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How Algo Trading Became My Focus, Passion & Income – Part II
My last post I talked about how “The Market You Trade Is Not Random“ which is what originally got me interested in trading. Let me continue with this series of how algo trading turned into my dream job and income stream.
In part one of “How Algo Trading became My Focus, Passion and Income” you saw how my 15+ years of trading evolved from trading only, to teaching and coaching others, and then writing financial newsletters to provide thousands of followers with video analysis, trading tips, and the occasional trade idea.
During that time it became clear that teaching and providing the masses with trading strategies that would provide a consistent stream of income year after year was much harder than I expected because of the way humans function as explained in part 1 of this report.
Seven years ago in 2006 is when I caught the algo trading bug. It was the day I saw an interview on CNBC about a trader who converted each strategy he had into algorithms and had incorporated each one into a powerful algo trading system. It was this hands free trading idea I was sold and set out to convert my trading strategies into an algo trading system of my own.
Having an algo system that trades and profits in up and down market conditions without having to look at the charts or pull the trigger on entering and exiting setups sounded so good I was determined to build my own.
Within a couple of hours of Googling the terms automatic investing, algorithmic trading, and algo trading type search results I had answers to my list of basic questions. Once I knew what trading platform I should use, some basic guidelines on what to look for in a trading programmer, and the main do’s and don’ts about algo trading I was ready to start calling my list of programmers. By the end of that day I had myself a programmer ready to start my project and I was fired up!
12 Algo Trading Strategies in One Automatic investing System for Individuals
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Fast forwarding to today, hundreds of version of each of my algorithms, and 4 programmers later I now have my own automatic investing algo trading system that naturally expands and contracts with the stock market using cycle analysis, volatility, trends, price patterns, volume and sentiment to invest in the S&P 500 index.
This all-in-one system has 12 of my best trade setups and strategies for the S&P500 index. No matter the market direction (up, down, or sideways) and no matter how volatile or lack of volatility it has there is an algorithm strategy taking advantage of the stock markets price fluctuations because we specialize (live and breathe) to make money from this highly liquid index..
Do not diversify. Specialize.
“Diversification is a protection against ignorance.
It makes very little sense to those who know what they are doing”.
Warren Buffet
Know that the number #1 problem investors struggle with is themselves because of the emotions, lack of focus, and lack of commitment us as humans have. And no matter how hard you try to make you’re trading rules simple to follow and execute you will always stray from what you should be doing from time to time.
Your will typically break your rules during a losing streak or highly emotional time in the market when it’s either overbought or oversold and you do not think your systems next trade will be a winner. Because you fall off the wagon at these critical points which happen to be the most important times for your system to make money in most cased you sabotage yourself and watch missed opportunities pass you by and you investing performance drop dramatically.
In the next part, you will learn about some really cook stuff and just how to take advantage of algo trading systems and how much money you can make on a monthly and yearly basis with zero investing/trading input.
Stay Tuned For Part III – How You Can Make Money With Algo Trading …
Chris Vermeulen
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Elliott Wave
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Every investor has seen the odd phenomena of stocks going down when there is good news about the stock or conversely stocks going up when there is bad news about the stock.* Is there a system that can be used to help analyze these trends and to be able to then predict stock trends?* The answer is yes, and one possibility is Elliot Wave Theory.
Elliot Wave Theory examines how groups of individuals react en masses to things in their environment and the psychological reasons for such reactions. Elliot Wave Theory then groups those reactions into predictable patterns or ‘waves.’* Once you have identified a particular trigger, you can then predict the coming waves and how groups will behave in accordance to those waves.
Elliot Waves: mini waves make up bigger waves
The key component of Elliot Wave Theory are the Elliot Waves themselves. Several mini Elliot Waves will make up one bigger wave. The bigger wave is known as a fractal. Fractals can then be grouped together to create an even larger wave showing a complete trend based one trigger.
Elliot Wave Predictions
The stock market is an excellent vehicle to use Elliot Wave Theory to analyze potential market trends.* Once a potential trigger has been identified, the potential movement of the stock can be predicted by the applying the Elliot Wave principles. Opportunities for solid Elliot Wave Predictions exist whether the stock is moving in an upwards or downwards trend as Elliot Wave Theory accounts for upwards and downwards movement.
Elliot Wave Gold
Elliot Wave Theory can be applied to anything that is traded, including gold. Elliot Wave Gold systems can provide an opportunity for excellent growth. The key of course is being able to identify a trigger, understand that triggers implications, and then predict how groups of investors will react. That’s where solid, proven Elliot Wave Theory application can give you an edge in your invested strategies.
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The Four Biggest Mistakes in Stock & Futures Trading Strategies
In this series I would like to share with you the four biggest mistakes traders and investors make which costs them time, money and usually self-confidence when trading stocks, ETF’s or futures trading strategies.
The Four Biggest Mistakes
1. Lack Of A Trading Plan
2. Using To Much Leverage
3. Failure to Control Risk
4. Lack Of Self-Discipline
Throughout this multi-part series I will cover the major mistakes, why traders make them and how you can avoid them with your stock, ETF, and futures trading strategies.
While most books about trading are based on success, I want to talk about the other 90% of traders and trading results – the dark side of the business. Why? Because if you can avoid the mistakes then success should naturally happen. Trading As Your Business should not be taken lightly and it’s generally the little things (negatives) that make the biggest differences.
Part I – Lack Of A Trading Plan
Recently to took a free online course by Steve Blank. The program was called “How to Build a Startup”. This course was really well done and if you are an entrepreneur then it’s a must do course hands down. I think it took me roughly 10-12 hours (online videos with embedded quizzes). Anyway, Steve teaches you everything you need to know and do before starting any type of business and why so many individuals fail to succeed.
The #1 mistake made by traders is because they have no trading plan to guide them through the financial market place. A surprisingly high level of traders enter the market without a clear strategy on how they will trade in and out of the market. Most traders are so excited to start trading they simply skip the process of creating, building and testing a stock, ETF of futures trading strategy before they actually start trading with real money and why there is a high rate of failure.
If you take great pride in your trading and truly want to succeed over the long run, then I am sure you find yourself as I do, constantly consumed by monitoring your trades and strategies to be sure the process is executed correctly. If this is you, then congratulations, you are rare and likely making some big money.
Why Do Trades Make Mistake #1?
The main reason individuals trade without a plan is because of the allure that making money in the market can be quick and highly profitable. Many people just do not want to “waste” time planning to trade when they can just pull the trigger to buy and sell within minutes of opening a trading account.
This mind set is understandable. We are all guilty of tossing a product manual to the side and just try to build or use a new product without learning how it works, only to realize hours or days later we are reading the manual because we made some mistakes…
Let’s face it, with so many marketing ads hitting our inbox each day, and books talking about how traders are turning $10,000 into $1,000,000 in less than a year most novice traders will get fired up and start trading before they are truly ready.
Stock ,ETF and Futures Trading Strategies Brutal Truth You Don’t Want
As with any business or professional to be a success a great deal of hard work is typically involved. First of all it is not easy to build a successful trading plan. And then if you can do that, then you need to follow the plan, which is actually even harder. If you want to be a successful trader then you better be prepared to pay the price in terms of time and money.
