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Commodity Futures Trading

January 24, 2010 — 3:15 pm

What is commodity futures day-trading? Day-trading strategies are unique mechanical methods for entering a liquid commodity market early in the trading day and exiting some time later in the same day for a profit. Keith Fitschen has developed a family of day-trading strategies for the commodity markets that use the same basic market principle to gain systematic profits. The basic methodology uses multiple timeframe analysis to determine the likely trend for each market early in the trading day. When the likely trend is determined, entry is made in the direction of the trend. Trade exit is made in one of three ways: a stop loss point is hit (and the trade is a loss), a profit target point is hit (and the trade is a windfall profit), or the exit is made at the end of the trading day, usually for a profit.

Keith Fitschen’s commodity futures day trading work methods are used in the most liquid commodities in each group: for the grains, wheat and soybeans can be traded; for the softs, coffee can be traded; for the currencies, the yen and euro-currency can be traded; for the metals, copper, gold, and silver can be traded; for the energies, crude oil, heating oil, and reformulated gas can be traded; for the financials, 10-year notes can be traded;, and for the stock indices, the S&P 500, the Russell 2000, and the German DAX can be traded.

Traditionally, the problem with futures day-trading strategies has been transaction costs: slippage and commission. These costs severely ate into the profit that could be made on a day-trade. But with the advent of deep discount brokers, and electronic trading, commission for a trade can be less than $10, and slippage for a trade can be as low as one or two ticks. This evolution has caused a number of successful trading system designers to promote day-trading strategies. Keith Fitschen’s strategies are unique because they use the same market approach across all the groups, and because the strategy “works” on all the liquid commodities. This type of day-trading leads to an average profit-per-trade of about $150 across all the commodities, and a winning percentage of about 55 percent.

Normally, successful commodity futures trading have been sold to the public for $3,000, or more. This high bar to entry reduces the funds available for trading for a typical trader. Keith Fitschen’s day-trading strategies are offered for a monthly lease fee. This allows a trader to avoid the large upfront expense and spread it over a long period of time, while retaining the right to stop at any time. This means of gaining access to the trading signals is certainly an advantage over the traditional approach.

The writer John has done hard work to attain the required target. He has been studied in detail all about the trading system from different resources so that the stuff he writes is useful for those who read. You can find More useful resources on this site http://www.keithstrading.com and best trading systems

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Example Of Good Wins Or Loss Ratio That Fails With CFDs

January 2, 2010 — 7:31 am

Among questions that are often asked by costumers when choosing an adviser or system for the CFD trading is what profit of recommendations that they can expect being winners, as well as how much they should expect to make every month. These form a part of natural psychological zone, however and be a part of reason why many people fail as the traders.

In any region of speculation, no matter whether it is the stock market investment, spread betting, forex trading or else CFDs, if underlying system has small edge, it is just a first part of the potential success. Key to getting constant returns also lies with correct approach to win or loss ratio & not in expecting particular level of profits that will distort an underlying methodology. The CFD traders have an ability to go very long & short at will, trading online makes it very easy to adjust the stops as well as targets any time.

Consider this instance: CFD trader chooses system where there is supposedly proven history of 7 out of each 10 trades proving to be the winners. Idea can be that every trade has target return of three percent, and in case it is achieved then position is closed. In case the trade however shows loss of three percent, then expectation is it must recover and position is doubled, with hope of getting to parity or making 6% of gain. If market or else share movements were random sequence, then it will not make any of the difference where a person entered or exited. Overall, returns will over time will be not any gain and loss, but costs & spread on trading will result in the virtual definite loss in the due course (casino approach).

Having slight edge is not sufficient
In case this system had edge though, expectation may be that 3% of the target will possibly be hit 6 out of 10 times, therefore making it virtual winning approach. However the problem lies in a fact that though markets & shares have an short-term periods while there seems to be an random action, they will trade a range & trend strongly some other times – this is known as the regular irregularity that may seem paradox, however happens all time in the financial markets. The shares often move quickly in just one direction, this trend will continue for longer than expected that makes 2 problems.

