Mechanical Trading System

Richard Weissman introduces the reader with a process-driven approach to trading. In addition to the development of mechanical trading systems, the significance of trader psychology is discussed throughout the book. Mr. Weissman calls it the framework of “reprogramming the trader.” He provides a clear understanding behind the conceptual development of mechanical trading systems as well as demonstrates possible mistakes by system developers and ways to avoid them. His main lesson for the reader is that flexibility enables traders to succeed in all kinds of trading environments. Download your copy now..

MECHANICAL TRADING SYSTEM

COMMON MISTAKES IN TRADING

$$$ COMMON MISTAKES IN TRADING !!!

• Trading for excitement & thrill and trading with a high ego.

• Trading with money that can't afford to loose & being too emotional about money.

• No trading plan and lack of record keeping.

• Not cutting losses and not letting profits run.

• Letting small losses turn into large losses.

• Not sticking to plans & changing strategies.

• Bottom fishing/catching falling knives.

• Fighting the trend - shorting bulls and buying bears.

 
 

GOLDEN RULES FOR TRADING

GOLDEN RULES FOR TRADING

• Divide your capital into few equal parts (preferably 10), never risk more than one part of your capital on any one trade.
• Trade only in active & high volume stocks/ futures.
• Always use stop-losses and  never over-trade and stick to your risk management rules.
• Never let profit turn into a loss. Use trailing stops to protect and lock your profits.
• Never get into the market because you are anxious from waiting, and never get out of the market just because you have lost your patience.
• Do not guess where the top and bottom of the market is, but let the market signal its top and bottom.
• Never average a loosing trade, also avoid taking small profits and big losses.
• Only trade with genuine risk capital, and be aware of the risk of losing.
• Always trade within your capabilities, financial and otherwise.
• Never let greed or fear take control over your winning positions.
• Avoid Tips & Rumors. This are spread by people with vested interests.  

GOOD LUCK ALL...........

TYPES OF TRADING

TYPES OF TRADING

There are several types of trading styles that persons seeking to profit from short term trades in the market may wish to use. Here is a brief description of the most widely used short term trading styles.

• Day Trading

Day traders buy and sell stocks throughout the day in the hope that the price of the stocks will fluctuate in value during the day, allowing them to earn quick profits. A day trader will hold a stock anywhere from a few seconds to a few hours, but will always square off all of those stocks before the close of each day. The day trader does not own any positions at the close of any day therefore  immune to overnight risks. The objective of day trading is to quickly get in and out of any particular stock for a profit  on an intra-day basis.

Day trading can be further subdivided into a number of styles, including:

Scalpers: This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes. The objective is to earn a small per share profit on each transaction while minimizing the risk.

Momentum Traders: This style of day trading involves identifying and trading stocks that are in a moving pattern during the day, in an attempt to buy such stocks at bottoms and sell at tops.

• Swing Traders

The principal difference between day trading and swing trading is that swing traders will normally have a slightly longer time horizon than day traders for holding a position in a stock. As is the case with day traders, swing traders also attempt to predict the short term fluctuation in a stock's price. However, swing traders are willing to hold stocks for more than one day, if necessary, to give the stock price some time to move or to capture additional momentum in the stock's price. Swing traders will generally hold on to their stock positions anywhere from a few hours to several days.

Swing trading has the capability of providing higher returns than day trading. However, unlike day traders who liquidate their positions at the end of each day, swing traders assume overnight risk. There are some significant risks in carrying positions overnight. For example news events and earnings warnings announced after the closing bell can result in large, unexpected and possibly adverse changes to a stock's price. 

• Position Trading

Position trading is similar to swing trading, but with a longer time horizon. Position traders hold stocks for a time period anywhere from one day to several weeks or months. These traders seek to identify stocks where the technical trends suggest a possible large movement in price is likely to occur, but which may not be fully played out for several weeks or months.

How to Invest in Commodities?

