Remember what I promised you. This section will NOT tell you a bunch of bull, it will be straight to the point and will show you exactly what to do. I don't care if this business seems too simple, because it is CONFIDENTIAL.
Actually, it's as simple as 1-2-3!
- 1) Get fresh charts (provided for free below).
- 2) Look at the charts until you find what I told you to look for.
- 3) Once you find it, place the trade.
Unlimited income from the comfort of "wherever"?
Speculation for profit
Speculation in the futures market is all about using information about the past to predict the direction of the future, the price trend. Since it is impossible to know all of the factors which influence price, the technical -trader (You) uses Charts to reach a conclusion on where the trend is going (up or down). If the reasoning after studying a chart is correct, the speculator (You) makes a profit, while an incorrect conclusion will lead to a loss. This is no different than any other business, as the future is always unpredictable but through "Paper Trading", you will refine you skills before risking any money.
?There are two basic categories of futures traders; Hedgers and Speculators.
- In general, hedgers use futures for protection against adverse future price movements in the underlying cash commodity. The reasoning of hedging is based upon the tendency of cash prices and futures values to move in tandem. Hedgers are very often businesses, or individuals, who at one point or another deal in the underlying cash commodity. Take, for instance, a major food processor who cans corn. If corn prices go up. he must pay the farmer or corn dealer more. For protection against higher corn prices, the processor can "hedge" his risk exposure by buying enough corn futures contracts to cover the amount of corn he expects to buy. Since cash and futures prices do tend to move in tandem, the futures position will profit if corn prices rise enough to offset cash corn losses.
- Speculators are the second major group of futures players. These participants include independent floor traders and investors. Independent floor traders, also called "locals", trade for their own accounts. Floor brokers handle trades for their personal clients or brokerage firms.
For speculators, futures have great advantages over other investments:
- If the trader's judgment is good. he can make more money in the futures market faster because futures prices tend, on average, to change more quickly than real estate or stock prices, for example. On the other hand, bad trading judgment in futures markets can cause greater losses than might be the case with other investments.
- Futures are highly leveraged investments. The trader puts up a small fraction of the value of the underlying contract (usually 10%-15% and sometimes less) as margin, yet he can ride on the full value of the contract as it moves up and down. The money he puts up is not a down payment on the underlying contract, but a performance bond. The actual value of the contract is only exchanged on those rare occasions when delivery takes place. (Compare this to the stock investor who generally has to put up at least 50% of the value of his stocks.) Moreover the commodity futures investor is not charged interest on the difference between the margin and the full contract value.
- In general, futures are harder to trade on inside information. After all, who can have the inside scoop on the weather or the Chairman of the Federal Reserve's next proclamation on the money supply? The open outcry method of trading - as opposed to a specialist system - insures a very public, fair and efficient market.
- Commission charges on futures trades are small compared to other investments, and the investor pays them after the position is liquidated.
- Most commodity markets are very broad and liquid. Transactions can be completed quickly, lowering the risk of adverse market moves between the time of the decision to trade and the trade's execution.
The Speculator (You)
Speculation should not be confused with gambling, which is to take a risk in the hope of gaining an advantage or a benefit through foolish behavior. The difference between speculators and gamblers is that speculators make a move based upon evidence. While gamblers engage based upon chance. A gambler's only asset is luck, while the speculator relies upon facts. The dictionary explains the word speculate as follows:
- To meditate on a subject; reflect.
- To engage in a course of reasoning often based on inconclusive evidence.
- To engage in the buying or selling of a commodity with an element of risk and profit.
There are three basic assumptions:
- The futures market discounts everything. The technician believes that the price posted on the board of a commodity exchange at any given time is the intrinsic value of the commodity based upon the fundamental factors affecting the supply and demand of the product. Therefore, if the fundamentals are already reflected in the price, market action (charts- price, volume, open interest) is all that is needed to be studied to forecast future price direction. Although not knowing the specifics of the fundamental news, the technician indirectly studies the fundamentals by studying the charts which reflect the fundamentals of the marketplace.
- Prices move in trends Prices can move in one of three directions, up, down or sideways. Once a trend in any of these directions is in effect it usually will persist and the outcome is predictable. The market trend is simply the direction of market prices, a concept which is absolutely essential to the success of technical analysis. Identifying trends is quite simple; a price chart will usually indicate the prevailing trend as characterized by a series of waves with obvious peaks and troughs. It is the direction of these peaks and troughs that constitutes the market trend.
