Candlestick Guide

By Ahmad Hassam

Download Candlestick Guide (82 pages) free after you finish reading this article. This candlestick guide is a complementary gift for you from Options University and is comprehensive. Candlesticks have become popular in the Western trading community especially the United States in the past decade. However, candlestick charting methods had been developed by Japanese rice traders hundreds of years back.

Internet made possible the availability of online trading to retail trading. The advent of internet has leveled the playing field for traders whether they trade stocks, futures, options, commodities, precious metals or currencies. In the last two decades there have been seismic changes in the way people used to trade. Access to the market is now only one mouse click away. Trade just by clicking your mouse!

The opening of retail trading especially in the currency markets that was previously only open to large players like big banks and corporations has been a revolution. Market information is now in most cases freely available online. Internet has made commission rates dramatically lower. The result is that a whole generation of new traders and investors want to try their luck beating the market. You can now demo trade with virtual money to develop and hone your trading skills.

Did you attend the last Steve Nison Candlestick Charting Technique webinar? Now, you should. Steve is the master of candlesticks and you can learn a lot from attending his candlestick. I am a great fan of candlesticks charting and I have seen many traders both new and professionals becoming die hard fans of candlestick charting. Why? Because candlestick charting is the best tool available. Can you beat the market? It depends if you are using the right tools.

There are many forms of charting techniques that have been developed over time. Why candlestick charting is superior to other forms of charting like the line charts, bar charts or point and figure charts? One of the best features of candlestick charting is its visual appeal and readability. You can glance at a candlestick chart and quickly gain an understanding of whats going on with the price action in the market.

You can easily spot opening and closing price of a security or currency on a candlestick chart. These price levels can be a very important area of support and resistance from day to day.

There are certain specific candlestick patterns that can help you identify when is the best time to buy, sell or wait on a trade or investment. This information can be extremely useful for short term traders like day traders and swing traders.

Now in order to trade and invest effectively using candlestick charts you need to understand these candlestick patterns. These candlestick patterns can be a real boon to your trading and you can combine them with other technical indicators for even more reliable results.

Patterns appear on the candlestick charts as simple, single stick occurrences or complex multi stick formations. Many different types of candlestick patterns can tell you what may lie ahead in the market.

Entry and exit are the two most important things in any trade. You may use the information provided by candlestick patterns to decide when to get into a trade, when to get out of a trade or even when to hang unto a trade you are already in. This information can be highly valuable in knowing that the prevailing trend might reverse or continue.

This is the best candlestick guide in the market and you dont need to waste your money on buying a guide because this candlestick guide is a complementary gift for you from the Options University. Download your 82 page candlestick guide here complete with strategy flash cards all free. - 31876

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try These 1500 Pips A Day Forex Signals From Heaven. Download Your Free 82 Page PDF Candlestick Guide!

Parameters To Select Your Trading System

By Ahmad Hassam

Why you need a trading system? You need a trading system to make sure that your trading decisions are not arbitrary and based on your whims or emotions. When selecting a trading system, first try to paper trade it. You need to paper trade your trading system to get the bugs out. Paper trading is not a substitute for live trading but still you can assume that 75% of the results that you achieve in demo trading can be replicated in live trading.

Money management plan for your trading system is a must. A good money management plan will tell you how much you should risk on each trade with that trading system. For that to know you need two ratios. Win ratio and the payoff ration are two highly important figures to know for any trading system. Use the results of these paper trades to calculate your win ratio and payoff ratio. Determine what your personal win ratio and payoff ratio are in using that trading system over time.

It takes three to tango here. The trading system, your money management system and you yourself, all three of you have to gel together. The stronger and more developed the relationship is between the three of you, the more profitable you will be over time.

So for you to become a successful trader, a trading system is not enough. You need a good money management plan as well. Win ratio and the payoff ratio are required in developing a sound money management plan that will work hand in hand with that trading system. What can be the best parameters to selecting your trading system? When selecting your trading system, use these five parameters:

1) The trading system that you select is analytical and not whimsical based on your emotions. Trade entries in the trading system are defined by market price activity, key support and resistance levels, volume and volatility dynamics and not on random and spontaneous decisions.

2) Before you enter the trade, the trading system is supposed to tell about the stop loss. The initial stop loss exit is determined before entering your trade.

