Sales ratio as a guide. But for accurate timing, traders can use technical analysis or charting to help in determining the next trend.

Your personal financial plan needs to be fine tuned and monitored along the way especially in the light of a market crash where stock market returns is one of the major income streams within your financial plan. Switching into defensive stocks might be good, but it is knowing the timing of the next trend when stock prices have bottomed that you can then perform the switching to lead to maximum profits.

posted by zzzzzzzzzzz at 5:29 AM

Some Tips For The Beginner In Mutual Fund Investing

Have you ever thought about buying stock, but were afraid to ask? If you are like many of us who never invested in the stock market, you are probably wishing you had made that one time investment in Google, right? Or perhaps many of you are retired, and the 401K plan you currently maintain with your employer is yielding very good results. Yet, if you were asked what your stock’s portfolio consists of, you would probably say, “I don’t have a clue!” To enable you to understand the inner sanctum of the stock market, here are some tips for the beginning investor.

Most likely, your company is diversifying by investing in mutual funds. What are they? Mutual funds are low-risk investments, which are also diversified. For example, let’s assume you are contributing monies per paycheck to your companies’ 401K Plan. You elect to have a portion of your wage paid directly into the 401K account. You can select from a number of investment options, usually an assortment of mutual funds that encompass stocks, bonds, money market investments, which is referred to as Variable A or B. If one of the securities in the fund happens to have a bad run, there is always the chance that other securities in the fund's holdings will be able to offset the losses. Conversely, any large gains in one security might be offset by losses in another. Most investors and companies use mutual funds in order to diversify their holdings and provide some stability to their portfolios. Your employer is probably investing in mutual funds to yield higher gains.

How do mutual funds work? Mutual funds raise money by selling shares of the fund to the public. Mutual funds then take the money they receive from the sale of their shares and use it to purchase various investments, such as stocks, bonds and money market accounts. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and in each of its underlying securities. Benefits of mutual funds include diversification and professional money management.

Is investing in mutual funds a good idea for the beginning investor? Yes I would definitely suggest that your initial step into the some what murky field of investing be the ultra safe and prudent mutual fund industry. Starting at an early age with systematic contributions into a mutual fund is a good balance to the somewhat riskier funds that are the darlings of Wall Street. Having a good portfolio begins with a stable , cautious fund for example with a reasonable proportion of its assets being those nice safe bonds. Using that type of fund as a counterweight you could then move cautiously into the more risky area of stocks of all kinds and other instruments. There are a lot of different ways that Wall Street can take your money but one of the safest ways to invest is mutual funds.
Have you ever thought about buying stock, but were afraid to ask? If you are like many of us who never invested in the stock market, you are probably wishing you had made that one time investment in Google, right? Or perhaps many of you are retired, and the 401K plan you currently maintain with your employer is yielding very good results. Yet, if you were asked what your stock’s portfolio consists of, you would probably say, “I don’t have a clue!” To enable you to understand the inner sanctum of the stock market, here are some tips for the beginning investor.

Most likely, your company is diversifying by investing in mutual funds. What are they? Mutual funds are low-risk investments, which are also diversified. For example, let’s assume you are contributing monies per paycheck to your companies’ 401K Plan. You elect to have a portion of your wage paid directly into the 401K account. You can select from a number of investment options, usually an assortment of mutual funds that encompass stocks, bonds, money market investments, which is referred to as Variable A or B. If one of the securities in the fund happens to have a bad run, there is always the chance that other securities in the fund's holdings will be able to offset the losses. Conversely, any large gains in one security might be offset by losses in another. Most investors and companies use mutual funds in order to diversify their holdings and provide some stability to their portfolios. Your employer is probably investing in mutual funds to yield higher gains.

How do mutual funds work? Mutual funds raise money by selling shares of the fund to the public. Mutual funds then take the money they receive from the sale of their shares and use it to purchase various investments, such as stocks, bonds and money market accounts. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and in each of its underlying securities. Benefits of mutual funds include diversification and professional money management.

Is investing in mutual funds a good idea for the beginning investor? Yes I would definitely suggest that your initial step into the some what murky field of investing be the ultra safe and prudent mutual fund industry. Starting at an early age with systematic contributions into a mutual fund is a good balance to the somewhat riskier funds that are the darlings of Wall Street. Having a good portfolio begins with a stable , cautious fund for example with a reasonable proportion of its assets being those nice safe bonds. Using that type of fund as a counterweight you could then move cautiously into the more risky area of stocks of all kinds and other instruments. There are a lot of different ways that Wall Street can take your money but one of the safest ways to invest is mutual funds.

posted by zzzzzzzzzzz at 5:28 AM

Stock Trading Strategies - Learn These Simple Yet Highly Profitable Strategies For Trading Stocks

Stock trading is carried out by stock traders who for the most part need an intermediate such as a brokerage firm or bank to carry out the trades. Stock traders work for themselves by investing money in shares which they believe will increase in value over time and then sell the shares at a later date for profit.

There are a number of strategies used by stock traders in order to accumulate profit. The most popular stock trading strategies are day trading, swing trading, value investing and growth trading. A brief description of each of these strategies will now be given

* Day trading is a form of trading in which stocks are sold and bought during a single day so that at the end of the day there is no change in the number of shares held. This is done by selling a share each time another share of equivalent value is bought. The profit or loss comes from the difference between the sale price and the purchasing price of the share. The motivation behind day trading is to avoid any overnight shocks that might occur on stock markets. All stocks are held for a very short time period

* Swing traders hold stocks over a medium time period, say a couple of days or 1 or 2 weeks. Swing traders usually trade with stocks that are actively traded. These stocks swing between a very general high and low extreme. Swing traders must therefore purchase stocks at the low end of their value and then sell the shares when they swing back up.

* Value investing is a method of stock trading in which traders purchase shares in a company which they consider to have under-priced shares. The hope is that by investing in the company the shares will eventually increase in value.

* Growth investing is a method of investing in companies that are showing signs of above average growth. The share price may be more expensive than what it would be expected to be however the view of the trader is that the share value will grow into what it has been purchased for.

Stock trading does come at a cost however. The high levels of risk and uncertainty as well as the complex nature of stock trading is enough to deter most people from becoming stock traders. There is also the brokerage fee charged by the bank or the brokerage firm every time a transaction is carried out. However all this aside there is still a considerable chance of getting lucky as a stock trader which is enough to supply the stock trading industry for the foreseeable future.

Stock Trading Strategies - Do You Know These Simple Yet Highly Profitable Strategies For Trading Stocks?

Stock trading is carried out by stock traders who for the most part need an intermediate such as a brokerage firm or bank to carry out the trades. Stock traders work for themselves by investing money in shares which they believe will increase in value over time and then sell the shares at a later date for profit.

There are a number of strategies used by stock traders in order to accumulate profit. The most popular stock trading strategies are day trading, swing trading, value investing and growth trading. A brief description of each of these strategies will now be given

* Day trading is a form of trading in which stocks are sold and bought during a single day so that at the end of the day there is no change in the number of shares held. This is done by selling a share each time another share of equivalent value is bought. The profit or loss comes from the difference between the sale price and the purchasing price of the share. The motivation behind day trading is to avoid any overnight shocks that might occur on stock markets. All stocks are held for a very short time period

* Swing traders hold stocks over a medium time period, say a couple of days or 1 or 2 weeks. Swing traders usually trade with stocks that are actively traded. These stocks swing between a very general high and low extreme. Swing traders must therefore purchase stocks at the low end of their value and then sell the shares when they swing back up.

