InvestMacro FX

By David Adams

There are many styles, methods, and systems to trade the various e-mini contracts currently available. As a trader, you are in a position to decide what system is or style best suits your needs and abilities. It is my opinion that choosing a system that best meets your personality and psychological makeup is of prime importance.

Choosing a system to trade involves considering a wide variety of very important variables. Some of these variables are, but not limited to:

• Your personal investment objectives
• deciding upon the e-mini contract that is suited to your objectives
• evaluating and choosing a system that works with the e-mini contract you choose to trade
• evaluating your personality style and risk tolerance and match those variables with both your chosen system and chosen e-mini contract
• How much time do you want to spend in front of a computer screen?

As you might infer from the above mentioned bullet points, it is my opinion that the methodology you opt to trade and the contract on which you concentrate your efforts are closely linked to your personal personality type. I realize that this is a rather esoteric discussion, and only through time and experience can you truly make an educated decision on how to effectively trade the e-mini contracts.

For lack of a better example, I’m going to use myself as an example. I possess a reasonable amount of patience, but can become very impatient after a period of time. But to be sure, I would describe my personality in relation to trading closely as linked to immediate gratification. For me, then, holding contracts overnight is a stressful and uncomfortable feeling; so I am in cash every night. Year s ago I decided to concentrate my trading efforts on the intraday methodologies. As I got older (and I suspect I became less patient) I focused my trading efforts into an even tighter trading style called scalping. For me, scalping became the ideal vehicle for my trading efforts. I feel very comfortable scalping for a number of reasons:

• All my money is in cash at the close of every trading session
• I am in and out of trades in relatively short periods of time
• The results of my trading efforts are immediately available to me for evaluation
• By virtue of my short investment horizon, I feel comfortable in making trading decisions
• I risk only small portions of my trading account and losing trades (which are inevitable) but do not take an emotional toll beyond my risk tolerance

I want to point out that I am not advocating scalping as your trading style, but illustrating the decisions I made relative to my personality and risk tolerance, and choosing the scalping trading style. For example, more patient traders with large trading accounts may choose swing trading as their preferred style. Swing trading involves holding positions overnight for several days or longer. It is my opinion that swing trading can be more profitable than the scalping, but my psychological makeup does not allow me to be comfortable swing trading.

There are even methodology issues to consider in your trading. Will you confine yourself to being a strict technical trader? Will you base your trading on price action? You might also consider trading based upon the news and other fundamental factors. These are all important variables to consider when choosing the style of trading that best fits your needs.

As a final note, within each trading style there are dozens of variations and systems available. I am proficient in five or six different scalping styles, and there are dozens of scalp systems with which I am unfamiliar. Swing trading has a wide variety of variations in methodologies and systems available. As you can see, it takes a considerable amount of effort to refine your trading style and then adopt a methodology that fits within your psychological parameters. It’s no small task, yet I believe it is one of the most important variables in trading. If you are uncomfortable with the system you are using, your chances of success diminish.

In summary, we have discussed a number of variables that traders might consider when deciding how he or she will approach trading. I have stated my personal opinion that trading style and methodology are closely related to a trader’s psychological/emotional makeup. I have also stated that it takes a considerable amount of time and experience to understand which style and/or methodology you, as a trader, will be most comfortable. Finally, I believe that using a trading system in which you are uncomfortable may well lead to unprofitable trading.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here

By James McKee

China’s outspoken distaste with how the US government has been handling its finances has not bee a secret to anyone, however they are now claiming that the way out of this quagmire is to buy other currencies. China’s thought is that other currencies (probably NOT the Euro) will be easier to control, since the United States government is not listening to anyone at the moment. China’s lack of political support for US incursions in Libya definitely does not help the situation either, and while political occurrences alone would not prompt China to move away from the dollar they certainly do not help.

If China does go forward with their plan to exchange the US dollar for other currencies look for the US dollar to drop through the floor on Forex charts. It is not going to be a good day for the US economy or most economies on the planet for that matter since the US dollar is the reserve currency of most nations. Every country’s government however is waking up to the fact that the United States has no real interest in preserving their financial solvency. While all countries will not “dump” their USD holdings all at once even an incremental sell off would be disastrous.

The only solutions to this problem lay in the United States doing everything it can to preserve ties with China and make a real effort to gain the trust of this economic giant. If the United States fails to do these things look for the USD to begin a massive slide sometime very soon after China begins its selloff. The USD will fall against most other majors on Forex charts if China does decide to sell off and many other economies and their currencies will be adversely affected as well, these are dark times for the USD.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the online forex trading regularly.

