Reasons to be Optimistic About the Economy

In any business I believe it is critical to be optimistic.  I am not suggesting that closing your eyes to reality is the correct path but before you set out onto the investing and trading path, I believe you must have an optimistic outlook.  If you have doubt or refuse to "believe" then it is logical that these negative element will leak into your trading mind and can onlky make a hard job harder.  Check out this fine article by Joseph Lazzaro from the Daily Finance on "Five reasons to be optimistic about the U.S. economy"  :  http://www.dailyfinance.com/2009/09/18/five-reasons-to-be-optimistic-about-the-u-s-economy/

Futures trading involves substatial risk and is not suitable for all investors

Is it Time to go Short Gold Futures?

It seems like everywhere I go the topic of gold comes up. Financial news carries the crawl across the bottom of the screen with the countdown to $1,000 for gold, commentator’s trade guesses about how far it will go and virtually everyone is sending in grandmother’s old broach to some PO Box to get a check. Should we care? Further, as I listen to the advertisements from gold investment groups hyping how “there has never been a better time to buy gold” Where were these ads in 2000 when gold was at $255? That was the time to trumpet the call to buy gold. I wonder, is now the time to short gold?
Realistically, doesn’t it seem more logical that we are closer to a top than a bottom? I get the philosophy that the world is ending and the dollar is worthless and gold is our savior, but us a trader this looks more like a top than a bottom. If this was corn, we would look to sell, not buy. With all the bumps against and only slightly through $1,000 I think it may have run out of gas and has a better chance to go to $700, than $1,500.

Futures trading involves substantial risk and is not suitable for all investors

E Mini Contract Specifications

Here is a link to the Chicago Mercantile Exchange, E Mini S&P 500: http://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_contract_specifications.html

Pros and Cons of Trading the E-Mini Futures Contract

Let’s start with a definition. An E-Mini futures contract is a smaller version of a bigger futures contract. While there are mini versions of just about any futures contract now, the predominant market is stock index sector. Of that, the mini version of the S&P 500 futures contract traded on the Chicago Mercantile Exchange is the unofficial “king” on the E-Mini’s. It should also be noted that the “E” in e-mini comes from the fact that these are all electronically traded and do not inhabit the trading pits.
First, it should be said that futures trading is not for everyone. I will outline some “pro’s” for you along with an equal amount of “con’s.”

The Pro Side of E-mini Trading
Low Entry Cost While the initial deposit amount varies with each brokerage firm, the bottom line is that the margin or up-front deposit required to trade the E-Mini stock index futures are around $5,600 and many firms require half of that amount if you wish to day-trade it.

More Control With the advent of electronic trading you have the ability to see actual bid and offer prices along with volume numbers which allows you to see the playing field better as opposed to a pit traded market.

Cheaper In comparison to buying and selling the actual stocks, the E-mini allows the investor the ability to participate in an entire basket of stocks all at one time as opposed to trying to individually buy all of those stocks individually.

The Con Side of E-Mini Trading

Fast is not always good Electronic markets such as the E-mini can move very rapidly. Unfortunately, the E-mini can be the siren song for new investors and with the connotation that it is easy to make money, newbie’s can lose a lot of money in a hurry. Just because you are only losing $200 on a trade isn’t o.k. if you string twenty of those losers together.

Overtrading The tendency is for traders of E-Mini’s is to treat it like a video game. In an electronic medium, it is easy to throw good money after bad.

Costs If you become a victim of overtrading commission costs can add up fast. Even at discount rates those can severely impact you account value.

Conclusion: I think the E-mini is a versatile and useful investment tool. Those that come armed with a trading plan and lots of discipline have a great chance of being successful. Those that rush to join the E-mini party will sadly become a grim statistic.

Futures trading involves substantial risk and is not suitable for all investors.

Fibonacci Numbers in the Futures Market

As I watched the movie version of Dan’s Brown’s best-selling novel "The Da Vinci Code", I got to see a simple investing strategy that I use every single day right up there on the big screen, Fibonacci Numbers! O.K., Tom Hanks didn’t exactly relate the use of Fibonacci Numbers back to where to buy the September E-Mini, but the movie did show how a sequence of numbers originally investigated in the year 1201 is relevant to so many things, from popular culture, science, and investing.

Let me tell you a little about myself. After college graduation in 1986 I began my futures career on the floor of the Chicago Board of Trade working as a runner on the grain floor. I progressed to doing grain market research and then began handling client business in 1988. From that time on, I have been involved in some capacity of futures trading system administration or management. I haven’t seen it all, but I have seen a lot. Over the years I have written articles for Futures Magazine, and SFO Magazine. My articles have also appeared on FutureSource.com and Bondheads.com. I currently oversee operations for an Introducing Broker headquartered in California called Trade Center, LLC.