First, taking 3% of profit on the trade might appear to be satisfactory, however it can be seen in the hindsight that profit was been taken very early, so in spite of achieving winning trade there is the element of regret, which was not taken. Next if position is showing loss, then trade must be in real world being deemed to be incorrect & closed out. However when using such system like this, by doubling up and averaging position on the losses, all what is achieved is increase in the risk –trader may be very lucky in a few situations, however 1 or 2 trades out of 10 might cause severe problems. In addition, there is an emotional capital, which is tied up in losing the trades.

This kind of system may make say six 3% of winners, two evens (where 1 position was doubled-up & returned to the parity) and two 10% of losers. Here overall, loss will be of 2%, in spite of good win or loss ratio, this is clearly dangerous method to play markets, however many traders operate precisely in that particular way.

Improving risk or reward
First point is setting a stop loss on every trade as well as stick to that and doubling up will just double an risk, which is fine in case there is one more system signal who reinforces an first trade, however generally that is not a case. Problem that then takes place is that in case the stop & targets are very close in the percentage terms, bouts of the short-term randomness mean it will almost be just like coin tossing that with costs is futile approach.

Shop around
Make sure you shop around for a beter CFD broker. Choose CFD broker carefully as charges and commissions can vary as well as the markets available. Visit IndependentInvestor.co.uk to find a wide range of broker including execution only and advisory ones.

Key is thus to make sure that the gains are much higher than the losses, so even though one just achieves 4 wins out of 10, there an be 2 big winners out there. In case a trader chooses that the 3% average loss is suitable, then what the average gain must be sought? This is a $64 question, and key is letting the profit runs as much as likely in a clearly distinct trend. Following rules are a part of methodology that is used at the Blue Index for longs & shorts CFD portfolio, as well as long term results also have so far been proved more than suitable.

For important things to know in the sphere of forex trading – read this web site. The times have come when proper info is really only one click away, use this chance.

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Common Sports Betting Futures Mistakes To Avoid

December 23, 2009 — 2:27 am

Sports book futures bets are an increasing popular and potentially profitable way to wager on the outcome of a full season. There’s a few common mistakes that novice players make that can be easily avoided by paying attention to the following:

You gotta shop around: More specifically, you have to ’shop points’ just as you would with a straight bet. This is crucial in all forms of sports betting but particularly key with futures wagers. There are often greater variances in the prices from book to book on future plays than any other type of wagering proposition. The reason for this is simple–most books are less concern with what the ‘other guys’ are doing as they are with keeping their own position ‘in balance’. All in all, the sports betting marketplace just doesn’t react as quickly to changing futures prices as it does to individual game lines.

Don’t try to pick the winner in a competitive marketplace: This may sound sort of counter intuitive since the general idea of betting on futures is to determine the actual winner but it’s really not. Like everything else, its essential to always be mindful of the value you’re getting. In a futures market with several legitimate contenders at the top the price offered is seldom high enough to properly compensate for the risk you’re assuming. Here’s an example: in a hypothetical NCAA hoops tournament Duke is +200 to win the national championship. They’ve certainly got a shot, but at a payback of only 2/1 its hard to justify a wager at this point with the potential for so many interceding events that can make a championship more problematic. Such events as injuries, a tough tournament draw or even just going into a slump at the wrong time can happen to any team but when you bet a higher priced team–a ‘dark horse mid major at 15/1 for example–you’re getting “compensation” for assuming the “risks” of betting on a proposition with so many unknown variables.

In more theoretical terms, the ‘true odds’ of a Duke or similar top team winning the tournament are almost always higher than the price offered. Think of it this way–say we’re betting Duke to win the national title at 2/1. This means that the Blue Devils would have to win more than 33% of the time to break even. So lets say, for the sake of argument, that we could play the tournament over 100 times. Would Duke come out on top more than 33 of these times? If not, they represent a poor value. Let’s say that they win 30 of 100 times. This means that any price under +333 or thereabouts is a poor wagering value.

