Tag Archives: Trading

General Forex

Option Trading Strategies – One Step Forward

If you are new in the options trading and just got finished with familiarizing with the idea, you might probably be thinking about option trading strategies. Even you have all the basic ideas about options trading, you’ll need a good strategy to make this work for you.

Before you start your trade on option, you must figure out a strategy. Simplest strategy is a long call option. Which is just buying a single call option. But it is just one among many other option trading strategies. Some of them are much more complex, incorporating buying and selling many options, both put and call. In general, they can be divided into three types. One being bullish, which believes the market rates will rise. The next is bearish, which believes the market rates will fall. And the last being neutral, believing the market rates may not change.

As it is said earlier, option trading strategies can be complex and incorporate buying of multiple put and call options, which may increase the chance of profit or decrease the amount of maximum risk. They can all end on same days or different days. Have same strike price or different ones. It all depends on the market understanding of the buyer and their future plan.

An example can demonstrate how a good strategy can be helpful in options trading. Say, you’ve bought a call option and a put option both of a stock at a strike price of $100. If the price of the options are $5 each, your total cost of the option is $10. Now, if the price of the stock increases up to $120, you can exercise the call option and your net gain would be $120 – $10 – $100 = $10. But if the price falls below $80 then you can buy the stock directly at $80 and exercise the put option. In that case also, your gain would be $100 – $80 – $10 = $10. So, if the market moves either way, you can gain from this strategy. Only way you will lose if the market doesn’t change, in that case your risk would be limited to only $10.

A very basic of the option trading strategies is to buy options that are greatly under-priced. In this way, the window of profit increases and the maximum risk amount decreases. Another very important key is the knowledge of what happening in the market. It can enable you to find a position in which the market moves to direction you want. It is not as simple as it sounds, it depends on a thousand factors which can go wrong, but it is a requirement to do successful trading.

So, it is a good idea to know more about various option trading strategies and applying a good strategy for option trading business. For this, you can consult various licensed firms and consultants to get good advice.

General Forex

Automated Forex Technical Analysis Trading Software on Mt4

There’s a numerous choices of technical analysis trading software, however don’t assume that every software provides traders with effective and trust-able trading features and options. Among several trading platforms, one shines out the most: MetaTrader 4.

Forex Technical Analysis Trading Software

Metatrader 4 offers you strategy testers, expert advisors, together with indicators, which allow fx traders to conduct evaluation tests on their personal trading systems with past historical market info. Advanced traders who know programming will find themselves able to write their trading system into a program and run their system on the past data to see how well their trading system performed in the past by just a press of the button.

To make things far more convenient, the open sourced software metatrader 4 have a lot of developers creating apps for the application. Introducing a type of software range we find it extremely useful are tools which allow the trader to draw lines on the chart and to instruct the lines to perform trade entry and exit executions automatically when price touches or breaks through them. This software is commonly mentioned in the community called trendline EA or trendline break EA. The drawing of line is all that is required for the trader to automate his trading work.

Explaining in more detail, you draw lines in the chart manually by hand, and when price breaks across or touches the line, will instruct the technical analysis trading software to make trade entries or exits. This will effectively frees up the forex traders’ time to look at the computer screen while waiting for the signal.

The drawing of lines now serves two functions, to perform technical analysis and also to execute trade entries and exits from there. Lines on the Mt4 charts are not just a visual marking tool but also the traders’ automated technical analysis trading software. In other words, they made most of manual forex trading systems to perform automated.

Look at the possibilities of how one can trade forex market in spite of having a day job. Trading this classical chart patterns in the past requires constant monitoring of the market, but now trading these technical chart patterns on automation are made possible.

Time-tested and commonly mentioned in most of technical analysis trading reports.

1) Breakouts

2) Support Levels And Resistance Levels,

3) Envelope Patterns Or Channels Trading

4) Triangles Chart Patterns- symmetrical triangle, ascending or descending triangles

5) Trading based on 2 stochastic lines and other oscillators (as a trade filter, entries or exit)

6) Fibonacci levels – application of these indicators enable forex traders to make a profitable entry into the market.

Technical Analysis Trading Software Offers Trade Versatility

There are many more indicators for forex traders to incorporate into their manual fx systems and made automated. Whether you want them to work as a trading filter, entry signal line or exit signal lines, it is now possible with the many automated technical analysis trading software on metatrader 4 or Mt4.

