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Forex Trading

Trading Crude Oil Futures (Part I)

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One thing should be clear to you. Energy markets will be a major focal point in the global financial makers and the global economy for many years to come. The key to understanding energy trading is to understand oil, natural gas, gasoline and heating oil futures.

You must be thinking that crude oil trading is being done only between different countries or hedge funds or highly wealthy individuals. For your information, crude oil contracts can also be traded by retail traders like you and me. NYMEX trades futures and options contracts for crude oil, natural gas, heating oil, gasoline, coal, electricity and propane. NYMEX is also home to trading in metals. Trading in energy futures is centralized at the New York Mercantile Exchange (NYMEX), the world’s largest physical commodity futures exchange.

For smaller traders NYMEX offers e-mini contracts for oil and natural gas that also trades on the GLOBEX network of the Chicago Mercantile Exchange (CME). Trading in NYMEX is conducted in two divisions: 1) The NYMEX Division and 2) The COMEX Division.

Sometimes the rise in oil prices leads to the increase in interest rates through the bond market and the actions of central banks and the other times the opposite happens. Rise in oil prices if often inflationary. As a trader, you should know this fact that oil price rise often tends to slow down the economy and lower retail sales as well as consumer confidence with lower traffic on the highways.

Oil prices and the interest rates generally move in the same direction when viewed over long periods of time. Now you need to understand the Peak Oil Concept. Peak oil is the concept that the world oil production has peaked and the production of oil will never be as high again.

No new major discovery of an oil well has been made in the past two decades. This means that the supply of oil is dwindling while the global demand for oil is on the rise. Now you need to understand the Peak Oil Concept. Peak oil is the concept that the world oil production has peaked and the production of oil will never be as high again. Oil prices and the interest rates generally move in the same direction when viewed over long periods of time.

Oil production in countries like Venezuela, Iran and Nigeria has peaked and is going down. Non OPEC sources of oil like North Sea and Mexico are also showing sign of declining production. There has been no major oil well discovery for the last few decades. Some people consider the Peak Oil idea as controversial but this concept is increasingly plausible given the state of the global oil industry.

Now you should keep these facts in the background of your mind as a trader. In any case, most of the experts now agree that in the next 10-20 years, the oil production will peak and after that it will start declining. 1) Demand fluctuates but supply of oil is finite. 2) The world runs on oil and any threat to the supply of oil often leads to rising prices. As an oil trader your primary goal is to consider the effects of events on the supply of oil and correlate this effect with your charts.

Mr. Ahmad Hassam is a Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading ! Visit the Uber Article Directory to get a totally unique version of this article for reprint.

Forex Trading

Knowing The Primary Trend

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If you are a trader and don’t know anything about technical analysis and how to draw the trendlines and support and resistance levels than you may as well stop trading before you learn and master these concepts. A picture is worth more than a thousand words. Trading would be almost impossible without charts and technical analysis. Trading is all about anticipating and predicating rather than forecasting. Technical analysis is the best tool a trader can have.

The most important thing that you should in a market is its primary trend. Primary trend is the direction of the market that offers the least resistance forward making money. When you follow a primary trend in a bull market you look for strong stocks and in a bear market you look for stocks showing weaknesses. Knowing the primary trend and trading in its direction increases your chances of making money. So how do you find the primary trend and what tools you need to determine the primary trend? You use the following tools to determine the primary trend:

Trendlines: Knowing how to draw and use trendlines gives you an excellent start on any trade. To correctly draw a rising trendline on the chart, start with the lowest low on the chart and connect it to the lowest low preceding the highest high in the chart without bothering about the prices between the two points. Similarly to draw the down trendline, draw a line connecting the highest high on the chart to the highest high preceding the lowest low of the chart without passing through the prices between the two prices.

Moving Averages: Support level is the price where the prices stop falling and the buyers step in overcoming the selling pressure. A break in the support level is an indication that more weakness may be ahead. Moving averages are sues to smooth out the market’s trend over a given period of time and serve as an important support and resistance levels.

Resistance level is the price where prices stop rising and the sellers overcome the buying pressure. A break above the resistance level is an indication that the market is going strong.