How to Avoid Mistake #1 – There are only two ways around making this mistake
Avoidance Method 1 - The first is to devote as much time and energy needed to develop a detailed stock, ETF or futures trading strategy that addresses all of the key elements of a successful trading plan and system and still knowing that this will BOT guarantee your success.
The Key Elements That Must Be Mapped Out
- How much money can you afford to lose/trade without affecting your lifestyle?
- What market/s will you trade?
- What trading time frames works best for you?
- Day trade, swing trade, investing, manual order entry, automated trading system?
- What will your criteria’s be for entering a trade?
- What will your criteria’s be for exiting a trade with partial profits?
- What will your criteria’s be for getting stopped out of a trade gone bad?
- What time frame chart will use base the trend of the market on for you trades to follow?
- How will to manage positions by letting your profits run and by cutting losses?
Avoidance Method 2 – The second and fasted growing route traders and investors are going is to buy or subscribe to ETF Trading Strategies, or Futures Trading Strategies and fast track the process to hopefully make money trading with the least amount of effort, the lowest amount of downside risk for their capital and being 100% hands free.
Part I – Conclusion:
I hope this short report helps you see the light at the end of the very long tunnel of creating, building and following a trading plan. Without this first step/blueprint you are doomed from day one.
Keep your eyes open for part II where I will talk about trading with leverage, how to avoid it, and how to use it to generate massive gains if used correctly.
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Chris Vermeulen – www.TheGoldAndOilGuy.com
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Why Use Automated Futures Trading Systems?
If you are a trader and are looking for a regular method that could be used to boost your P/L, then automated futures trading systems could be the answer to your problem.
So, just what is a futures trading system? A trading system is effectively a set of rules that you will use to place all of your trades in the market. These rules tend to be automated trading signals and are executed through a computer, to save you time and from human error.
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What are futures contracts? If you want to look at it in the most basic of terms, a futures trading contract is like stock that has a specific expiry date.
So, why should you trade something like that? It’s quite simple. As a trader, you want to have as diverse a profile as you possibly can. Diversity is very important to traders and those with large trading accounts.
The majority of these futures contracts are based on commodities like gold and oil, coffee and grains. Because these materials are used pretty much constantly worldwide, it makes them almost immune from the spikes and dips that you get from other markets.
Using automated futures trading systems to devise your strategies for the markets is very important as it helps you do two things. One, it will help you understand the markets better as you can track and trade many different futures trading contracts at the same time with ease. Secondly, you will be able to avoid human error and trading from your gut (emotions) which tend to have a negative impact on futures trading systems.
Automated futures trading systems are very important for the active trader. A futures trading system can help to balance your portfolio volatility, and they can stop you making bad decisions based on your gut or your “feel”.
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The Fed Taper Explained by SPX Options
With the last major news item for 2013 less than 48 hours away, I thought I would share some insights as to what the S&P 500 Cash Index (SPX) options were pricing into the Federal Reserve’s monetary policy announcement due out Wednesday.
After the news is released and the week ends, it will be time for Santa Claus to come to Wall Street. While most people believe in the Santa Claus rally, what few understand is the bullish undertones that traditionally accompany a triple witching event.
This coming Friday, is a triple expiration. Equity options, index options, and futures contracts will be expiring this Friday. This event is traditionally known as “triple witching” and historically the quarterly expiration event ushers in serious bullishness.
According to Bank of America Merrill Lynch, “In the 31 years since the creation of equity index futures, the S&P500 has risen 74% of the time during this week. More recently, it has risen in ten of the past 12 years.” The chart shown below was posted on*zerohedge.com and was provided by Bank of America Merrill Lynch.
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The chart above clearly demonstrates that the December triple witching event is statistically relevant for higher prices. What many call the “Santa Claus Rally” may have more to do with triple witching than whether Wall Street was naughty or nice.
The data above would demonstrate that unless the Federal Reserve either shocks the market or initiates a tapering of their quantitative easing program, we are likely to see some strong bullish price action in stocks going into the end of the year. Trend following quantitative trading strategies are a great way to automated your trading or investing.
While it can be argued as to whether or not a tapering has been fully priced in, what is of keen interest to me is whether SPX option analysis confirms a bullish disposition for future price action.
I want to be clear, that as an option trader I am constantly looking at probabilities for trade selection. I use a variety of credit spreads to take advantage of higher than normal implied volatility and use the passage of time as an additional profit engine. Additionally I use probabilities to help me select the option strikes that I am going to utilize for trade structures.
Based on the closing prices in the December Monthly (Exp. 12/20/13) S&P 500 Cash Index (SPX) on Monday December 16, 2013 the marketplace is pricing in a fairly tight short-term range. This is to be expected when time to expiration (in this case 4 days) is fairly short in duration. However, when we look at the standard deviation analysis from Monday’s close an interesting narrative is born.
The 1 standard deviation (68% probability) price range in SPX based on Monday’s close is around 1,770 – 1,800. The SPX option market is pricing in that there is a 68% chance that by the close Friday the SPX price will be in that range. However, the 2 standard deviation (90% Probability) price range tells a considerably different story.
The December Monthly SPX options show a 2 standard deviation range between 1,730 – 1,825. There is a 90% probability that at Friday’s close price will be in that range. However, when we look closer something interesting is revealed.
The Monday closing price for the SPX was 1,786.50. I would simply point out that the SPX options marketplace is saying that the risk of a larger move to the downside is more likely. Note that the 2 standard deviation upside price level is roughly 40 points higher than Monday’s closing price.
The 2 standard deviation downside range is more than 55 points lower. The marketplace is clearly pricing in that should a price shock take place, it will be much more devastating if prices move lower on the Federal Reserve’s statement. The price range is shown below on the SPX daily chart.
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The fact that the option market is clearly favoring more downside potential does not mean that the marketplace’s reaction will force prices lower. The extra risk premium to the downside exists because the marketplace believes that there is more downside risk potential.
Unfortunately the SPX December monthly option chain cannot tell us much more at this point in time about future price action. However, some analysis provided by Bank of America Merrill Lynch solidifies my expectations that in the immediate short-term more downside is likely. However, a major bottom is likely to form which coincides with the December triple witching event. The chart below is courtesy of Bank of America Merrill Lynch.
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The chart above demonstrates that the target range is somewhere between 1,745 and 1,775. In overnight futures trading on Sunday evening prices fell sharply, but Monday’s action caused prices to regain their footing. The recent lows in the SPX just barely made it into the range highlighted above. My guess is that one more pullback may occur before we see prices start moving higher due to triple witching and seasonality.
However, what is most important for readers to understand is that the risk should the Federal Reserve surprise the marketplace with a more hawkish action could be quite bearish in nature. A tapering announcement or a larger than anticipated tapering could cause the S&P 500 Index to react violently to the downside.
