Currency Futures Trading

October 31st, 2010 admin

 

Currency Futures, also known as foreign exchange trading, is the concept of changing one currency for another. This futures trading is based on selling these currencies on a specified date in the future for a set price. This is usually based on the US Dollar and, as such, your currencies will be based on the exchange rate of the dollar. This can be a great reason to get involved in currency trading, but with the exchange rate of the dollar slipping it could end up costing you a bit more than you would have expected just a few short years ago.

The profit from currency futures is usually paid in full on the date of the contract. You will also find that it is usually paid in the currency you are trading at the time the contract is handed in as well. This means that if you are trading in Yen, when the contract closes and is handed in you will be paid in Yen. However, there is a great option that allows you to cancel out your contract before the end and take the profit before hand. This is a fantastic way of making a decent profit.

Currency futures trading started in the early 1970’s with the Chicago Mercantile Exchange. This happened shortly, only a few months actually, after the system of fixed exchange rates and the gold standard was abandoned. A lot of commodities trades were not able to gain access to the exchange markets and believed that the changes in the currency market that were about to happen would be significant. So, they created the International monetary Market and, thus, currency exchanging was born. Ever since then, the IMM has been a power of currency exchanging with upwards of 750,000 plus contracts daily.

Ever since the Internet has become so popular, currency futures have seen an uprise in the electronically traded options. Since it has become so popular, the currency exchange rate has doubled in profit in the last decade. But, with the currency rates dropping every day and the financial crisis that is happening all over the world, it is becoming a bit harder to really make much profit if you don’t have a decent amount of money to invest in the currency you want to trade in. This has caused a lot of issues with some people, and they have started to look down on the whole currency exchange in general.

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Futures Trading Software : Important Tool In Futures Trading

October 20th, 2010 admin

 

Futures trading is of course one very good investment that you may explore as a means to make money or earn a living too. Nevertheless, it really is significant to note from the very beginning that even though you may hit massive time in trading – whether you might be trading commodities or currencies, high risk is normally involved.

With certain investments similar to futures trading or exchange, it really is then quite important that you know the investment prior to even trying to risk your hard-earned cash on it. While futures trading does not necessarily mean having the commodities on hand for trading, but as opposed to trading futures contracts, it still entails great risks and that, you might have to be well ready to tackle its challenges.

One of the preparations that you might have to pay attention to is your trading tools. Aside from being of great aid in predicting and analyzing trends, having a futures trading software for example, will help you make trading easy and convenient.

Naturally, when you need to do your trading on the web, which is now a extremely convenient approach to do trading – whether you trade currencies or commodities, it helps a good deal to have a futures trading software or system that permits you to automate some of your trading tasks. This will lighten your load aside from the convenience of trading on-line too.

Learning the various tools in predicting future prices, which is obviously a key consideration in futures trading, can be a very good beginning in making excellent predictions, and in analyzing the trends correctly most of the time.

It’s important to note that even how prepared you’re for the said investment, losing is inevitable, and you’ll be able to never say you are able to prevent losing. In this risky business, losing is part of the game but needless to say, the key to making excellent profits in this kind of venture is to minimize these loses and learning the way to prevent losing more.

Cash management, discipline and self-control are among the things that you also have to keep in mind to be successful in futures trading, and naturally, the tools and your correct market analysis can also be a huge part of your success in trading.

Charting for example, is yet another method that permits you to generate excellent predictions for your futures trading. Indeed, predicting future prices is quite hard and risky, but with the appropriate tools and strategies, you will be able to pull off a good trading career along with a profitable venture also.

Having a very good futures trading software, you may also do trading by yourself, with out having a broker, but naturally, it does not mean it is possible to totally steer clear of losses. If you are ready to challenge trading and make cash from it, then go ahead. Find out everything initial, from the tools to your own technique so you won’t regret later. 

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Commodities – Funds

September 30th, 2010 admin

 

Investors come in all varieties. Some are bold, if they have capital to lose or not. Some are cautious and consider capital preservation, with the hope of some small return over a long period, as the paramount value. Somewhere in between, but closer to the latter probably is the area for most fund investors.