What I will teach you in this article is how to calculate and use Fibonacci numbers to find support and resistance levels for the futures and stocks you trade. I myself have found these levels to be quite useful.

What are Fibonacci Numbers?
First, a little background on what Fibonacci numbers are and where they came from. In doing research for a book in 1202, mathematician Leonardo Pisano set about to study patterns in numbers identified by another countryman named Fibonacci, as they applied to some rabbits in his garden. The example he started with was this: If you started with a pair of baby rabbits enclosed in the garden and assumed that each pair of rabbits bears a new pair each month, which from the second month on itself becomes productive, how many pairs of rabbits will be in the garden at the end of a years time?

As the months go by in the garden, a given sequence of numbers (pairs or rabbits) 1,1,2,3,5,8,13,…occurs. Leonardo noted that the sequence is that each number after the second 1 is equal to the sum of the two previous numbers. Thus, 1+1=2, 1+2=3, 2+3=5, and so on. Now back in the garden, each month, the new rabbit births consist of one pair born to each of the newly adult pairs plus one pair for each of the earlier adult pairs. By reading out in the sequence to the twelfth number you get 144 pairs.

These numbers as it turns out appear in nature over and over again. The number of petals found on most flowers equals a Fibonacci number. An iris has 3 petals, an aster 21, a daisy 34. Counting the beautiful spirals on a sunflower you will find 21, 34, and 55. All are Fibonacci numbers.

Another interesting property of these numbers is that any given number is 1.618 times the preceding number. And 0.618% of the next number34/55 = 55/89 = 144/233 = 0.61855/34 = 89/55 = 233/144 = 1.618

One more interesting Fibonacci fact: If you take any two adjacent values and divide each by their sum:

Fibonacci Numbers 5,8 5/13 (sum of 5 and 8) = 38.5%8//13 (sum of 5 and 8) = 61.5%8,13 8/21 = 38.1% 13/21 = 61.9%Often referred to as the “Golden Ratio” this property is the link to nature, and in turn market prices.Thus, the two magic numbers are 38% and 61.8%

Putting it to work
O.K., so we have identified Fibonacci numbers. Now what? These two numbers can now be used for support and resistance numbers for virtually any market.

Example # 1
I primarily use Fibonacci numbers to determine where to buy or sell a market. The basic thought is that all markets retrace at some point. For a market to retrace back 38% from it’s high point is sometimes known as a natural retracement. To calculate this point we take the recent high, in this case Crude Oil at $79 and subtract the significant low point of $59. High – low = swing point$79 - $59 = $20To find the 38% Fibonacci Retracement point, and perhaps a golden buying opportunity, we take the swing point value of $20 and multiply it by 0.38. This equals $7.60. Now, subtract the swing point value from the high of $79 to get our buy point of $71.40!$20 X 0.38 = $7.60$79 - $7.60 = $71.40A major retracement is the 61.8% Fibonacci point. The process to get this buy point is the same as above, simple substitute the 38% for the 61.8%$79 - $59 = $20$20 X 0.618 = $12.36$79 - $12.36 = $66.64I have included a chart of crude oil and drawn in the two Fibonacci numbers to illustrate how the two might be great buying points should crude oil start to fall. Orange represents the 38% Fibonacci number and green the 61.8%.

Example # 2
What about using Fibonacci points to find a selling point? All the same principals apply, we just need to invert the numbers. Here is an example of a declining market, coffee.As in the first example, orange is the 38% Fibonacci number and green is the 61.8%.Here is how they were calculated:Recent high = 130.5 Recent low = 94.5130.5 – 94.5 = 36 (swing point)36 X .38 = 13.68 (38% Fibonacci point)36X .618 = 22.25 (61.8% Fibonacci point)This time we ADD the Fibonacci point to the LOW price to get our points.94.5 + 13.68 = 108.18 (38% Fibonacci point)94.5 = 22.25 = 116.75 (61.8% Fibonacci point)Now we have some selling points should the market rally and retrace part of the down move. Also note how coffee rallied to exactly the 38% retracement in August of this year!Example # 3Now let's look at an example of a market that has seen prices fall below the 38% Fibonacci number already. The next key level to target is the 61.8% number. Take a look at Heating OilAgain, orange is the 38% and green, the 61.8%. You can see the major support that the 38% mark provided at an area just below 2.00. Here is how they were calculated:Recent high = 2.175Recent low = 1.6752.175– 1.675= 0.5000 (swing point)0.5000 X .38 = 0.1900 (38% Fibonacci point)0.5000 X .618 = 0.3090 (61.8% Fibonacci point)This time we subtract the Fibonacci point to the high price to get our points.2.175 - 0.1900 = 1.985 (38% Fibonacci point)2.175 - 0.3090 = 1.866 (61.8% Fibonacci point)

ConclusionFibonacci points are easy to calculate and use. In my opinion they are also very powerful. Try it out on paper for a while. No matter whether it is a commodities or stock chart, I think you will find they work for you too.