* Value investing is a method of stock trading in which traders purchase shares in a company which they consider to have under-priced shares. The hope is that by investing in the company the shares will eventually increase in value.

* Growth investing is a method of investing in companies that are showing signs of above average growth. The share price may be more expensive than what it would be expected to be however the view of the trader is that the share value will grow into what it has been purchased for.

Stock trading does come at a cost however. The high levels of risk and uncertainty as well as the complex nature of stock trading is enough to deter most people from becoming stock traders. There is also the brokerage fee charged by the bank or the brokerage firm every time a transaction is carried out.

However all this aside there is still a considerable chance of getting lucky as a stock trader which is enough to supply the stock trading industry for the foreseeable future.
Stock trading is carried out by stock traders who for the most part need an intermediate such as a brokerage firm or bank to carry out the trades. Stock traders work for themselves by investing money in shares which they believe will increase in value over time and then sell the shares at a later date for profit.

There are a number of strategies used by stock traders in order to accumulate profit. The most popular stock trading strategies are day trading, swing trading, value investing and growth trading. A brief description of each of these strategies will now be given

* Day trading is a form of trading in which stocks are sold and bought during a single day so that at the end of the day there is no change in the number of shares held. This is done by selling a share each time another share of equivalent value is bought. The profit or loss comes from the difference between the sale price and the purchasing price of the share. The motivation behind day trading is to avoid any overnight shocks that might occur on stock markets. All stocks are held for a very short time period

* Swing traders hold stocks over a medium time period, say a couple of days or 1 or 2 weeks. Swing traders usually trade with stocks that are actively traded. These stocks swing between a very general high and low extreme. Swing traders must therefore purchase stocks at the low end of their value and then sell the shares when they swing back up.

* Value investing is a method of stock trading in which traders purchase shares in a company which they consider to have under-priced shares. The hope is that by investing in the company the shares will eventually increase in value.

* Growth investing is a method of investing in companies that are showing signs of above average growth. The share price may be more expensive than what it would be expected to be however the view of the trader is that the share value will grow into what it has been purchased for.

Stock trading does come at a cost however. The high levels of risk and uncertainty as well as the complex nature of stock trading is enough to deter most people from becoming stock traders. There is also the brokerage fee charged by the bank or the brokerage firm every time a transaction is carried out. However all this aside there is still a considerable chance of getting lucky as a stock trader which is enough to supply the stock trading industry for the foreseeable future.

Stock Trading Strategies - Do You Know These Simple Yet Highly Profitable Strategies For Trading Stocks?

Stock trading is carried out by stock traders who for the most part need an intermediate such as a brokerage firm or bank to carry out the trades. Stock traders work for themselves by investing money in shares which they believe will increase in value over time and then sell the shares at a later date for profit.

There are a number of strategies used by stock traders in order to accumulate profit. The most popular stock trading strategies are day trading, swing trading, value investing and growth trading. A brief description of each of these strategies will now be given

* Day trading is a form of trading in which stocks are sold and bought during a single day so that at the end of the day there is no change in the number of shares held. This is done by selling a share each time another share of equivalent value is bought. The profit or loss comes from the difference between the sale price and the purchasing price of the share. The motivation behind day trading is to avoid any overnight shocks that might occur on stock markets. All stocks are held for a very short time period

* Swing traders hold stocks over a medium time period, say a couple of days or 1 or 2 weeks. Swing traders usually trade with stocks that are actively traded. These stocks swing between a very general high and low extreme. Swing traders must therefore purchase stocks at the low end of their value and then sell the shares when they swing back up.

* Value investing is a method of stock trading in which traders purchase shares in a company which they consider to have under-priced shares. The hope is that by investing in the company the shares will eventually increase in value.

* Growth investing is a method of investing in companies that are showing signs of above average growth. The share price may be more expensive than what it would be expected to be however the view of the trader is that the share value will grow into what it has been purchased for.

Stock trading does come at a cost however. The high levels of risk and uncertainty as well as the complex nature of stock trading is enough to deter most people from becoming stock traders. There is also the brokerage fee charged by the bank or the brokerage firm every time a transaction is carried out.

However all this aside there is still a considerable chance of getting lucky as a stock trader which is enough to supply the stock trading industry for the foreseeable future.

posted by zzzzzzzzzzz at 5:28 AM

Financial Versus Fundamental Analysis - What Is The Difference?

The examination of key ratios and viewing the performance of a certain company is one of the many ways in which an investor can decide to invest in stocks. This form of investment is known as fundamental analysis.

A simple description of fundamental analysis would be, the determination of how much money a company is making from this deciding how much earnings can be expected in the future. A good way of predicting future earnings is look at the past performance of the company.

Earnings are reported by companies usually on a quarterly or annual basis and from these figures the expected growth levels of the company can be predicted. The value of the company on the stock market is to a large degree set by how well the company is performing.

There is a large variety of ways of determining a company's earnings. Information on earnings can come from financial statements provided by the company. The financial statement which is required to be provided by all publicly traded companies, and in the statement is included a balance sheet, auditor's report, statement of cash flow, description of business activities and the expected revenue for the financial period.

The information provided in the financial statement makes it possible for fundamental analysis to reveal information on the value of the company, its competitive advantage, and the ratio of management to outside investor's ownership.

Fundamental analysis applies a variety of tools to the financial data in order to extract important information on the company. For instance the earnings per share can be found out. This is a very useful piece of information to any investor and is far more useful to know than, for example, total company profits. Although the earnings per share is a good way of comparing the performance of two companies in the same industry it should not be used as a deciding factor when choosing what shares to invest in.

The price to earnings ratio (P/E) shows the relationship between the stock price and company earnings. If a company has a high P/E then it is possible that the company is overpriced, it could also mean however that the company is expected to continue to grow and yield more profit. A low P/E may indicate that investors are sceptical about the company's future performance, however it could also indicate that most investors have failed to see the opportunity that the company holds.

Other ways fundamental analysis can be used through its ability to discover the price to sales ratio for companies with no earnings, or the price to book value for investors who are interested in long term investments. Another indicator of whether or not an company is a good investment is its dividend yield. This is the percentage return a company pays in the form of dividends.
The examination of key ratios and viewing the performance of a certain company is one of the many ways in which an investor can decide to invest in stocks. This form of investment is known as fundamental analysis.

A simple description of fundamental analysis would be, the determination of how much money a company is making from this deciding how much earnings can be expected in the future. A good way of predicting future earnings is look at the past performance of the company.

Earnings are reported by companies usually on a quarterly or annual basis and from these figures the expected growth levels of the company can be predicted. The value of the company on the stock market is to a large degree set by how well the company is performing.

There is a large variety of ways of determining a company's earnings. Information on earnings can come from financial statements provided by the company. The financial statement which is required to be provided by all publicly traded companies, and in the statement is included a balance sheet, auditor's report, statement of cash flow, description of business activities and the expected revenue for the financial period.

The information provided in the financial statement makes it possible for fundamental analysis to reveal information on the value of the company, its competitive advantage, and the ratio of management to outside investor's ownership.