3) The trading system that you select is rule based. Just like the trade entries, the trading system determines the trade exits by market price activity, key support and resistance levels, volume and volatility dynamics and fundamental rules, not on any arbitrary dollar loss that you feel comfortable with.

4) You must not underestimate the importance of paper trading though it is not a substitute for live trading. Your trading system has been adequately paper traded or live traded and you have determined your personal statistical performance. You need to know your win ratio and the payoff ratio.

Some traders would like to use the win ratio and the payoff ratio achieved by the other traders. Do not rely on the results that the other got with that trading system. Use the actual results that you attained while using that trading system in calculating your win ratio and the payoff ratio.

Do not try to rely on computer back tested results. Your personal performance results are the real results that matter. You cannot depend on computer results and other traders results.

5) This is very important. Your trading rules should be written out step by step in sequence so that the entries and exits are consistent, clear and above all quantifiable. This makes your trading mechanical and emotions free.

One perfect example of a rule based trading system is the Turtle Trading System. Have you ever heard of the Turtle Trading System? You must read the story of the Turtle Trading Experiment. Turtle Trading System was developed for the commodities futures market.

You must know the story of Turtle Trading Rules. The story of Turtle trading rules is very interesting. The creators of that trading system had a discussion one day. One was of the opinion that great traders are born. The other said great traders can be made.

Both the great masters had a bet. Advertisements were placed in the Wall Street Journal and the Barrons. After short listing, a number of completely new traders were selected to teach them those rules and see if they could become successful traders. Many succeeded with the turtle trading system and became highly successful traders. But only those succeeded who had the discipline to consistently apply the Turtle Trading Rules while trading. - 31876

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Know Forex Charts! Try This 1500 Pips A Day Forex Signal Service!

Learn about Sugar Commodity Trading, Follow Sugar Commodity Markets

By Marianna Gomes

At a time of rising global agricultural prices, what are the opportunities in sugar commodity trading for the trader or investor looking for exposure to commodities as an asset class? In 1974 this soft commodity witnessed a price spike of over 60 cents a pound and another over of 40 cents a pound in 1981, at the end of the 1970's commodity bull market. It seems the sugar market and commodities in general are no different in 2009. Following the serious global economic slowdown in 2008, markets are recovering and sugar commodity prices are at their highest for 28 years.

There are numerous cases of serious sugar shortages as desperate consumers across Asia queue for small quantities of this key commodity. To think that while in 2007 India was a major exporter of sugar, with a surplus of five million tons, but from 2009 the country is a net importer. So what has caused this serious imbalance between world sugar demand and supply? After the shock of the global economic crisis, the US dollar is falling against other currencies and hopes of a strong rebound are causing real asset prices to be driven higher. Add in the weak monsoon season in India and very unhelpful weather for sugar plantations in Brazil, impacting adversely on sugar yields, and the result is raw sugar prices heading for a high of 25 cents a pound.

Preparing for your sugar commodity trading analysis, find out where sugar comes from, in what forms and consider the recent phenomenon that threatens to change the dynamics of global sugar commodity markets in future. Between 75-80% of sugar comes from sugarcane, produced in over 100 countries globally, largely from the tropical and sub-tropical areas of the southern hemisphere. Rainfall is important for successful crop yields, with ideally around 600 mm needed annually. In addition to bad weather, crop infestation due to pests is another variable causing a rise in sugar prices on world commodity exchanges.

Key producing nations are led by Brazil, also the largest global exporter, then India, China, the EU, USA and Australia. Subsidy regimes in Europe and the US are a major distorting factor in world sugar markets, as they artificially support producers giving them prices higher than the world sugar price. As well as established uses in fruit and vegetable products and in bread fermentation, sugar is now increasingly used as a source of ethanol fuel.

Moving on from 2007 when there was already very little room between supply and demand, the situation will almost certainly deteriorate with an expected demand surge in emerging BRIC nations particularly China and India. In fact India as the largest consumer in the world is now using significantly more sugar for ethanol as an alternative fuel. Meanwhile, starting from a very low base of 7kg annual per capita consumption is China, and as the world's third largest consumer and producer, is still some way behind the annual USA per capita demand of 45kg.