- History repeats itself. Technical analysis includes the psychology of the market place. Patterns of human behavior have been identified and categorized for several hundred years and are repetitive in nature. The repetitive nature of the market is illustrated by specific chart patterns which indicate a continuation or change in trend.
Reading Chart Formations
The study of Charts requires the Technical Trader (You) to look for price behavior in the past and use that information to predict price change in the future. You are looking for Chart Patterns to establish its behavior. Based on these formations, the appropriate action can be taken (Buy, Sell, Do Nothing). The first step in arriving at a conclusion is to identify the 3 basic Chart Patterns explained in this manual. These patterns will help you predict the direction of the trend.
Again, here is all you need to do:
- Get fresh up to date commodity charts.
- Look at a chart and see if you can find a pattern/formation (I show you exactly what to look for).
- If a pattern/formation is present, call and place the trade.
Making accurate forecasts by reading charts is only one step in the process. The second step, is timing. Since commodity futures markets are so highly leveraged (initial margin requirements are generally less than 10% of a contract's value), minor price have a dramatic impact on trading performance. Therefore, the timing of entry and exit are very important. Timing is everything when dealing in the commodities markets, and timing is almost purely technical in nature. This is where a practical application of charting becomes essential in the price forecasting and risk management process. The formations will tell you when to enter and when to exit as they are indicators of a change in trend.
- The first thing you must learn when reading charts is the 50% rule. It simply means than when a price trend changes from Bull to Bear or vice versa, the prices have a tendency to bounce back or "retract" 50% of its last major move. For example: If Gold went from $345 all the way down to $265 and the trend has turned, it should go back to approximately $305.
- The second thing you must know is that prices move in TRENDS which are a result of SUPPORT & RESISTANCE. The art of trading is to identify the change of a trend and follow it. To do so, we use a few simple chart formations that occur AT the change of trend.
Definition of Support & Resistance
Trends are a result of Support and Resistance. Each HIGH and LOW is either a Support or Resistance point. We identify each of the HIGH (Resistance) and LOW (Support) points by the fact that the point holds for two or more days. The two day rule is not set in concrete, as some markets may be trading using a three day holding period or longer; however, the two day hold period is a good rule of thumb.
This is how the Resistance and Support Points look like:
Definition of Market Trends (The bull & the bear)
There are only two ways a speculator can trade. One of them is to go long (Bull) and the other to go short (Bear).
- LONG: A trader who takes a long position believes that this market will be going UP. (Prices will get higher) Like any other business, a trader makes money if he sells it for a higher price than he/her bought it for. Going "LONG": If after doing your research, you believe the market is going UP , you will want to go long. When you take a long position you will receive a profit if your exit price is higher than your entry price. In other words, buy low now,… to sell high later.
- SHORT: A trader who takes a short position believes that this market will be going DOWN. (Prices will get lower) If you go "Short" you want the prices to "fall" lower than your entry price in order to make a profit.Going/Buying "SHORT": If after doing your research, you believe that the market is going to go DOWN, you will want to sell short. The trade will be a success if the exit price is lower than the entry price. In other words, sell high now, …to buy low later.
What about delivery?
In either case, you never actually receive or deliver the actual commodity, you only control it, for a FRACTION of its value (Leverage). In order to control a future contract, you must put up a "good faith" deposit called margin. Remember that you are only using the market to leverage your position, and you NEVER want to deliver or take delivery of the commodity. You are here to MAKE MONEY. So You have no intention of ever seeing the actual commodity. If you are in a long position, you must be out by the first notice date of delivery or you will be obligated to take delivery of the actual physical commodity and pay the balance due. If you are in a short position, you must be out before the last trading day or expiration, or you will be obligated to deliver the actual commodity. You will, with a 5 minute phone call, close out your positions before the deadline so that you NEVER EVER take delivery of your contract. (It can get messy to have 100,000 pounds of pork bellies in your front yard)
The definition of an UpTrend or Bull Market is a market which is making a series of HIGHERHIGHs and HIGHER LOWs. The market is GOING UP. We define each of the low points as a support point and each of the high points as a resistance point. In a Bull Market, prices tend to hold support points and violate resistance points. A Bull Market knows no Resistance.