Fundamental analysis applies a variety of tools to the financial data in order to extract important information on the company. For instance the earnings per share can be found out. This is a very useful piece of information to any investor and is far more useful to know than, for example, total company profits. Although the earnings per share is a good way of comparing the performance of two companies in the same industry it should not be used as a deciding factor when choosing what shares to invest in.

The price to earnings ratio (P/E) shows the relationship between the stock price and company earnings. If a company has a high P/E then it is possible that the company is overpriced, it could also mean however that the company is expected to continue to grow and yield more profit. A low P/E may indicate that investors are sceptical about the company's future performance, however it could also indicate that most investors have failed to see the opportunity that the company holds.

Other ways fundamental analysis can be used through its ability to discover the price to sales ratio for companies with no earnings, or the price to book value for investors who are interested in long term investments. Another indicator of whether or not an company is a good investment is its dividend yield. This is the percentage return a company pays in the form of dividends.

posted by zzzzzzzzzzz at 5:27 AM

What Do I Need To Know About Technical Analysis Of Equities?

Predicting future moves in the stock market has become a science. This form of prediction has become known as technical analysis. Traders who take this approach to investing in the stock market usually hold stocks for a short time period and then sell their stocks once the predicted profit has been achieved.

The foundations to technical analysis can be found in the understanding that stock price movements are predictable. All the factors affecting the value of a stock are reflected in the stock market with the greatest efficiency that can be found in any type of market. Movements in the stock value follow predictable historical trends, coupled with the efficiency of the market make it possible to predict the direction the stock is going to go.

Technical analysis is a very short term method of investing because the potential long term growth of a company is not taken into account through this method. Trades are timed to exactly reflect the upward and downward trends in the market so nothing is left to chance. Because buying and selling go through at specific times, losses can be minimized if the market does not move in the predicted manner.

Many methods of predicting the movement of the market have been developed for use in technical analysis. These methods for the most part are based on the 'support' and 'resistance' concept. How this works is that, support is the level by which a downward price is predicted to increase by and resistance is the level by which an upward price is expected reach before coming down again. To put this in clearer terms prices tend to fluctuate between a support and resistance levels.

Market movements are predicted for a large part through the use of charts (mostly bar charts). The horizontal axis represent time be it a minute, hour, day or week, while the vertical axis represents the price of the stock. By looking at the chart a trend for the stock value can be traced.

A trained analyst studies the chart and can see certain patterns in the chart that they can then use to predict for future movements in the price of stocks. As is the case with most things there is no one single pattern that fits all. There are hundreds of different types of movements, indicators and patterns that can be used. By combining a number of different indicators technical analysis can make it possible for an investor to become very successful on the stock market.
Predicting future moves in the stock market has become a science. This form of prediction has become known as technical analysis. Traders who take this approach to investing in the stock market usually hold stocks for a short time period and then sell their stocks once the predicted profit has been achieved.

The foundations to technical analysis can be found in the understanding that stock price movements are predictable. All the factors affecting the value of a stock are reflected in the stock market with the greatest efficiency that can be found in any type of market. Movements in the stock value follow predictable historical trends, coupled with the efficiency of the market make it possible to predict the direction the stock is going to go.

Technical analysis is a very short term method of investing because the potential long term growth of a company is not taken into account through this method. Trades are timed to exactly reflect the upward and downward trends in the market so nothing is left to chance. Because buying and selling go through at specific times, losses can be minimized if the market does not move in the predicted manner.

Many methods of predicting the movement of the market have been developed for use in technical analysis. These methods for the most part are based on the 'support' and 'resistance' concept. How this works is that, support is the level by which a downward price is predicted to increase by and resistance is the level by which an upward price is expected reach before coming down again. To put this in clearer terms prices tend to fluctuate between a support and resistance levels.

Market movements are predicted for a large part through the use of charts (mostly bar charts). The horizontal axis represent time be it a minute, hour, day or week, while the vertical axis represents the price of the stock. By looking at the chart a trend for the stock value can be traced.

A trained analyst studies the chart and can see certain patterns in the chart that they can then use to predict for future movements in the price of stocks. As is the case with most things there is no one single pattern that fits all. There are hundreds of different types of movements, indicators and patterns that can be used. By combining a number of different indicators technical analysis can make it possible for an investor to become very successful on the stock market.

posted by zzzzzzzzzzz at 5:25 AM

Monday, April 16, 2007

Stock Market Crash of 2007 - How To Trade Stocks During The Bearish Corrective Wave

While many traders will classify the market drop of over 200 points on the Dow Jones Industrial Average in March 2007 as a pullback and not a crash, all traders will agree that it was a market correction that had to come to dilute the long term excesses of bullishness and euphoria over the years of strong uptrend and shallow pullbacks.

Recently, I was in the kitchen, watching my wife as she was cooking an exotic dish of stew pork in aromatic spices and garlic. With the aromatic scent in the air,I could not help but paid attention as she proceeded to tell me some facts about the nicely cut chunks of meat in the pot...and about knives.

"I would rather have two good and sharp knives than the entire set of knives that were of lower quality that we got as a present from your friend," my beautiful wife said. "Two good knives that are sharp and of good quality will not go blunt easily, and can cut easily into the meat for a very long time without sharpening than the entire battery of knives that are of low quality".

As a professional stock trader and a trading coach, I cannot but marvel at the aptness of what my beautiful wife had said about picking knives, and how they would relate to picking stocks after a market crash. Indeed, many traders are unable to trade during bearish times as they have not been exposed to bearish periods before, having only begun to trade during the past few years when the stock market had been bullish.

So how would you trade during a bearish period?

When the stock market has crashed, and a strong pullback is in progress, it is wise to wait for the market to stabilise. Statistics have shown that stocks fall around 3 times faster than they have taken to move up in price. Any corrective move in stocks will bring fear into the eyes of traders who have not been exposed to deep market corrections before.

But when the stock prices have stabilised, then the stock selection process is important. And that is when the lesson of selecting cutting knives from my beautiful wife comes into play.

Like the knives, it is more profitable for you to select a few stocks that are of good quality that has stumbled in price, but which have good growth potential, and good management. These good stocks now are selling at attractive Price-Earning ratios brought low because of the price pullback and will be good stocks with lower risk.

"I would rather have two good and sharp knives than the entire set of knives that were of lower quality...", my wife beautiful had said.

How true it is in selecting the stocks to trade during a bearish period.

Spend time researching your stocks. Seek out the good quality stocks, and buy into those that have the better quality as they will rebound fast in price than buying a host of cheap, penny stocks that have been dumped by discerning traders during the bearish market, with little prospect of recovering fast.

In bearish times, there is always a flight back to quality stocks and like knives, you must select those of good quality.
While many traders will classify the market drop of over 200 points on the Dow Jones Industrial Average in March 2007 as a pullback and not a crash, all traders will agree that it was a market correction that had to come to dilute the long term excesses of bullishness and euphoria over the years of strong uptrend and shallow pullbacks.

Recently, I was in the kitchen, watching my wife as she was cooking an exotic dish of stew pork in aromatic spices and garlic. With the aromatic scent in the air,I could not help but paid attention as she proceeded to tell me some facts about the nicely cut chunks of meat in the pot...and about knives.

"I would rather have two good and sharp knives than the entire set of knives that were of lower quality that we got as a present from your friend," my beautiful wife said. "Two good knives that are sharp and of good quality will not go blunt easily, and can cut easily into the meat for a very long time without sharpening than the entire battery of knives that are of low quality".