You will help your sugar commodity trading strategy by getting to know about the Brazilian market, the largest world producer. This country's strategy is to avoid a sugar glut by taking any surplus sugarcane crop to produce ethanol for biodiesel for export and domestic consumption. More sugar is being channelled for ethanol as crude oil prices rise, along with sugar demand surges in China. There are major challenges for sugar producers going forward, given the likely high crude oil prices in future coupled with growing demand, seeing sugar prices remaining high.

Armed with your chosen commodity trading system and good advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. The #11 Raw sugar futures on the ICE US Futures platform is the most heavily traded sugar futures contract globally, followed by the #16 Sugar futures contract. It is also possible to use LIFFE CONNECT, part of the NYSE Euronext Group, to trade raw sugar futures. For those hesitant about leveraging in futures, an alternative could be to look at a soft commodity index using an ETF. Broadly speaking, higher sugar prices suggests sugar commodity trading looks very exciting going forward, given growing sugar consumption in the BRIC economies and rising demand for bio ethanol. - 31876

About the Author:

Covering soft commodities, the author, Marianna Gomes, writes articles for the Commodity Trading Today website, a helpful online resource. Discover more about how you could benefit from sugar commodity trading suggestions here.

Understanding Spot Forex Market (Part II)

By Ahmad Hassam

The worlds big banks are the main players in the spot forex market. These big banks make an exclusive club where most trading activities take place. This club is known as the Interbank Market.

Unlike other markets, the interbank market operates on the principle of highest credit standing in dealing with the counterparty in any forex transaction. For this reason, big banks prefer to deal with big banks only. As a result smaller fish are shut down the line from the interbank market. Down the hierarchy in the spot forex market are the smaller banks, big multinational companies, hedge funds and other institutional investors or speculators and the retail forex brokers. The wealthier you are and the more money you have or are able to get credit for, the more chances you have of accessing this big boys club.

These players conduct currency transactions in the interbank market if they have large capital and have credit standing with the large banks. The independent retail traders lie at the bottom of the market structure.

The retail forex traders trade through their forex brokers. They generally trade in much smaller lot sizes. Central banks are also occasionally involved in currency transactions. So there is no central exchange in the spot forex market to set the prices. Then who sets the currency prices?

Market makers make the bid and ask prices based on the currency movements that they anticipate will take place. Without a central exchange, the currency prices are set by the market makers.

Many banks have professional traders solely dedicated to trading forex for speculation. Largest banks are the major market makers and they handle billions of dollars worth of forex transactions on behalf of their clients like the other institutions and companies and also for themselves.

This big money laden network is knows as the interbank market. Interbank market is where large banks deal with one another. The resulting massive flow of money handled by these big banks is what primarily drives the currency markets.

Most of the trading activity takes place in the interbank market. The transactions carried out by these big banks like the Citigroup, Barclays, UBS, Deutsche Bank etc amounts to the greatest bulk of the total daily forex volume.

How do the big banks deal with one another in the interbank market? The banks deal directly with one another through the electronic brokering platforms like the Electronic Brokering Services (EBS) or Reuters Dealing 3000 Matching. These brokering services get the best available rates for the various currency pairs. Products from EBS, Currenex, FXAll etc enable banks to reach a larger client base while still maintaining control over their risk. The reality is that a small group of banks control the forex market.

A forex transaction is not the exchange of cash for another asset like the stocks or oil but rather the exchange of cash today in return for the acceptance of cash at a later date. In order to do this the banks need to know that the counterparty is of highest credit standing. The banks establish specific credit lines with one another in order to deal with one another in the forex market as there is no exchange to serve as each banks counterparty. These brokering systems match buying and selling requests from the bank dealers. Between these two competitors they connect at least 1000 banks together.

Smaller banks that also trade forex also get access to these brokering platforms. Next large companies come. As the main market makers, these big banks constantly quote bid and offer prices to one another thereby making the market. - 31876

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!

You Should Have A Stop Loss (Part I)

By Ahmad Hassam

Do you have a trading system that tells you when to enter the market? Lets assume that you already have got a trading system that tells you where to enter the market. Does this system also tell you where to get out before you enter the trade?

In other words are you taking the market conditions into account and willing to give your trade a breathing space so that you dont get whipsawed or repeatedly get stopped out. On the road to profitability, lets start by agreeing that we need stop loss exits.

