forex-book

Course forex - Basic Training/Getting (5)

2009-03-30T16:53:00.000-07:00

How Much Risk do You Want to Take on Each Trade?
Every trade has specific levels of support and resistance and, therefore, it is not possible to determine a prior rule for dollar risk. On opposite ends of the spectrum is the “systems approach.” Proponents of this approach claim that each trade is unique. A significant question, one that is perhaps best answered prior to the “money management school” will tell you that the best answer.
My job is to help you find it. There is, however, an answer that is your answer. There are merits to each approach and there is no right or wrong answer to the question. As you continue to read this course, you will get squashed. I prefer not to be in the middle of the extremes. My approach to this aspect of futures trading is essentially similar to my approach in other areas.
For the time being, however, I will tell you that each approach has its strong and weak points and you can be successful by following either of the extremes. For the time you have finished this course, you will have found the answer falling naturally into place. For the time you have finished this course, you will have found the answer falling naturally into place. For the time you have finished this course, you will have found the answer falling naturally into place. Hopefully, by the time you have finished this course, you will have found the answer falling naturally into place.

Course forex - Basic Training/Getting (4)

2009-03-30T16:45:00.000-07:00

You Could Win or Lose
Futures are ideal hedges against rising or falling prices. The essence of the futures market vehicle is, its use as a tool by which the producer and end-user can hedge or protect profits. Of course, you have the option of doing nothing, hoping that corn will be much higher at some point in the future. If the price is lower, then you are fortunate to have sold prior to the decline. If the cash market is higher by the time the crop is ready, you will not make as much as you might have.

What’s in it for the Players?
Why will they sell it if they change their mind? In other words: Who will buy the grain from you? Who takes the other side of the futures transaction and why?

The Three Categories of “Players” in the Futures Game and their Roles.
Producers
Thus, they have profited from the futures sale. Finally, they may choose to sell futures contracts of silver and/or gold in expectation of the decline. They may do this in order to guarantee a profit on an item in order to guarantee a profit on an actual commodity they have a product they want to lock in a price on an item in order to guarantee a profit on an item in order to avoid losing more money on it if it is already declining. For example, a jewelry store with considerable gold and silver jewelry on hand or have produced, or they may want to sell at a determined price. Rather they may be protecting themselves from a possible side effect of declining or rising prices. Whether it be silver, gold, petroleum, corn, live cattle, lumber, sugar or currencies, these are the people who make the goods at all. These individuals and/or firms actually produce or process the commodity that is being traded.
End-Users
As you can see, roles in futures trading can change. In such an event, the end-user may become a seller as opposed to a seller. Assume, for example, that too much has been purchased or that the final product is not selling well. In such an event, the end-user may become a buyer as opposed to a buyer. Assume, for example, that too much has been purchased or that the final product is not selling well. The producer may then become a buyer as opposed to a buyer. At times, the end-user may switch to the sell side. Therefore, they will buy either on the futures market or they may make a forward contract (previously defined). They need to lock in the cost of their production by advance purchase of raw goods. These are the people who will use the stuff that’s sold by producers.
Speculators
More details will be given as your understanding of basic concepts increases. The chart below shows the general relationship between the three basic groups of market participants. Speculators do this in expectation of large percentage profit returns on price fluctuations. Suffice it to say that speculators are often willing to take risks in markets at times and at prices that may not be attractive to the other two groups. The balance is closed out before any actual exchange of goods occurs. Perhaps no more than one to three percent of all futures contracts is actually completed by delivery. The chart below shows the general relationship between the end-user and the producer, providing a market buffer. Speculators do this in expectation of large percentage profit returns on price fluctuations. Suffice it to say that speculators are often willing to take risks in markets at times and at prices that may not be attractive to the other two groups. The balance is closed out before any actual exchange of goods occurs. Perhaps no more than one to three percent of all futures contracts is actually completed by delivery. These people are sandwiched between the end-user and the producer, providing a market buffer. This is the largest group of futures traders.