Futures trading involves substantial risk and is not suitable for all investors

Common Sense Strategies for the E-Mini's

Would you like a simple, common sense way to trade the E-mini and other stock index markets? While not a guarantee or risk-free, what I will lay out in the next few paragraphs may be a solution for you as these volatile markets play out over the rest of the fall and into winter.
First, let's take a look at what kind of markets we are dealing with. This portion of the article is short because we are all painfully aware of what is going on in the market place. My opinion is that the volatility we saw in 2009 is going to roll on through the majority of 2010 and perhaps beyond. So, liquidate everything and move to a cabin in the mountains, or roll up our sleeves and try to figure a way to profit from the hand that has been dealt us?
I'm choosing to play. If you are still reading this article then you agree with me that these are volatile markets. In my opinion the way to trade in volatile markets is by utilizing volatility breakout methodologies. There are many ways to do that. Many of our clients use computerized trading systems to do this. In this path, market data is inputted into a software program and based on history and probabilities, the trading system outputs exact buy and sell points that aspire to take advantage of volatile markets that are breaking out of a trading range. The logic is that what follows consolidation is a break out, either up or down in the markets. Volatility breakout traders hope to ride that breakout for a specific period of time and hopefully make a profit.
For those traders not deploying a computerized system, here is one widely used approach, Pivot Points.


1. Pivot Points. The pivot point tools are available in many forms on both charting services as well as TradingMarkets.com and are a method to hopefully define if a market has broken out. Pivot points basically use the high and low points for a market and from there determine a middle, if you will or pivot point. Then a calculation is made as to support and resistance. If a market breaks out and goes above the resistance point there is a reasonable chance that the market will continue in that direction in these volatile markets. The same goes for the short side if the market goes down through the support level.
How to trade it
I recommend a three-to-one risk reward and further, I would stick to the E-mini Russell and S&P 500 markets. Once you have determined the break out point, put in an entry order on a stop at that point.
An illustration of this can be seen below on a Russell Index chart. The two green lines show the pivot points, one above the market price and one below. If the market touches either one, an entry is elected.
Mechanics of the Trade
Example: E-Mini S&P 500 currently at 1312.75
Resistance is marked as 1342.00
Place a buy stop @ 1342.00 and a profit target at 1348 ($300 profit before fees and commissions). If the entry is filled, trail this with a $100 stop. If the entry gets hit, you want to try and capture a $300 profit and risk $100. In the case of the E-Mini Russell, I would try to capture $500 and risk $167 (3:1 risk ratio). If you enter the market and you don't hit the profit objective or the stop by the close of the US session, cancel the two orders and exit the market. You can see from the illustration that in this case, you only get in the market if it rallies up to your buy stop (a break out). If the market breaks out and goes above the resistance point, in my opinion there is a reasonable chance that the market will continue in that direction.