If you want to include commodities as part of your long-term portfolio investment, below are the 5 common methods that guide you on how to invest in commodities.

The 1st way to invest in commodities: Spot Trading
Commodities trading can be done on the spot through "spot trading" where delivery takes place within a few business days. Spot trading is not the main way in which commodities are almost always bought in large quantities, few buyers would want to take the risk of accepting whatever the spot price is at the time of purchase, and immediately delivery.

The 2nd way to invest in commodities: Futures Trading
Commodity futures trading is the most popular ways of buying and selling commodities. Instead, most commodities are traded on futures exchanges such as NYMEX and CBOT. The prices of commodities are efficiently and transparently discovered through the participation of thousands of buyers and sellers.

Commodities futures trading have two mentalities:

One may speculate by taking a position, either long (buy) or short (sell) for example, a crude oil futures contract in the hope that the crude oil would rise or fall in price respectively, and to be profited in the expected price movement direction.
OR, an investor may hedge to mitigate the risk of a natural position in the commodity. For example, a soybeans farmer can insure against a poor soybeans harvest by purchasing soybeans futures contracts. If the soybeans crop is significantly less due to bad weather, the farmer makes up for that loss with a profit in the soybeans futures contract, since the overall supply of the crop is short everywhere that suffered the same conditions.
In futures trading, investors trade directly in commodities futures and encounter high level of risk not only because of the volatility of commodity prices. It also involves sophisticated skills, correct trading methodology, and dedicated time to follow the commodities market that is dominated by large commodity trading houses and financial institutions with professional traders.

The 3rd way to invest in commodities: Commodity index funds
Invest in commodity index funds are less risky than invest directly into commodity futures trading. Therefore, for investors who are looking into diversify their portfolios without wanting to trade directly into commodity futures, commodity index funds are good alternative investment choice. Some funds specifically track commodity indices like the Dow-Jones-AIG Commodity Index, the Reuters/Jefferies CRB Index, the Goldman Sachs Commodities Index (GSCI), and the Rogers International Commodities Index (RICI).

The 4th way to invest in commodities: Commodity unit trusts
For investors who are unit trust lovers. There are dozen of unit trusts investment funds available for retail investors. Some unit trusts generally invest broadly across the major categories of commodities. Some even focus on more specific sectors of the commodities market, such as gold & silver, energy, metals and agriculture. Therefore, for a better investment diversification, one can consider to add in commodity unit trust funds into the long-term investment portfolios.

The 5th way to invest in commodities: Commodity stocks
Lastly, investors can buy commodity stocks that are linked directly to light crude, palm oil, iron, copper, ore and energy related stocks to be profited directly from the stocks price appreciation. For example, Australian company BHP Billiton is one of the world's largest diversified producers of diamonds, coal, iron ore, aluminum, oil and natural gas.

Learn and understand about commodities investment. Add commodities investment as part of our long-term investment portfolio for a better investment diversification and assets allocation.
Visit Market Future Outlook - Daily Dow Jones review provides better Dow Jones market outlook.

Article Source: http://EzineArticles.com/?expert=John_Khoo

How to Control Your Emotions

Congratulations! You have decided to venture into the capital markets! The first thing you need to know is that trading is an intense profession and your emotional control will be tested.
When the markets become unpredictable and sweat begins to form on your brow, will you know what to do? Don't worry! We are here to help! Read on for tips on how to control your emotions!

An Unexpected Market Environment

Let's say you have chosen to start your career as a Crude Oil trader. You expect the price to increase in the coming months due to news that China has started working on two strategic oil reserves. You execute a trade for five contracts at $85 a barrel. You expect your investment to return profits in the future but all of a sudden the price drops to $84 a barrel, then $80 and all of a sudden you see the price fall to $70 a barrel.
You start to panic and lose control of your breathing. Your palms get sweaty and you clench your hands together just to see the price drop to $68 a barrel. Before you change your trading strategy or panic anymore than you already have, take a step back from the situation and breathe.