I will be the first to admit I have no idea what is going to happen, but I think hedging longs or taking some profits where available makes sense ahead of the Federal Reserve’s statement. While higher prices are more obvious based on seasonality and the binary triple witching event, a downside move could catch market participants off guard and strong short-term selling could result. Short-term risk is high!
Happy Trading!
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Developing The Best Futures Trading System
If you are getting a little bored of dealing with equities and would like a bit more of a challenge from the markets – and larger profits – then keep reading on. We want to look at the immense power of a futures trading system. If you work in the stock market, you will still have the high risk-high reward lifestyle that many stock traders have, but the advantage of futures trading and futures trading systems is that risk can be managed 24/7.
However, while the profits can be massive, so can the losses. So you need to be ready for virtually any outcome that could happen, and the best way to do this is with a futures trading system that has position and money management built into it. The best futures trading systems allows you stay away from poor decision making because they are automated in which removes emotional based trading. It also saves you from making any silly mistakes and miscalculations, as the entire futures system is automated and will execute futures strategies for you.
Futures trading is quite difficult and don’t think because you have bossed other markets, you can do the same here. A deep knowledge, power and real life experience is required to successfully trade these markets. However, once you find yourself in a position where you can take on and even absorb the larger risks that come with futures trading, you will be ready to make the most of this market.
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Must Know Formula for Futures Trading System Development
The first thing that you need to concentrate on with a futures trading system is the specific market you want it to trade. Find something you are comfortable with – if you prefer to trade futures on indexes, you could start with the SP500, NASDAQ, DOW and Russell 2K. Or you could walk into the world of commodities like gold, oil and grains.
Once you have selected a market to trade, creating, building and testing your new automated futures trading system is important. Keep in mind there are many down falls to back testing and the further back you can go, the better. Most futures trading system developers only back test 6-12 months which to me is not enough data. You really should back test the strategy as far back as possible. If the data points you use in your futures trading system goes back 6 years, then build a system that works well during all of that time. If the data goes back 10 years… then even better. The farther back you go the more solid the futures trading system will be going forward.
Once you have successfully backtested the futures trading strategies its time to manually review each and every trade to confirm your system and testing was accurate. If not, adjust the system, backtesting criteria and repeat until you are happy with the results.
Some of the best futures trading systems are dynamic. This means they automatically adjust to market volatility, trend direction and manage positions on the fly without the futures trading system developer having to manually adjust strategies each week or month in which the market conditions change.
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The Four Biggest Mistakes by Stock & Futures Traders – Part II
This part two of a five part series of the four biggest mistakes traders and investors make which costs them time, money and usually self-confidence when trading stocks, ETF’s or futures trading strategies.
The Four Biggest Mistakes
1. Lack Of A Trading Plan – Part I
2. Using To Much Leverage
3. Failure to Control Risk
4. Lack Of Self-Discipline
Mistake # 2 – Using Too Much Leverage
With this section talking about leverage I am mainly going to be referring to futures trading because futures provides the most leverage. Anytime I talk about futures trading with someone, more times than not they either say they do not trade those things, or they tune out all together because in their mind its crazy and risky.
While there is no question that futures can be volatile at times, what individuals do not understand is that it’s not the volatility of the market that cause problems. It’s proven that most large cap big name stocks actually have more volatility than the majority of futures contract whether it’s the SP500, wheat, corn, gold, oil etc… The problem is the amount of leverage one used with their money.
Understanding Leverage
The difference between trading stocks and futures is the amount of capital required to enter a trade. While this could be a very long and detailed section with examples of leverage, I am going to keep things simple and short cause it’s really not that difficult.
Using an example of a trader which we will say his name is “Dave” who wants to trade the SP500 index with their risk capital here are two examples that show how leverage drastically changed the outcome of a position.
Dave has a $10,000 account, and wants to swing trade the SP500 index.
Option #1: He buys $5000 worth of the SP500 ETF (SPY). And if the SP500 rises in value by 3% Dave would see a $150 gain on his trade. This ETF has no leverage and follows the performance of the stock market.
Option #2: Dave decides to buy 1 ES mini futures contract which is the SP500 Index futures contract. Using the same numbers as the previous option, the SP500 rises in value just 3%. How much money did Dave make on this trade? He made a whopping $2,625 on the same move that the ETF did, how is that possible?
Let me explain, when you buy a non-leveraged ETF like the SPY with $5000, you are literally only trading with a $5000 investment. But with futures, when you buy one ES mini contract which is worth roughly $5000, you are actually controlling roughly $75,000. So think if it as 17.5x leverage on your money.
So that 3% gain in the stock market is based off a $75,000 investment which is how you get $2625 or a 52.5% return on your money.
Futures trading in my opinion is not for beginner or intermediate traders. The only way your money should be involved with futures is if you truly understand how the market move and have strict money management rules, or us a system that trades and managed positions for you. Remember, leverage is a double edge sword that can make you wealthy or broke quickly if not traded appropriately.
Why Do Traders Make Mistake #2?
The simple answer is mainly because of “ignorance”. I’m not saying most traders are ignorant, im just saying most individuals are unaware of the mount of leverage involved with futures trading or even the 2x and 3x leveraged ETF’s.
People who are used to putting up $10,000 of capital to buy $10,000 of stock/ETFs often assume they are doing the same with futures. Little do they know, that $10,000 position in futures is actually controlling $170,000 and in some cases up to $330,000 in capital.
Another problem is that most brokers will not tell you when you are over leveraged. Brokers make money on trade commission’s so it’s not too often they tell you to trade less and watch your leverage levels.
How to Avoid Mistake #2
A way in which you can try and void trading with too much risk is by having the properly account and position size. The key is to use just enough leverage on your money to generate above average returns while not exposing you to too much risk.
Of course trading with leverage come increased trading emotions. This is one of the reasons why automated futures trading systems have become so popular. Having system (mechanical trading system) can eliminate a vast majority of emotional and psychological issue us as humans struggle with.
Using To Much Leverage Trading Conclusion:
In short, if your trades will typically have a drawdown of say 20%, then you must be sure your account has enough money to be able to enter the same size position after lose 20% or your account. If you will not have enough money left to keep trading then either adjust your strategy or deposit more capital.
To get a solid feeling of how leverage works I suggest spending 20 minutes and play with a calculator and play with the potential gains or losses using various leveraged instruments like the 1x, 2x, 3x exchanged traded funds, and also futures contracts like the ES mini which is $12.50 per tick, or $50 per point.
Stay tuned for Part III – Failure to Control Risk
Chris Vermeulen
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Building Long-Term Profits For A Futures Trading System
When working in the world of a futures trading system, you can build up log-term capital gains in a short period of time. Your futures system, if traded properly, can earn you profits from 50-100% of what you started with in a short period of time (days or weeks)!
Using a, automated futures trading system immediately helps you do a few things – it helps you diversify your trading so that you can trade the same futures contract like the ES mini (emini) over and over again and a automated fashion. Futures trading systems is growing in terms of use and more individual traders are starting to demand automated futures trading systems by their brokers.
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One of the most exciting parts about autotrading futures is that it can be done with a small amount of capital. Couple that with the extreme leverage they provide you can create, build and trade futures trading strategies that are based on compound trading. Gains are exponential with these strategies and is a large part of why so many people flock to futures trading systems.