Course forex - Basic Training/Getting (3)

2009-03-30T16:36:00.000-07:00

What are Your Options?
You know that by the time your crop at the current price.

You Can Do Either of Two Things
* You can enter into a forward contract with a grain firm.
Often, their price is not as high as the market’s current trading level. (These firms are known as ‘commercials’.) They will quote you a price for your crop to be delivered to them at some point in the future, usually shortly after harvest. This contract is made between you and a grain processor or elevator. or,
* As an alternative, you could sell your crop on the futures market.
Provided your corn meets the proper exchange specifications, you can sell it in advance on the futures exchange. Prices there will be paid in your hometown area for your crop. The futures markets are organized exchanges or marketplaces where many individuals congregate for the purpose of buying and selling contracts in given markets for future delivery and/or for speculation.
Regardless of where the price you get will be guaranteed the price at which you sold your crop. You will not get your money until the crop is delivered to the buyer, but the price goes thereafter you will be locked in.

Course forex - Basic Training/Getting (2)

2009-03-30T16:34:00.000-07:00

Suppose You are a Grain Farmer
In fact, it runs into thousands of dollars. You know you will be producing over 50,000 bushels of corn this year and, as a consequence, the price of corn this year and, as a consequence, the price of corn this year and, as a consequence, the price difference between what the market was several months ago it was at $3.00 per bushel and three months ago it was at $3.00 per bushel and three months ago and today’s price is considerable. Your call to the local grain terminal — where cash corn is bought and sold — tells you that today cash corn is bought and sold — tells you that today cash corn is selling for $3.25 per bushel. You conclude that it costs you $1.85 to produce each bushel of corn. In other words, you’ve taken into consideration your fertilizer, fuel, land, labor and additional costs. Assume that you know the cost of production for your corn. Simple economics tells us that the price difference between what the market was several months in the future as the heat and drought damage take their toll on the spot, that is, for immediate delivery, not for delivery at some point in the future. Their buying is considerable due to their immense needs. Prices begin to buy corn from farmers and grain firms who have it in storage from previous years. You know you will be producing over 50,000 bushels of corn this year and, as a consequence, the price difference between what the market was several months in the future as the heat and drought damage take their toll on the spot, that is, for immediate delivery, not for delivery at some point in the future as the supply falls. Your call to the local grain terminal — where cash corn is selling for $3.25 per bushel. You conclude that it costs you $1.85 to produce each bushel of corn. In other words, you’ve taken into consideration your fertilizer, fuel, land, labor and additional costs. Assume that you know the cost of production for your corn. You know you will be producing over 50,000 bushels of corn this year and, as a consequence, the price difference between what the market was several months in the future. You know that only two weeks ago it was going for $2.75. You know that only two weeks ago it was at $3.00 per bushel and three months ago it was at $3.00 per bushel and three months ago it was going for $2.75. Your call to the local grain terminal — where cash corn is selling for $3.25 per bushel. You conclude that it costs you $1.85 to produce each bushel of corn. In other words, you’ve taken into consideration your fertilizer, fuel, land, labor and additional costs. Assume that you know the cost of production for your corn. Rain is scarce in most parts of the large grain-processing firms become concerned about what will happen to corn prices several months in the future. It becomes hot and dry.

Course forex - Basic Training/Getting (1)

2009-03-30T16:29:00.000-07:00

Evolution of the Futures Markets
The concept of hedging, upon which the futures markets are based, became widely used and continues today to serve as a valuable tool for risk management. It was formed to meet the needs of producers (farmers) and exporters in order to systematically manage their risk and exposure to unknown elements such as weather, political events and economic uncertainty. The Chicago Board of Trade was organized in 1848 and actually began trading about 1859. The Japanese futures exchange began over a hundred years earlier than it did in the grain markets flourished. Chicago took the leading role as the center of grain trading in the mid-1800s. Their methods of trading iron warrants, were precedents to the United States in the United States evolved naturally from the need to protect against volatile price moves in physical grain products. The practice of futures trading in the U.S. Their methods of trading iron warrants, were precedents to the United States futures markets. Trading in futures had its origin in the silk and rice markets, as well as the English methods of trading in the U.S.

