Author: A. Pablo
Source: articledashboard.com
One of the most important characteristics of the Forex markets is that they have the largest volume of trades per day among all the capital markets you can opt to trade. This characteristic along with it's high, Stock Day Trading, leverage and around the clock trading schedule makes Forex a very attractive activity with a huge profitability potential.The forex markets have an additional characteristic that makes them "easy" to trade compared, Stock Day Trading, to other markets. Very often they develop strong trends that seem to follow a repetitive pattern in all the different time, Stock Day Trading, frames you can use to analyze the market conditions.Ralph Nelson Elliot observed this patterns and after analyzing a great number of charts he discovered in the late 1920's that the, Stock Day Trading, markets move in a repetitive manner that is too far from being a simple chaotic behavior. He discovered that the markets move in cycles and that they reflect the mass psychology of the active elements participating in them, with characteristic "waves", Stock Day Trading, representing this active elements psychology in their daily encounters with the markets.Elliot not only discovered the repetitive nature of the markets cycles represented by the waves but he also realized that this patterns had a fractal nature. This means that the patterns not only repeated with time but that in a given fixed period of time the characteristic wave pattern would repeat at different time scales (days, hours, minutes).The Elliot wave pattern is divided into, Stock Day Trading, five constitutive waves: the first of the waves is called the impulsive wave. The fractal nature if this waves was evident to Elliot when he observed that in every impulsive wave he analyzed, when observed at a smaller time scale he would find the characteristic five waves of the pattern he had found and if he now looked at the impulsive wave of the smaller impulsive waves in an even smaller scale, Stock Day Trading, he would find again, Stock Day Trading, five ways, etc. Elliot waves are very important in Forex trading because considering the repetitive nature of this patterns you can make a pretty accurate forecast of what the markets will do next giving you a huge advantage over other forex traders without this great trading tool.
Saturday, October 3, 2009
Thursday, October 1, 2009
The Six Sure-fire Ways To Fail Trading Commodities, Part 5
Author: Thomas Cathey
Source: articledashboard.com
Actual trading events where things went very wrong - and, Stock Day Trading, how to avoid them The Six Sure-Fire Ways to Fail Trading Commodities:5) Load Up With Everything You Have in Your AccountWe've all read the same stuff about commodity trading money management...about how we should only risk 5-10% of our account one any single trading idea, etc. Much of the trading folklore is false, but this one idea is the truth.During the last 2006 gold commodity market run up, I sometimes chatted with commodity futures brokers about the anonymous results of their clients who traded their own accounts. No names, just results. There was one futures and option trader who stood out. He was right, Stock Day Trading, about the gold market. He hated buying way out-of-the-money inflated options on futures (for good reason) and stayed with futures contracts only, Stock Day Trading, . He was a brave soul who had about $100,000 to work with and held maybe 5 futures contracts for the long haul. As gold futures moved from the $500/oz area toward $650, he was making a good score. I was proud hearing of his ability to sit through the corrections and add more on the dips. He was up to about, Stock Day Trading, 12 futures contracts. His protective stops were down maybe 25 full points away from the action. His stops were safe at the time because the volatility was mild. His was a textbook campaign so far.Then came the day when the gold futures market took its first sharp dip and stopped him out. He made about $60,000 on the trade, but was angry he got stopped out. The gold market took off again to the upside. He lost his discipline and started buying breakouts. Gold futures contracts went into a nasty chopping range for a month as he bought futures most days and got stopped out for losses. He was livid. He then started buying larger and larger lots and moving his stops farther away. The market always figures a way to screw the majority at any one time and continued to take him out. In short order he gave back the $60K profit and some of his principal.This was his second warning to stop and pull, Stock Day Trading, the plug on himself, but he didn't get the message. The gold market had changed from a trending market to a chop. Finally he decided to change his tactics and join'em in the chop game. He started buying 20-lot futures in the middle of the night with stop loss orders a few dollars away. This wasn't his game and he lost again, dropping another $50K, Stock Day Trading, . The market started to trend up again as he added more new money to his account to buy the breakouts. The days were running out for this gold bull leg. Gold future contracts were sometimes having daily swings of $50. It was totally Jaws V.Then he decided he needed to buy gold call options to survive this intra-day and overnight volatility. He loaded up on strikes at 900 and 1000, far out-of-the-money. At about this time gold futures contracts finally made their top at over $700/oz as he correctly forecast in the beginning. He would have been up over $120K just by sitting tight. Since that time, gold futures have declined sharply into the low $530 range, Stock Day Trading, . His option account eroded to worthless. While holding call options, he had gotten stubborn and decided the market would not boot him out, no matter what. Does this sound familiar?What can we learn from this? He started out well, but unfortunately made a multitude of errors in the end. He had a fixed scenario, lost his discipline, traded too large for his account and bought far out-of-the-money, Stock Day