Note that the more competitive the market, the more difficult it is to find good value on the favorites. Since you can make a case for quite a few teams to win the NCAA tournament at this point this particular futures market is clearly a very competitive one. In a less competitive marketplace it might be possible to “pick the winner” and have it be a good value though you will pay a price for this. Here’s a (thankfully) hypothetical example: let’s say the UFC decided to hold a one night round robin tournament with 5 competitors. Competitor #1 would be heavyweight champion Brock Lesnar. The other four competitors would be professional figure skaters Elvis Stojko, Rudy Gallindo, Brian Boitano and Evgeni Plushinko. Even if he didn’t bring his “A game”, Lesnar would be essentially have a 100% certainty of beating the four untrained fighters, who also happen to be rather effeminate. If a sportsbook installed Lesnar as a -1000 favorite a bet on the 63 265 pound takedown would still be theoretically a good value. It’s always difficult to risk so much to win a little, but from a strictly theoretical standpoint its a good play.

Don’t get seduced by big underdogs: Sports betting is not a place to make the “big killing”. It may happen occasionally, but more often it doesn’t. While a sports book might offer a huge price on a cellar dwelling team to win the World Series, the big payback does not mean its a good value. On a practical level, there’s probably nothing wrong with throwing a few bucks on a wager like this with a huge payback if the impossible occurs. My only problem with this is that making too many bets like this just perpetuates bad sports betting habits. If you’re strictly a recreational player, no big deal. If you aspire to bet professionally, or at least want to pursue it with some degree of seriousness I’ve always maintained that you need to develop discipline that’s not situational. In other words, if you want to be a serious sports bettor you need to approach it with a consistent level of seriousness at all times. If you want to chase a huge, life altering jackpot go to Las Vegas and play the Megabucks slots or buy a Powerball ticket.

Wagering value is just as important at the bottom of the barrel as it is at the top. Just because you’re getting a huge potential payback on a big dog doesn’t make it a good value. Make sure that the payback you’re getting presents an overlay situation–even on a huge underdog.

Don’t bet one-sided futures or propositions: Though many of these are not futures per se, a lot of sportsbooks offer silly propositions on nonsport events as a way to get publicity, or just to be funny. Its important to make a distinction between this type of silly bet and more realistic nonsport propositions which frequently present good wagering value. Im talking the really outlandish stuff here. Not too long ago, a sportsbook posted a line on Martians landing on earth and painting the White House red by the end of the year. The “YES” was +2500 or thereabouts, which is far from reflective of the “true odds” of this unlikely event. Even if you’re the type that collects classic Art Bell shows on tape and believes in UFOs you wouldn’t place the probability of this happening at more than a fraction of a percent. The book only offered the “YES” side of the proposition, meaning that you couldn’t lay even a huge price on the more likely outcome. Another book had a futures offering for what would happen first with Ashton Kutcher, Demi Moore and Bruce Willis. All of the options were very unlikely–Ashton and Bruce fighting on PPV and my favorite–and the longest odds–Ashton, Bruce and Demi hopping in bed together and releasing a porno video documenting the event. You’d receive a sizable payback if any of the events ever transpired, but I’m not exactly sure how to compute the “true odds” on “when pigs fly.

Ross Everett is a widely published freelance writer and noted authority on sports betting odds comparison. He writing has appeared on a variety of sports sites including sportsbooks and betting odds portal sites. He lives in Southern Nevada with three Jack Russell Terriers and a kangaroo. He is currently working on an autobiography of former interior secretary James Watt.

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INO TV – An Alternative To High Priced Trading Courses

December 17, 2009 — 8:17 am

How are you paying per trading course? It’s rare that I come to you like this, but I’ve had a revelation after a recent email I received. You and I both know there are plenty of good trading courses out there, but for traders just starting out, they’re a bit pricey. So why are we paying thousands when we don’t have to? Well, here’s the answer to my revelation that should satisfy all. It’s called INO TV and I have an “on the house” preview just for my readers…