Lastly, futures trading systems require next to no input from the user. You are still required to follow and track automated systems but in the most part you can focus on living a more normal life (not being glued to the computer screen each day.
Some technical and cost setbacks can set a future trading system developer back a few notches in terms of time and financial commitment .They require knowledge and specific computer software to make them work effectively. In most cases a dedicated server is required and these alone cost upwards of $100 – $200 per month. Add that to your automated trading software, data feeds and trading commissions, futures trading systems can get expensive quickly.
What is the Reputation of the Seller for your Futures Trading System?
Whoever is selling this automated futures trading system must have some experience in the game. Make sure they do before you buy – you could be buying from somebody who has never made a dime trading their own system.
The Logic – The logic of the system needs to be easy to understand and conform to how you think and feel the market should be traded. Being comfortable with a system that is trading your money is important for long term success.
The idea here isn’t to find a futures trading system that will get you the most money quickest, it is to find a system that can give you long-term sustainability and give you something to think about for years, not weeks.
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Technical Trading Mastery Book Now Available
My new book “Technical Trading Mastery – 7 Steps To Win With Logic” is now available for you on my website Order Digital Version Here. In two months the paperback will be on Amazon.com Pre-Order on Amazon.
I am going to tell you about something really special. But first let me tell you about the book itself.
I have been planning to writing an investment/trading book for you for years and believe you will be really happy with it once you get it. Unlike most trading books that are like big encyclopedias full of the same concepts explained in a different way, my book is going to show you a new way to analyze the markets to find low risk trading and investing opportunities. My new style of analysis I call INNER-Market Analysis along with what has actually worked for me over the years are covered in detail.
You will find my process of knowing what to trade, my specific indicators and strategies in the book to be simple, unique, and exciting. Its everything I have used to manage my money and navigate big swings in the market with great success.
This is really logical way of trading not only makes sense but you can implement some of it to your trading literally overnight.
I wrote the book for you to be able to read it in two or three sittings and I share with you my story of becoming a trader which I’ve never shared before. I think that you will enjoy reading it as much as I did writing it for you.
To order the book go*here.
Special Bonus for Buying the Book
Starting in January I will be starting a monthly newsletter for investors. As you probably know monthly investment newsletters are the standard product in the investment advisory business and most of them range from $97 to $500 a year.
But, because this is my first book jam packed with the best of everything I know and use today, and the fact that I am extremely happy with how it turned out I’m just going to let you have a lifetime membership to my investment newsletter for free as a special bonus if you buy the book before Jan 1st.
In this monthly investing newsletter you will receive my big picture market analysis using all the indicators, tools, tips and techniques explained in the book. The only thing better than learning new trading techniques through a book is by seeing them done live in the market for you to follow.
I do run a business and will be selling this newsletter in a couple weeks, but I would rather use it as an incentive to get you to buy my book right now. We all know that building long-term relationships with clients/new trading buddies is all about providing the best value for the best price.
I can tell you that a few of my competitors heard what I am doing here and it’s creating some controversy with other investment writers and advisory services.
What they do not know that I like to offer people real value they can’t refuse – not through tricks – but by offering things that have so much value that at the price I offer them one would have to be a fool not to go for it.
Over the next 9 days I expect to sell a few thousand copies of my book to my 25,000+ followers. Here’s the catch and why I am offering this special to buy the digital version. I was only able to get 1000 books printed and shipped to Amazon with my publisher. It’s a long story, and the good news is there will be more books printed and shipped to the warehouse shortly after, but without the free lifetime newsletter membership offer. So with the paperback book being limited I wanted to extend my book in a digital version on my website at 50% off the retail price + plus the lifetime membership to my new investing newsletter.
I believe that those who benefit the most in life and business are those that truly help as many people as they can. And for me that comes from providing people with great information for the price they pay and also by giving people high quality usable free information too.
I’ve been online since 2001 and have a big following due to this philosophy.
Also I truly believe that this book will help everyone who reads it in some way, shape, or form. I cover a lot of key areas of trading we all must focus on improving including myself.
How to Get Your Special Bonus Free
All you have to do is go to my website Here To Buy The Book and I will have your email for sending you the monthly investing newsletter.
You can also pre-order the paperback from Amazon.com to get one of the first 1000 books with the free investing newsletter information on the back page. Pre-Order At Amazon.com
Now I’m only going to offer this bonus to you for the next few days, because I do plan on selling this newsletter so I have to stop just giving it away at some point.
So go ahead and order the book today.
Chris Vermeulen
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E-Mini Futures Trading Systems
When talking about futures trading systems or magical formula that produces profitable result, it’s important to remember that there is basically no such thing as a fool proof plan. By using the example of the “Holy Grail” it is safe to say that in the world of futures trading systems, there will never be a 100% winning system or one that will generate profits in all market conditions.
In history, the Holy Grail was never actually located – was it? Well, in comparison, there is no holy grail of automated futures trading systems either. Sadly, if a system like that existed we would all be making huge amounts of money, wouldn’t we?
If you look back on the best automated investing systems and futures trading systems in particular that have been used in the past, then one thing they all have in common is not their success but their failure. Most successful investor has at one stage suffered big losses – it is just a part of the investing game.
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So is there a fool proof futures trading system out there?
Trading something known as an e-mini (ES Futures) is a brilliant way to get involved in the futures markets. E-mini trading is a lot less risky and does not offer you quite so many different avenues for failure if you have the proper futures trading strategies and systems in place.
Reducing downside risk is very important in the futures market because of the leverage involved. Remember that greed is a bad thing, a really bad thing, so making the decision to earn a little less to ensure you don’t lose more is very important. A simple strategy is to trade multiple futures contracts at the same time. This allows you to quickly take profits on one contract as soon as price starts moving in your favour and allows your other contract to mature with the larger underlying trend.
So while an e-mini trading systems do not offer you 100% success rates, they can help you cut back the risk while keeping the reward fairly high. Let’s face it, 24/7 trading hours allow us as futures traders to manage risk by avoiding price gaps which happen every day for those trading ETFs and stocks.
The best futures trading systems won’t take on too many markets and contracts. Focusing your attention on just a few different markets and really put your heart and soul into those strategies and systems to get the best results possible.
ITS BETTER TO BE REALLY GOOD AT ONE THING THAN IT IS TO BE GOOD AT A BUNCH!
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Bear Market Cycle Bottom Forming in Gold and Gold Stocks Right Now!
David A Banister – www.MarketTrendForecast.com
Today we take a look at the Bullish Percent Index chart relative to Gold’s cycle and Gold Stocks.
Essentially it tells you what percentage of Gold sector stocks are at or above a moving average, which normally would be 50 days. When 70% or more are above a 50 day moving average, sectors can be peaking out. If you look at our chart at the bottom, we have labeled various incidents with A, B, C, and D.
A. The precious metal as we all know peaked in the fall of 2011 at $1923 per ounce, and the Bullish percent index was at 80%! Usually at 30% or so, they are bottoming out in most cases.
