Unique Commodity Trading Strategies To Survive And Prosper During Tough Markets

Surviving the rough times to be present for the big moves is the name of the game in commodity trading. With some luck we can even break even while the other participants are getting chopped to pieces. It requires giving up something to get something else. Learn how a few of the big hits can be avoided for a small price. Read about ways to participate in the long haul moves while still sleeping well at night.Let's say our forecast makes us bullish on the market. We want to check out the possibility of buying a future contract and hedging it by buying a put option. There will always be a choice here - either buying an option spread (as in the previous example) or buying a future with an option hedge. One method will always be better than the other. We need to determine this to get our strategy edge on the market. Much depends on the option premiums. Again, this is where it's handy to have an automated option evaluation program.Now we can get creative and more flexible. Let's say you have faith in your forecast that the market is going to rally within 2 - 3 weeks. If it doesn't happen by then, then the trade is suspect. Let's buy a futures contract and also buy a put option as close to the current market price as possible. Hopefully we pay a reasonable price for the put option. The closer you buy it, the less loss and risk if the futures contract declines sharply against you. However, the option premium will be higher too.The put option becomes a synthetic stop loss order for the futures contract. You will lose until the market hits that option strike price and then no matter how far the market drops, the futures contract loss is fixed and limited. Now here's the trick and edge...Select an option with only a small amount of time, like 30 days or so. The option will cost less because of having a short time remaining. If your future contract moves up within 2-3 weeks as you expect, the put option will lose its value quickly and expire within 30 days anyway. The option is the sacrificial lamb that has done its job for a few weeks and then dies. It has protected you against the big potential hit. We dodged the ball. Now it's up to the futures contract. That's where the profit will come from, if the trade is destined to work out.Once the futures contract gets far away from your entry point under the initial protection of the option, you can then move up the future's stop loss order to break-even. A new option could always be bought later if desired to synthetically lock in some profits. However, this is option overuse and the premiums start to catch up with you. We must take on risk or the market will not pay us. We become parasites if we hedge too much, add no liquidity or load risk onto others. In this example we economically used an option to lay off large risk at a critical time. After that brief, partially-hedged window, we again assumed the risk. There are other ways to do this, but beyond the scope of this article. More later.So far we have discussed entry techniques and ways to lower our risk at critical times when our exposure is the greatest. Remember that we are trying NOT to get hit by the dodge-ball and are happy making singles and doubles. Let the newbies swing for the fences and strike out 90% of the time. The idea here is survival until we identify a big market forecast and the move starts. That's the only time to swing for the fences. You want to play it conservative 90% of the time and swing hard 10% at most. To do otherwise is the road to consistent losses. Trade like a guerrilla warfare fighter. Survival first, shoot at our own time and place...sparingly. Let the others line themselves up and face off to their heart's desire. In another article we will discuss methods of using futures and options for synthetic exit strategies. This will include option granting, and futures hedging of options. Good Trading!