By David Adams

When discussing trading oscillators in relation to e-mini trading, there is certainly no shortage of opinions as to how well they perform. To be sure, there are traders who rely solely upon the information derived from oscillators to enter and exit trades. On the other end of the spectrum, some traders abstain from using oscillators in any form. In my opinion, the best results are derived from using a combination of trading oscillators and chart reading. In this short article, we will discuss various types of oscillators and how they function.

In its basic form, and trading oscillator is a set of data points derived by using an algorithm or formula to a dataset of prior market prices. Like any formula or algorithm, the variables (or input data) can take several forms, especially when it comes to trading. Some formulas use the opening price, others use the closing price, and still others use the range of a given series set of bars. It is not unusual for individual traders to have preferences as to which variable they believe yields are the truest reading for setups they prefer.

While trading oscillators are broken down into several different categories, for the sake of discussion we will classify oscillators as leading indicators and lagging indicators. Even this classification is a topic of debate because all oscillators use earlier data to produce a given data points. I could easily argue that all oscillators are lagging indicators because they use historical data, even if the data is only seconds old. On the other hand, I am not in the majority position on this issue so we will stay with mainstream thought on trading oscillators.

Leading Trading Oscillators

Proponents of leading indicators claim that these trading oscillators are able to lead price action. These oscillators are generally referred to as momentum indicators. Most momentum indicators utilize the rate of change (ROC) of a given security or index. For our discussions, we will be referring to futures indexes. As the name implies, the faster a security increases/decreases in price will cause momentum to increase up or down. Some well-known momentum, or ROC indicators are:

• Commodity Channel Index
• Momentum Indicator
• Relative Strength Indicator
• Stochastic Indicator

While these oscillators calculate rate of change with different methodologies, they all fall into the category of momentum indicators. By definition, momentum indicators seek to precede actual price action. In my trading, I have found the Commodity Channel Index to be an effective trading oscillator and I utilize it often. There are times when I have used all of these indicators, depending upon market conditions. Leading indicators are especially effective in range bound markets.

Lagging Trading Oscillators

Lagging indicators fall under the classification as trend following indicators or oscillators. These oscillators seldom lead the price of the futures contract or security. For obvious reasons, these oscillators/indicators are of most use when the market is in a trending mode. As a note of caution, using lagging indicators in a non-trending market will lead to many false indications because of the lag time that is inherent in lagging indicator/oscillator calculation. Some very popular lagging indicators are:

• Moving Averages (exponential, simple, or weighted)
• MACD

Once you have entered a trend, lagging indicators are useful in keeping you in that trend. It is relatively easy to see the trend weaken as the moving average begins to flatten. As this flattening begins, most traders began considering their exit strategy.

In summary, we have talked about oscillators and indicators and their application. In range bound markets, leading indicators are especially effective while lagging indicators will create many false entries and exits. On the other hand, lagging indicators are especially effective in trending markets and can assist a trader in gauging the strength and longevity of a trend he or she is following. In short, trading oscillators have a variety of uses and applying the correct oscillator to given market conditions may help the trader be more profitable.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here

By Cedric Welsch

Unlike the old days of investing, when almost everything was entirely done manually and technology was still in its prehistoric era, nowadays investing is so simple like clicking the mouse of your computer. Indeed the sudden rise of computers and the internet has created a whole new ball game in terms of making profits out of investment opportunities. And one of the most popular forms of investment today that can easily be accessed by anyone through the internet is the stock market. So many wannabe investors are flocking the internet with a quest in mind to learn about stocks and how they can make real profits off it.

Any individual can now invest in stocks very easily because of the internet. The most important step that any stock investor will undertake in the quest of making profits off of stocks is when finding the perfect company to buy stocks from. Obviously this one step needs a lot of researching to do. But then again, investors can find all the information they need on the internet for free. Companies literally list down every asset they got on the web to attract more investors. It is a mutual agenda between companies and investors to find each other. Companies want to find the right investors, while investors want to find the perfect company to put their money in and make profits.

Finding The Right Company To Buy Stocks From

So as an investor, what should be your major basis for choosing the right company to invest in? This is surely the most intelligent question that any investor who is really that serious to making big profits off of stocks, could ever ask himself. And answering this profitable question is the very reason why research is so important for every individual wanting to invest in stocks.

The most important data you would want to find out about a company is regarding its stability. The more stable a company is, the more qualified it becomes as a target prospect for investment. To find out whether a company is stable or not should be easy. First, see the company’s historical data. Find out how old is it already as an established business entity. Then you would want to check its growth history. Has it been progressively expanding over the past years? Has the growth been gradual and steady? Obviously a sudden spurt of progress in any short period of time is not what you want to see. You are after a company that’s showing consistent and steady growth in all recent years.

If you will be able to accurately find that target company to buy your share of stocks from, then you are definitely in for a start on gaining that momentum at earning more investment profits in the years to come.

About the Author

Do you want to know the cheapest online stock trading techniques? Now you can sure learn cheap online stock trading easily.