As a professional stock trader and a trading coach, I cannot but marvel at the aptness of what my beautiful wife had said about picking knives, and how they would relate to picking stocks after a market crash. Indeed, many traders are unable to trade during bearish times as they have not been exposed to bearish periods before, having only begun to trade during the past few years when the stock market had been bullish.

So how would you trade during a bearish period?

When the stock market has crashed, and a strong pullback is in progress, it is wise to wait for the market to stabilise. Statistics have shown that stocks fall around 3 times faster than they have taken to move up in price. Any corrective move in stocks will bring fear into the eyes of traders who have not been exposed to deep market corrections before.

But when the stock prices have stabilised, then the stock selection process is important. And that is when the lesson of selecting cutting knives from my beautiful wife comes into play.

Like the knives, it is more profitable for you to select a few stocks that are of good quality that has stumbled in price, but which have good growth potential, and good management. These good stocks now are selling at attractive Price-Earning ratios brought low because of the price pullback and will be good stocks with lower risk.

"I would rather have two good and sharp knives than the entire set of knives that were of lower quality...", my wife beautiful had said.

How true it is in selecting the stocks to trade during a bearish period.

Spend time researching your stocks. Seek out the good quality stocks, and buy into those that have the better quality as they will rebound fast in price than buying a host of cheap, penny stocks that have been dumped by discerning traders during the bearish market, with little prospect of recovering fast.

In bearish times, there is always a flight back to quality stocks and like knives, you must select those of good quality.

posted by zzzzzzzzzzz at 2:02 AM

My Experiences Trading Soybeans, Soymeal and Soybean Oil Commodity Futures Contracts and Options

Soybeans are king of the speculative trading "soy" complex. The complex includes soybeans, soymeal and soybean oil. Soymeal is used primarily as feed. Poultry and cattle producers use the majority of soymeal. The majority of soybean oil is used for cooking and salad oil.

For about $1200 of account margin you can control a 5,000 bushel contract of Soybeans worth about $35,000. A 10 cent move equals $500. (example: a move from 750 to 760)

For about $600 you can control 60,000 pounds of soybean oil worth about $16,000. A $1 move equals $600. (example: 28 to 29)

For about $900 you can control 100 tons of soymeal worth about $20,000. A full 10 point move equals $1000. (example: 210 to 220)

As you can see, you are permitted the privilege of tremendous leverage. There is great potential for both profit or loss if you choose to use it. Bear in mind you are NOT required to use leverage and may deposit all or any part of the contact's value into your account. For example, if you maintain $35,000 in your account for one contract of soybeans, you have 100% of the soybean contract covered and essentially are not trading on leverage

Recently, soybean oil has attained notoriety as an alternative fuel source. (Bio-diesel) Similar attention goes to corn / ethanol fuels. There is a trading strategy based on the processing of soybean products. It's called a "crush" spread. It works by buying one soybean contract; then sell one soybean oil and one soymeal contract. To profit, you want the soybean contract to gain on the soybean oil and meal contracts. A "spread" is the difference between the two legs.

There is also a "reverse crush" spread. You would sell one soybean contact; then buy one soybean oil contract and buy one soy meal contract. Notice that one soybean contract ($35,000) is worth roughly the same value as an oil and meal contract.($16,000 and $20,000) Thus, this is a reasonably balanced spread.

Soybeans, soybean oil and soymeal futures all tend to trend in the same direction but still have different patterns and habits. It's a good idea to buy the strongest of the three and sell the weakest of the three. One way to determine the strongest is to watch the chart's rising bottoms in an uptrend. Pick the commodity making the highest bottoms. You want the one with the most inclined stair step uptrend. This is the strongest of the group to buy. You can also see this evidence when comparing a sideways bottom formation between the three. Reverse this for analyzing a topping area to sell short.

For the serious trader, soybean complex futures and options are one of the top trading commodities. They have it all; liquidity, volume, open interest and great moves up and down. The charts show many classic patterns. Look for triangles, head and shoulders, breakouts, spikes and gaps. Soybeans can be a chartist's dream. Beans also exhibit regular seasonal and cyclic patterns to use as rough guidelines.

The soybean market often trends for long periods of time because it's based on a specific crop. In the last forty years, the lowest price was in 1968 at $2.38 a bushel. The all-time high is 1973 at $12.90.

The rallying cry of the bean bulls has been “Beans in the teens!" It may happen one day.

In the last five years, Brazil and Argentina have become big soybean producers. Their seasonal harvests are the reverse of the U.S. American traders need to keep an eye on our southern neighbor's production and growing seasons. Some say soybeans will never approach the old highs because of these new suppliers in the market. Never say never.

Of course, weather is a major market mover. During the summer, big moves can occur around monthly or weekly reports. Selling into these reports can be profitable. Fifty-cent limit moves ($2500) are not unusual when the market is rolling and a report comes out.

The soybean complex lends itself to all types of different strategies in options and futures. Spreads, straddles, strangles and synthetics are all good ways to trade when the forecast is high probability. The CBOT has recently started trading electronically as well as overnight in a shortened session. At this time, all soybean complex options continue to be pit traded.

Wheat Futures and options are probably the most volatile of the grain group. Wheat can move very quickly. Wheat is better suited to an intermediate level commodity trader wanting quicker results and more risk. Wheat futures and options can trade counter to corn and soybeans. This is probably because rain is not as important to wheat as to corn and soybeans.

Over the last forty years, wheat has traded as low as $1.20 in the late 1960’s and as high as $7.50 in the mid 1990’s. One dollar a bushel moves can occur when the market is active. ($5,000) Hang on to your hat when trading wheat. There is an old trader's adage that goes, "Don't sell your wheat until it boils!" It's true that wheat has a tendency to end a bull campaign with fireworks and spike tops. Panic shortages are unique to commodities. Shortages rare in the stock market.

Good Trading!
Soybeans are king of the speculative trading "soy" complex. The complex includes soybeans, soymeal and soybean oil. Soymeal is used primarily as feed. Poultry and cattle producers use the majority of soymeal. The majority of soybean oil is used for cooking and salad oil.

For about $1200 of account margin you can control a 5,000 bushel contract of Soybeans worth about $35,000. A 10 cent move equals $500. (example: a move from 750 to 760)

For about $600 you can control 60,000 pounds of soybean oil worth about $16,000. A $1 move equals $600. (example: 28 to 29)

For about $900 you can control 100 tons of soymeal worth about $20,000. A full 10 point move equals $1000. (example: 210 to 220)

As you can see, you are permitted the privilege of tremendous leverage. There is great potential for both profit or loss if you choose to use it. Bear in mind you are NOT required to use leverage and may deposit all or any part of the contact's value into your account. For example, if you maintain $35,000 in your account for one contract of soybeans, you have 100% of the soybean contract covered and essentially are not trading on leverage

Recently, soybean oil has attained notoriety as an alternative fuel source. (Bio-diesel) Similar attention goes to corn / ethanol fuels. There is a trading strategy based on the processing of soybean products. It's called a "crush" spread. It works by buying one soybean contract; then sell one soybean oil and one soymeal contract. To profit, you want the soybean contract to gain on the soybean oil and meal contracts. A "spread" is the difference between the two legs.