INO TV  gives you access to educational seminars streaming live just for traders. This on the house preview includes Dan Gramza, Derek Sammann and Joseph Raia! I recommend you tune in to watch these 4 seminars today. Remember, they’re on me! Enjoy, while I keep looking around for more good values for you, the trader. When Adam Hewsion asked me to review his INO TV service, I told him I really don’t have time. But he was persistent so I did it. As I started to explore the site… I got excited! For those of you who are new to the scene, in early 90’s there was this symposium called “TAG”. (Technical Analysis Group) that was I believe an annual or biannual event. All the biggest and best minds in the industry were there, and it offered traders and investors one of the only places to immerse themselves in trading ideas. (Remember this was the pre expo, pre Internet media era..) They recorded these presentations, first as audio cassettes (remember those?) then video later on… Well, INO TV has the rights to ALL THOSE SEMINARS! I also secured a link for you to watch 4 seminars for free! I have just scratched the surface as I believe they have some 500 titles. Some of the names I am excited to listen to are…

* Mark Cook
* Linda Raschke (Her “Short Skirt” presentation was one of the first   seminars I ever attended! Well worth the price of admission alone…)
* Richard Arms (The inventor of the TRIN)
* Larry Conners
* Toby Crabel (Who’s book Day Trading With Short Term Patterns and Opening Range Breakout sells for $1500 on ebay.)
* Mark Douglas
* Dr. Richard McCall
* George Lane (The inventor of Stochastics)
* Victor Niederhoffer
* Martin Pring
* Jack D. Schwager (Author of the Market Wizards series.)
* Victor Niederhoffer
* Peter Steidlmayer

And a ton more…. The best thing about most of these presentations is that they are old…(Really!) These ideas are universal and still as powerful as the day they were given…Yet I bet you money right now that many of you don’t know some of the names I put up on that list… That means that most of the other traders who have come to the markets recently are also in the dark! There is gold in them thar’ videos, and not much competition for what once were dominate investment strategies. The service is $100 a year for unlimited on-demand streaming access to their entire library. You will be amazed at what you see up there. It will really help your trading. Raschke’s Slump Busting Techniques” presentation is again more then worth the hund-ski.

A good trading education = a good trader = good profits

If you have not had the chance I strongly recommend that you check out this educational resource for traders, as it’s something I personally use and enjoy. You see, it’s no longer necessary to spend thousands of dollars, travel great distances and be away from home and family to understand the secrets of the market experts. It doesn’t matter where you live, it doesn’t matter if you are just starting to trade or a seasoned pro … this “brain trust” of trading experts has the potential to change your life. Check out how INO TV can provide you with the trading education and answers you’ve been looking for. I know capital is tight, but you can’t afford not to check it out today.

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Hassam

What Are Futures

November 21, 2009 — 7:46 am

Commodity prices rise and fall and you can profit by speculating of future prices of these goods through an investment called Futures Trading. Commodities are basically the essential things that people use everyday.

What Commodities Can You Trade?

Originally, futures trading consisted only of a few farm commodities such as grains. Of course more commodities were added in at a later date. Now there are futures trading markets that trade in precious metals such as gold, silver and platinum. There is also a futures trading market for livestock and cattle as well as for energy products such as crude oil and natural gas. Also being added to the futures markets have been currencies, interest rates, foods like coffee and orange juice, along with industrially produced products such as lumber..

Don’t confuse futures trading with stock trading where you are investing in a part of a company. With futures, you don’t actually own anything. The idea here is that you speculate what the future may hold with regards to the prices of commodities that you will be trading. In other words, you speculate about what the prices of such goods will be in the future. To start with the process, you must invest a sufficient amount of capital that you will deposit with a brokerage firm. This way, the broker will be assured that you are able to pay for your losses in the event that your trade loses money.

What Are The Advantages of Futures Trading?

Futures trading has the advantage of being basically just a paper investment. Although futures trading involves certain commodities, the investor doesn’t have to worry about how to take care of the produce himself. Normally the only thing being bought and sold is only the futures contract and not the commodity itself. This makes it quite convenient since the investor doesn’t have to worry about where to store and keep the commodities being traded.

The leverage on your capitol that futures trading offers is also very attractive to investors. Sometimes traders can invest a little as 10% of a contracts value as a margin to begin trading futures. So futures contracts can be traded with a lesser investment for a larger valued contract.

Beginning traders should first try to establish that they can afford to trade such a contract Even if your margin is enough to enter into a contract, a trader needs to consider if they can afford the loss if a sizable move goes against them..