Most importantly, automated technical analysis trading software must be able to consider the unique experiences and personality of the trader putting on the trade position- the ‘edge’ that enables the trader to combine objective chart information with his own understanding and experience so that these crucial information will be passed onto and used by the software to perform key trading processes like trade signal recognition, trade entry and exit and trade management.

This technical analysis trading software will make forex trading in mt4 works in a similar fashion just like an actual manual trader trading the markets (and if not even better).

General Forex

Pre- Requisites To Support Resistance Trading

Support Resistance Trading is most often used by traders. As traders will plot charts with trendlines and key horizontal levels to mark the support and resistance levels, this will only constitute half of the battle to more profits; the other half requires the trader to be able to trade these levels.

Every Trader Has His Own Support Resistance Trading System

Somehow, each trader has his own way of identifying key support and resistance levels and there are some who do not even know how to plot. The next few points will highlight what are support and resistance levels so that a trader is able to plot and use them effectively without compromising the quality of his trading performance for his support resistance trading strategy. Therefore it serves as a foundation to support resistance trading.

Key Foundations To A Good Support Resistance Trading System

Using Trend Lines

Trend lines in support resistance trading are used to depict the direction of price on a chart. These trend lines are often used to enter trades whenever the market touches or breaks through them. As trend lines drawn are subjective in nature, there is a possibility that the price can choose not to respect the support or resistance line a trader has plotted.

It should only be used as a guide to determine a trader’s trade intention of a buy, sell or stand aside base on the trend.

Generally accepted practice to draw a trend line in support resistance trading is by connecting three or more consecutive lows increasing in price for up-trend or consecutive highs decreasing in price for down-trend.

Drawing Support

Support line is drawn across consecutive candle lows which indicate an area where buyers and sellers are balanced, therefore price unable to go lower. This level serves as a spring-board to push price higher, suitable for buy entry.

Drawing Resistance

Resistance line is drawn across consecutive candle highs which indicate an area where sellers and buyers are balanced, therefore price unable to go higher. This level serves as a spring-board to push price lower, suitable for sell entry.

Note that support and resistance levels can often swap roles whenever price breaks through them. This is when price breaks through a support; it will serve as a resistance level as the market will want to test this level before proceeding to fall further. The same also goes for resistance level becoming a support level.

Use Round Numbers

Round numbers are excellent to be used as potential support and resistance levels as it represents the psychological factor in supply and demand. Traders are humans with tendencies to prefer round numbers for entry or exits as it is easy to remember and calculate profits.

Using Daily Ranges

Daily high and low of every trading day represents key support and resistance levels for support resistance trading. Often, the market will want to test these levels. The validity of these daily levels can only be taken for the last two to three days as support and resistance levels.

Use Long Term Support And Resistance For Support Resistance Trading

Look out for resistance and support levels from longer timeframes as the validity of price respecting these values are often strong. Moving to shorter timeframes, the validity will decrease but these are the levels where a trader can hunt for bargains and make their move.

Support Resistance Trading Conclusion

The above six point gives an idea to the trader on how to start plotting key support and resistance levels as a foundation to trade analysis and trade entries for support resistance trading. This will eventually boost a trader’s confidence and trading performance.

General Business

Trading Commodity Futures Via The Internet

Before online commodities and future trading became the high-rolling, high-stake investment ground that it is today, its early proprietors were farmers of the 1800’s.

These farmers would grow their crops and bring these to the market come harvest time in the hope of selling them. But the main concern then was that without an indicator, they could not efficiently gauge how much of their goods are needed therefore resulting either to shortages or excesses, both causing losses for the farmer.

With shortages causing loss of the opportunity to earn more and excesses causing meats and crops to rot and dairy products to spoil. Also, when a certain produce is out of season any product made from them would be priced so high due to its scarcity.

A central marketplace was subsequently created for farmers to take their harvests and sell them either for immediate or forward delivery. Immediate delivery is what is known now as the spot or cash market and forward delivery is now called futures market.

This concept helped stabilize prices for commodities that were out of season as well as served as an effective indicator of supply and demand therefore saving farmers thousands of dollars that would otherwise go to spoilage.