Serious, regular investment is the arena of people who have resources and can have the time to reverse the act of frequently. Most traders do not have the time, expertise, nor the venture capital and the market regularly. To such people, mutual funds – in particular, mutual funds – is the perfect solution.

But stocks, bonds and other fixed income instruments are not the only items worth investing in. True enough, for a long time, the stock market performs better on average than most other investments. Somewhere in the range of 12% annual return, depending on the selected period. But there are shorter periods, extending for several years sometimes, when other investments outperform significantly. In recent years, that’s raw materials. As a result, commodity funds have risen in popularity.

Since the beginning of 2000, commodities have increased significantly. Gold has risen over 25% and oil has nearly doubled. In the same period, commodity funds have seen double-digit return.

Pimco, for example, has about $ 12 billion under management in their commodity fund and from mid 2004 to mid 2005 garnered a return of 14.5 5%. Their next closest competitor, Oppenheimer, with about $ 1.7 77 billion under management, earned 19.5 5% during the same per

Generally stocks and commodities tend to move in opposite directions. This was the period of 1974-2000, when the Dow Jones Industrial Average rose, while the DJ AIG Commodity Index fell. But the recent years have seen a reversal of the historical trend.

Nobody can predict how long it will last. Financial advisers always say: “Past performance is no indicator of future profits.” But in the last year that the S & P 500 fell 0.5%, while the Dow Commodity Index rose 6.5%. Over the longer period from May 2000, AIG Commodity Index rose 47% vs. a 15% decline for the Standard & Poor’s 500-stock index, if reinvested dividends.

This could end anytime, but due to pressure on oil and other energy prices – which affects the price of everything else – it seems unlikely to happen soon. Experts seem to agree, as most commodity funds are not selling short. Selling short would mean that speculators are betting on a decline in prices.

However, one must look under the covers a little bit. Commodity funds often have considerable investment in the items that you might not normally consider a commodity – like the United States Treasury securities. Pimco, for example, has more than 90% of its assets in T’s.

But technically, even financial instruments seems like commodities in some markets when they trade through futures contracts on some of the exchanges. Not only the instruments themselves sell as futures, but the indices that track the instruments do too.

As a commodity fund may have investments in commodities directly, or futures contracts that cover them, or even indexes that track them. The latter may be three steps removed from something you can see and touch, but profits are real.

Investing in them is an excellent way to diversify your portfolio and not just depend on stocks or bonds.

 

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Futures And Commodities – Fundamental Analysis

September 22nd, 2010 admin

Fundamental analysis, in essence, comes down to studying the factors affecting supply and demand. When supply is great relative to demand, prices tend to fall. When demand is large relative to supply, the price of a commodity rises. But beyond those simple and obvious principles, there’s a world of complexity. What, after all, affects supply and what influences demand?

Some general factors affect all commodity prices. Taxes, inflationary pressures and money supply, political events, weather, transportation costs and technological changes all play a part along with a dozen other large-scale causes.

Beyond those general factors, the detailed answers depend heavily on which commodity a trader researches.

‘Softs’ – sugar, cocoa, coffee and a few others – are agricultural products in demand all over the world by millions. One of the reasons they make excellent commodities. As such, their demand is affected mostly by price with some minor influence from cultural factors. Sugar demand is suppressed slightly, for example, by newspaper horror stories about the alleged evils of consumption and obesity. Supply, on the other hand, is influenced by weather, soil quality and moisture levels, transportation costs, insect population changes, etc.

Energies, such as crude oil and natural gas, on the other hand show almost the opposite profile. Supply grows very slowly, owing to technological and political factors, while demand has been rising for decades with no end in sight. For example, China’s economy is growing as is India’s. In both cases, this produces a heavy demand for energy to build new buildings, increase manufacturing plants, heat and power homes and a hundred other uses.

Fortunately, no matter what commodity an investor considers, there is a host of data sources available.

Crop and weather reports from the USDA (U.S. Dept of Agriculture), available directly or through your broker, are just one example of a major source of information about softs or grains.