Just like any other form of investing, success with futures trading will depend on how much you know about the markets and the process of trading. Gaining knowledge in the future markets is absolutely essential if a trader wants to make a profit on their investment. Not only that, unknowledgeable traders are more likely to experience losses on their investment.

Obtain practical information in the sphere of forex investment – please study this webpage. The time has come when concise info is truly within your reach, use this possibility.

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Trader’s Quiz

November 20, 2009 — 7:26 am

Take this Trader’s Quiz by Norman Hallett from The Disciplined Trader Intensive Program. Read what Norman says; I’ve just put together a simple 10-question Quiz that will test your Trading Discipline…It will only take you about 10 minutes to complete…(if you it takes you less time, it means you didn’t think hard enough about your answers)…Tap Here NOW To Take the TRADER’S QUIZ I very seldom “dare” anybody to do anything.

Hey…I’m a believer in free choice and if you don’t want to do something, who am I to push you? Well, I’m a guy who’s passionate about making sure traders who ask for my help get it when  it comes to improving their trading discipline. Step 1 to being a Disciplined Trader is to assess… WHERE YOU ARE with your discipline. And that’s what this little Quiz will do…

My advice: First download the Quiz by itself.  Take it honestly. THEN, download the separate Answer Sheet and see how you did.  The Answer Sheet will also give you the guidance on how to shore up the “weak spots” in your discipline. You need to be disciplined to be a consistently winning trader.See where YOU stand…Stock, Forex, commodities and bond traders are all taking my 10-question multiple-choice TRADER’S QUIZ.  Have you?…Here’s some reaction to Quiz scores…

“Until you ask yourself the tough questions, you won’t improve.  This QUIZ really shed light on weaknesses in my trading discipline.  Thanks for the exposure!”

“Geez. Your Quiz hurt!  But I’ll be a better  trader because of it…”

“Thanks for your revealing quiz. Anyone scoring high should be applauded. Being honest wasn’t  easy!”

The simple 10-question quiz I’ve designed will help you see WHERE YOU STAND with the most-ignored (and arguably most important)  element of successful trading…

Your Discipline.

So let me ask…Where do you REALLY STAND in terms of your  personal trading discipline?

Don’t guess.

Take the TRADER’S QUIZ and know EXACTLY where you  stand…The ANSWER SHEET you’ll get with this Quiz has all the information you’ll need to get you “on track” with your trading discipline. The quiz is worth taking for every active trader of any market. Whether you trade Stocks, Forex, options, commodities or bonds I hope you enjoyed my 10-question multiple-choice  TRADER’S QUIZ.  If you haven’t taken the quiz to see how you rate,..

Here’s a little tip on how to improve your trading discipline…Do more than just record your TRADES in a journal at the end of the day. (Hopefully, you’re doing at least that.) While you have your journal open, take moment and reflect on HOW you performed discipline-wise in general, or better yet on a specific trade. If there is something you need to improve upon, start by WRITING in your journal a future statement of improvement… for instance…if you found yourself moving a stop you weren’t supposed to, you may want to write…

“Tomorrow I will be a more disciplined trader, making sure I place my stops, and leave my stops placed, according to my trading plan.”

THEN, the next morning, before you begin your next trading session, re-write and affirm that statement in a statement of fact…

“I am a disciplined trader.  After I enter a trade, I place my stops exactly according to my trading plan and manage my stops according to my trading plan.  I am a wise and disciplined trader and I act as such.”

So… you’re letting yourself know that tomorrow you will improve and then you state that improvement as fact the next day. This is a little tip that I give to the students of The Disciplined Trader Intensive Program, during the week we tackle How To Journal. This tip works to help you to “do the right thing” and follow your trading plan

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Forex Secret Weapon

November 12, 2009 — 8:45 pm

You are probably aware of this, but the key secret of successful Forex trading is the proper education. If you plan on trading foreign currency, it is important that you get a good education. Adequate education will provide you with a huge trade territory.

Forex trading is a serious business, and you can lose, and many of them, a lot of money if you are not properly educated. Most people do not survive in the business Forex trading, or in any trade for that matter. Prospective traders are not willing to use patience, time, discipline and resources to obtain relevant knowledge and practices for trade.