Oscillators: Oscillators are graphic depictions of points derived from the mathematical formulas that are plotted below the price charts. Knowing these mathematical formulas is not important as a trader. What is more important to know is the fact that oscillators produce useful mathematical data that can help you tell whether the market is overbought or oversold and whether the momentum of the primary trend in the market is still strong or there is a potential change in the primary trend ahead? Two important oscillators that you should be familiar with are RSI and MACD.

Bollinger Bands: Bollinger bands are also known as volatility bands or envelopes. Bollinger bands give you visual evidence when the market has travelled too far in any one direction. Bollinger bands are calculated by plotting points one or more standard deviations above and below the 20-day moving average. However, you can calculate Bollinger Bands with any moving average.

Mr. Ahmad Hassam has done Masters from Harvard University. Try these cash printing Forex Signals from heaven. First trade on your Forex Demo Account! This and other unique content ‘forex’ articles are available with free reprint rights.

Forex Trading

Good Traders, Bad Traders (Part II)

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Scalper is a workable profile for a small retail trader. However, you should be able to view the overall trend of the market to gauge whether you are trading with or against the prevailing trend. A scalper is also a seeker of short term profits of the level of 25-50 pips.

A scalper might use a 10 minute chart to follow the market, a 1 hour chart to determine the long term trend and the 5 minute chart to time the entries and exits for each trade.

However, sometimes you might not want to close the trade at the end of the day as the trade is in profit and you are expecting more profits if you continue with the trade overnight. There is a rollover cost if you rollover your trades overnight. Be sure if you want to day trade, you know your broker policy on rollovers and the rollover cost for you.

However, sometimes you might not want to close the trade at the end of the day as the trade is in profit and you are expecting more profits if you continue with the trade overnight. There is a rollover cost if you rollover your trades overnight. Be sure if you want to day trade, you know your broker policy on rollovers and the rollover cost for you. A Day trader is looking for larger profits something like 50-100 pips. A Day Trader might use a 15 minute chart to follow the market, a 4 hour chart to determine the long term trend and the 5 minute chart for making the entry and exit.

Position trading is long term like a few months to a year. A lot can happen in few months to a year. The whole world can go topsy turvy. The important question is can you make an investment for that long and survive looking at it for that long.

Each profile requires different scales of charts and time frames but also indicators and money management parameters. If you aim for a 1/3 risk/reward ratio, a Guerilla will risk 5-10 pips per trade, a scalper will risk 15-20 pips per trade, a day trader will risk 25-30 pips per trade and a position trader will risk 40-50 pips per trade.

Even if two trader s use the same charts and technical indicators they might interpret them differently. The differences in money management techniques and attitudes are much less. Good traders tend to share money management and attitude traits. So do bad traders.

Do you want to become a good trader or a bad trader? Always keep in mind that in forex trading a 10 pips move up or down can easily occur within seconds or minutes very quickly without any reason or rhyme. No two traders can be exactly alike.

Mr. Ahmad Hassam has done Masters from Harvard University. Try these cash printing Forex Signals from heaven. First trade on your Forex Demo Account! Get a totally unique version of this article from our article submission service

Forex Trading

Trading Systems (Part I)

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Using a mechanical trading system not only helps traders to make decisions and increase profits but it also provides great psychological comfort to the traders. At one point in your trading career that might come soon rather than later, you would want to switch over to a mechanical trading system.

You will also have to develop a systems approach to your trading. You will find most of the traders using a trading system approach to trading. You will realize the necessity of switching over to the system trade in order to lower the psychological pressure experienced when making every market transaction. Some of the traders may use a discrete trading system while others prefer a mechanical trading system. Trading without a system can be stressful.

The mechanical trading system set of rules may be translated into a computer program for automated trading. However, the mechanical trading system lacks fundamental analysis capacity.

The creator of such a mechanical trading system then becomes just another user of the trading system monitoring the computer generated signals. The trading system then generates trading signals that can be used by traders having access to the trading system.

Many traders over their trading careers develop their own trading systems. Besides the traders using their own trading systems, there are now many actively developed trading systems for sale as computer programs. These trading systems may be taken as grey and black boxes. Their prices might vary from a few hundred dollars to hundred of thousands of dollars.