By James McKee

The tsunami that occurred just off the coast of Japan has continued to cause waves throughout the island nation’s economy, this is due to the ever-present threat of nuclear meltdown. Workers have been working around the clock in an attempt to resolve trouble with a nuclear reactor that has been going into meltdown for a couple weeks now. Readings from the power plant have been scary to say the least and today Japanese officials learned that the data was misinterpreted and that engineers made a mistake. Japanese energy employees are being pushed to the breaking limit and it is likely that more mistakes will happen in the near future.

The rest of the world has continued to contribute to Japan’s emergency funds in an effort to avert disaster not only in Japan but also on a global level. Nuclear particles have been found as far away as Iceland and this is concerning for the global community. If the nuclear trouble persists the Japanese Yen will surely see much instability on forex charts in the near future, just remember that the Japanese Yen is ideally weak against other majors so in this time of crisis it will likely rise in value.

Pairing the Japanese Yen with a weaker major like the CHF or USD is a good idea, stay away from the GBP/JPY pair as it has been smashing through resistance and support on forex charts a lot lately. In these times of uncertainty fundamental trading really comes in handy in addition to technical trading, keep your eyes glued to your charts and stick to small time frames where possible. Intraday trading for the JPY is not recommended currently unless you have done extensive research and have the proper TP/SL stops in place, take comfort in the fact that what goes up must come down.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the online forex trading regularly.

The Nasdaq OMX Group (NASDAQ:NDAQ) and the IntercontinentalExchange (NYSE:ICE) announced today a joint proposal to acquire NYSE Euronext (NYSE:NYX) for $42.50 per share in cash and stock, or approximately $11.3 billion, based on the closing prices of the respective stocks as of March 31, 2011. The proposal represents a 19% premium over the buyout offer from Deustsche Boerse, based on the German exchanges closing share price as of March 31, 2011, according to Nasdaq OMX and ICE. Under the terms of the deal, NYSE Euronext stockholders would receive $14.24 per share in cash, plus 0.4069 shares of Nasdaq OMX stock and 0.1436 shares of ICE stock for each NYSE Euronext share they own. As part of the proposal, ICE would purchase NYSE Euronext’s derivates business, with Nasdaq OMX retaining the rest of NYX’s businesses, including its stock exchanges in New York, Paris, Brussels, Amsterdam, and Lisbon, as well as its U.S. options business. The combined NYSE EuronextNasdaq would merge the two largest stock exchanges in the world by total market capitalization of companies listed and total value of trade on the exchange. The exchange would have a total market capitalization of companies listed of over $20 trillion, have a geographic footprint in 16 countries and be headquartered in New York City. Robert Greifeld, CEO of NASDAQ OMX, said: “Our industry is undergoing a period of historic change. During the last five years more than 90 percent of the top 100 global listings chose not to list in the U.S., depriving U.S. investors of the opportunity to easily invest and trade in these companies. The combination of the two leading U.S. exchanges delivers an opportunity to build a global exchange platform that has the scale and growth potential to benefit investors, issuers and other market participants. We believe it would increase transparency and liquidity in U.S. markets and create jobs as new companies raise capital. For Europe, it strengthens the equity markets by creating a new, truly pan-European equity-trading platform and solidifies Paris and London as premier financial hubs. Given that our proposal is clearly a superior proposal, we hope that NYSE Euronext’s Board will recognize this opportunity as well as the benefits for NYSE Euronext’s employees and customers.”

The Bank of England has held the benchmark bank rate at 0.5 percent for the past two years but as rising prices continue to erode the buying power of the pound, pressure builds on the Bank to hike rates. The minutes of the last Monetary Policy Committee (MPC) meeting in early March reveal that the interest rate vote at that time consisted of six voting members in favor of maintaining the current rate, and three votes for an increase.

The next MPC interest rate decision will be announced on Thursday, April 7 at the conclusion of the committee’s monthly two-day meeting. The early line is that the decision could be even tighter this time, but the prevailing belief is that the MPC will opt to continue with the current rate policy for the time-being at least.

The Bank of England is responsible for maintaining growth as close as possible to an annualized rate of 2 percent. This is considered the ideal trade-off between sustainable growth and inflation. When the Bank fails to meet this goal by more than a full percent above or below the target, the Bank is required to explain why the target was missed and what steps will be taken to correct the situation. This explanation arrives by way of a letter that Bank Governor Mervyn King must write to his boss in the government, the Chancellor of the Exchequer.

As of the end of February, the inflation rate for the previous twelve months as measured by the Consumer Price Index was 4.4 percent. The expected result for March is even higher. This means Governor King must fire off another letter to the Chancellor – in fact, if this is indeed the case, it will actually be his seventh straight letter explaining why monthly inflation surpassed the target by a wide margin.