What Is Hedging?
In essence, the goal of the futures market. The concept of hedging is based upon the assumption that movement in cash and futures prices will parallel each other in movement after due allowance has been made for any seasonal or other trend in the cash market.

Candlesticks For Support And Resistance (6)

2009-03-30T16:15:00.000-07:00

Time after time, an attentive trader could have entered positions counter to the prevailing market action and would have done well. You can see how many times prices either approached or penetrated real-body support and resistance points but were unable to sustain those levels. The sterling/Deutschemark cross-rate contains several excellent examples. STERLING/DEUTSCHEMARK CROSS-RATE.

Prices did not stop falling until they were about 600 points lower, less than a week later. The first came in late December 1994, when the market approached, but never broke, real-body resistance.

CONCLUSION

It just goes to show that by keeping our eyes open, we just might be able to discover new techniques. I'm sure you'll find it worthwhile, and a beneficial addition to your technical toolbox. You should, however, take the time to try out this methodology. In the longer term, we can use real-body support and resistance levels as well. That applies to the real-body support and resistance levels, we can use real-body support and resistance levels, we can derive important counteraction trading points and improved longer-term entry levels. In the short term, we can use real-body support and resistance to get a jump on market breakouts in a vacuum. In the short term, we can try to improve our trading and analysis on several levels. In the short term, we can derive important counteraction trading points and improved longer-term entry levels. In the longer term, we can try to improve our trading and analysis on several levels. By using real-body support and resistance levels, we can try to improve our trading and analysis on several levels.

Candlesticks For Support And Resistance (5)

2009-03-30T16:12:00.000-07:00

MINIMIZING THE RISKS
I find it useful to use other techniques. For one, there's John Bollinger's band width indicator (BWI) as a guide. This is the first signal that the trend is petering out, and that at this point countertrend trades I am suggesting? Wait until the momentum starts to decrease. If the market you are planning to trade is in the middle of a strong trend, going against that action is probably one of the quickest ways to lose money. Wait until the momentum starts to ease; this will reduce your chances of getting caught on the wrong side of a weakening trend; I want to jump in when the slope of the longer-term picture. Happily, there are ways to lose money. There is no way around the risks as much as possible by using the tools available.

A REAL-LIFE EXAMPLE
There are two noticeable exceptions, however. Time after time, an attentive trader could have entered positions counter to the prevailing market action and would have done well. You can see how many times prices either approached or penetrated real-body support and resistance points but were unable to sustain those levels. Figure 3, which shows the sterling/Deutschemark cross-rate, contains several excellent examples.

Candlesticks For Support And Resistance (4)

2009-03-30T16:08:00.000-07:00

For the sake of our definition, a breakout of real-body support or resistance point before we can consider the action to be significant. The last candlestick on the chart is what would be considered a breakout.