Example of how an UpTrend looks like (Bull Market)
The definition of an Downtrend or Bear Market is a market which is making a series ofLOWER LOWs and LOWER HIGHs. The market is GOING DOWN. We define each of the low points as a support point and each of the high points as a resistance point. In a Bear Market, prices tend to hold resistance points and violate support points. A Bear market knows no support.
Example of how a Downtrend looks like. (Bear Market)
The Trend is your Friend
Identifying the market's trend is the first step. By following the trend, you are following the general direction of the market. Think for a moment how many significant Highs and Lows there really are. Most of the time prices dip, rally, upon a path. The general path of the market is the trend. By knowing the main trend of the market, you will increase your odds of success when trading in the direction of the trend and practicing solid discipline. Identifying the trend can be done several ways. Some people use trend lines, like we did above, connecting major highs and lows with a line and continuing the line forward in time. Though this is a good technique, it requires a lot of work. We feel that reading charts as explained in this manual is much more effective and definitely the way to go.
The 50% retractment rule
Assumes that the price will always retract about 50% of it`s last major move and works for both long term and short term trading, even for fast day trading and even 60 second binary trades. This is the absolute easiest pattern to trade by as even a dumbass can identify it and works both on uptrends and downtrends in any market (commodities, stocks, whatever).
The Chart Formations
The following 6 formations or "patterns" are easy to find and have proven to be extremely accurate. Using the Links in the menu bar, study how to identify these patterns and then get charts and start paper trading immediately.
The 6 chart patterns that we focus on are:
- The Channel Formation (Medium - Long term)
- The 123 Top Formation (Medium - Long term)
- The 123 Bottom Formation (Medium - Long term)
- The Inside Day Formation (Quick Day trading)
- The Outside Day Formation (Quick Day trading)
- The One Day Juke Formation (Quick Day trading)
1) The Channel Formation
Sometimes the market does not trend up or down, but side to side. The Channel (or Trading Range) can be identified when the market makes roughly matching support and resistance points. The change of trend from sideways to either bullish or bearish happens when prices break either side of the channel. When the price breaks EITHER side of the channel, a new trend is born. A Channel can occur anywhere on any chart.
The Channel Formation looks like this:
Every time you see this formation on a price chart, make a Double Order!
- Place an Open Order to Buy a LONG contract if the price goes higher than the Matching Resistance at the TOP.
- Place an Open Order to SELL SHORT a contract if the price goes lower than the Matching Resistance at the BOTTOM.
This is what we call a Double Order and is very effective when trading Channels, Tops and Bottoms.9 (Refer to Double Orders) If the trend moves either direction, you'll be on the right market. Keep your initial stop loss at 50% of your initial investment and move it to follow the market as your profits increase. On this kind of trade, you will lose money on ONE of the two trades. That is expected and you can place your stop loss wherever you feel comfortable. It is simply recommended that you leave some room for "play" since the markets do constantly move.
2) From Bear to Bull - the 1-2-3 Bottom Formation
A 1-2-3 Bottom Formation can be spotted easily when a market has been in a downtrend. The lowest support point of this downtrend is labeled #1. In other words, when the price reaches its 12-month low and begins to ascend, a #1 Bottom is born.
Following the #1 Bottom, the market bounces back and the trend will turn again, forming a #2 Bottom. Like this:
After the #1 Bottom and the #2 Bottom have been established, we have a potential 1-2-3 Bottom formation. When the market has established a #2 Bottom, it will change direction AGAIN and a #3 Bottom will be established. You would place an Open Order to go LONG when the market hits the #2 Bottom. Like this:
But only if the #3 Bottom is NOT lower than the #1 Bottom!
If after a #2 Bottom has been established, the prices drop LOWER than the #1 Bottom, a new #1 Bottom has been formed and the prior formation seizes to exist and you should cancel any Open order. If the prices raise above the #2 Bottom, the trend has now changed from bearish to bullish, which is what a 1-2-3 Bottom is all about. This is the signal to go long if the prices go above the #2 Bottom. Consider using a Double Order or an Open Order. Go LONG at the #2 Bottom and ride the Bull market! Set your Target Exit Price according to the 50% Rule. And protect the trade with a stop loss. Consider a double order. Higher Highs and Higher Lows are the definition of a Bull Market! The 1-2-3 Bottom formation is simply a change in trend from bearish to bullish. Since the trend is your friend, be always on the look-out for trend changes to take advantage of. When a break-out does occur, you will establish a long position using the #3 point as your initial stop loss. The stop loss should be moved higher as higher points of support manifest themselves. That's it! All you have to do is to repeat the same process with all commodity charts.
