Posts Tagged ‘commodities’
How To Survive As A Day Trader
Anyone who is in the day trading business for sometime now would readily agree that sticking with two to three day trading styles that work is advantageous. This is among the beneficial practices that ought to be implemented by those preferring simpler trading yet with ideal returns. Let’s be honest – don’t we all wish we just had some type of trading robot to do all the work for us? The sad fact is that most traders do everything manually. Being able to master one single technique that has historically worked for the trader seems to be practical.
Beneficial for the trader is in the mastery and concentration on style and the ongoing trade. Jacks of all trades do not have a good place in this kind of business. These people who frequently shift from one trading style to another normally face lots of losses due to untimely decisions that are brought by the lack of proficiency in the styles. A market that is erratic doesn’t show mercy to people who commit unwarranted mistakes and people who do not have specific systems are more likely to get victimized by such mistakes. A person who has a very specific and high level expertise tends to be better paid than a person who has a very broad understanding with no real expertise.
If a trader would only dedicate his learning on a certain style of trading, he will learn all the necessary principles that he needs. Both the trader and system will develop in a similar manner. Don’t just go out there and always try to get the best penny stocks you see. If you do that you are not better than folks hunting for discounts at the supermarket. Style comes in favour of the businessman, as he constantly concentrates on the business. If one is only using the style he is familiar with he no longer has to bother on dividing attention between the fast-paced changes in the trade and the decisions on what move to take next. For other critical aspects of trading like money or risk management, develop specific styles. This business is not just about being able to build up a style or two and earning money along the process but also optimizing the power to earn more or to lessen the unnecessary risks encountered. Traders with the most success have learned each facet of trading without wasting time on those aspects that aren’t very significant.
Knowing money management for example will help the trader allocate his accounts to those shares that are most lucrative after quickly evaluating the profits against the risks involved. There is an equilibrium achieved between risk and fear when using risk management. Many things must be learned pertaining to day trading, and choosing a style is one of them. Have a look at my trading robot review if you want to know how to automate your trading using software tools.
{The End of the Corn Mania – Administered by the Bullish Last Engulfing Pattern}
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We’ve heard about the The Tulip Bulb Mania and the South Sea Mania. We know the way they ended. The dramatic rise in stock prices since 1995 was a mania, too. The advance took prices to a new all-time high in year 2000 and then to a reaction high in October 2007, from which level they have been falling almost without interference falling ever since. If it is true that all price manias collapse and end at a point which is as low as, or lower than, the point at which they began, then it necessarily follows that the Dow Jones Industrials Average will decline to its level in 1995 – say 4000.
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It can be argued that the run-up in Corn prices beginning in October 2007 and came to an end in June 2008 was a mania, too. It was propelled at least in part by an environmentalist-generated program which was fraudulent from its inception: the the mad rush to bring volume production of Corn-based ethanol on line. The product contains less energy than the amount of energy which is required to produce it; and, ironically, the energy which is necessary to make it is largely petroleum-derived. So, from the from the inception, the whole program was broadly hyped on a false premise. The whole thing was a hoax, pure and simple. It had the highly undesirable effect of raising havoc with the worldwide supply-demand and cost equations for Corn, whose principal uses have always been as people-food and animal feed.
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Now the inevitable result has come to pass. The mania has collapsed; and indeed Corn prices are lower now than they were at the time the mania began. It was a foregone conclusion that it would end this way.
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When we study the Weekly chart of Corn for 2007-2008-2009 (to date), we see a vertical rise in prices in 2008 – called a “blowoff” rise – which is shown as tall white Candlestick bars for the weeks of June 6 and June 13, followed by a black bar for the following week (was that a “hiccup” or an “uh-oh” week?) and then, for the week of June 27, a tall white bar which completely surroundsthe the “hiccup” week bar. That tall white bar is a classically perfect “Bullish Last Engulfing” pattern, equallyin consideration of its placement at the extreme end of a long-established uptrend and in terms of its design. The Bullish Last Engulfing Pattern is strongly bearish, in spite of its name. Any investor who goes or remains Long after seeing that pattern, believing that the strong uptrend willprobably continue, takes an undue financial risk. Indeed, in this case prices started to fall immediately after the emergence of the Bullish Last Engulfing pattern. They fell almost without interruption for several months, until December 2008, stopping at a point at which prices were about 80 cents lower than those which were in effect at the beginning of the mania in October 2007.