“Greed Factor” is trying to seize power in the new traders. Many people have made millions in the Forex market. However, some people believe that they can choose the system of trade in foreign currency and start earning thousands of dollars within a few days. It is not likely, and is a way to lose money. The proposal, just send me money and avoid all the anxiety of losing it (just kidding, of course).

How do you research on the Forex you probably noticed that there are two main approaches to the selection. One of the leadership “to do everything yourself” approach and the other is to use “approach Automated Trading Forex Software.” You can be successful with both of them.

“We must do everything yourself” approach will allow you to spend a considerable amount of time to study a large number of Forex trading systems and courses that are available. Many of them are very good and they are not. However, when you first examine them all they seem to be more.

Do not hurry; remember it’s your money at risk. Do some investigation of the 10 systems before choosing any. If your head did not explode after that, then narrow it to 2-3, which you think best. Next get a trial or evaluation period for each. Run each system with a demo account broker and see how they, and you. Do not blame the system if you do not follow it correctly.

The second approach is to use “automated trading system Forex” or Forex robot. The use of these robots is growing rapidly for several reasons, or, for example, ease of use, time leverage, money management, a high ratio of victories and low cost.

With automated trading Forex, trades are made under strict principles that are built into the robot. The software is programmed and tested traders should be simple, effective and trade “Hands off” mode for experienced or beginning of forex.

Automated approach software can provide you with trading experience and success while you build your Forex knowledge. Automated software can be your primary trading system or grow your knowledge can be a secondary system to allow time for the levers.
learn forex trading forex trading strategies forex secret trading

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Learn Forex Secret Trading

— 7:00 pm

The experiment we will look at proved that anyone can learn currency and do it quickly, with the right mentality and education, and you can learn a lot from this inspiring story.

The experiment was conducted a famous trader Richard Dennis to settle bets with his business partner, who thought traders were born not made. Dennis disagreed and said: anyone could be taught. So he took the evidence he was right, gathered a group of people together who only had one common trait – they knew nothing about trade. There were some card players, a young man just leaving school, ladies auditor, a security guard and an actor, a very heterogeneous group.

Education was only 14 days.

Dennis taught them a simple method and some money management rules, and then set them to leave the trade. The result is well known and these traders went to make hundreds of millions of dollars, and many are still trading today.
So how did they succeed, when 95% of new traders fail?
Of course, they were good teachers, but Dennis knew that most people do not stand up because of his method; they are not in most cases, because they can not apply a method with discipline.

The key to winning is losing

The reality of trade you have nothing to lose, to win, and you should keep your losses small and keep going until you hit return again.
Most traders believe that garbage they talked about facing the reduction of periods of more than a few deals, but the fact is, even the best traders lose for weeks. The key to victory, actually losing – Keeping your small losses and to maintain the course until you hit home run.

Method + discipline = currency trading success

You can have a better way, but discipline is necessary, and this is exactly what Dennis taught his disciples to keep going through periods of losses until they hit profits. In an interview with traders in the experiment commented on how the system was easy to learn – but do it with discipline and money management was much more difficult.
Of course, if you do not have discipline, you will lose.

Discipline is based on learning the basics and build trust and understanding.

You are going to at some point hit and survive the drawdown period so you need to be prepared. Forex trading is based on simple, reliable, method is applied with discipline. Dennis knew this and taught his disciples to him the importance and history inspires all new traders, because it shows anyone can learn, and everyone can enjoy success with the right education and mindset.

Always remember – this is not a market that beats the dealer, it is a trade that had hurt him. If you understand this and are ready to be disciplined, you can win.
learn forex trading forex trading strategies forex free trading

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Market Mover Reports

— 7:32 am

Breaking news always surprises the market. Nobody can predict what will happen. Anything is possible! With today’s technologies, news spreads like wildfire in matter of minutes or even seconds. Within minutes you can find your stop losses getting tripped as the market has started behaving in an unexpected fashion.

Apart from breaking news, there are a host of economic reports that are released each month. Most of these economic reports are prepared and released by educational institutions, think tanks, industry watch dogs and governmental agencies. Sometimes the markets will respond to these economic reports in a major way and other times, the market may not even respond and care about that report. It depends on various factors.