Using Time to Find the Right Futures System

Futures and forex traders who deploy a computerized trading system to help them trade are a special breed of investor. They tend to go beyond the basic research when analyzing which trading system to use and trust. But here’s the problem: The same zealous traders also tend to get excited about the equity curve of a trading system. What is sometimes overlooked is that after they get in and start using the trading system, what happens if the road gets bumpy and losing trades replace the winning trades? Should you ditch the system, or stick with it? I will show you a possible solution to that problem. The technique is called Time Window Analysis. Moreover, the techniques I will discuss are applicable to any researchable investment vehicle. First let me tell you a little about myself. After college graduation in 1986, I began my futures career on the floor of the Chicago Board of Trade
working as a runner on the grain floor. I progressed to doing grain market research and then began handling client business in 1988. From that time on, I have been involved in some capacity of futures trading system administration or management. I haven’t seen it all, but I have seen a lot. Over the years I have written articles for Futures Magazine, and SFO Magazine. My articles have also appeared on FutureSource.com and Bondheads.com. I currently oversee operations for an Introducing Broker headquartered in California, called Trade Center. What I am going to teach you is one technique to evaluate the performance of a trading system so you, the investor, can better understand what to expect in the future. These techniques are applicable to any investment; the limitation is getting your hands on the data. Those who develop and market trading systems are very keen to looking at Time Windows.While it does get more complex than what I am about to say, most investors want to know the basics about an investment or trading system:
1. How much do I have to invest?
2. How much can I make?
3. How can I get my money back out?
Sound familiar? We all talk about planning our investments, but it seems like the three questions above get the most attention. How about adding another simple question:How ugly can it get and how long will the ugliness last?Almost nothing starts winning immediately. I have some Microsoft and Qualcomm stock that I have had for years--with never a profitable day. The same holds true for those using a trading system to help them get buy and sell signals. What if you could peer back into history and know that the worst run of bad trades or drawdown lasted four months from the peak? Think that might come in handy when you are trying to figure out if pulling the plug is the best thing? Let’s look at some examples. You can obtain data from sites like tradecenterinc.com or from the individual trading system developer. Example # 1 This trading system is down approximately $2790 on $15,000. Now for the most important question, how ugly can it get and more importantly, how long may this last? For that we turn to Time Window Analysis.
Time Period
1 Month
3 Months
6 Months
12 Months
Profitability Odds
64.71%
90.63%
96.55%
100%
From the table above we can see that this system has a 64.71% probability of being profitable in any 1-month period. Any three-month period is 90.63% and so on.
The big key is seeing how long it takes to make it to the 100% mark. With this valuable piece of information, I know that I need to wait at least twelve months for my system or account to get back to even or profitability. Obviously, this is not a certainty or guarantee, but this information is critical in both the planning and maintenance of a system investment. Thus, if the current drawdown is a little over seven months long, I need to plan on sticking with it for about five more months.Example # 2While some systems can be successful, they do take some fortitude.
Time Period
1 Month
12 Months
18 Months
36 Months
Profitability Odds
54.93%
86.26%
94.40%
100%
From the table above we can see that this system has a 54.93% probability of being profitable in any 1-month period. Any twelve-month period is 86.26% and so on.
The chart above shows us that when the big drawdown comes; you need to be able to sit with it for three years. Example # 3 This system is up about $4005 on a $30,000 investment for 2006. Better to plan NOW for how to act when the drawdown comes, because it will come.
Time Period
1 Month
3 Months
6 Months
12 Months
Profitability Odds
75.68%
91.43%
96.88%
100%
From the table above we can see that this system has a 75.68% probability of being profitable in any 1-month period. Any three-month period is 91.43% and so on.
What have we learned? Hopefully this shines a light where perhaps there was none and hopefully this can be used as a corollary to other investments above and beyond futures and forex trading systems. Have a plan for what to do when something ugly, bad or costly happens. Obviously, you can’t just close your eyes and wait out a twelve-month bludgeoning because the Time Window says so, but you can go into an investment armed with some information that gives you the edge. And isn’t finding the edge the difference between winning and losing in just about everything?

Futures, options, and forex trading involves substantial risk and is not suitable for all investors

Power Poll

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Futures trading involves substantial risk and is not suitable for all investors.

On the Managed Futures Front

Barclay Names Financial Commodity Investments (FCI) to Top 20 CTA List

Washington, D.C - August 29, 2009

Financial Commodity Investments (FCI) is proud to report that FCI has recently been ranked as one of the top CTA performers for the past five years. The "Barclay's Managed Funds Report", which is published by BarclayHedge, Ltd. has summarized and reported results of the top CTAs managing at least $10 million dollars as of June 30, 2009. The original FCI program, the FCI-OSS (Option Selling Strategy) as reported by Barclay's, posted a 21.54% compounded annual rate of return for the five year period from July 1, 2004 through June 30, 2009. During this same time frame, the S & P equity index generated a negative 4% (-4%). Published quarterly for the last 18 years, the Barclays Report provides industry professional with information on relevant industry trends and performance rankings for the managed futures (CTAs) and hedge fund investment industries. This year, 582 programs were reviewed and included in the calculation of the Barclay CTA index. To qualify, an advisor had to have publicly reported at least five years of prior performance history. "Our customer focus and risk management discipline approach in executing an Alternative Investment Approach with commodities has resulted in consistent commendable returns for our institutional and private investors. Furthermore, our long term consistent returns illustrate that an alternative investment program such as FCI, is a viable investment strategy that can be used to further diversify a portfolio," stated Craig Kendall, President of FCI. FCI has approximately $40 million of assets under management. FCI is a registered Commodity Trading Advisor (CTA). FCI's mission, philosophy and investment strategy is "Absolute Returns in an Uncommon Market." FCI now serves more than 250 financial institutions and individual client who are located in 42 states and 26 countries. Recently FCI has also been recognized by Inc. magazine as one of the Inc 500/5000 awards. FCI has been ranked as #509 of the top fastest growing privately held firms in the nation.