Make The Decision To Have Emotional Control

Just like you made the decision to become a futures trader, you need to make the decision to control your emotions. This is something you need to think about every day. You have to make the conscious effort that you are not going to let your emotions get in the way of your trading. You also need to take steps to be in the right mindset once you have decided to control your emotions.
What are you feeling? Anxiety? Nervousness? Anger? Whatever it is you are experiencing, it could make sense to let it out. Talk to someone. Go to the gym and work out on the treadmill. Once you have released some of that negative energy, you will have a better grip on your emotions for your next trading session.
Also, get a good night's sleep and eat a healthy breakfast. These tips are often overlooked but undervalued. Having the right mindset to approach trading challenges is the first step in conquering your emotional responses.

Understand What Triggered Your Emotions

You can't help how you feel when something doesn't go your way but you can control your actions. The first thing you need to do is figure out what triggered your anxiety and nervousness. In this situation, it was the price movement and the potential risk of loss. By understanding what triggered your emotional response, you can plan for similar situations you might be faced with in the future.
At what price, were your emotions triggered? By figuring out your comfort levels, you can plan ahead for future trading strategies. If you got uncomfortable with your investment when the price of Crude Oil dropped to $80 a barrel, recognize that that will be your limit next time around.
Work your comfort levels into your trading strategy to prevent your emotional control from being tested.

Think Positive!

When you get frustrated or start to panic, your mind turns itself off from the learning process. Don't let your emotions get the best of you! Again, take a step back from the situation and try to relax. Concentrate on something that will calm your mind and lift your spirits. Breathe and think positive thoughts.
Instead of focusing on the price of Crude Oil spinning erratically out of control, focus on your trading account increasing from $10,000 to $15,000.

Close your eyes and picture the amount in your bank account going up. See the numbers on your bank statement increase in direct correlation to how many Crude Oil trades you make. As your bank account grows, think about what you are going to do with that money. Are you going to buy a Ferrari? Take your family on a cruise? Pay off some debt?
Whatever you do, do not panic! Being pessimistic will only hurt your chances of success.

Controlling Your Emotions

Trading professionally is an intense occupation but one you can succeed at with the proper preparation. When the markets react in a way you did not expect, take a step back from the situation. Breathe, gain your composure and make the conscious decision to have control over your emotions. Also eat healthy, sleep well and work out when you have a stressful day. It is important to get all that negative energy out to have a calm day the next time you trade. Finally, think positively!
Just remember that with any new career, there is going to be a learning curve. With our help, hopefully that learning curve won't be as steep!

Larry Levin trades the S&P 500 at the Chicago Board of Trade, now known as The CME Group; the world's largest and most diverse financial exchange. Levin is the Founder of Trading Advantage.com, a leading trading education firm specializing in empowering traders to achieve and surpass their financial goals. He appears regularly on CNBC, Fox Business News and other major media outlets worldwide.

Contact larry at 888-755-3846 or larry@tradingadvantage.com

Article Source: http://EzineArticles.com/?expert=Larry_M._Levin

Commodity Hedging - What Is It?

Commodity hedging is when a company decides to offset or eliminate risks due to the fluctuations in the raw material prices. This is a risk management strategy to protect against price fluctuations and against losses and well as protecting profits.

How does it work?
To begin with, let's explore some definitions. The cash or spot market is where you can actually buy or sell physical commodities. The futures market on the other hand involves the trade of contract, where it involves the physical delivery of the goods or commodities at the future date, where hedging can take place.
For example, if an aluminum producer expects the price of the raw material, aluminum to rise in the next two months, he will then enter into a long position of a futures contract to offset the increase of aluminum prices. Likewise, if he expects the price of aluminum to fall, he will enter into a short position in the futures market to sell in the futures market against the aluminum he holds.