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So, there are two morals to this story: 1) here is fresh evidence that prices in a financial mania always retrace to a level which is at least as low as the point at which the mania started; and 2) the Candlestick Bullish Last Engulfing Pattern is a bearish predictor that has to be taken seriously.
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http://www.commoditiesjunction.com
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{Every Serious Investor Should Learn Commodity Trading}
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If you or I choose to invest in stock market indexes, or in individual stocks themselves, we find that we are investing in ephemeral things or in pieces of paper which identify a larger reality. You and I can’t very well boil, a stock index. Such an invention has a life solely in the observer’s mind or on paper or on one’s computer screen. On the other hand, when you or I invest in Commodities, we enjoy control over goods which we use daily – staples including wheat, cocoa, sugar, beef, and cotton. The whole thing seems much more “personal.”
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A major difference between trading stock indexes and stocks (on the one hand)and the Commodities (on the other) is that stock and stock index trading is mostly driven by the investor’s mood, while Commodities trading is principally driven by the ever-present law of supply and demand. This, in turn, depends upon weather patterns, air termperatures which have been forecast, carryover of last year’s harvest, amount of acreage which has been planted, animal birthing levels, cost of animal feed, historical slaughter rates, availability of labor and transportation,cost of fuel, variations in worldwide consumption, and general economic conditions.
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Because emotional input applies less to trading in Commodities than it does to trading in stocks, it follows that we can more closely forecast the next direction of Commodities prices. We can learn to interpret the formations of the seesaw-like waves of prices and of particular Indicators which we read together with price information so that we can quite precisely forecast the next direction of prices – particularly in the immediate future, such as the very next day.
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Whether we think that prices will go up – or go down – it doesn’t make any difference. We can place our bet either way. Naturally, we would prefer to make the correct choice !
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All of us have heard tales of woe having to do with a load of soybeans being unceremoniously dumped at the trader’s front yard. That conceivably could occur, but a trader would really have to work at it. A bit of ordinary prudence should serve to keep any reasonable person away from that risk. And, if you stick to buying options and avoid getting involved in contracts, at least while you learn the ropes, it it would be impossible for it to happen. The beautiful part of buying options is that you control all of the action. When you put your money on the table, all the cards are yours. All the while,your maximum total risk is the consideration which you paid when you acquired the option. You have the right, but not the obligation, to perform. The option seller who sold you the option is saddled with all of the risk.
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Here’s the really great part of Commodity trading: Before you begin to think about committing real money, you can reduce your investment risk to zero by paper-trading to your heart’s content while you learn the system. What a concept! Learn something new, fascinating, and filled with profit potential without risking even a dime.
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And, really, this is a fascinating world. It is enormously satisfying to make a wager on the direction of the market price of a Commodity – even a paper bet! – and observe it go in the direction you wanted.
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You should not attempt to do this haphazardly. We know very well that prices do move in waves; that the waves move in known patterns; and that the patterns are repetitive and are roughly predictable in size and direction as the days pass. We do not simply stick a wet thumb in the passing breeze and guess at it; we make our moves having the benefit of a basic understanding of Candlestick price patterns and of the many Indicators which reveal clues regarding the next likely direction of prices. So, it really isn’t guesswork at all. We deal in probabilities, with knowledge of these tools right alongside us, guiding us to investment decisions which are sensible. It’s a gathering-in of all of the evidence before funds are placed at risk.
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Over a course of years of trading, I have found that trading Commodities is truly an enjoyable intellectual exercise that, when done conservatively and smartly, can be very profitable, at a risk level which is completely controllable by the trader.
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http://www.CommoditiesJunction.com/
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