One way is to develop these forex trading systems and use the trading signals generated by them in your trading. The most significant thing about these programs is that the traders should be able to accomplish transactions in accordance with the signals generated by the trading system. The other solution is to completely automate these forex trading systems. Sometimes theses trading systems are developed for big banks and corporations.

Majority of the successful individual traders use self developed mechanical trading systems. However, it is very difficult for a mechanical trading system to cope with different market conditions.

Change of market behavior leads to negative results from a previously effective trading system which obviously would require replacement. For example, many trading systems that are satisfactory in trending conditions become highly ineffective in nontrending environment. How do you deal with the challenge of changing market situations? This is the most serious challenge that automated forex trading has to solve. One way is to use a diversified forex trading system.

Many trading systems now depend on complex mathematical formula which is not understandable by the trader if the trader is not the author of the trading system. The most common disadvantage of these trading systems is the negative balance between he profitable and unprofitable trades.

What you need is a forex trading system that is profitable in the long term. In other words, it gives more winner than losers. Obviously the trading system can only be profitable in the long run if the ratio of the profitable trades is higher than the non-profitable trades. In other words the average profit of each profitable transaction is greater than the average loss of each unprofitable transaction.

Making correction in any mechanical trading system in the process of the trade is almost impossible. The trader must accurately and unconditionally follow the trading system without making any attempt to adjust it to the market conditions.

Mr. Ahmad Hassam has done Masters from Harvard University. Discover a Revolutionary Forex Robot Trading System. Read about a Forex Trading System with an ROI of 3000% per month. You are welcome to reprint this article – but get your own unique content version here.

Forex Trading

Using LEAP Options

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Great Britain was finding it difficult to stay within the tight exchange rate band set by the European Monetary Union (EMU) in the early’90s. One person who made history with options was George Soros who is famously known as the man who broke the Bank of England.

George Soros had this intuition that the Bank of England would be forced to devalue British Pound. So he bought call options on German Marks and put options on British Pound. He made a bet of $10 Billion by leveraging all the assets in his hedge fund.

Bank of England had made a number of public statements regarding its intention of staying within the EMU. However, within a few days of the speculative attack on the British Pound, Bank of England was brought to its knees as it was unable to sustain the immense selling pressure on the British Pound. Bank of England was forced to devalue British Pound in view of the speculative attack on the British Pound.

In a matter of a few days, George Soros made a cool $1 Billion profit on his bet. Can you make such a bet? Maybe not but this one example show the immense power options have if used correctly. Options are risky; there should be no doubt about it.

Options contract give you the right to buy or sell an underlying security like stocks, futures, commodities or currencies at a price before a certain date. This price is known as the Strike Price. This date is known as the Expiry Date. However, in European Style options you can only buy or sell on the expiry date not before that. Most people who trade options lose money, plain and simple.

You need to learn the Options Greeks. Time factor is very important when valuing an option. Further out the options contract is from expiration, you will have to pay a higher premium. As the options contract approaches the expiration date and if it is out of money, it loses its value very fast.

Have your heard about the LEAP options? LEAP stands for long term equity anticipation. It basically means that the option is much like the regular option except that the timeframe to expire is greater than 1 year. LEAP options are basically long term options. Leap options can help you profit over the long haul. You can use LEAP options in options strategies like the covered calls, straddles, spreads and so on.

LEAP options are risky because the option writer usually demands a hefty premium for taking on the long term risk. However, LEAP options can be incredibly profitable if used correctly. The buyer of the LEAP options has the right to exercise the option prior to expiration should the price of the underlying stock move in the money.

Far away from expiration, the higher the value of the options contract! Closer the out of money option is to expiration, faster its value drops. What this means is that the buyer of the options loses the premium that was paid for getting the right to buy or sell the underlying security. LEAP options can be a great trading vehicle for swing traders as they mitigate some of the time decay that is inherent in short term options. If you need to learn options trading than you should consider joining the Live Options Mastery Classes online at the Options University. Learn options trading from a former options floor trader for safer and better investing!

Mr. Ahmad Hassam has done Masters from Harvard University. Learn Candlestick Charting! Know Fibonacci Retracement! Get a totally unique version of this article from our article submission service