From forward contracts evolved commodities and futures contracts. Forward contracts are effectively agreements to buy now for payment and delivery at a specified date in the future, which is usually three months from the date of the contract.

These were originally only for food and agricultural products but now they have expanded to include financial instruments. Forward contracts have evolved and have been standardized into what we know today as futures contracts.

Basically, when dealing in online commodities or futures trading, a contract must have a seller (the producer) and a buyer (the consumer). If you purchase a futures contract, you are agreeing to buy a commodity that is not there yet for a specific price.

Although most futures contracts are based on an actual commodity, some futures contracts also are sold based on its future value based on stock market indices.

Unless you are a businessman who is into the trade of the actual commodity you purchased, you won’t actually use the goods (if you’re the buyer) or actually provide the commodity (if you’re the seller) for which you’re trading a futures contract.

Remember, buyers and sellers in the futures market primarily enter into futures contracts to minimize risk or speculate rather than to exchange physical goods.

On the other hand, online commodities differ from futures trading in that commodities trading may involve the physical delivery of the goods. In which case a receipt is issued in the favor of the buyer. This receipt enables the buyer to take the commodity from the warehouse.

Traders in online commodities and futures market can use different strategies to take advantage of rising and declining prices. The most common are known as going long, going short and spreads.

When an investor enters a contract by agreeing to buy and receive delivery of the commodity at a set price – it means that he or she is trying to earn from an anticipated future price increase, he or she is going long.

When he or she is looking to make a profit from declining price levels, this is going short. The speculator sells high now so he or she can repurchase the contract in the future at a lower price.

When one makes a spread, however, he or she is trying to benefit from the price difference between two separate contracts of the same commodity.

As an online commodities or futures trader, therefore, you should be armed with a firm grasp of how the market and contracts function.

General Business

Coffee Futures Trading

Coffee is one of the world’s most popular beverages and is considered among the globe’s most important of the commodities that are traded internationally. Today, the prime market for trading coffee, cocoa and sugar futures and options is the CSCE at the Commodity Exchange Center in New York. It has been in operation since 1993.

As an exchange, the CSCE is not responsible for the price coffee trades are set. However, what it does is supply a free-market and tangible venue wherein traders are able to make options and futures transactions under the laws and regulations stipulated by the Exchange.

All of the options and futures traded under the CSCE are uniform and that grade, delivery times, locations and quantities are constant factors.

The only item that is negotiable is price. With the environment espoused by the exchange, coffee prices and the prices of other participating commodities are allowed to hit their natural levels — a move that is often referred to as ‘price discovery’.

Trading coffee futures has a strong demand because its supply is relatively abundant, depending mostly on weather conditions, that’s why coffee is grown primarily in areas with subtropical climate.

Weather is one of the greatest influences in determining the world supply of coffee. Aside from the weather, the price of coffee in the trading market is also subject to consumer tastes and demands.

At times when price variations are at normal levels, coffee demand is deemed inelastic. What this entails is that when the price of coffee rises, people do not necessarily reduce their intake of coffee, and that even when the price of coffee declines, consumers also do not react much differently. However, if the increase is significantly great, there is a likelihood that demand would drop commensurately, as what happened in 1977 and 1976.

The price of coffee is thereby determined by a public consensus on the Exchange floor. This is called the ‘open outcry’, where traders bid vocally, to give an assurance that every trade is transparent and competitively completed. Within the ‘open outcry’, all participants are given the chance to either sell or buy at the best price available. After which, the Exchange will distribute the prices determined to different parts of the world.

Basically, there are two kinds of market participants on the trading floor: the investors and the hedgers. The investors are those people who seek gains based on changing prices. Their orders are usually coursed via brokerage firms, or futures commission merchants, or via commodity funds managed by CTAs, or commodity trading advisors.

On the other hand, hedgers are the commercial companies that trade in the futures and options market in the hope of reducing their risk against unfavorable pricing shifts in the actual market. What hedgers do is lock in rates for futures buys or sales. Some of the pioneering hedgers included coffee makers, importers and roasters.

There is still a lot more to be learned about coffee futures trading. However, if you’ve already had experience dealing with commodity trades, this should be easier for you. Coffee is a product that can be easily tracked and for which a lot of information is available. In fact, it is considered one of the safest commodities to trade in.