B. We saw a rare case in the summer of 2013 where the Bullish percent index for Gold stocks was at 0%, yes that is not a miss-print.
C. Gold bottomed at 1181 in late June 2013, and then rallied up to 1434 and we saw Gold stocks rally 40-80% in individual cases and the Bullish percent index rallied up to 55%.
D. If we fast forward to December 2013, we have Gold pulling back in the final 5th wave down from the Bull cycle highs in August 2011 at $1923. The Bullish percent index is back to 10% and heading towards 0 or close once again.* At the same time, the Gold miners index ETF (GDX) is at 5 year lows and even lower than June-July 2013 lows.
These types of indicators are coming to a pivot point where Gold is testing the summer 1181 lows and may go a bit lower to the 1090 ranges. At the same time, we see bottoming 5th wave patterns combining with public sentiment, bullish percent indexes, and 5 year lows in Gold stocks. This is how bottom in Bear cycles form and you are witnessing the makings of a huge bottom between now and early February 2014 if we are right.
The time to buy Gold and Gold stocks is now during the next 4-5 weeks just as we were recommending stocks in late February 2009 with public articles that nobody paid attention to.
This is the time to start accumulating quality gold miner and also the precious metals themselves as the bear cycle winds down and the spring comes back to Gold and Silver in 2014.
http://www.activetradingpartners.com...3/12/atp11.png
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The Stock Market Holiday Bulge – Prepare for Selling
I would like to start by wishing you a Happy Holidays & New Year!
So far this year (2013) has been a great year for trading and my 2014 forecast looks to be as good if not even better. I do have something exciting to share with you that is going to make 2014 really amazing, but first let me talk about the stock market and what is likely to unfold in the next week or two so you can protect your investments.
As many of you know, I follow and post frequently on StockTwits.com. I like to see what traders and investors are thinking/feeling about the broad market using extreme sentiment readings as a contrarian signal for trade ideas or to protect open positions more by tightening my protective stops and locking partial profits.
Below I have posted a two charts on sentiment courtesy of StockTwits to show these extreme readings of where the US stock market is trading at. The first chart is of the symbol $STUDY and this sentiment shows us that 98% of trading material is bullish on the stock market right now. My theory is, if everyone is moving in one direction, you better be ready for them to change direction any time. The masses move like a school of fish and one they get spooked they change direction and start selling everything they just bought.
The second sentiment chart is of the SPY exchange traded fund. This mimics the SP500 index and is also a gauge for broad market sentiment. If we think back to the 80/20 rule, we know that 20% of the crowd/clients are correct while 80% tend to be incorrect. With sentiment reaching the highest level in a couple months and with the index making new highs, coupled with the holiday price bulge (holiday rally) logic says a pullback in the near term is very likely an that it could be sharp and it almost like automated trading.
Market Sentiment – Broad Market Contrarians Indicator
http://www.thegoldandoilguy.com/arti.../sentiment.png
The stock market has wave like patterns that form on a monthly basis that provide us with a steady stream of trading opportunities. One of the best swing trading tools for timing these waves is through the use of this chart below provided by Barchart.com.
The chart below is self explanatory, but let me quickly explain how it works. This chart rises as more and more stocks trade above the 20 day simple moving average. And when the majority of stocks are in a strong uptrend, it’s a lot like humans all trading in the same direction (a school of fish) and the odds favour a change in direction temporarily. These waves are great intermediate trends for swing trading and typically last multiple weeks at a time. This is one of my strategies which I trade with my members at TheGoldAndOilGuy.com alert newsletter. Keep in mind, its not as easy as it looks, because there are more moving parts to this equation but you can see these extreme waves clearly in this chart.
http://www.thegoldandoilguy.com/arti...3/12/20dma.png
The Holiday Bulge & Amazing Information Conclusion
With the stock market still firmly in an uptrend and firing on all cylinders short term analysis is pointing to a pause or pullback in the next week or two. I did forecast this exact price action several weeks ago and how it could lead to the start of a major market top. If a major top does form early in 2014 then we could make some big money once the down trend starts.
Remember, stocks fall 3-7 times faster than they rise, so once we get short massive gains can be made quickly and while the masses (school of fish) are losing money, we should be on the other side watching our trading account sky rocket!
NOW FOR THE GOOD NEWS!
A few days ago my new book “Technical Trading Mastery – 7 Steps To Win With Logic” became available to my followers and readers with an offer you would cannot refuse. If you buy my book before Jan 1st you get a Lifetime Membership to my new Monthly INNER-Investor Newsletter so you can keep your long term investment capital on the right side of the market forever.
Get the Full Details at: http://www.thegoldandoilguy.com/arti...surges-amazon/
Chris Vermeulen
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Choosing A Futures Trading System
When trying to decide on a futures trading system, there are many different factors that you need to take into account. The majority of the systems that you look at will probably fall into categories that you have an interest in whether it is day trading, swing trading or more of a position/investing strategy.
Once you have selected the time frame in which you want to trade and how active you will be trading it is important to select a market to trade. Personally I like the SP500 index. Its big, highly liquid and has many investment vehicles that track its performance.
Some of the investment vehicles include exchange traded funds being 1x, 2, or 3x leveraged. The largest asset based ETF that mimics the SP500 is:
SPDR S&P 500 ETF Trust (SPY) – No surprises here! The S&P 500 tracker is the most successful fund having just past its 20th birthday. The oldest ETF on the market, the S&P 500 ETF Trust is the largest and most successful fund with*$121 billion in assets under management. This fund is the most liquid and actively traded ETF, and in it investors have stored nearly one tenth of all assets invested in ETFs. With an annual expense ratio of .095%, this fund proves that success brings lower expenses.
ES Futures Contract: But the most popular trading investment for the SP500 index is the ES futures contract also known as the Emini, or E-Mini.
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No matter the futures trading strategy or investment vehicle to decide to trade each will have its own drawbacks. Before settling on any system that you come across, make sure that you look at the account drawdowns, number of trades it has for winning and losing streaks, how often it trades etc… Systems can have pretty long and draining drawdowns, so discovering them early could be very important to how you thin, feel and react to them in real-time.
When reviewing new systems and its backtested data, be sure to confirm that the system has not been curve fitted or your success with the system will not work for more than a few months at best. A curve fitted system is one in which the futures system designer optimized it to work extremely well for the recent price action/market conditions. So when the market changes and evolves your once dream machine is junk and likely going to cost you a lot of money in losses.
Most systems available are not only black-box trading system, meaning you do not have a clue why its trading when it does, but you also never have access to the system designer or developer. If this is the case then be cautious about putting real money to work. It simply means the creator does not have any confidence in his own system and wants to remain hidden. Customer support is crucial.
See more here.
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Time to buy out of favor ETF’s for 2014?
David A. Banister- www.ActiveTradingPartners.com
The best time to buy cheap is when you are afraid to bring up your ideas around the water cooler at work for fear of the peer laughter. Our work centers on looking for oversold conditions and crowd behavioral anomalies that can give us better low risk entries with good upside potential. A combination of fundamentals and technical, combined with Elliott Wave Theory patterns can lead to nice profits with low risk.