3) From Bull to Bear- the 1-2-3 TOP Formation
The opposite of the 1-2-3 Bottom is a 1-2-3 Top formation. It is THE SAME thing, but up side down. A 1-2-3 Top Formation can be spotted easily when a market has been in a UpTrend. The highest support point of this UpTrend is labeled #1 Top. In other words, when the price reaches its 12-month high and begins to descend, a #1 Top is born. Like this:
Following the #1 Top, the market bounces back and the trend will turn again, forming a #2 Top. Like this:
After the #1 Top point and the #2 Top have been established, we have a potential 1-2-3 Top formation. After the market has established a #2 Top, it will change direction AGAIN and a #3 Top will be established. You would place an Open Order to go SHORT when the market hits the #2 Top. Like this:
But only if the #3 Top is NOT higher than the #1 Top! If after a #2 Top has been established, the prices raise HIGHER than the #1 Top, a new #1 Top has been formed and the prior formation seizes to exist and you should cancel your Open order to go short at the #2 Top. In other words, if the prices do drop BELOW the #2 Top, the trend has now changed from bullish to bearish, which is what a 1-2-3 Top is all about. This is the signal to go SHORT if the prices drop below the #2 Top. Consider using a Double Order or Open order. Go SHORT at the #2 Top and ride the Bear market! Set your Target Exit Price according to the 50% Rule. And protect the trade with a stop loss. Consider a double order. Since the trend is your friend, be always on the look-out for such changes to take advantage of. When a break-out does occur, one will establish a short position using the #3 point as your initial stop loss. The stop loss should be moved lower as lower points of support manifest themselves. That's it! All you have to do is to repeat the same process with all commodity charts. Day Trading The following 3 chart patterns are short term patterns that have been constantly trusted by traders. These short term patterns only have short term purpose, but they are worth watching for as they can make you quick money. However, be careful and pay extra attention when day trading. You can make a lot of money FAST, but you can also lose money FAST. Always use Stop Losses to protect your investment.
4) The Inside Day Formation
The inside day is one in which the high and the low prices for today's trading day are within the bounds of the previous days trading range, or a day with both a lower high and a higher low. After an Inside Day formation appears, wait for a break-out of the Inside Day. The Inside Day Formation looks like this:
- If prices surpass the high of the inside day, then we believe that prices will continue higher and it is our signal to go LONG.
- If prices drop below of the inside day signifies our belief of lower prices to come and is your signal to go SHORT.
5) The Outside Day Formation
The opposite of an Inside Day, the Outside Day formation is where the both the high and the low of the current trading day surpass the previous days high and low. An Outside Day has both a higher high and a lower low. The closing direction of prices on an outside day is the important factor using this formation. Market history states that prices tend to continue in the direction of the closing prices,.
- A higher close is bullish and you should go LONG
- A lower close is bearish and you should go SHORT
The Outside Day Formation looks like this: Go long if you see this or Go short if you see this
6) The One Day "Juke" Formation
A "Juke" is a quick reversal, similar to a ball (with a spin) bouncing back before bouncing to the other direction. It is the one day juke. The key ingredient to a "Juke" is a large price range with the close near one extreme. Juke patterns are most reliable at market extremes, as the opposite end of the Juke Day (the low for a Bullish Juke, and the high for a Bearish Juke) often penetrates support or resistance, before turning the other day.
- A Bullish Juke is when price break precipitously before rallying back to close near the high for the day. Go LONG if the high of the Juke Day is violated.
- A Bearish Juke occurs when price rally strongly but then fade off and break, closing very near the lows for the day. Go SHORT if the low of the Juke Day is violated.
The Juke Day Formations look like this: Go long if you see this or Go short if you see this
Now that you know how these 6 basic chart formations look like...
It is time to start Paper Trading he markets. Get as many charts as you can and find these formations. When you find one of them, simply write down what you would have traded and follow that market. There is no limit on how many markets you can trade. It can be 1 or it can be 30. Just make sure that you don't get confused and discipline yourself in updating your trades every or every other day. This won't take more than 5-15 minutes of your time.