Trading, gold options that were inflated in value. It's sad, really. The saddest part is that he was correct on the direction of the gold futures market! He KNEW gold was going up and had started buying futures contracts in the lower $500/oz zone. He was right as rain for several months and was doing fine. But the market changed from a trending, to a chopping, then finally to a bearish, Stock Day Trading, decline. This is quite normal in normal markets. Remember, Stock Day Trading, to always trade for a normal market! He was always looking for a classic gold-bug blow-off scenario. Sure it will happen again someday, but not often enough to risk money on it every time.SOLUTION:, Stock Day Trading, The moral of this story is back to our 5%-10% money management rule. ALL the bad things in this tale could have been greatly softened if he risked only 10% or less on any one trading idea. He would still be trading. It's no crime to get sloppy and lose our discipline. We are human and will always have trading issues. But an all-or-nothing attitude will sink us every time. (Read some of my lessons on "Win-Loss Ratios and Risk")Part Six of Seven Parts - Next!There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Source: articledashboard.com
Actual trading events where things went very wrong - and, Stock Day Trading, how to avoid them The Six Sure-Fire Ways to Fail Trading Commodities:5) Load Up With Everything You Have in Your AccountWe've all read the same stuff about commodity trading money management...about how we should only risk 5-10% of our account one any single trading idea, etc. Much of the trading folklore is false, but this one idea is the truth.During the last 2006 gold commodity market run up, I sometimes chatted with commodity futures brokers about the anonymous results of their clients who traded their own accounts. No names, just results. There was one futures and option trader who stood out. He was right, Stock Day Trading, about the gold market. He hated buying way out-of-the-money inflated options on futures (for good reason) and stayed with futures contracts only, Stock Day Trading, . He was a brave soul who had about $100,000 to work with and held maybe 5 futures contracts for the long haul. As gold futures moved from the $500/oz area toward $650, he was making a good score. I was proud hearing of his ability to sit through the corrections and add more on the dips. He was up to about, Stock Day Trading, 12 futures contracts. His protective stops were down maybe 25 full points away from the action. His stops were safe at the time because the volatility was mild. His was a textbook campaign so far.Then came the day when the gold futures market took its first sharp dip and stopped him out. He made about $60,000 on the trade, but was angry he got stopped out. The gold market took off again to the upside. He lost his discipline and started buying breakouts. Gold futures contracts went into a nasty chopping range for a month as he bought futures most days and got stopped out for losses. He was livid. He then started buying larger and larger lots and moving his stops farther away. The market always figures a way to screw the majority at any one time and continued to take him out. In short order he gave back the $60K profit and some of his principal.This was his second warning to stop and pull, Stock Day Trading, the plug on himself, but he didn't get the message. The gold market had changed from a trending market to a chop. Finally he decided to change his tactics and join'em in the chop game. He started buying 20-lot futures in the middle of the night with stop loss orders a few dollars away. This wasn't his game and he lost again, dropping another $50K, Stock Day Trading, . The market started to trend up again as he added more new money to his account to buy the breakouts. The days were running out for this gold bull leg. Gold future contracts were sometimes having daily swings of $50. It was totally Jaws V.Then he decided he needed to buy gold call options to survive this intra-day and overnight volatility. He loaded up on strikes at 900 and 1000, far out-of-the-money. At about this time gold futures contracts finally made their top at over $700/oz as he correctly forecast in the beginning. He would have been up over $120K just by sitting tight. Since that time, gold futures have declined sharply into the low $530 range, Stock Day Trading, . His option account eroded to worthless. While holding call options, he had gotten stubborn and decided the market would not boot him out, no matter what. Does this sound familiar?What can we learn from this? He started out well, but unfortunately made a multitude of errors in the end. He had a fixed scenario, lost his discipline, traded too large for his account and bought far out-of-the-money, Stock Day Trading, gold options that were inflated in value. It's sad, really. The saddest part is that he was correct on the direction of the gold futures market! He KNEW gold was going up and had started buying futures contracts in the lower $500/oz zone. He was right as rain for several months and was doing fine. But the market changed from a trending, to a chopping, then finally to a bearish, Stock Day Trading, decline. This is quite normal in normal markets. Remember, Stock Day Trading, to always trade for a normal market! He was always looking for a classic gold-bug blow-off scenario. Sure it will happen again someday, but not often enough to risk money on it every time.SOLUTION:, Stock Day Trading, The moral of this story is back to our 5%-10% money management rule. ALL the bad things in this tale could have been greatly softened if he risked only 10% or less on any one trading idea. He would still be trading. It's no crime to get sloppy and lose our discipline. We are human and will always have trading issues. But an all-or-nothing attitude will sink us every time. (Read some of my lessons on "Win-Loss Ratios and Risk")Part Six of Seven Parts - Next!There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
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