Naturally, those concerned with the level of inflation are lobbying for taking interest rates higher to curb consumer spending. Governor King has argued against adjusting rates upwards claiming he fears this could derail the very fragile recovery underway in the British economy. He is also not convinced inflation is due solely to unrestrained spending habits.

To bolster his argument, King points to recent tax hikes introduced as part of the government’s attempts to reduce the country’s massive budget gap of nearly £150 billion (US$241.3 billion). On January 1st, the main sales tax known as the Value-Added Tax (VAT) was increased from 17.5 percent to 20 percent. This was an across the board increase that spared no consumer or business.

Governor King also identifies the spike in oil and energy costs over the past year as a major contributor to inflation. Britain is highly dependent on imported oil and King claims the higher fuel costs alone account for roughly one-third of the jump in inflation in recent months.

Finally, Governor King is quick to point out the impact the severe spending cuts outlined in the most recent government budget will have on future growth. To reduce the national deficit, the government has committed to reducing spending by £83 billion (US$133.5 billion) over the next four years. This is expected to eliminate 300,000 public sector jobs alone and could push unemployment to 9 percent by the end of this year from the current rate of 8 percent.

For April’s MPC meeting, it appears King has sufficient like-minded voting members to carry the decision but if inflation does not soon show signs of easing, King may soon find himself defending a “stay-the-course” position on his own.

Scott Boyd is a currency analyst at OANDA and blogs on MarketPulse FX.

The SEC is considering whether to investigate the purchase of stock in chemical products maker Lubrizol (LZ) by David Sokol, one of Warren Buffett’s top executives at Berkshire Hathaway (BRK.A) before his abrupt resignation on Wednesday, according to The New York Times.

By Elliott Wave International

Earnings season is upon us, so it’s a good time to delve into how earnings affect stock prices. Here’s an excerpt from Bob Prechter’s February 2010 Elliott Wave Theorist. It considers the conventional belief in a cause/effect relationship between earnings and stock prices. EWI’s 50-page Independent Investor eBook includes the entire report on the effect 10 different economic events, political events, and monetary and fiscal policies have on the market. You can download it now for free.

Claim #4: “Earnings drive stock prices.“
This belief powers the bulk of the research on Wall Street. Countless analysts try to forecast corporate earnings so they can forecast stock prices. The exogenous-cause basis for this research is quite clear: Corporate earnings are the basis of the growth and the contraction of companies and dividends. Rising earnings indicate growing companies and imply rising dividends, and falling earnings suggest the opposite. Corporate growth rates and changes in dividend payout are the reasons investors buy and sell stocks. Therefore, if you can forecast earnings, you can forecast stock prices.

Suppose you were to be guaranteed that corporate earnings would rise strongly for the next six quarters straight. Reports of such improvement would constitute one powerful “information flow.” So, should you buy stocks?

Figure 9 shows that in 1973-1974, earnings per share for S&P 500 companies soared for six quarters in a row, during which time the S&P suffered its largest decline since 1937-1942. This is not a small departure from the expected relationship; it is a history-making departure. Earnings soared, and stocks had their largest collapse for the entire period from 1938 through 2007, a 70-year span! Moreover, the S&P bottomed in early October 1974, and earnings per share then turned down for twelve straight months, just as the S&P turned up! An investor with foreknowledge of these earnings trends would have made two perfectly incorrect decisions, buying near the top of the market and selling at the bottom.

In real life, no one knows what earnings will do, so no one would have made such bad decisions on the basis of foreknowledge. Unfortunately, the basis that investors did use–and which is still popular today–is worse: They buy and sell based on estimated earnings, which incorporate analysts’ emotional biases, which are usually wrongly timed. But that is a story we will tell later. Suffice it for now to say that this glaring an exception to the idea of a causal relationship between corporate earnings and stock prices challenges bedrock theory.

For more of Robert Prechter’s analysis of cause/effect relationships in the markets, download EWI’s FREE 50-page Independent Investor eBook. It includes essays from recent issues of The Elliott Wave Theorist and its sister publication The Elliott Wave Financial Forecast, in addition to a full chapter from the New York Times bestseller, Conquer the Crash. Download your free eBook.

The American manufacturing sector posted its 20th consecutive month of expansion in March, according to the closely followed index from the Institute for Supply Management. The 61.2% reading was just above the 61.1% economists had expected. It was down slightly from the 61.4% in February, which was the highest level since May of 2004. March is the third month in a row the index came in above 60. Any reading over 50 indicates an expansion of the sector. Norbert Ore, Chairman of the ISM’s manufacturing business survey committee, commented, “The component indexes of the PMI remain at very positive levels and signal strong sector performance in the first quarter. While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices. Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins.” The prices index rose to 85%, up from 82% in February.