Mining levels, information about new sources of gold, silver, platinum and a dozen other factors affecting supply are similarly easy to obtain, often through the exchanges themselves. (See http://www.thebulliondesk.com/ or http://www.amm.com/ as just two examples.

One could hardly avoid hearing news about oil, which is discussed endlessly on the front pages of newspapers. Behind the scenes things get even more interesting. Offshore Engineer, for example, is just one excellent source of information about offshore oil news. (See http://www.oilonline.com/oe/)

Coffee is the second most widely traded commodity, after oil. That tells you something about the world. It’s grown in a dozen countries and has been a popular product for over 200 years. Recently, however, prices have been depressed owing to large supplies, even though demand remains strong.

Coffee trading is here to stay, though. For data see the International Coffee Organization website: http://www.ico.org/ and in particular the statistics page at http://dev.ico.org/trade_statistics.asp. For current prices see: http://dev.ico.org/prices/pr.htm

Fundamental analysis in commodities trading runs counter to one basic difference with the stock market, however. Stock trading professionals trade every day, but the average investor tends to take a slightly longer view. In commodities trading, almost all investors trade short term. Supplement any fundamental analysis with technical analysis to get the best possible chance for profits.

 

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Futures & Commodity – Trend Trading

September 16th, 2010 admin

 

You will find several principles which need to be component of every futures trading method. They’re:

 

1) Make commodity trades by using the principal futures trend,

2) Liquidate your investment losers quickly,

3) Leave futures buying and selling profits add-up, and

4) Find out to control risk for any current market trade.

 

It is important that you ensure that their trading strategy includes all the futures trading elements listed above to be able to be a successful trader.

Trading using the commodity trend is relatesd to the decision of how to make a trade. It basically signifies to make product trades in the direction of the prevailing direction of the price movement.

Technical analysis of commodity price data has shown that price changes are primarily random with a small trend pattern component. This observation is extremely critical to traders wanting to pursue trading in a scientific manner. It indicates that an attempt to trade short-term futures patterns not based on the primary trend pattern are going to fail.

Effective commodity traders use a futures analysis technique that gives them a trading edge. This edge comes from the tendency of commodity price to move in a trending pattern. In the long time period you’ll be able to make money buying and selling with the trends. Thus, when prices are moving in an uoward direction, the trader should only buy. When prices are moving in a downward direction, the trader should only sell.

Although investing commodities together with the main futures development is well-known, traders violate it generally. Buyers are looking for market bargains so the dealer prefers to attempt to purchase at the bottom or market at the top of a product market prior to a new trend becomes established. Winning futures traders have learned to wait until a craze is confirmed, ahead of taking a position with the major development.

One of the alternative strategies to trend following is market predicting. This isn’t a recommended strategy to make use of to find out rather or not to enter a trade. Several traders have concluded that the way to be successful at futures buying and selling is to discover the way to predict where a market will move to in the future. There’s an abundance of men and women willing to promote you their latest market predictions. Numerous futures traders wish to believe that predicting current market tops and bottoms is the most effective technique to use for investing markets. Once a market is trending, then the trader can use product evaluation to find out a probable price objective and the approximate time when the futures will reach the probable price objective. Not till the industry trend is basically determined!

Buying and selling together with the futures development is hard to do due to the fact the commodity traders logical protective loss stop will probably be farther away, potentially causing a larger loss if the trader is wrong. This is a very good example of why so few merchants are successful. The dealer simply won’t be patient and wait till they have in fact confirmed the markets trend.

Remember that the futures investor can define trend only in relation to a particular buying and selling time frame. Whenever you decide the trend, it must relate towards the time frame you are investing that specific market. If you might be online day dealing, you would not be utilizing the weekly futures development to find out the industry trend for the next 20 hours. So an essential element of any product investing plan is deciding what current market time frame to utilize for making trend trading decisions.