There is also a "reverse crush" spread. You would sell one soybean contact; then buy one soybean oil contract and buy one soy meal contract. Notice that one soybean contract ($35,000) is worth roughly the same value as an oil and meal contract.($16,000 and $20,000) Thus, this is a reasonably balanced spread.

Soybeans, soybean oil and soymeal futures all tend to trend in the same direction but still have different patterns and habits. It's a good idea to buy the strongest of the three and sell the weakest of the three. One way to determine the strongest is to watch the chart's rising bottoms in an uptrend. Pick the commodity making the highest bottoms. You want the one with the most inclined stair step uptrend. This is the strongest of the group to buy. You can also see this evidence when comparing a sideways bottom formation between the three. Reverse this for analyzing a topping area to sell short.

For the serious trader, soybean complex futures and options are one of the top trading commodities. They have it all; liquidity, volume, open interest and great moves up and down. The charts show many classic patterns. Look for triangles, head and shoulders, breakouts, spikes and gaps. Soybeans can be a chartist's dream. Beans also exhibit regular seasonal and cyclic patterns to use as rough guidelines.

The soybean market often trends for long periods of time because it's based on a specific crop. In the last forty years, the lowest price was in 1968 at $2.38 a bushel. The all-time high is 1973 at $12.90.

The rallying cry of the bean bulls has been “Beans in the teens!" It may happen one day.

In the last five years, Brazil and Argentina have become big soybean producers. Their seasonal harvests are the reverse of the U.S. American traders need to keep an eye on our southern neighbor's production and growing seasons. Some say soybeans will never approach the old highs because of these new suppliers in the market. Never say never.

Of course, weather is a major market mover. During the summer, big moves can occur around monthly or weekly reports. Selling into these reports can be profitable. Fifty-cent limit moves ($2500) are not unusual when the market is rolling and a report comes out.

The soybean complex lends itself to all types of different strategies in options and futures. Spreads, straddles, strangles and synthetics are all good ways to trade when the forecast is high probability. The CBOT has recently started trading electronically as well as overnight in a shortened session. At this time, all soybean complex options continue to be pit traded.

Wheat Futures and options are probably the most volatile of the grain group. Wheat can move very quickly. Wheat is better suited to an intermediate level commodity trader wanting quicker results and more risk. Wheat futures and options can trade counter to corn and soybeans. This is probably because rain is not as important to wheat as to corn and soybeans.

Over the last forty years, wheat has traded as low as $1.20 in the late 1960’s and as high as $7.50 in the mid 1990’s. One dollar a bushel moves can occur when the market is active. ($5,000) Hang on to your hat when trading wheat. There is an old trader's adage that goes, "Don't sell your wheat until it boils!" It's true that wheat has a tendency to end a bull campaign with fireworks and spike tops. Panic shortages are unique to commodities. Shortages rare in the stock market.

Good Trading!

posted by zzzzzzzzzzz at 2:02 AM

Bonds, Stocks, and Commodities

The first chart shows TLT (long-bond ETF; black line and left scale) and SPX (red dashed line and right scale) remain at high levels. Typically, after stock market corrections, both TLT and SPX fall (while cash is raised or investments are deleveraged). The 10-year bond yield has traded around 4 1/2% recently, while TLT has traded around 90. Also, below price chart, gold (GLD) has outperformed the commodities index (CRB), which reflect inflationary and slow growth concerns. Consequently, bond yields may rise and TLT may fall (I've added the most recent "Monthly Economic Review & Forecast" below the charts for free this week). So, TLT Sep puts may be buys. The second chart suggests the NYMO 50-day MA and NYSI haven't bottomed and will not bottom for at least a month. So, SPX may fall much lower or trade in a lower range.

Charts available at PeakTrader.com Forum Index Market Forecast category.

The U.S. economy had a quick and massive "Creative-Destruction" process from 2000-02 that made Information-Age firms more efficient and freed-up resources for emerging industries. The U.S. had slow growth from 2001-03, after the mild 2001 recession. However, real growth was around 4% for three years, in the mid 2000s, and has slowed recently, since the Fed is attempting to achieve a soft-landing, e.g. roughly 2 1/2% real growth. U.S. actual output generally slightly exceeded potential output in the mid and late '90s and U.S. actual output has generally been slightly below potential output in the early and mid '00s. Consequently, the U.S. had a slight economic boom/bust cycle. The Fed targets the general price level. Asset prices are only residuals. The U.S. has gained the most in the foreign economic boom and will lose the least in the foreign economic bust, because of monetary, fiscal, and globalization policies. The U.S. is in position to increase output through exports. So, actual output may rise to and slightly exceed potential output over the next few years.

Many people underestimate the benefits of globalization, particularly in the U.S., which has less restrictive policies than its major trading partners. Basically, U.S. consumers benefit directly from cheaper imports, Older U.S. producers benefit from greater foreign competition, which raises productivity or keeps prices low. Newer U.S. producers benefit from the freed-up resources of older U.S. producers. So, more new high value products can be created and produced. It's a virtuous cycle that benefits U.S. consumers and producers. Globalization tends to increase the economic pie, e.g. through the Law of Comparative Advantage. However, the U.S. benefits more, in part, because of relatively less restrictive globalization policies.

Also, I may add, export-led economies have been financing much, if not all, of the U.S. war in Iraq and those economies will end up paying for much of the war.

A precipitous fall in the U.S. dollar will make U.S. exports cheaper and U.S. imports more expensive. Consequently, the U.S. will have inflationary growth, while export-led economies will have slower growth or recessions. The U.S. will tighten the money supply, while export-led economies will ease their money supplies. Nonetheless, U.S. trade deficits will become much smaller. U.S. bond prices should fall. So, export-led economies will lose in the U.S. bond market. If those economies shift into U.S. stocks or physical assets, they'll pay premiums. The adjustment is inevitable, whether it takes place slowly or suddenly.The first chart shows TLT (long-bond ETF; black line and left scale) and SPX (red dashed line and right scale) remain at high levels. Typically, after stock market corrections, both TLT and SPX fall (while cash is raised or investments are deleveraged). The 10-year bond yield has traded around 4 1/2% recently, while TLT has traded around 90. Also, below price chart, gold (GLD) has outperformed the commodities index (CRB), which reflect inflationary and slow growth concerns. Consequently, bond yields may rise and TLT may fall (I've added the most recent "Monthly Economic Review & Forecast" below the charts for free this week). So, TLT Sep puts may be buys. The second chart suggests the NYMO 50-day MA and NYSI haven't bottomed and will not bottom for at least a month. So, SPX may fall much lower or trade in a lower range.

Charts available at PeakTrader.com Forum Index Market Forecast category.

The U.S. economy had a quick and massive "Creative-Destruction" process from 2000-02 that made Information-Age firms more efficient and freed-up resources for emerging industries. The U.S. had slow growth from 2001-03, after the mild 2001 recession. However, real growth was around 4% for three years, in the mid 2000s, and has slowed recently, since the Fed is attempting to achieve a soft-landing, e.g. roughly 2 1/2% real growth. U.S. actual output generally slightly exceeded potential output in the mid and late '90s and U.S. actual output has generally been slightly below potential output in the early and mid '00s. Consequently, the U.S. had a slight economic boom/bust cycle. The Fed targets the general price level. Asset prices are only residuals. The U.S. has gained the most in the foreign economic boom and will lose the least in the foreign economic bust, because of monetary, fiscal, and globalization policies. The U.S. is in position to increase output through exports. So, actual output may rise to and slightly exceed potential output over the next few years.