Who will hedge?
Producers and manufacturers that are exposed to risks due to the volatility in commodity prices will see to hedge. In the case of Malaysia, it is a palm oil producing country, thus the majority commodity hedgers in Malaysia will be palm oil producers. They can enter the position in the futures market of Crude Palm Oil Futures (FCPO)

How to start hedging?
Hedging is the same as trading futures contract. One will need to enter into a position either long or short. The hedger will also have to pay a margin of the total contract value, which is usually 5-10% depending on the contract.

What about the risk?
As the producers are hedging against the physical goods, it is generally considered not risky if it is based on a short-term period. However, the hedger, if forecast the wrong price movement will lose out on potential savings.

Sheim Quah writes for Oriental Pacific Futures, a Malaysia-based brokerage authorized to provide futures broking services to institution and private clients since 2007. OPF specializes in futures broking, particularly Crude Palm Oil Futures (FCPO) traded on Bursa Malaysia Derivatives. Head on to this futures broker website or visit http://www.opf.com.my for more information.

Article Source: http://EzineArticles.com/?expert=Sheim_Quah

Technical Vs Fundamental Trading In Crude Palm Oil (CPO) Futures

If you are a novice trader in CPO futures trading, fundamentals data and news will always be very hard to get on time or we can just say that you won't have the first hand information, so to say. Therefore, back up yourself with certain technical skill on how to read technical indicators like 20ma, RSI, stochastic before you start trading will be a better choice.

Then, how to succeed in CPO Futures trading?

Do not ever follow broker's advice or other trader you know to trade because you may not have the same emotion or psychology on discipline that they have, which can be a disaster that you yourself cannot take it.

CPO Fundamentals data that always watched by majority traders have been placed in my blog for you to refer and I think it is a good place to start as a beginner. Fundamentals data allows you to digest how will be the impact of those data can affect the trend of cpo futures in Bursa Malaysia Derivatives and how are the major players plan their next trading strategies after those data being released. The data like palm oil export figures released by those two well known palm oil cargo surveyors will be the most closely watched by all palm oil traders. The data consistently being released on five specific dates and times every month. Another important figure being released is the government agency official figures out in every middle of month about demand and supply of palm oil related products.

CPO Technical trading will be regarded as the most trading tools being used by majority crude palm oil futures traders; therefore, as a novice trader, you should build your base with technical trading first which it indirectly helps you build up your trading discipline. Buy some good technical books about cpo futures trading and start following the method of the trading signal given by those indicators which help build your own trading rhythm in future. Don't be shy asking if you want to succeed in CPO Futures trading.

CP Yeoh is presently based in Malaysia with over 15 years of crude palm oil futures trading, where he developed his interest in futures trading. As crude palm oil futures has not been an area the average investor would consider, but that has changed and suddenly there are so many opportunities out there to profit from futures trading. CP Yeoh enjoys sharing his knowledge with other enthusiasts. He has prepared a complimentary technical report packed with facts which you can download at CPO Futures trading. Article Source: http://EzineArticles.com/?expert=CP_Yeoh

CRUDE PALM OIL FUTURES (FCPO)

WHAT IS FCPO?
Bursa Malaysia’s Crude Palm Oil Futures contract, or better known as FCPO, has been the global price benchmark for the Crude Palm Oil market since October 1980. The FCPO is a deliverable contract which is traded electronically on Bursa Malaysia’s trading platform. With an impressive track record of 27 years, Bursa Malaysia’s FCPO price has become the reference point for market players in the oils and fats industry.

BENEFITS OF FCPO
• To manage price risk – plantation companies, reneries, exporters and millers can
use the FCPO to manage risk and hedge against the risk of unfavourable movements
in the price of FCPO in the physical market.
• To speculate – traders can use the FCPO to gain leveraged exposure to movements in
CPO prices.
• To gain immediate exposure into the commodity market – via FCPO, global fund
managers and proprietary traders are able to be part of the active commodity
market instantaneously.

- courtesy of BURSA MALAYSIA