Practice through Paper Trading
The goal of your "Paper Trading" is to gain experience in the markets. We recommend that new traders stay away from Lumber, Orange Juice, Pork Bellies, Coffee and Palladium due to violent moves. Also, watch out with the currencies. These markets move too fast for the beginner but when you're fast enough, go at them. One of the drawbacks of "Paper Trading" is that your orders are not actually placed, so you have no exact idea about the price at which your order was executed. Don't worry too much about it. The exact entry price is not that important. What is important is that you get into the market and follow the trend you predicted. When "Paper Trading", you must try to make it as realistic and as close to your actual trading as possible to get the most of the learning process. Be honest with yourself, keep good records, and you will benefit from the process.
The Futures Contract
The futures contract is a simple agreement and the very thing you are trading. When you buy a futures contact, you are simply agreeing to buy a commodity at a certain DATE and at a specified PRICE by putting up a small deposit as "good faith deposit". (Much like Real Estate's earnest money). Futures contracts are standardized according to the quality, quantity, delivery time and location for each commodity. The only variable is price and commodity type, which is determined on an exchange. Going long is simple to understand but even though it may take you some time to grasp the concept of going short, keep it simple and treat short as a normal trade only "up side down". As when going long, in order to make more money, you can buy as many contracts as you can afford to at the time of going short. If we buy 10 contracts (Long or short), the profits will be 10 times greater than if we buy only one contact.
GOING LONG (Predicting the prices will go UP)
Lets pretend You go LONG on a contract (100 ounces) of December Gold at $300 per ounce in the month of January. That simply means that you are bound to buy 100 ounces of Gold at $300 per ounce ($30,000. Do not be alarmed, remember, you will never take delivery. You will sell your contract BEFORE the deadline. The market is liquid and you can sell your contracts (long & short) with a 2 minute phone call.
- Lets assume that you can control a $30,000 Gold contract for only $1,000 Margin and for every dollar the market moves, your contract will make or lose $100.
- Let's say that you sell your LONG contract in June and the Gold price is $335. Well, if the market made a $35 move at $100 per dollar, that would equal $3,500 profit on this trade.
- Although a $30,000 contract profiting only $3,500 is not that great, since you only put up $1,000 margin, your return is 350% in 5 months. That's awesome!
GOING SHORT (Predicting the prices will go DOWN) Lets pretend that You go SHORT on a contract (100 ounces) of December Gold @ $300 per ounce in the month of January, it simply means that you are bound to sell 100 ounces of Gold at $300 per ounce ($30,000 in December. Do not be alarmed, remember, you will never deliver. You will sell your contract BEFORE the deadline. The market is liquid and you can sell your contracts (long & short) with a 2 minute phone call.
- Let's assume that you can control a $30,000 Gold contract for only $1,000 and for every dollar move, your contract will make or lose $100. Let's say that you sell your LONG contract in June and the Gold price is $280.
- Well, if the market made a $20 DROP at $100 per dollar, that would equal $2,000 profit since you are selling your contract for $300 and you can buy one simultaneously for $280.
- Although a $30,000 contract profiting only $2,000 is not that great, since you only put up $1,000 margin, your return is 200% in 5 months. That's good! Now you understand the raw leveraging power of commodities.
The Stop Loss Those words sound comforting. The Stop Loss is exactly what it sounds like. A STOP of losses. If we buy a contract of December Gold at $300 and put a Stop Loss at $295, it means that if the price drops below $295, your position will be sold. As the price moves, your Stop Loss should be adjusted to follow the market and eventually takes the role ofprotecting your profits rather than limiting losses. This is great, because it allows you to determine how much money you are going to risk in the event of your trade going the wrong direction. AND when your trade is in a profit position, it will protect your profits in the event the market turns against you while on vacation or enjoying the day.
- In the LONG example above, we would have placed our Stop Loss at $295 and risked $500 on this trade, but only for a few weeks. As the price goes up, your Stop Loss should follow at a safe distance. Remember that the markets MOVE and you don't want to be stopped out by mistake. In the example above, we would have kept our Gold Stop Loss at $500 below the market and got Stopped Out when the market hit $335.