Posted by ™Mr.Games at 4:42 AM 0 comments

Why Trade the Forex Market

rading the Forex market has become very popular in the last years. Technology advances like the internet have spawned this new trading craze, where anyone with a secure internet connection prepared to undertake a small amount of training can engage in trading foreign exchange on the forex market. Before the Internet, only corporations and wealthy individuals could trade currencies in the Forex market through the use of proprietary trading systems of banks, often through private banking. The foreign exchange market is one of the largest in the world if not the largest. It is more than 3 times larger than the stock/equities market and more than 5 times bigger than futures, give Forex traders nearly unlimited liquidity and flexibility. It has been estimated that approximately $2 trillion USD of currency exchanges hands each and every day. The foreign currency markets are very liquid because worldwide, the most powerful international banks provide a market around the clock. The Global foreign exchange market daily averages of the Bank for International Settlements in 1998 were $660 billion and now have increased to $2.3 trillion (2006). There is really no insider information in the forex markets. Since exchange rates are calculated by actual money flow as well as by the outlook of financial flowage, which takes into consideration such things as inflation, GDP changes, trade and budget deficits and surpluses, as well as interest rates, it would be difficult to come across so-called 'insider information'. All of these factors are self-evident, though different projected outlooks may prove more accurate than others. There is less room for market manipulation is there may be for thinly traded stocks. A equally important property of forex market is the fact that trends in forex market last longer and are more clearly defined than in any other trading instrument. Analysis of forex market charts also often displays identifiable chart patterns of price movement and once a pattern is established, the trend or pattern becomes the most probable course of future price action until the market changes. Because the FOREX market is so huge, there is no possibility of someone controlling the market price for a long time. When there are a lot of buyers and a lot of sellers, you can expect to buy or sell at a price that is very close to the last market price. The market maker in the forex market is usually a bank or brokerage company that provides during the trading day a bid and ask price. Example of forex market makers include CMS Forex, GFS, Forex, Forex Capital Markets (FXCM), and Global Forex Trading, all of which are regulated by the Commodity Futures Trading Commission (CFTC) of the USA. Brokers offer clients access to online FX trading system, platform or software that can make it easy and fun to trade the market and usually there are usually no commission charges. With these trading systems and platforms you can trade the forex markets for free using the same state-of-the-art software packages that professional Forex traders use to help them make real-time, live currency trades. So individuals with a few hundreds of their own currency hope to buy and sell something for a smiling profit. Speculators trade to make a profit by purchasing one currency and simultaneously selling another. In conclusion I think the FOREX market is one of the best investment opportunities around today. There are great opportunities in the FOREX market because of the constant movements of the exchange rates. There is no surprise that more and more traders are turning to the foreign currency market to take advantage of the fluctuation in exchange currency rates as a way to speculate and trade to increase their capital and wealth.

Posted by ™Mr.Games at 4:42 AM 0 comments

A Look at Online Forex Brokers

An online forex broker is a firm that facilitates retail trading using Internet technologies. Global Forex Trading (GFT), one of the popular online forex brokers. It provides retail traders with a free demo trading account, allows users to open a live account, gives live help, provides software called DealBook FX 2, and allows viewing of account documents. (DealBook FX 2 can be downloaded for the demo trading account).Gain Capital Group's Online Forex offers 200:1 leverage. In some cases, the total return on investment is higher due to leverage. For example, with $1000 cash in a margin account, the investor can control up to $200,000 in notional value. Of course, trading on leverage magnifies both the investor's profits and losses. GCI Financial Ltd. offers commission-free online trading in forex. GCI offers Internet trading software, fast and efficient execution, and 0.5% margin requirements. This broker offers USD or Euro denominated trading accounts. The spreads are 3 pips in EUR/USD and USD/JPY, and are 4 to 5 pips for other major commissions. Clients can hedge by opening positions in the same currency in opposite directions. Risk to the investor is limited to the deposited funds. Market analysis and research, real-time charts, and forex trading signals are available at no charge.ACM, part of the REFCO group, offers 3 pip spreads on all major currencies, which works out to between 0.02% and 0.03% on the dollar value. They also offer commission-free trading, and forex trading with a 1% margin, which means that a trader can control $1,000,000 with $10,000 in his account.There are many online forex brokers that offer free demo accounts for potential forex traders to practice trading. It is only a matter of registering and starting demo trading to get a feel for forex trading. In addition, at most sites, traders can find free forex news to assist them with their trade strategies.