Just dont forget, the more trades you place, more commissions or spreads you will have to pay and the higher your trading cost will be. After this agreement on having stop loss exits, we need to determine how to effectively select stop loss exits to avoid excessive stop outs.

So right there you can increase your profitability if you increase the number of winning trades that is your win ratio thereby decreasing your trading cost. The best way to do this is to develop a stop loss strategy that takes into account currency market conditions.

There need to be a connection between you and your trading system. It truly is like having a personal relationship. Finding the right trading system can be a lengthy process. You must believe in your trading system and have a high degree of trust that it can produce consistent level of profits overtime.

If you have a trading system that isnt working for you and your win ratio and your payoff ratio dont generate a profit over time then you need to rethink your trading strategy. But you must also understand that no trading system can be perfect and no trading system can produce 100% winning trades.

When you lose a trade, it can be your trading system or it can be you yourself. Determine if it is your trading system that isnt working or is it your trading psychology that is off. Make adjustments to entry and exits. Maybe the market conditions have changed and you havent adjusted your trading system to the new market conditions.

Just keep this in mind that to jump constantly from one trading system to another trading system in search of a holy grail wont help you if you dont give your trading system a chance to work.

Divorce is never a good idea. But if the things dont work out there is no recourse except taking a divorce. Divorce of any kind can be emotionally and financially expensive so proceed with caution when divorcing your trading system. The decision to divorce your trading system should be a carefully thought out one.

The primary purpose of your trading system is to make you feel comfortable and confident. If you feel comfortable and confident with your trading system, you ultimately will also be profitable.

In the end, you need to develop a relationship with your trading system. You will feel confident when your trading system has proven to you and you have proven to your trading system that both can work together. Its a team work. - 31876

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try These 1500 Pips A Day Forex Signals From Heaven. Download Your Free 82 Page PDF Candlestick Guide!

Understanding Spot Forex Market (Part I)

By Ahmad Hassam

The spot forex market is a decentralized network of buyers and sellers. There is no physical central exchange that acts as a central clearing house. The spot forex market is an over the counter market.

Over the counter means that the buyers and sellers make a binding contract with each other after agreeing on the price and this is not carried through an exchange unlike the forex futures trading that is carried out through the exchange like CBOT, CME etc.

What are the advantages of a centralized market over OTC market? There is a better price discovery in a centralized market and there is trading anonymity something that big players want to hide their trails. There are several other advantages of a central exchange too like the counterparty risk for the trade is reduced. Forex traders in the spot forex market carry out their activities by dialing directly with one another or through brokers on telephone or internet.

For all the practical purposes, the spot forex market is unregulated and free of distorting red tape. The sheer size of the daily trading volume something like $3 trillions means that the government and the central banks interventions have little long term effect on prices. Chicago Mercantile Exchange (CME) along with Reuters launched the worlds first centrally cleared global forex market place in 2007; FXMarketSpace. CME will act as the clearing house and guarantee the performance of all the contracts for both buyers and sellers in this centrally cleared system.

Only sophisticated investors with net worth of more than $20 Million can trade on the FXMarketSpace. Unfortunately FXMarketSpace is an institutional trading platform and is not open to retail forex traders.

There are many players involved in the spot forex market. Recently NFA (National Futures Association) had also passed certain new rules that make it more skewed against the small investor like you and me. The spot forex market is still skewed against the retail forex trader. Why is it so?

The spot forex market has always been an unfair playing field for the big boys. It became possible to introduce trading platforms for the retail investors with the advent of the internet. Previously spot forex trading was the playfield of the big banks, multinationals and the hedge funds.

A mushroom growth of online forex brokers took place. Many did not have even enough capital with them to start the brokerage business. But this is the way; the spot forex market has developed over the years.

Why these players trade forex? What type of advantages they have over the retail forex traders? It is essential for you that you understand the nature of the spot forex market and who are the main players. Off balance sheet earnings are the declared aim of most banks and spot dealing in forex which represents a high loss potential but practically no credit risk falls in that category.

Over the counter nature (OTC) of the spot forex market means that currency transactions do not take place at any single place. Instead OTC means that the spot forex market is spread all over the globe.