- In the SHORT example above, we would have placed our Stop Loss at $305 and risked $500 on this trade, but only for a few weeks. As the price goes DOWN, your Stop Loss should follow at a safe distance. Remember that the markets MOVE and you don't want to be stopped out by mistake. In the example above, we would have kept our Gold Stop Loss at $500 above the market and got Stopped Out when the market hit $280. It is advised to always trade with a Stop Loss.
How to place an order The following is the basic protocol to follow when calling a broker in an attempt to be as clear and efficient as possible. Remember that the broker is nothing more than an order taker and is to be used strictly to access the trading floor. Do not trade anything suggested by your broker (or anybody) without doing your research FIRST! Provide the broker with the following information.
- Name and account number.
- Open order or day order
- Buy or sell. (Go long or short)
- Number of contracts.
- Contract month.
- Commodity (strike price, commodity/ long or short)
- Entry price and order type (market, limit, stop-see order types).
- Stop loss and/or profit objective.
LONG OPEN ORDER EXAMPLE (Simply invert for SHORT/PUT orders):
"Hello, this is %name%, account number 12345, and I would like to place an OPEN order to buy (go long) 2 contracts of December Corn at 255 on a stop (breaking above that price), and place my stop loss at 235 with a profit objective of 305 or better." SHORT OPEN ORDER EXAMPLE: "Hello, this is %name%, account number 12345, and I would like to place an OPEN order to sell (go short) 2 contracts of December Corn at 255 on a stop (breaking below that price), and place my stop loss at 275 with a profit objective of 210 or better."
Market Buy or sell at the market without regards to price. Use when wishing to enter the market right away.
Stop Buy on a break above a specified price or sell on a break below a specified price. Use when trying to enter a market on violation of a specific point, or to protect against further losses (Stop Loss) or adverse moves in the market. This type of order will become a market order once the contract trades at the specified price. Slippage may occur.
Limit (or better) Buy at a price lower than the current market price or sell at a price higher than the current market price. This order must be filled at your price or better. If the market trades exactly at your price, then goes the back the opposite way, you may not receive a fill. Use when trying to take profits or enter the market on a pull back of an up or down trend.
MARKET IF TOUCHED (MIT) BUY or SELL at the Market, but not until the price reaches the MIT price. Buy MlTs are entered below the current market price. Sell MlTs are entered above the current market price.
LIMIT ORDER To BUY or SELL at the Stated Price or Better. Buy Limits are normally entered below the current price, while Sell Limits are typically entered above the current price.
STOP LIMIT ORDER To Buy or Sell at the limit price or better, but not until the bid or asked price reaches the Stop Price. Buy Stop Limit is entered above the current market price, Sell Stop Limit is entered below the current market.
MARKET ON CLOSE (MOC) To Buy or Sell a contract in the last 3 minutes of trading, to be executed before the closing bell regardless of price.
STOP CLOSE ONLY (SCO) To Buy or Sell a contract only if the closing price is above or below the stop order. The closing price is to be determined in the last three minutes of trading before the closing bell is rung.
DOUBLE ORDER This kind of orders require more capital and experience but assures your participation no matter what the market does. It is a great way to target your entry to a specific market and be able to, if necessary, wait for the trend to "pull you ". To Bracket a market, use 2 Open Orders, one LONG and one SHORT. If the trend moves either direction, you'll be on the right market. Keep your initial stop loss at 50% of your initial investment and move it to follow the market as your profits increase. One contract will make you money while the other will be stopped out and cause you to lose a determined amount money. The sole purpose with double orders is to have the opportunity of participating NO MATTER what the markets do. When you get the hang of it, you won't be able to stop.