Posted by ™Mr.Games at 4:42 AM 0 comments

Forex Trading

Forex trading, or foreign exchange current exchange trading, is a global phenomenon. This is the single largest market in the world. There are many different market sectors that are involved with Forex trading. These include, but are not limited to; " Banks" Corporations" Governments" IndividualsWhat is Forex trading you ask? At its simplest, Forex trading is currency being traded for another currency. However, Forex trading is anything but simple. The market has massive trade volume and is very fluid. Not to mention the hundreds of different currencies being traded and their ever changing value.Forex trading is a very focused area of trading, but the amount of time andenergy most people and companies spend getting trained and educated on Forex trading and its inner workings and pitfalls, is at least as much time as it takes to learn the stock market.Because of the complexity, Forex Trading is not your typical overnight success operation. There are many large corporations, such as GCI Financial which is a market leader in this space.Forex trading is unique in that everyone does not have access to all of the same information and prices at the same time, as they do with the stock market. I won't get into specifics here, but basically there is a tiered level whereby different levels of access are given to the Forex traders and Forex firms.The other main thing to remember about Forex trading is, until such time that the world adopts a single currency, Forex Trading will be around for a very long time.

Posted by ™Mr.Games at 4:41 AM 0 comments

How to Find a Broker for the FOREX Trading Market

t's not always easy to know what to look for in a broker in any market, much less a market as complex as the FOREX. But, if you want to trade in FOREX you need a broker. While it might be tempting to simply ask the brokers what they can do for you, you can't always depend on them to give you a straight answer. Here are a few things to consider when choosing your broker. You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money. Along with this, you should be looking for a broker attached to a reputable institution. Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC). Once you've narrowed your choices down to brokers that won't cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems. Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed. The next item that you will need to evaluate carefully is the number of leverage options your potential broker has. Leverage is a necessity in FOREX trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits. If capital is not a problem, any broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs. Along with different levels of leverage, look for brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage. The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the broker you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.

Posted by ™Mr.Games at 4:41 AM 0 comments

Learn Forex Trading to Expand Opportunities

Capitalize on the opportunity to learn forex trading so you can begin the process of branching your portfolio out of domestic stocks and into the global market. Any financial advisor worth his weight will tell you that it is important to diversify your investment portfolio and this is by far the largest volume market in the world. Daily, it does nearly four times the volume of trading than the New York Stock Exchange does. Anyone who holds a basic understanding of how money is converted and exchange rates work can learn forex trading. The sale or trading of currency is at the heart of what forex is. Using one currency to buy another means that your counterpart is using their currency to buy yours. As exchange rates fluctuate and the economies of nations surge and recede, these investments in cash behave in value very much like a traditional stock. As with any new venture, you will need to master the vocabulary that is an inherent part of forex. When you begin to learn forex trading you will be introduced to terms like pip, spread, cross, base currency and trade currency. Foreign exchange trading does have some unique terminologies. While they may be new to you, you will learn them quickly because they describe certain parts of forex quotes that you will need to understand in order to trade. There are quite a few resources available to those who wish to learn forex trading. The reliability of internet access has opened the door to online forex trading, which means that more investors have the ability to participate in trading activity. Since the foreign exchange trade is considered a spot market, the ready availability of internet access is crucial. Business is done on the "spot," thus the name. You can capitalize on many benefits when you learn forex trading. The availability of a 24-hour a day market is one. Since forex involves the trade of currency at banks across the globe, the market never closes. The market is also remarkably liquid, meaning that you will never have trouble finding trading partners. Since most of your trading partners are banks and the medium is cash, you will never be at a loss for customers. Another benefit is the lack of commissions. Since you make the trades on your own, you don't have to spend part of your profit on brokerage commission fees. Taking the time to learn forex trading opens one more investment door for you. As you continue to realize the importance of diversifying your investment portfolio, it may be a good idea to begin looking at what kinds of opportunities are available to you in foreign exchange trading. You may be surprised to see who else is capitalizing on this market and just how easy it is.

Posted by ™Mr.Games at 4:40 AM 0 comments

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Blog Archive

* ▼ 2007 (6)
o ▼ July (6)
+ Unique Commodity Trading Strategies To Survive And...
+ Why Trade the Forex Market
+ A Look at Online Forex Brokers
+ Forex Trading
+ How to Find a Broker for the FOREX Trading Market
+ Learn Forex Trading to Expand Opportunities


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