For just a few quick ideas that would make sense in this area, we point out 3 ETF’s that you could look at entering now as they are way out of favor and very oversold.
Gold Stocks: GDXJ
The Junior Miners index is high risk, high reward. However, if you time the entry right at the opportune moment the upside is very high with low downside risk. With GOLD out of favor, we have been pounding the table the last 10 days or so that there are only 4-5 weeks left to buy quality miner names. Instead of picking through them one at a time, you can pick up the high beta play GDJX ETF.
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How about Brazil?
Everyone hates Brazil stocks now, but they have some of the most valuable natural resources in the world, and Brazil almost always bounces back strong off bear cycle lows. Here is a way to play the commodity rebound we see in 2014: EWZ ETF
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It’s not too late to eat some Turkey:
The country TURKEY also often is a very volatile play to invest, but going in during very oversold conditions often plays out to the upside for gains later on. ETF TUR is beat up, it’s time to buy.
http://www.activetradingpartners.com...12/chrart3.png
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The Foundations of a Successful Futures Trading System
The futures trading system that you use should be about more than just making money. To design a futures trading system, you need to understand the fundamentals of the market and then build on those foundations. If you do not take these considerations seriously, then it will take much longer to create a system that consistently pulls money from the market, if ever…
The first fundamental that any successful futures trading system is the robustness that it can offer. The best futures trading systems are versatile and can adjust strategies and money management as the market conditions change. If you have a system that has actually worked for a long time (many years), you already know what is involved to make a robust system.
Costs are the next important foundation of any successful system. It helps to be extremely mindful and vigilant about the costs your system might incur. Things like drawdowns, slippage and general overheads like commissions and dedicated server fees can add up quickly and strip your trading system of its profits. Don’t make any optimistic judgments regarding costs – overtrading has been the killer of many a good trading system. Some of the most stable and profitable systems only trade 20-40 times a year, so don’t get caught up with how many trades you think a system should have to make to generate cash flow.
http://www.futurestradingsignals.com...-algorithm.jpg
The expectancy of a system is the potential gain from any trade that it makes on average. Based on three stats known as average win, average loss and win percentage. You want a system that can generate a positive return with the systems statistics after factoring all costs and slippage. Finding a system that can offer you positive expectancy consistently is very important yet hard to create or find.
You also need to ensure that your system has a personality similar to yours. This might sound a little strange, but if you have a system that is based on the long-term and you are somebody who works on quick wins and moving fast, then it may not be the right fit for you. If you have patience, you want something that is more based around the long-term, and vice versa if you are an impatient and highly strung person a day trading system may be more your thing.
These fundamentals are all extremely important to your success in trading futures systems. If you can build a system that works with all of these methodologies and fundamentals in a positive way, then you are off to the races!
See more here.
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The Most Important Trading Tool That Money Can’t Buy
This is the last part four of my four part series. The biggest mistakes traders and investors make which costs them time, money and usually self-confidence when trading are laid out in in the information below.
This last mistake is the by far the biggest and hardest problem individuals have. Believe it or not, the best way around it is with the use of algorithmic trading strategies which trades for you simply because we cannot mess things up. This is one of the reason automated trading has exploded in the recent years.
The Four Biggest Mistakes
1. Lack Of A Trading Plan – Part I
2. Using To Much Leverage – Part II
3. Failure to Control Risk – Part III
4. Lack Of Self-Discipline – Part IIII
Mistake #4 – Lack Of Discipline, this silent killer is in all of us!
Over the 16 years in which I have been trading and investing, I have never found a person who has not had discipline issues in their trading career. The brutal honest truth you likely do not want to hear is that you will never succeed at trading if you cannot follow a proven trading strategy and all its rules over and over again.
While some individuals just don’t have enough discipline to trade, most of us fall victim to fear, greed or our ego causing us to break our trading rules and do silly things with our money or open positions.
Lack of discipline is failing to do what you should do in a given circumstance when trading your strategies. We all know how easy it is to break rules from time to time because our gut feeling is so strong against what our trading strategy is doing but it is a huge mistake to intervene.
How to Avoid Your Lack Of Discipline
There are only three ways that will only help reduce (not eliminate) your lack of discipline.
1. Lose enough money that you now respect the market.
2. You have taken the time to think, create, and test a proven trading strategy that trades within your market philosophy and risk levels. I talk about this in great detail in my book “Technical Trading Mastery – 7 Steps To Win With Logic”.
3. You either automate your trading strategies or subscribe to a Automated Trading Strategy that removes you from the equation.
An interesting way to think of trading is not think but react.
The key to defeating your lack of discipline is to create and trade a system that is very simple to execute. And you must have 100% confidence in the system so you do not step in and alter its trading decisions. The key is to react and execute trade first with your proven strategy, and then once you are done you can think about what and why things did what they did all you want.
The last point I want to make, is that if you have your own system it is crucial that you are not tinkering with it all the time. If you keep tinkering with it, then you will never truly know how well it works thus you will second guess its activities and remain an un-disciplined trader.
Four Biggest Mistakes Series Conclusion:
My primary goal of this series has been to show you that there really is only one person who can control your success or failures in trading along with everything else in life. That person is you. In the end you are responsible for everything you have done.
The most common pitfall traders fall into is that when something goes wrong, they blame the market for the loss and not himself.
The key in trading is to accept that you will have losing trades and understand that it is part of this business. And when you lose a trade be sure not to allow these bad experiences have a negative effect on subsequent trades.
So the next time you find you self contemplating breaking a trading rule that has proven to work well over the long run for you, know that if you fall off the discipline train you will instantly be categories as one of those 90% of losing traders kind of guy.
I hope that his series has helped you. If you missed the previous parts, scroll up and use the links within this article near the top for Part I, II and III.
Here are some important resources for conquering these four biggest mistakes:
1. Read my new book “Technical Trading Mastery – 7 Steps To Win With Logic”
2. Take the Trading As Your Business program
3. Complete the Trading System Mastery Program
4. Build your own Automated Trading System with RIZM
5. Or review my All-In-One Automated Trading System
Chris Vermeulen
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Why did you do it? What most traders done realize…
Our friend Brian posted this great little article/traders experience we feel is worth sharing…
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He couldn’t even remember a time since he started years ago, what it was like to NOT take time, usually hours, out of his time that used to be spent with family.
It’s amazing how time flies.
When we got to talking about it, he was really almost shocked at the fact that it’s been over 5 years he’s been struggling along, beating his head on the rock, and still not really any further along than at any other point.
Sure, he’s learned a lot along the way and certainly dozens of ways to NOT make money in trading.
But when I asked him why he got into it in the first place, why he chose trading over all the other choices he had, he paused.
Well, it was for his family.
He wanted to provide a better life for them, to have the time and financial freedom to enjoy living, especially with his kids.
When I asked him what went wrong, he said probably that never planned it out, just wanted to make some money and it seemed simple enough.
But then he got ‘stuck’ running on the treadmill, trying different systems from time to time, but mostly just got used to the “try-and-fail” routine.