Players in the spot forex market range from those who trade billions of dollars daily to those who only trade just a few thousand dollars daily. A players access to the spot forex market depends on the quantity of transactions of large amounts of money. Now who are the main players in the forex market against whom you as a retail forex trader will be competing? - 31876

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!

Forex & Other Financial Markets (Part II)

By Ahmad Hassam

The lower the prices of oil, the lower the inflationary pressures are going to become but this is not always true. The higher the price of oil, the higher the inflation would be and the slower the economic growth is going to become. Take oil as an inflation input and a limiting factor on the overall economic growth.

The global oil reserves are finite. With the rising energy demand in emerging economies like China, India and Brazil, the prices of oil are expected to rise and reach around $200 per barrel in the coming few years. We would like to factor changes in the prices of oil into our inflation and growth expectations and then draw conclusions about the course of US Dollar from them. Above all, oil is just one input among many.

Stocks: Almost everyone is familiar with stocks and the stock markets. You can take stocks as microeconomic securities rising and falling in response to individual corporate results and prospects. Stocks are units of ownership rights that get traded on the stock exchanges. You must have invested in stocks sometimes back. Many people invest in stocks. Buy and hold is the best strategy that has been followed over the years by the stock investor. Warren Buffet is the famous example who became the second riches man in the world by investing in good stocks over the years.

You can think of individual countries as companies and their currencies as stocks that get traded in the global financial markets. Currencies are essentially macroeconomic securities fluctuating in response to wider ranging economic and political developments. As such there is no intuitive reason that stock market should be related to the forex market.

There was a boom in the Tokyo Stock Exchange a decade back. Many investors wanted to take part in that boom. But in order to invest in Japanese stocks, they needed Japanese Yen (JPY). Heavy buying pressure on JPY made it appreciate. So sometimes a relationship develops between a stock market and a currency. If you have all your money invested in the stock market, you are completely at the mercy of the movements of the stock market. If you diversify your investments a little bit, however, and put the majority of your money in the stock market and a portion of it in the Forex market, you can retain more control of your financial future. Diversifying your money enables you to react to the movements of the market, regardless of its direction. However, long term correlation studies bear this out that there is no major relationship between stocks and currencies. Major USD currency pairs and the US equity markets over the last five years have almost zero correlation coefficients. However, the two markets occasionally intersect as the above example shows.

For example, when equity market volatility reaches extraordinary levels lie when S&P 500 Index loses 2% in a single day, USD may experience more pressure than it otherwise would have. But there is no guarantee of that. The US stock market may drop on an unexpected hike in the US interest rates while USD may rally on the surprise move.

Bonds: When interest rates are on the rise, at some point, doing business becomes difficult, and when interest rates fall, eventually economic growth is energized. The bond market rules the world. Everything that anyone does in the financial markets anymore is built upon interest rate analysis. Globalization is here to stay. At the center of the globalization phenomenon is the entity known as the bond market. As a futures trader, you are likely to deal mostly, but not exclusively, with the U.S. Treasury bond futures. However, over the next 10 or 20 years, or perhaps sooner, the European bond market, and more than likely bond markets in Dubai and China, will play significant roles in the global economy.

That relationship between rising and falling interest rates makes the markets in interest rate futures, Eurodollars, and Treasuries (bills, notes, and bonds) important for all consumers, speculators, economists, bureaucrats, and politicians.

How can you anticipate the interest rate changes in the market? By following the bonds market! Ten-year T-note yields are the key for setting long-term mortgage rates. By watching this interest rate, you can pinpoint the best entry times for re-mortgaging, relocating, or buying rental property, and you can keep tabs on whether your broker is quoting you a good rate. Both the bond market as well as the forex market reacts to interest rate changes and inflation. Bond or fixed income markets have a more intuitive relationship with the forex markets as both are heavily influenced by the interest rate expectations. However, the short term supply and demand fluctuations interrupt most attempts to establish a viable link between the two markets on a short term basis.

Sometimes, the bond markets more accurately reflect the changes in interest rate expectations with the forex market doing the catch up. At other times, the forex markets react first and fastest to the shifts in the interest rate expectations.

Changes in the relative interest rates exert a major influence on forex markets. As a forex trader, you definitely need to keep an eye on the yields of the benchmark government bonds of the major currency countries to better monitor the expectations of the interest rate market. - 31876

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!