If you trade in the direction of the trend, you will be truly following the comodity markets rather than predicting the markets. Most unsuccessful traders spend their entire careers looking for better methods to predict the commodity markets ahead of having truly confirmed the trend. Developing the discipline to measure trends employing intermediate to long-term time frames and trading in the direction of your futures trend, will provide the trader with the very best opportunity to become a prosperous commodity and futures investor. 

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Futures Trading Strategy – How to Trade Futures

September 11th, 2010 admin

 

Here are the three major types of futures trading strategies that the professionals use – trendline trading, cycle and seasonal trading.

Trendline Trading

What does trend line trading? Simply put, you’re looking to trade with the trend. Know the major market trends and ignore the ‘noise’ of the daily fluctuations. Markets tend to move in the direction of the trend over time, so trying to trade against the trend will be almost suicidal. Place stop loss below the trend line, and taking profits when the market is approaching the resistance line.

 

Cycle Trading

To trade cycles effectively, you must first find a market with reliable cycles. Reliable cycles of stock index futures contain 20-23 week cycles and a 14 day cycle. As for grain and livestock markets, the 9-11 month cycle could be a good guide, while for silver and gold markets, 28-day cycle. Interest rate futures follows a roughly 32-day cycle.

Avoid markets which are highly correlated, as this would put you at even greater risk than necessary, both markets would tend to move in the same direction. If your prediction is wrong, the losses you take would be on both fronts. Markets tend to follow similar basic cycles must be avoided.

Seasonal Trading

Seasonal trade can be one of the most successful trading methods. While other trading practices may have a strong theoretical backing, they have little empirical evidence of success. In contrast, the seasonal trading method has almost no theory to support it, but a tendency to perform the best empirically. This method assumes that certain markets have a tendency to peak or plumet at certain months of the year. This is especially true in the commodity markets, where prices can fluctuate with the seasons.

However, seasonal price trending is able to generate success in up to 80 percent in some markets. There are three main types of price trends: Seasonals in cash prices, futures prices, and futures spreads. Seasonal in cash prices tend to operate on a month-to-month basis. Seasonal in futures prices tend to operate on a week-to-week or a day-to-day basis because of the nature of futures, new futures are generated as the previous ends, and different contract months will reflect the different fundamentals . Seasonal in Futures Spreads primarily reflects the relationship between two different but related markets or between two different contract months in the same commodity.

 

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E-Mini Futures Trading – Top 4 worst times of trading

September 6th, 2010 admin

 

E-mini trading can be a very time-consuming occupation. The markets are open almost 24 hours a day and traders have access to the markets moving at all times. The diversity of instruments available for trade may make it difficult to walk away from the computer and focusing energy elsewhere.

The electronic markets in today’s E-mini futures allow traders to buy and sell around the clock. This freedom of e-mini futures are often viewed as an advantage over other trading partners instrument as traditional warehouses. This may be true, but with freedom comes the disadvantages of a 24 hour market. So what is the best time to stay out of the e-mini markets?

 

1 4:15 ET – 02:30 ET

Known as the After Hours session of the period immediately after the U.S. Market is closed can be extremely slow trading meant. Low levels of participation often implies that the market will not move a tick for several hours. The other side of the low volume is as important support and resistance levels where you would normally expect to see high participation can be cut without much of a fight. Moves that occur during this period are best suited for traders who are engaged and trade multiple markets.

 

2 9:30 ET – 10:00 AM EST

AS a profitable e-mini trader your job is to rely on high probability trading set ups. Technical analysis and trend identification are important aspects in making successful trading decisions. The first 30 minutes of the trading day is driven by market orders. Individuals placing these transactions often have large stop losses in place and are less concerned with the actual fill levels and more worried about missing a big move. Technical level are often ignored during this early period blitz. Save yourself commissions and focus on identifying the trend for the day.

 

3 11:30 ET – 1:15 ET

The East Coast lunch may prove to be very slow trading. Traders are better off taking some time away from your computer so that they can come back relaxed and refreshed for the afternoon peak.