About FCI: FCI is a commodity trading advisor (CTA) service registered with the National Futures Association (NFA). FCI executes investment strategies on behalf of an investor directly in the investor's own account. FCI trades options in a diversified range of commodities including energies, grains, softs, metals and financial commodities. Participants in FCI have unlimited risk. To learn more visit http://rs6.net/tn.jsp?et=1102681176229&s=6200&e=001l-3xp8mXHLkvyZf3et_Ipyl1xzu8G3OWGlDhZ4daYeipyyRLyI-oMLZYIpnlBS5nU5wU2lKiyHuCcIT-A03JN6sQ3ndEssUko44QIekj9iYPwTgXnyvvnw== and/or http://rs6.net/tn.jsp?et=1102681176229&s=6200&e=001l-3xp8mXHLmRJkSK8o1eC2qPctTaiOdCJxr6rX8kb5I5eDEHMuT9_RlDEfYYzUt04j-9Uq31qQ2eG8G_PSANsYoxXuiKZHEncsArGC3LsQcDjCG6sUPv5Q== or call 703-435-2777.
Futures and options trading involves substantial risk and is not suitable for all investors. Past performance is not indicative fo future results.

twtpoll :: So what do you think is more of an issue for the economy? (via @cmegroup)

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Futures and options trading involves substantial risk and is not suitable for all investors. Past performance is not indicative fo future results.

Five Things to Consider Before you Invest

Before you embark on trading the E-Mini futures contract, or any futures contract for that matter, there are a few things to consider. Actually, there are probably hundreds of things to consider depending on your level of expertise and tolerance for risk but for this article we will focus on some of the key points. A common note that comes across when talking to investors is that they have invested in various instruments before and they wish to use this vehicle to raise their current income.

Very courageous, is what comes to mind. It is possible to accomplish this feat, it is my opinion though that they must first do a great deal of homework and have luck on their side.

As mentioned before, this is a partial list and is not the proverbial “Roadmap to Riches.” What I offer is a good jumping off point:

1. Are you properly capitalized? Easily the most avoided item in the aspiring trader’s tool-box. Here is some basic math to illustrate. To hold one E-mini contract overnight will require around $3,500. This amount fluctuates depending on which one of the mini stock index markets you trade and the current level of volatility. Let’s just say that of your first 20 trades, you have a bad streak of losers. If you lost just $250 on each trade, and did that ten times, that is already $2,500. Add on commissions of $120 and you can see that bad things can happen fast. I recommend that trader start with a minimum of three times the overnight margin. In this case, that would be $11,000. With that kind of capital, you have a better chance of weathering the storm versus going in undercapitalized. Look at it this way; you are basically opening a business. Would you open a flower shop but not have the capital to buy flowers past the first week or pay your rent?
2. Find a method that works for you. There are a million ways to trade any market and be successful. There are an equal number of ways to lose money. Before you get up to bat, investigate as many possible strategies as you can until one clicks with you. Simplest is usually best. If you are less computer savvy maybe you should investigate how indicators work. These are basically overlays to charts that provide an indication as to potential future market direction. If you are more computer oriented, look toward trading systems. These are computer generated models which yield buy and sell points.
3. Join a group. Mine the internet for trading groups in your area. It seems like there is a new “meet up” site starting every day in this wonderful “social networking” world that we live in. From Facebook to Yahoo Groups this is a resource you should tap into. These groups are filled with people just like you that have probably already covered a lot of research ground and are happy to share the knowledge.
4. Read! Seriously, read everything you can get your hands on about the subject of investing. So many people treat investing as a video game that is leaded with unlimited quarters. Before you do any investing, do your investigation first. The actual trading might not come for a long time and that will be frustrating to you but unless you have unlimited funds, the long road is the best.
5. Practice. Virtually all clearing firms have an online demo you can use to try out their software. This is not only an excellent time to get used to their software, but for you to try out your ideas before you put down your money. You might even be able to pay a small fee and use it for whatever length of time you need in order to feel comfortable.
Futures and options trading involves substantial risk and is not suitable for all investors. Past performance is not indicative fo future results.

We are pleased to announce the launch of http://www.easy-emini.com/!
Futures and options trading involves substantial risk and is not suitable for all investors. Past performance is not indicative fo future results.