And now here it is, years later and they’ve gone by in what seems like no time.
I asked him why he sought me out, and he said that it’s because I ‘preach’ about skills and treating trading as a business.
And those really seemed to resonate with him because it makes it about HIM, instead of about focusing on the money (which hadn’t worked in over 5 years).
Trading is a skill-based occupation, even though it seems simple enough on the surface.
And the better you get at the right things, the easier it becomes.
That’s why I focus on ‘training’ rather than ‘shiny objects’ like systems – those are just tools.
Getting your trading operation properly organized goes a LONG way to dramatically shortening your time to consistent profitability.
Getting good at taking trading methods and properly systemizing and verifying them gives you confidence and makes you good at the ‘making money’ part.
To learn more about either training program, just click the links below.
Time is MORE than money – it is life itself, and you should invest your time wisely so that it doesn’t just slip away like it does for so many traders.
Focus on yourself, become the successful trader.
To learn more about either training program, just click the links below.
Time is MORE than money – it is life itself, and you should invest your time wisely so that it doesn’t just slip away like it does for so many traders.Focus on yourself, become the successful trader.
See more here.
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Gold Market Traders – New Gold Bull Market Cycle Has Started
2013 was one of the worst years for gold in a generation and the strangest part of it is that this loss came during a time in what should have been a banner year for gold.
When the Fed launched its QE1 and QE2 programs, gold posted huge gains but with QE3, we only had a brief rally in late 2012, it’s been all downhill for there.
The price of gold over the last year highlights just how much Europe has become a powerful driver behind gold vs. the US which has historically been the main mover. When the European debt crisis started a few years ago, people fearing a financial meltdown in Europe put a lot of their money into gold as it was the save haven of choice.
However, with financial and political risk in Europe subsiding, we have seen money leave gold and move into other markets, hence the big outflows from gold ETF’s.
Other factors that have dragged on gold over the last year include falling jewelry demand, the loss of its role as an inflation hedge with deflation becoming more of a concern in some areas, also tax increases on gold imports in India, and the supposedly improving economy in the US. All these contributed to the selling of gold.
Gold and gold stocks crashed last year in the summer. They have since been going through a stage one base. This suggests that 2014 will mark the start of a new bull market for gold, gold mining stocks and commodities.
Gold Market Traders & Manipulators Provide Contrarian Bullish Outlook
Gold market traders and manipulators like some of the commercial banks/brokerage firms have been verbally slamming gold, and it turns out many are not as negative as lead us to believe…
Goldman Sachs we all know are the biggest hypocrites. While advising clients to sell gold in the second quarter of 2013, they bought a stunning 3.7 million shares of the GLD. And when Venezuela needed to raise cash and sell its gold, guess who jumped in to handle the transaction? Yup, GS! So while they tell everyone to sell gold, they are accumulating as much as they can without being obvious.
There is a lot more reasons and fundamentals to be bullish on commodities and gold, but that is not the point of this technical based report.
Weekly CRB Commodity Index – Bull Market Cycle About To Start
Taking a quick look at the CB index which is a basket of commodities, it looks as though a breakout above its down trend line will trigger a new bull market in the commodity sector. While this has not yet happened it looks s though it may happen in the next few months.
On stock market that recently broke out of a Stage 1 basing pattern (new bull market) is the Toronto Stock Exchange. This index is heavily weighted with commodity based stocks.
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In this report I want to show you some interesting charts that are pointing to a new gold bull market cycle which looks to be starting.
The chart below of the gold miner’s bullish percent index is often misread by many traders and trade off its information incorrectly. Many for example think this index is based on stocks trading above a moving average which is no correct.
How a bullish percent index is calculated is based on Point & Figure buy and sell signals with each individual stock within the sector and in our case the gold minders ETF GDX.
Gold prices peaked in 20111 at $1923 an ounce when the gold mining stocks index was above 80%. Why is this important? Because gold stocks typically lead the price of gold in both directions, tops and bottoms.
As of today we have the reverse situation with the bullish percent index at 13% and showing bullish divergence from that of gold stocks. This is an early signal that the new gold bull market cycle is turning up and it should not be overlooked.
Also we see the 5th and final Elliott wave pattern forming and we could once again whiteness another multi year rally in the price of gold.
Gold Mining Bullish Percent Index – Weekly Chart
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Gold Miners ETF – Monthly Chart
Gold stocks have not yet broken out to start a rally as you can see in the chart below. But the important thing to note is that the daily chart has formed a mini Stage 1 Basing patterns and could breakout this week to kick start a multi month/year rally.
http://www.thegoldandoilguy.com/arti...014/01/GDX.png
Gold & Gold Stock Bull Market Conclusion:
If you have been following me for a while, you know I don’t try to be a hero and pick tops or bottoms. We all know that strategy is a losing one over the long run.
Since 2011 I have been a very dormant gold trader. Why? Because the price and technical indicators topped out and confirmed a massive consolidation or bear market was in motion.
With gold, gold stocks and precious metals about to start a new bull market, it is time to get back to trading gold and gold stocks.
See more here.
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Closing in on an SP 500 Top
David Banister - www.MarketTrendForecast.com Jan 15 2014
The SP 500 has been in Major wave Elliott Wave 3 up of Primary wave 3 from 1267 by our best projected counts. Our technical analysis of stock trends predicted back in early September a large rally up in the SP 500 to 1822-1829, which we managed to see hit just 3 months later from the mid 1600’s.
Recently, the market had a bit of an extension higher than our original 1822-29 pivot projections, but we see possible trouble ahead. Our Elliott Wave Theory interpretation is based on Fibonacci sequencing, Investment Advisor sentiment surveys, traditional technical analysis patterns and more.
The stock market is climbing here now likely in a final 5th wave of Major 3 and we believe it may truncate or be shorter than normally expected. We also have a rising bearish wedge from the Intermediate wave 4 lows of 1560 for Major wave 3 structure, which is a classic topping pattern for the markets in general.
Our view is that the SP 500 Index or the market should top out around 1868 and then begin a Major Elliott Wave 4 correction in February, and at the same time GOLD and SILVER are forming bottoms now and will begin strong moves up in February.
Much like our Kitco.com piece in early September called for a Top in GOLD and a Bottom in the SP 500 at the time, we see the opposite nearing now.
Below is our updated best projection on the SP 500 market trend analysis and near term action, with potential of course for a blow off reversal top over the 1868 area. For now we would watch 1868 and we would be buyers of GOLD as we have been saying for several weeks during this final window into early February.
http://www.themarkettrendforecast.co.../gold-TMTF.jpg
See more here.
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Gold Market Traders: Metals And Stock Market will Swap Trends – Part II
The two trend reversals everyone has been waiting a year for are about to take place, but they have not yet started.
While I do think 2014 is the year we see gold, silver, miners and many other commodities rally, it is important to follow the trend and wait for a reversal to form before getting overly excited and long commodities.
Each time we see the daily charts form some type of bullish pattern gold market traders become instantly bullish. And each time this happens they get another reality check about their trading technique of trying to pick a bottom.