 

4. 3:00 ET – 4 PM EST

The final hour of trade is an extreme version of the volatility seen in the first 30 minutes. Companies looking to close their positions as time is approaching and orders fills are less and less solid. Extreme price swings are not uncommon, and inexperienced traders can familiarize themselves with the very problematic spots, if they start acting during the last hour.

Do yourself a favor and work to avoid e-mini trading at these times. You can not see an immediate impact on the bottom line, but over time you will save money on commissions and failed trades by waiting for intelligent market participation.

 

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Commodities – Financial Indexes

August 31st, 2010 admin

 

Stocks and bonds are not the sort of thing a beginning investor usually think of as a commodity. Even to a lesser extent, they show a statistical measure of changes in their prices similar to gold, wheat or oil. But because stocks and bonds (and the index measuring price changes), trading in the form of futures and options can be traded like other goods.

While oil remains the most actively traded physical goods, the financial futures market today is the largest of all contracts traded. One of the most popular is the contract for the Standard & Poor’s 500 Index, S & P 500

As, so to say, the gold standard of indices S & P gives traders a broad view on the stock market as a whole. The companies included in the S & P 500 represents 80% of the total market capitalization – the top 40 stocks in the S & P 500 represents 50% of its total.

This means that traders can be confident that there is no liquidity problem, as sometimes happens with other products.

This also means that risk is easier to assess. The tools available to measure and predict the S & P 500 are more reliable as predicting the stock price is much simpler than that of the commodities. Easier, but certainly not easy. Just as an example, the stocks in the S & P 500 reliably offered the highest return over a 30-year period for investments, around 12% depending on the selected area.

Stock prices can definitely be volatile, and large single-day price drops have happened several times. But indexes typically are designed to move to a lesser extent and less quickly than other prices. The idea to use a broad index is just to smooth out the bumps individual stocks, to assess the direction of the market as a whole.

But with a lower risk and greater predictability, traders still enjoy the other benefits associated with using futures and options as trading vehicles. Margin percentages in the 5-7% range, is so high leverage is still available, as it is with other commodities futures and options contracts.

Trade in commodities is often very short, with day trading the norm. But with index trading, investors can benefit from these sharp turns, and still take a long time horizon view, as they would with ordinary stock investing.

For example, a common trading strategy is the ‘rollover’. This technique makes it possible for traders to take a long position in a futures contract, when – as expiration approaches – transfer position to contract with an expiration date further out in the future.

This “spread” strategy makes it possible to take advantage of price differentials and low commissions, while monitoring the settlement date. It is executed when traders predict that prices will soon go in the desired direction, where “soon” is just after the expiration date.

S & P index futures traded on CME (Chicago Mercantile Exchange), and there’s even an S & P 500 ‘E-mini “contract available, which carries a smaller commitment – one fifth the standard contract. Trading unit is $ 50 when S & P 500 Index. Trading unit of the standard contract is $ 250 times S & P 500. In addition, because it seems everything electronically, but open outcry or pit trading, opening hours are almost around the clock.

For current prices and specific contracts, see the CME website http: www.cme.com . 

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Commodities – Commodities In Your Portfolio

August 26th, 2010 admin

 

For more than thirty years – roughly 1974-2004 – S & P 500 trended upward, with the CRB (Commodity Research Bureau) Trending down. The CRB is analogous to the Dow Jones Index – a mathematical combination of commodity prices and their movements. It is composed of the weighted average price of oil, coffee, gold, wheat, etc. But many savvy investors continue to trade in goods, and many of them are doing very well. Why is that?

The reason is that the indexes do not tell the whole story. General trends do not show the detailed, day-to-day price movements, many traders taking advantage of this situation and making a profit. Indeed, at the end of the day what counts is the difference between the prices of buying and selling, not the absolute prices.

Another reason is the historical role played in commodities trading strategies. Since commodities and stock prices tend to move in opposite directions,commodities are considered ingredients in many intelligent hedging strategies.

Possibly part of the explanation lies in the Contrarian attitude many investors. A view of the runway argue, reasonably, and with historical data support, that you can not make money by following the crowd. To profit you must do what the other guy is not. This is true for this type of investment, and also across different investments.