Many people underestimate the benefits of globalization, particularly in the U.S., which has less restrictive policies than its major trading partners. Basically, U.S. consumers benefit directly from cheaper imports, Older U.S. producers benefit from greater foreign competition, which raises productivity or keeps prices low. Newer U.S. producers benefit from the freed-up resources of older U.S. producers. So, more new high value products can be created and produced. It's a virtuous cycle that benefits U.S. consumers and producers. Globalization tends to increase the economic pie, e.g. through the Law of Comparative Advantage. However, the U.S. benefits more, in part, because of relatively less restrictive globalization policies.

Also, I may add, export-led economies have been financing much, if not all, of the U.S. war in Iraq and those economies will end up paying for much of the war.

A precipitous fall in the U.S. dollar will make U.S. exports cheaper and U.S. imports more expensive. Consequently, the U.S. will have inflationary growth, while export-led economies will have slower growth or recessions. The U.S. will tighten the money supply, while export-led economies will ease their money supplies. Nonetheless, U.S. trade deficits will become much smaller. U.S. bond prices should fall. So, export-led economies will lose in the U.S. bond market. If those economies shift into U.S. stocks or physical assets, they'll pay premiums. The adjustment is inevitable, whether it takes place slowly or suddenly.
The first chart shows TLT (long-bond ETF; black line and left scale) and SPX (red dashed line and right scale) remain at high levels. Typically, after stock market corrections, both TLT and SPX fall (while cash is raised or investments are deleveraged). The 10-year bond yield has traded around 4 1/2% recently, while TLT has traded around 90. Also, below price chart, gold (GLD) has outperformed the commodities index (CRB), which reflect inflationary and slow growth concerns. Consequently, bond yields may rise and TLT may fall (I've added the most recent "Monthly Economic Review & Forecast" below the charts for free this week). So, TLT Sep puts may be buys. The second chart suggests the NYMO 50-day MA and NYSI haven't bottomed and will not bottom for at least a month. So, SPX may fall much lower or trade in a lower range.

Charts available at PeakTrader.com Forum Index Market Forecast category.

The U.S. economy had a quick and massive "Creative-Destruction" process from 2000-02 that made Information-Age firms more efficient and freed-up resources for emerging industries. The U.S. had slow growth from 2001-03, after the mild 2001 recession. However, real growth was around 4% for three years, in the mid 2000s, and has slowed recently, since the Fed is attempting to achieve a soft-landing, e.g. roughly 2 1/2% real growth. U.S. actual output generally slightly exceeded potential output in the mid and late '90s and U.S. actual output has generally been slightly below potential output in the early and mid '00s. Consequently, the U.S. had a slight economic boom/bust cycle. The Fed targets the general price level. Asset prices are only residuals. The U.S. has gained the most in the foreign economic boom and will lose the least in the foreign economic bust, because of monetary, fiscal, and globalization policies. The U.S. is in position to increase output through exports. So, actual output may rise to and slightly exceed potential output over the next few years.

Many people underestimate the benefits of globalization, particularly in the U.S., which has less restrictive policies than its major trading partners. Basically, U.S. consumers benefit directly from cheaper imports, Older U.S. producers benefit from greater foreign competition, which raises productivity or keeps prices low. Newer U.S. producers benefit from the freed-up resources of older U.S. producers. So, more new high value products can be created and produced. It's a virtuous cycle that benefits U.S. consumers and producers. Globalization tends to increase the economic pie, e.g. through the Law of Comparative Advantage. However, the U.S. benefits more, in part, because of relatively less restrictive globalization policies.

Also, I may add, export-led economies have been financing much, if not all, of the U.S. war in Iraq and those economies will end up paying for much of the war.

A precipitous fall in the U.S. dollar will make U.S. exports cheaper and U.S. imports more expensive. Consequently, the U.S. will have inflationary growth, while export-led economies will have slower growth or recessions. The U.S. will tighten the money supply, while export-led economies will ease their money supplies. Nonetheless, U.S. trade deficits will become much smaller. U.S. bond prices should fall. So, export-led economies will lose in the U.S. bond market. If those economies shift into U.S. stocks or physical assets, they'll pay premiums. The adjustment is inevitable, whether it takes place slowly or suddenly.The first chart shows TLT (long-bond ETF; black line and left scale) and SPX (red dashed line and right scale) remain at high levels. Typically, after stock market corrections, both TLT and SPX fall (while cash is raised or investments are deleveraged). The 10-year bond yield has traded around 4 1/2% recently, while TLT has traded around 90. Also, below price chart, gold (GLD) has outperformed the commodities index (CRB), which reflect inflationary and slow growth concerns. Consequently, bond yields may rise and TLT may fall (I've added the most recent "Monthly Economic Review & Forecast" below the charts for free this week). So, TLT Sep puts may be buys. The second chart suggests the NYMO 50-day MA and NYSI haven't bottomed and will not bottom for at least a month. So, SPX may fall much lower or trade in a lower range.

Charts available at PeakTrader.com Forum Index Market Forecast category.

The U.S. economy had a quick and massive "Creative-Destruction" process from 2000-02 that made Information-Age firms more efficient and freed-up resources for emerging industries. The U.S. had slow growth from 2001-03, after the mild 2001 recession. However, real growth was around 4% for three years, in the mid 2000s, and has slowed recently, since the Fed is attempting to achieve a soft-landing, e.g. roughly 2 1/2% real growth. U.S. actual output generally slightly exceeded potential output in the mid and late '90s and U.S. actual output has generally been slightly below potential output in the early and mid '00s. Consequently, the U.S. had a slight economic boom/bust cycle. The Fed targets the general price level. Asset prices are only residuals. The U.S. has gained the most in the foreign economic boom and will lose the least in the foreign economic bust, because of monetary, fiscal, and globalization policies. The U.S. is in position to increase output through exports. So, actual output may rise to and slightly exceed potential output over the next few years.

Many people underestimate the benefits of globalization, particularly in the U.S., which has less restrictive policies than its major trading partners. Basically, U.S. consumers benefit directly from cheaper imports, Older U.S. producers benefit from greater foreign competition, which raises productivity or keeps prices low. Newer U.S. producers benefit from the freed-up resources of older U.S. producers. So, more new high value products can be created and produced. It's a virtuous cycle that benefits U.S. consumers and producers. Globalization tends to increase the economic pie, e.g. through the Law of Comparative Advantage. However, the U.S. benefits more, in part, because of relatively less restrictive globalization policies.

Also, I may add, export-led economies have been financing much, if not all, of the U.S. war in Iraq and those economies will end up paying for much of the war.

A precipitous fall in the U.S. dollar will make U.S. exports cheaper and U.S. imports more expensive. Consequently, the U.S. will have inflationary growth, while export-led economies will have slower growth or recessions. The U.S. will tighten the money supply, while export-led economies will ease their money supplies. Nonetheless, U.S. trade deficits will become much smaller. U.S. bond prices should fall. So, export-led economies will lose in the U.S. bond market. If those economies shift into U.S. stocks or physical assets, they'll pay premiums. The adjustment is inevitable, whether it takes place slowly or suddenly.

posted by zzzzzzzzzzz at 2:01 AM

My Experiences Trading Cotton and Lumber Commodity Futures Contracts and Options

Cotton Futures and Options

COTTON futures and options trade on the NYBOT. (The New York Board of Trade) Cotton has low to medium volume and liquidity; just enough to get by. An account margin of $1300 controls 50,000 pounds of cotton, worth about $30,000. One full point of price movement equates to $500.