How to Structure a Channel Double Order:
Place an Open order to go LONG at the breakout of the TOP resistance point of the CHANNEL and place an Open order to go SHORT at the Bottom resistance of the CHANNEL. Make the unfilled order the Stop Loss Order for the current position. Ex: Corn has been in a channel. The channel has a bottom at 210, a top at 225, and the current price is 218. Bracket the Market with a LONG Open Order at 225 and a SHORT OPEN Order at 210, using the opposite side as your stop loss. In this example, if Corn trades above 225 you are long and if Corn trades below 210 you are short. How to Structure a 123 Top or Bottom Double Order: Going LONG: Every time you are to trade a 123 Bottom Formation, simply place an Open Order to go LONG and an Open Order to go SHORT at the break of #2 Bottom. Place a comfortable (1/2 of the contract price) Stop Loss on BOTH Orders (The Long one & The Short one). Going SHORT: Every time you are to trade a 123 Top Formation, simply place an Open Order to go SHORT and an Open Order to go LONG at the break of #2 Top. Place a comfortable (1/2 of the contract price) Stop Loss on BOTH Orders (The Long one & The Short one). By Double Ordering in the 123 Top and Bottom formations (But not in The Channel), you will lose money on ONE of the two trades. That is expected and you should place your stop loss wherever you feel comfortable. Only you decide how much to risk on a trade. However, It is recommended that you leave room for "play" since the markets do constantly move. The reason for the channels difference is that only ONE order will be executed and not two simultaneous Orders as in the 123s. This way, either way the trends move, you're in. That's the beauty of Double or Bracket orders. Don't forget to adjust your Stop Loss to follow the trend.
Calculating Profit/Loss - POINTS VS. CENTS
This is something you should know. However, it is very technical and boring. Review it a couple of times, but not let it get in your way of reading charts. In general, your broker will have all up to date information available to you. The following is an explanation of Commodity contract specifics. It will help you establish the size and profitability of your investment.
IN THE 4 MAJOR GRAINS: Wheat, Corn, Soybeans, and Oats, the price is quoted in dollars and cents for both futures and options. Example of a price quote of 3.09 1/4 is actually 3 dollars 9 and 1/4 cents per bushel. These grains all move in 1/4 cent increments, which is $12.50 of real money. Profit or loss of 1 cent = $50. IN SOYBEAN MEAL: The contract is quoted in dollars (and cents) per ton (100 ton contract). When you see a price of 170.50, it means one hundred seventy dollars and fifty cents per ton. When you see a change of -.20, it means in reality 20 cents (per ton). Although it is commonly stated as 20 points. (1 point = $1). So in this case you would be at a profit (or loss) of $20 for the day.
IN BEAN OIL: The 60,000 pound contract is quoted in dollars (and cents) per 100 pounds. When you see 18.48, it is actually eighteen dollars and forty eight cents per 100 pounds of Bean Oil, when you see a change of +.09, it actually means 9 cents (per 100 pounds) but is commonly stated as nine points. (1 point = $6).
IN ALL THE MEATS (LIVESTOCK) MARKETS: The contracts are quoted in cents per pound. Although the price levels are different, same rule applies to all of them. In hogs, for example, you'll see a price of 44.55. This is, in fact, forty-four cents and fifty-five one hundredths (55/100) of one cent. The decimal point is not meant to be a division of dollars and cents. This rule applies the same for options. The premium may be 5.15, the simplest way to figure this is to drop the decimal point and state it as points (for Hogs 1 point = $4). So 515 points = $2,060.
IN THE FOODS OR "SOFTS": Coffee, Orange Juice and Sugar are all quoted in cents per pound. The same rules that govern the meats also apply here. Try it for yourself and see. Cocoa, however, is one of the most widely misunderstood of all the commodities to calculate. You'll notice that it is the only one that has no decimal points in its price. That's because it's quoted in even dollar amounts per ton (10 tons per contract). So when you see a price of 1069, it is actually, one thousand sixty nine dollars per ton of Cocoa, and is commonly quoted verbally in points. So a change of +76 is actually a change of 76 dollars (per ton). Add a zero to the change and you'll have the exact amount gained or lost for the day. (76 dollars per ton x 10 tons =$760). Options are exactly the same. Just add a zero to the premium price to give you the actual cost of the option.
IN THE METALS: Gold, Platinum, and Palladium are just as they appear with regards to the way dollars and cents usually appear. The numbers to the left of the decimal are dollars, and the numbers to the right of the decimal are cents. Don't confuse points with cents here, they are the same thing. If you hear that Palladium dropped 85 points today, just know that it's the same as saying that it dropped 85 cents (the 100 ounce con tract yields $1 per point for an actual cash gain or loss of $85 per contract). SILVER: A bit different when seen in the newspaper, though. You'll commonly see a number like 387.4 for a quote and -.05 for a change. Really, silver is quoted in the same cents per ounce as the other metals, but it's not three hundred eighty-seven dollars forty cents, it's 3 dollars eighty-seven cents and four tenths (or point four as it is commonly stated) per ounce. If silver had moved twenty cents, it would look like this: from 374.4 to 394.4, not 374.4 to 374.6. Although silver can settle on 1/10th cent, the futures actually only trade in 1/2 (one half) cent increments. However, Silver options do trade in 1/10th increments. i.e.; 6.1, 6.2, 6.3, etc.