However, it is always wise and prudent to be aware about these economic reports and when they are released so that you are prepared ahead of time. At least you have some idea that at this time, the market can become volatile. Which economic reports are the most market moving you may want to know that! Let’s discuss some of the most market moving reports.

The FED

Any announcement made by the FED moves the market. Any economic report released by the FED moves the markets. The impact can be short term or long term. FED is the acronym from Federal Reserve Board. FED is a powerful governmental agency that controls the monetary policy and the banking sector in United States.

YouTube Preview ImageThe job of FED is to control inflation and unemployment in the US economy. This is done through controlling the monetary policy in such a manner so as to keep the economy on an even keel. There are a number of tools at the disposal of FED to achieve its stipulated goals. The most important is the discount rate. This is the overnight rate the banks charge each other for

YouTube Preview ImageAt the apex of FED is the seven member board of Governors. Then there are 12 regional Federal Reserve Banks each with its President, Federal Open Market Committee (FOMC), member banks and the advisory committees. FOMC meetings are the most market moving. FOMC is supposed to hold 8 formal meetings each year. The interest rate is the primarily responsibility of the FOMC.

YouTube Preview ImageFOMC meetings are considered very important and each meeting is followed by the analysts weeks in advance. The FOMC sets the discount rate that is then achieved through the open market operations involving buying and selling of the US Treasury Bills and Bonds. More on the FED in a later post! Just keep this in mind that FED is a huge market mover. Watch every move made by the FED if you are a serious trader.

The Gross Domestic Product (GDP)

GDP is a measure of the goods and services produced in an economy in a year. GDP gives you the overall idea of the supply and demand in the economy. High GDP growth rates mean that the economy is doing good and expanding. A negative GDP rate means that the economy is contracting and it is in recession. GDP figures are compiled and reported by the Bureau of Economic Analysis (BEA) of the United States Department of Commerce (DOC) released quarterly at 7:30 AM EST.

YouTube Preview ImageHowever, the advanced numbers, the preliminary numbers, final numbers and the revisions are regularly released. You need to check the website of BEA.  GDP is an important report that is carefully followed by the market analysts, traders and the public. Every serious trader needs to pay close attention to it. Take my advice always be on the sidelines when this report is released.

The Consumer Price Index (CPI)

YouTube Preview ImageCPI is widely used to measure the rate of inflation in the economy. Each month Bureau of Statistics, The Department of Labor (DOL) takes a certain basket of goods and services and determines the prices of those goods and service in the urban metropolitan areas by taking a survey. The most important items in the basket of goods and services include food, housing, apparel, medical care, transportation, education, recreation among other goods and services. The release of CPI figures can have a significant impact on the Wall Street. High numbers mean increasing inflation and a slowing down of the economy. DOL releases the CPI figures in the middle of each month. This is an important economic release. Don’t get off guard.

The Producer Price Index (PPI)

YouTube Preview ImageJust like the CPI it tracks the prices changes but this time for a basket of producer goods. Now there are thousands of PPIs with each industry in the US having its own PPI. Department of Labor (DOL) weighs each PPI and reflects it into one bug PPI that is released every month.  PPI acts as an early warning economic indicator. PPI foreshadows the prices changes before they appear in the retail sector. PPI is an important economic figure. Know when it is released and be prepared.

The Michigan Consumer Sentiment Index (MCSI)

Each month the University of Michigan conducts a survey to measure how the consumers are feeling about the economy. The survey is designed to determine how the consumers feel about spending. 5,000 households are surveyed each month. On the first business day of each month, the survey results for the prior month are released. A preliminary report is released on the 10th of each month.

You must have understood that MCSI is a lagging indicator since it talks of the economy that has changed. However, manufacturers, banks, retailers and governmental agencies use the results of this index to make financial decisions. So if the numbers are strong and the consumers seem to be willing to spend a lot, businesses may decide to expand and have more inventories keeping in view the consumer expectations.

The Consumer Confidence Index (CCI)

YouTube Preview ImageThis is another measure of the consumer confidence. The data are collected and released by the Consumer Confidence Board. It is another survey like the MCSI. The consumers are only surveyed on their plans to spend or not to spend. As a trader, you need to be aware of when these numbers are released.