Day trading cotton futures can be difficult. At times, the short-term charts can make little sense. Cotton futures fills (order execution price) often have significant slippage while the option fills are slow coming back from the floor. Market orders will get you filled immediately but you may not be happy with the results. Obviously, the main problem with short-term trading cotton is liquidity.

Liquidity is not really a problem with long-term cotton position trades lasting weeks in duration. Low liquidity will make little difference in your overall results because of infrequent entries and exits. Effectively using limit orders in cotton will solve the slippage problem, but makes entry and exits more challenging.

Normal moves of five to ten cents are common in cotton. ($2500-$5000) Over the last few decades, the cotton market has cycled within a large price range. The extreme lows are 28 cents to highs of $1.17 a pound. The goal of many long term traders is to catch big moves like this.

Weather is always a consideration when trading cotton. Droughts, floods, disease and insect infestation (boll weevils, etc) can propel prices. There's times when cotton trades counter to the other grains. (wheat, soybeans, corn, etc) What may be good growing conditions for cotton may be adverse to the other grains and visa versa.

LUMBER

LUMBER Futures and options are traded on the (CME) Chicago Mercantile Exchange. An account margin of $1700 controls 110,000 board feet of lumber worth about $27,000. One full point in lumber equates to $110.

Lumber's forty year low in the 1970’s was $94. It's all-time high was $493.50 after the Mt. St. Helens volcanic eruption blew out vast amounts of timberland. A $100 move in lumber over several months is typical. ($11,000 a contract) Limit moves up and down are a very common occurrence. The liquidity in lumber futures is a problem but tolerable. Market orders are sometimes necessary, but there is a big chance of slippage.

Lumber options are illiquid. They are hard to buy and sell. A series of limit moves in your direction will help you liquidate with a nice execution price and profit. Effectively using limit orders in lumber will solve the slippage problem, but makes entry and exits more challenging

Lumber prices can trend well since supply and demand are based on various long-term trends. These include U.S. housing demand and the supply trade agreements with Canada.

Short term trading is possible if you are nimble. Look for a five-dollar swings as an objective. ($550) If you get a limit move in your direction, you may want to get out of your futures contract. Reversals are common after big moves. However, if the move is supported by long term bottoms and major time cycles, you may want to hold on for what could be a big ride.

STRATEGY

Here's how I look for opportunities in the cotton and lumber markets: First I generate a TimeLine forecast that shows a strong move up or down in cotton or lumber. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there's always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, "high probability, low risk trades."

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders - and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

Good Trading!
Cotton Futures and Options

COTTON futures and options trade on the NYBOT. (The New York Board of Trade) Cotton has low to medium volume and liquidity; just enough to get by. An account margin of $1300 controls 50,000 pounds of cotton, worth about $30,000. One full point of price movement equates to $500.

Day trading cotton futures can be difficult. At times, the short-term charts can make little sense. Cotton futures fills (order execution price) often have significant slippage while the option fills are slow coming back from the floor. Market orders will get you filled immediately but you may not be happy with the results. Obviously, the main problem with short-term trading cotton is liquidity.

Liquidity is not really a problem with long-term cotton position trades lasting weeks in duration. Low liquidity will make little difference in your overall results because of infrequent entries and exits. Effectively using limit orders in cotton will solve the slippage problem, but makes entry and exits more challenging.

Normal moves of five to ten cents are common in cotton. ($2500-$5000) Over the last few decades, the cotton market has cycled within a large price range. The extreme lows are 28 cents to highs of $1.17 a pound. The goal of many long term traders is to catch big moves like this.

Weather is always a consideration when trading cotton. Droughts, floods, disease and insect infestation (boll weevils, etc) can propel prices. There's times when cotton trades counter to the other grains. (wheat, soybeans, corn, etc) What may be good growing conditions for cotton may be adverse to the other grains and visa versa.

LUMBER

LUMBER Futures and options are traded on the (CME) Chicago Mercantile Exchange. An account margin of $1700 controls 110,000 board feet of lumber worth about $27,000. One full point in lumber equates to $110.

Lumber's forty year low in the 1970’s was $94. It's all-time high was $493.50 after the Mt. St. Helens volcanic eruption blew out vast amounts of timberland. A $100 move in lumber over several months is typical. ($11,000 a contract) Limit moves up and down are a very common occurrence. The liquidity in lumber futures is a problem but tolerable. Market orders are sometimes necessary, but there is a big chance of slippage.

Lumber options are illiquid. They are hard to buy and sell. A series of limit moves in your direction will help you liquidate with a nice execution price and profit. Effectively using limit orders in lumber will solve the slippage problem, but makes entry and exits more challenging

Lumber prices can trend well since supply and demand are based on various long-term trends. These include U.S. housing demand and the supply trade agreements with Canada.

Short term trading is possible if you are nimble. Look for a five-dollar swings as an objective. ($550) If you get a limit move in your direction, you may want to get out of your futures contract. Reversals are common after big moves. However, if the move is supported by long term bottoms and major time cycles, you may want to hold on for what could be a big ride.

STRATEGY

Here's how I look for opportunities in the cotton and lumber markets: First I generate a TimeLine forecast that shows a strong move up or down in cotton or lumber. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there's always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, "high probability, low risk trades."

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders - and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

Good Trading!

posted by zzzzzzzzzzz at 2:00 AM

My Experiences Trading Live Cattle and Meat Commodity Futures Contracts and Options

Live Cattle, like corn is a great market for beginning commodity traders. The meats complex also includes Pork Bellies, Lean Hogs and Feeder Cattle. Here's some hints and kinks to get you off to a good start trading the meats!

LIVE CATTLE

Live Cattle, like corn, is a great market for beginners. The margins are low and the volatility is usually medium. An account margin of $1200 controls a 40,000 pound futures contract of about $30,000 in value. One full cent/pound of price movement is equal to $400.

The meat complex includes Live Cattle, Feeder Cattle, Lean Hogs, and the ever-popular Pork Bellies. The name, "Pork Bellies" may sound funny, but it's actually frozen bacon. The meat complex has a lot of similarities amongst its members. However, at times their differences and situations can be very different.

Live Cattle futures is the most liquid and actively traded of the meat complex. ("active and liquid" go hand in hand) Live cattle have a dominant ten-year cycle. This rhythm has occurred like clockwork over the decades. Many major lows have occurred when this cycle was due to bottom. This past year the cycle has flipped phase to a high rather than a low, which is indicative of a major top forming. Indeed, cattle has set major historic highs on this ten year cycle. Many lows and highs occur in April-May time frame. Keep an eye on the market during this time period.

Cattle put and call options are generally fairly priced. Usually the CME (Chicago Mercantile Exchange) has the option bid and offer quotes posted. This is invaluable to prevent flying blind during entries and exits. Buying options "at the market" is a recipe for poor fills in most any option market. However, these option quotes are not updated to the minute. It's best to check them by having the broker call the floor first, before placing an order.