COPPER: Is exactly the same as Silver, except it is quoted in cents per pound(not per ounce), so a number like 116.20 is actually one dollar sixteen cents and twenty points per pound.
IN THE PETROLEUM PRODUCTS: Follow these guidelines: crude oil is quoted in dollars per barrel (bbl). A number like 19.25 is nineteen dollars twenty five cents per barrel. Read just like Gold, Platinum, and Palladium, except in barrels not ounces, therefore a 0.01 cent move is $4.20/bbl in Heating Oil and Unleaded, and $10.00 in Crude because Heating Oil and Unleaded contracts call for delivery of 42,000 bar reels, while Unleaded calls for delivery of 1,000 barrels of Crude Oil.
HEATING OIL & UNLEADED GAS: Are quoted in cents per gallon (gal.) Use the same rules that apply to the meats.
NATURAL GAS: Is quoted in measurements of heat called "British Thermal Units" or BTU. A quote of 171.20 is actually one dollar seventy-one cents and twenty points (same as silver). One point equals $1 and minimum fluctuation is 10 points. (171.20 to 171.30).
IN WOODS AND FIBERS: Cotton is quoted in cents per pound, and the guidelines for meat also apply here. Lumber is quoted in dollars per 1,100 board feet (bd.ft.) So a price of 233.90 is literally two hundred thirty three dollars ninety cents per 1,100 bd.ft.
FOR THE CURRENCIES: The exchange quotes dollar based currency futures in "American terms," which is the dollar price of each foreign currency (e.g., $.6000 per Swiss Franc). Or another way of thinking is how much of our currency it takes to buy one of theirs (60 cents buys one Swiss Franc). To figure profit or loss, just drop the decimal point and multiply the change by the point value of the commodity. ($.6000 to $.5982 =18 pts, 18 x $12.50 [value of each Swiss Franc point] = $225) So, assuming that you "soaked it all in" remember that all you need to do is:
- Get fresh up to date commodity charts.
- Look at a chart and see if you can find a pattern/formation.
- If a pattern/formation is present, call and place the trade.
Do this as it will get your business going and you will be amazed with the results! And if you don't do what I just thought you, you'll regret it forever. Don't let this knowledge "sit"...
FREE BINARY OPTIONS AUTOTRADING SOFTWARE
Now that you know how to trade and you have gained the knowledge of a professional trader, let`s move on to TRADING AUTOMATICALLY (HANDS OFF). For that purpose, create accounts in the 6 folowing softwares and deposit $500 into each ($3,000 TOTAL) as these 3 softwares are each programmed with the best strategies possible so the 6 combined are pure AUTOMATED TRADING DYNAMITE.
Here are the 3 additional FREE AUTOTRADERS
WHY? Because they will make you more than enough money to trade ``manually`` like ``the big shot trader`` you deserve and want to be as ``manual trading`` gives you the confidence in yourself and the ``BALLS`` you want to have?
- CREATE TRADING ACCOUNT AT ANY REPUTABLE COMMODITIES TRADING BROKER
- START REVIEWING THE CHARTS BELOW AND FIND THE FORMATIONS DESCRIBED HEREIN
- Papertrade for 3 months as explained herein (above) and when confident in yourself (as your 3 AUTOTRADERS continue to make you money), JUST DO IT!
REMEMBER: The chart patterns to focus on are:
- The Channel Formation (Medium - Long term)
- The 123 Top Formation (Medium - Long term)
- The 123 Bottom Formation (Medium - Long term)
- The Inside Day Formation (Quick Day trading)
- The Outside Day Formation (Quick Day trading)
- The One Day Juke Formation (Quick Day trading)
- And obviously, the 50% retractment rule
I welcome to the world of Trading!
LIVE CHARTS (20 second delay)
Click on the WEEKLY charts (my personal favorite) one by one until you find a formation/pattern (Start at the top and move your way down, use browser's back button to return and choose another market)
NOTE: You don`t care which market you trade, ypou `` like/dislike`` NO-THING, you only follow the pattern/frormation indiscriminantely using weekly charts.