The Construction Spending

The Department of Commerce (DOC) releases data about both residential and commercial construction. These numbers may change significantly from one month to another depending on the weather or other factors that affect construction. These numbers are released on the first business day of each month at 9:00 AM EST. Again these numbers can move the markets. Know when these numbers are released and don’t be caught off guard.

Housing Starts

YouTube Preview ImageIn this data only residential units are counted. These numbers are reported by the Department of Commerce (DOC) and released at 7:30 AM EST during the middle of each month. This is a leading indicator and can be taken as a predictor of economic health. Housing starts are important for the Wall Street. Sometimes these numbers move the market and sometimes they don’t. In any case be prepared when these numbers are released.

Institute Of Supply Management (ISM)

YouTube Preview ImageThis report can be a major market mover. It is released on the first business day of each month and is used by both the government and the economists. It measures both industrial and non-industrial purchases.

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RSI Relative Strength Index

November 8, 2009 — 2:49 am

As a trader, you should be familiar with the different technical indicators that are used in trading. Now technical analysis studies the past price action to predict the future price action. Technical indicators are an integral part of understanding the price action that is taking place in the market. Relative Strength Index is a highly popular technical indicator and widely used by the traders to trade different markets. Relative Strength Index (RSI) is a type of momentum oscillator. You must know what momentum means from your high school physics. RSI is a momentum indicator because it RSI follows the uptrend or the downtrend in the security prices. Now why RSI is considered to be an oscillator because RSI always fluctuates between 0 and 100%! Another feature of RSI that is considered to be very important by the traders is its levels that indicate when a security or a currency pair is considered to be overbought or oversold. When a security reaches one of these levels, an experienced trader always gets ready for a change in the RSI trend.

YouTube Preview ImageMost of the technical indicators are lagging. What lagging means is that they follow the price action! RSI indicator is also considered to be lagging as it compares the strength of the security or the currency pair on its up days with its down days and this way an RSI indicator can cut through the erratic changes and really confirm price movement. In some ways, it is also considered to be a leading indicator as you can count on an RSI indicator to change ahead of a currency pair’s or a security’s price action.

YouTube Preview ImageAnother intriguing concept is the overbought and oversold levels. Most of the time you will hear the security or the currency pair being overbought or oversold!  30 on RSI is considered to be an oversold level and 70 as an overbought level.  How do you know that the security or the currency pair is overbought or oversold at these levels? These overbought and oversold levels were introduced by a famous Technician J. Welles Wilder who had introduced the RSI indicator in his book, “New Concepts in Technical Trading Systems”.  These are just relative numbers. Keep 30 and 70 in your mind and when these two levels are penetrated look for confirmation from other indicators.

Now Wilder in his book quoted above had recommended these levels. The oversold level of 30 and the overbought level of 70 are indicated as lines on the bottom of the chart to let you see when these two levels are crossed by the RSI. So when you see one of these levels penetrated, time to get on your toes and get confirmation from another indicator. Wilder also suggested to use 14 as the standard number of price periods for calculating the RSI.

Calculating an RSI on your own with a spreadsheet is fairly complex. If you try to calculate the RSI indicator you may take a few pages! You just need to know this the RSI indicator takes the up and down days and plugs that data into a fairly complex formula to come up with a percentage number between 0 and 100. However RSI is very easy to use in practice. It is shown on the bottom of the chart as a slow moving line. By comparing this slow moving line at the bottom of the chart with the main candlestick chart in the upper part of the chart, you can understand what is happening to the price action.

YouTube Preview ImageMost of the time RSI will try to follow and mirror the movements of the price action in the top part of the chart. However, sometimes RSI will flatten while the price continues to move or even move in the opposite direction. When it does so, this change is known as Divergence. Divergences are the key to using RSI. Divergence is the most powerful tool in trading. More on the divergences in a later post!

As said earlier, you cannot simply use an RSI to buy when it hits 30 or selling when it hits 70. It is always good to combine the RSI with candlestick patterns or a divergence in RSI.  So you have to combine it with other indicators to give more reliable buy and sell signals.

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