Position traders can usually look for five to ten cent moves in cattle. This equates to $2,000- $4,000 a contract. The live cattle market once sold as low as 34 cents / pound in the 1970’s. Just recently the market traded as high as $1.04 / pound when mad cow disease and bird flu threatened the cattle stock.

A big percentage of meat futures contracts and option trading originates from commercial business hedging and not speculation. The unwinding of these hedges can greatly influence the market. Hedging is when a producer sells a futures contract to lock in his delivery price for the future. He is simply looking to get a far price for his goods and doesn't want to worry about further price swings. The speculators take on this risk hoping to buy and sell these contracts at a profit.

FEEDER CATTLE

Feeder Cattle trade much like Live Cattle. Feeders are basically what the name implies; cattle on feed. The price of feed will make a difference in the price of the Feeder Cattle futures. If the price of grains skyrockets, it may be too expensive to keep feeding cattle. That would mean a rancher might be forced to sell off a larger part of his herd than he would have in more normal conditions. This will create a price drop if many ranchers choose this remedy. A speculator could profit from this price drop by selling cattle futures short.

The Feeder Cattle futures contract is less liquid than Live Cattle futures. The Feeder contract size is larger by ten thousand pounds. This equates to $100 more per full point move. (one cent = one full point) Feeder Cattle usually make larger movements than Live Cattle. The price low in the 1970’s for Feeders was at 36 cents while the high in 2006 was $1.20 a pound. This was 16 cents higher than Live Cattle Futures.

LEAN HOGS

Lean Hog futures and options are very liquid. Call and put options can be purchased cheaply at times, or at least for fair prices. Lean hog futures often make good price moves. Live Hog cash margin requirements are about the same as Live Cattle, about $1200. A one cent move equates to $400.

If you ever buy lean hogs in the low 20-cent level or sell them in the high 85-cent level, you are trading at their historic trading ranges. These prices have historically been great places to accumulate positions for a long haul trade. Sometimes the Lean Hog market has doubled in a relatively short period of time. Highs often occur in April and May; lows in the late fall.

PORK BELLIES

Pork Belly Futures are the most illiquid, volatile, and difficult to trade. However, you can make a lot of money if you're right. This is not a market for the unaware. It's very common to see Pork Belly futures go limit up and down in the same day. Account margin is $1600 to control a $30,000 futures contract. This is similar to hogs and cattle futures.

There are no Pork Belly contracts available from September to January. Therefore there are very large fluctuations when the August contract expires and the February becomes the next active month. Major highs and lows often occur around this time period. Pork Belly options are completely illiquid and there are few traded. Few option strikes are available and open interest is practically non-existent. Trade these options at your own risk.

STRATEGY

Here's how I look for opportunities in the meat markets: First I generate a TimeLine forecast that shows a strong move up or down in a particular meat. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there's always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, "high probability, low risk trades."

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders - and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

Good Trading!
Live Cattle, like corn is a great market for beginning commodity traders. The meats complex also includes Pork Bellies, Lean Hogs and Feeder Cattle. Here's some hints and kinks to get you off to a good start trading the meats!

LIVE CATTLE

Live Cattle, like corn, is a great market for beginners. The margins are low and the volatility is usually medium. An account margin of $1200 controls a 40,000 pound futures contract of about $30,000 in value. One full cent/pound of price movement is equal to $400.

The meat complex includes Live Cattle, Feeder Cattle, Lean Hogs, and the ever-popular Pork Bellies. The name, "Pork Bellies" may sound funny, but it's actually frozen bacon. The meat complex has a lot of similarities amongst its members. However, at times their differences and situations can be very different.

Live Cattle futures is the most liquid and actively traded of the meat complex. ("active and liquid" go hand in hand) Live cattle have a dominant ten-year cycle. This rhythm has occurred like clockwork over the decades. Many major lows have occurred when this cycle was due to bottom. This past year the cycle has flipped phase to a high rather than a low, which is indicative of a major top forming. Indeed, cattle has set major historic highs on this ten year cycle. Many lows and highs occur in April-May time frame. Keep an eye on the market during this time period.

Cattle put and call options are generally fairly priced. Usually the CME (Chicago Mercantile Exchange) has the option bid and offer quotes posted. This is invaluable to prevent flying blind during entries and exits. Buying options "at the market" is a recipe for poor fills in most any option market. However, these option quotes are not updated to the minute. It's best to check them by having the broker call the floor first, before placing an order.

Position traders can usually look for five to ten cent moves in cattle. This equates to $2,000- $4,000 a contract. The live cattle market once sold as low as 34 cents / pound in the 1970’s. Just recently the market traded as high as $1.04 / pound when mad cow disease and bird flu threatened the cattle stock.

A big percentage of meat futures contracts and option trading originates from commercial business hedging and not speculation. The unwinding of these hedges can greatly influence the market. Hedging is when a producer sells a futures contract to lock in his delivery price for the future. He is simply looking to get a far price for his goods and doesn't want to worry about further price swings. The speculators take on this risk hoping to buy and sell these contracts at a profit.

FEEDER CATTLE

Feeder Cattle trade much like Live Cattle. Feeders are basically what the name implies; cattle on feed. The price of feed will make a difference in the price of the Feeder Cattle futures. If the price of grains skyrockets, it may be too expensive to keep feeding cattle. That would mean a rancher might be forced to sell off a larger part of his herd than he would have in more normal conditions. This will create a price drop if many ranchers choose this remedy. A speculator could profit from this price drop by selling cattle futures short.

The Feeder Cattle futures contract is less liquid than Live Cattle futures. The Feeder contract size is larger by ten thousand pounds. This equates to $100 more per full point move. (one cent = one full point) Feeder Cattle usually make larger movements than Live Cattle. The price low in the 1970’s for Feeders was at 36 cents while the high in 2006 was $1.20 a pound. This was 16 cents higher than Live Cattle Futures.

LEAN HOGS

Lean Hog futures and options are very liquid. Call and put options can be purchased cheaply at times, or at least for fair prices. Lean hog futures often make good price moves. Live Hog cash margin requirements are about the same as Live Cattle, about $1200. A one cent move equates to $400.

If you ever buy lean hogs in the low 20-cent level or sell them in the high 85-cent level, you are trading at their historic trading ranges. These prices have historically been great places to accumulate positions for a long haul trade. Sometimes the Lean Hog market has doubled in a relatively short period of time. Highs often occur in April and May; lows in the late fall.

PORK BELLIES

Pork Belly Futures are the most illiquid, volatile, and difficult to trade. However, you can make a lot of money if you're right. This is not a market for the unaware. It's very common to see Pork Belly futures go limit up and down in the same day. Account margin is $1600 to control a $30,000 futures contract. This is similar to hogs and cattle futures.

There are no Pork Belly contracts available from September to January. Therefore there are very large fluctuations when the August contract expires and the February becomes the next active month. Major highs and lows often occur around this time period. Pork Belly options are completely illiquid and there are few traded. Few option strikes are available and open interest is practically non-existent. Trade these options at your own risk.

STRATEGY

Here's how I look for opportunities in the meat markets: First I generate a TimeLine forecast that shows a strong move up or down in a particular meat. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there's always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, "high probability, low risk trades."

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders - and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

Good Trading!

posted by zzzzzzzzzzz at 2:00 AM