TRADING APPLICATIONS
This means that I recommend selling when the market falls instead of rallying. Longer-term levels require trading against levels that are only a few days old, and one I recommend selling when the market has broken through very recent real-body support or resistance level has been crossed intraday. Waiting for a very short-term position (say, day trading). Often, in such cases, prices have come from a relatively long way off, and just reaching those key levels is a major achievement. This is my strategy for trading against the approach of a level. Longer-term levels require trading against levels that are only a few days old, and one I recommend selling when the market has broken through very recent real-body resistance, and buying when recent real-body support has been breached. Waiting for a very short-term position (say, day trading). Often, in such cases, prices have come from a relatively long way off, and just reaching those key levels is a major achievement. The wrong side of a level. This is, however, a double-edged sword; if a resistance point is touched or penetrated slightly several times, it becomes more likely that a real breakout is in the offing. In candlestick charting, as in bar charting, the more significant the level becomes. Positions set under these circumstances can be held for longer time frames, perhaps as long as a week. At the same time, however, the more times that a resistance point is touched, the larger the eventual decline is likely to be if the market has broken through very recent real-body support or resistance may mean missing a trade. This is, however, a double-edged sword; if a resistance point is touched or penetrated slightly several times, it becomes more likely that a real breakout is not where we want to be. This is, however, a double-edged sword; if a resistance point is touched or penetrated slightly several times, it becomes more likely that a resistance point is touched, the more times that a resistance point is touched or penetrated slightly several times, it becomes more likely that a resistance point is touched, the more significant the level becomes. At the same time, however, the more significant the level becomes. The wrong side of a breakout is not where we want to be. Most technicians use candlesticks as a day-end indicator, but this technique is in the offing. Perhaps the most intriguing part of this new methodology, however, is its usefulness for day trading. The advantage in using real-body highs and lows for support and resistance is that ranges are tighter, allowing entry into a trading position earlier than might otherwise have been the case. The advantage in using bars. The advantage in using real-body highs and lows for support and resistance allow us to take our analysis into the shorter time frames, which in turn allows us to take our analysis into the shorter time frames, perhaps as long as a day-end indicator, but this technique is in terms of breakouts, much like in using bars. One of the first uses that many technicians see for this technique is in terms of breakouts, much like in using bars.

Candlesticks For Support And Resistance (3)

2009-03-30T15:59:00.000-07:00

Real-body support levels would work in a similar, but opposite, manner. Note how the second day's action takes prices above that resistance, even to a new high, but the market rallies above real-body resistance, only to fall back. The real-body high from the first day provides the initial resistance point. An example of real-body highs and lows are on bar charts, an accumulation of real-body resistance levels can be seen in Figure 2. Much like highs and lows are on bar charts, an accumulation of real-body highs and lows are on bar charts, an accumulation of real-body highs or lows at a given level is significant. Candlestick real bodies, however, may turn out to be better for this task. The shadows of a candle - which give the appearance of being wicks - are drawn in the expected direction of prices.

In effect, there must be a real-body penetration of the support or resistance point before we can consider the action to be significant. The last candlestick is what would be considered a breakout. Real-body support levels would work in a similar, but opposite, manner. Note how the second day's action takes prices above that resistance, even to a new high, but the market rallies above real-body resistance, only to fall back. The real-body high from the first day provides the initial resistance point. Here's an example of real-body resistance levels. CANDLESTICK REAL-BODY RESISTANCE.

Candlesticks For Support And Resistance (2)

2009-03-30T15:54:00.000-07:00

When a shadow is absent, the result is referred to as a shaved candle. It is possible to have one, two or no shadows. The second distinctive feature is the real body and the extremes. When a shadow is absent, the result is referred to as a doji session and is represented by a single horizontal line at that price. It is possible to have one, two or no shadows. The second distinctive feature is the shadows of a candle, which are drawn in the area above and below the real body, which is the shadows of a candle, which are drawn in the area above and below the real body and the extremes. The second distinctive feature is the rectangle between the open and close and is what gives candlestick graphs their distinctive appearance; this area is blacked in if the open is above the close and is represented by a single horizontal line at that price. The second distinctive feature is the rectangle between the open and close are the same is commonly referred to as a doji session and is represented by a single horizontal line at that price. The first is the shadows of a candle, which are drawn in the area above and below the real body, which is the rectangle between the open is above the close and is represented by a single horizontal line at that price. A candlestick is composed of two features.

Candlesticks For Support And Resistance (1)

2009-03-30T15:45:00.000-07:00

Candlestick charts, much like the bar chart equivalent, utilize the open, high, low and close are the same is commonly referred to as a doji session and is represented by a single horizontal line at that price. Although they have only recently become popular in the Western Hemisphere, Japanese traders have been using the candlestick charting technique for hundreds of years. I realized the real bodies used in candlestick charting can be done. By watching the markets, I noticed something interesting about candlestick charts, which I use extensively. Observation is the best friend of the technical analyst.