This is also true that a well diversified portfolio, some of just about anything: Stocks, bonds, cash and – in some cases – commodities. As part of an overall hedging strategy, and diversification of both risks and benefits, it is wise to have a bit of everything. As bonds move down, such as commodities go up. Inflation tends to work on them in opposite directions.

Finally, it is only an empirically observable fact that many commodities have been rising for many years. Oil is probably the most remarkable example of the precious metals are the typical alleged loser. ‘Loser’ is actually a misnomer, though. The price of gold has peaked almost 30 years ago, but fell sharply and has been stable throughout most of this period but has trended up strongly the last few years, rising to over 40% since 2003.

Some say that the price for gold will take some time to come. Recital of the latest views of the Federal Reserve on inflation, there may well be true. As with all investments, no one can be sure. If they could, it would not be called speculation.

This much is a good bet, however. The world will continue to consume wheat, oil, gold, coffee and other common materials. Another truism is that some of those who can not be completed and the more you extract the harder it is to get what remains.

This is certainly true of gold, but with national governments in charge of the biggest stores and a tendency to liquidate them will put the prices of gold under continuing pressure for some time to come. Canada, for example, have eliminated horded gold over the period 1980-2003.

Oil is also likely to be more difficult to recover. Recovery of North Sea oil peaked several years ago and has been declining since. Until and unless a radical new technology comes into play, or environmental policy change, the rate of supply is probably not going to increase significantly. Meanwhile, demand continues to rise, particularly from China.

All these factors tend to bode well for particular commodities as a part of your portfolio at least in the form of ETFs (Exchange Traded Funds). Other mutual funds that focus on raw materials are available, as well. And there is an advantage for these investments. Some have a tendency to move in the direction of stocks, not the opposite to them.

 

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Investing in Futures Trading

August 18th, 2010 admin

 

Futures Trading can be an attractive investment option for some people. This is a type of investment where investors try to take advantage of trading futures contracts. These are agreements made by the producers of a product with a sales representative who represents an obligation to deliver a certain quantity of a particular product for some time in the future. The commodity futures trading which may include grains such as wheat, maize to other products such as timber, livestock, cattle, coffee and even orange juice. There are also futures contracts for precious metals like gold, silver and platinum.

What makes futures trading very attractive is the high level of investment leverage, that it provides. Investors can invest as little as ten percent of a futures contract value to be able to buy it. This allows investors to trade futures contracts using less investment capital to trade higher valued contracts.

Futures contracts are generally standardized quantities of the goods which they involve. For example, if an investor holds a future contract for wheat, he usually holds a value worth 5,000 bushels. Trading the contract would be dealing based on the value of the 5,000 bushels of wheat.

Futures require only a relatively small investment (usually ten percent of contract value, known as margin), investors should continue to think before they make or buy a futures contract. Novice traders should first try to determine that they can afford to buy such a contract. Traders should consider whether they have sufficient margin to cover the contract, and if they have what it takes to trade and deal a considerable move in the prices that may conflict with their position.

It is also important that new operators are trying a system of risk and reward to adopt when trading for a particular commodity. There are many factors that can affect the position of a trader in various futures contracts, since they may involve a variety of goods. Traders have a good idea on how to handle their position to make money in trading futures. A good way to do this is to establish a functioning stop loss on futures are traded. This simply means that investors establish a certain price range in which contracts can stop the trade in order to preserve the surplus from trade, or to minimize potential losses.

Beginner traders should also consider spreading their trade from a variety of materials instead of merely trading only one according to the concept do not put all your eggs in one basket. If you have capital to afford the five trading futures contracts, it would be wise to have contracts involve a variety of goods. This way the risk can be spread over a variety of commodities, this would provide a more or less stable position when one of the commodities value suffers a decline in price. As with only a single product in this case may significantly increase the potential losses.

Novice traders should just try to trade no more than five per cent of their trading capital on futures contracts. The reason for this is that you can also easily lose significant capital in futures trading. It is wise for traders to only invest the amount they are prepared to lose..

 

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