I just published a book in December which teaches readers how to identify trends and stages in the market – “Technical Trading Mastery – 7 Steps to Win With Logic”. Buying into a bear market rally is not a high probability winning position. Odds favor that sellers will pull the price down and likely to new lows.
This January is one of these times and gold market traders are getting excited and long positions. While the bottom may in for precious metals, buying a bounce in a bear market is tricky and you better have some trading discipline to exit if price starts to sell back down.
Eventually we will see the stock market rollover and breakdown below its support trendline and gold will rally. But keep in mind, some of the largest percentage based moves take place just before a reversal. What does this mean? It means that the stock market could easily go parabolic and rally for a few more weeks, then reverse down sharply. And precious metals would do the opposite, sell off, make new lows, then reverse back up and start a new bull market.
Stock Market VS. Gold – Gold Market Traders Be Aware!
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Below are a few more charts showing my big picture trend analysis for silver and gold miners.
http://www.thegoldandoilguy.com/arti...SilverBull.png
http://www.thegoldandoilguy.com/arti...MinersBull.png
Gold Market Traders Conclusion:
In short, the precious metals sector is still in a bear market and has not yet reversed to the upside. As you know I don’t pick bottoms or tops which go against the longer term trend. In this case the trend is down for precious metals so I am not trying to pick a bottom.
While I am starting to get excited about the eventual bottom in gold, I am still sitting on the fence with my cash.
See more here.
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Logical Fear Trade – Emotions vs. Analysis & Logiс
I apologize now for the Christmas colored charts below… Its a lot of red and green but these are the most understood colors for knowing what ranges means (bullish or bearish).
This was a very emotion week for traders. The strong selling Thursday and Friday has traders and investors running for the door and panicking out of positions. While I did close out our long SP500 swing trading on Thursday to lock in a profitable trade, I do feel as though we can re-enter next week a better price.
The only ones feeling pain today are those who do not have enough self-discipline to create rules and trade by them. Again this is talked about in GREAT DETAIL in my new book. If this is you, I recommend buying my book and reading it this weekend as it’s a quick and simple read. There is a paperback version or instant PDF download available: Get Book.
Without self-discipline no amount of courses are trading services will make you a successful trader.
Let’s get technical and jump into the charts…
Momentum Index – The Intraday Extreme Overbought/sold indicator
This is an indicator I follow daily to understand how strong the selling is. If it is broad based or sector related. The last two sessions clearly shows is broad based and that the market has moved to quickly in one direction and is primed for a knee jerk reaction bounce.
http://www.thegoldandoilguy.com/arti.../oversold1.png
Swing Trading Cycles : 3-8 Weekly Overbought/Sold Market Cycles
This is a fantastic tool for timing key pivot lows and highs in the broad market. We are nearing another key pivot low but there is still room for more selling next week.
http://www.thegoldandoilguy.com/arti.../oversold2.png
Options Traders Are Fearful of Continued Selling
If you don’t know what the put/call ratio is, in simple terms it tells us when the majority of traders are buying put options (expecting stocks to fall, ratio of 1.0+), and when they are overly bullish (expecting stocks to rise, ratio below 0.60).
The chart below shows everyone is leaning towards more selling in the stock market. I use this as a contrarian indicator.
http://www.thegoldandoilguy.com/arti...01/PCRatio.png
The Fear Trade – Shorting Fear with an Instrument that Naturally Loses Value: VXX
There is a lot of interesting way to trade the stock market and once way it through shorting the VXX ETF during bull markets. Instead of buying a long position in stocks, you could simply short the VXX fund. This thing loses value over time because of the way it’s managed/constructed. So logic says, shorting it on bounces can be very rewarding during times when fear is high.
Keep in mind this fund and its underlying index moves FAST with 20-30% percent swings… Trade small position sizes if you ever touch this thing…
http://www.thegoldandoilguy.com/arti...14/01/VXX3.png
Weekly Technical Trading Report Conclusion:
In short, (pardon the pun) I feel the stock market is setting up for another big bounce. The technicals and longer term trend remains bullish. I trade with the trend until proven wrong. Only then will I change the direction and trade with the new trend.
See more here.
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Gold and Silver Ready To Rumble Higher?
David A Banister- www.MarketTrendForecast.com
We have been writing about the bottoming process of the Gold Bear Cycle (Elliott Wave Theory) since December 4th 2013, and our most recent article on December 26th reiterated that the best time to accumulate the Gold/Silver stocks was in the December and January window. Specifically this is what we wrote:
“These types of indicators are coming to a pivot point where Gold is testing the summer 1181 lows…at the same time, we see bottoming 5th wave patterns combining with public sentiment, bullish percent indexes, and 5 year lows in Gold stocks.* This is how bottom in Bear cycles form and you are witnessing the makings of a huge bottom between now and early February 2014 if we are right.
The time to buy Gold and Gold stocks is now during the next 4-5 weeks just as we were recommending stocks in late February 2009 with public articles that nobody paid attention to. This is the time to start accumulating quality gold miner and also the precious metals themselves as the bear cycle winds down and the spring comes back to Gold and Silver in 2014.”
Since that article a few of our favorite stocks rallied 40-50% in just 3 weeks or so from the December timeframe of our article. A recent pullback is pretty normal as we set up for Gold to take out the 1271 spot pricing area and run to the mid 1300’s over the next several weeks. By that time, you will be kicking yourself for not being long either the metals themselves or the higher beta stock plays.
A few suggestions that we have already written about we will reiterate here again. Aggressive investors can look at UGLD ETF, which is a 3x long Gold product that will give you upside leverage as Gold moves into elliott wave 3 up. Other more aggressive plays we already recommend a lot lower include GLDX, JNUG, NUGT and others. Picking individual stocks can be even better and we have recommended a few to our subscribers that are already doing very well.
What will trigger this next rally up is sentiment shifts to favor Gold and Silver over currency alternatives. The precious metals move on sentiment, much more so than interest rates or GDP reports or anything else in our opinion. Sentiment remains neutral to bearish as evidenced by the larger brokerage houses running around in January telling everyone to sell Gold, so we see that as a buy signal on top of our other indicators.
http://www.themarkettrendforecast.co.../TMTF-Gold.jpg
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Is February a Risk-On or Risk-Off Trade: Equities or Gold & Bonds
Recent price action in the stock market has many traders on edge. With the market closing below our key support trend line last week, the market has now technically starting a down trend.
While trend lines are a great tool for identifying a weakening trend and reversals in the market, I do not put a lot of my analysis weighting on them.
Most of my timing and trading is based around what I call INNER-Market Analysis (Market Stages, Cycles, Momentum and Sentiment). Using these data we can diagnose the overall health of the market. Knowing the strength of the market we can then forecast short term trend reversals before they happen with a high degree of accuracy.
In this report I keep things clean and simple using just trend lines. During the last three weeks we have seen the price of stocks pullback. And because 2013 was such a strong year for stocks most participants are expecting a sharp market correction to take place anytime now.
So with the recent price correction fear is starting to enter the market and money is rotating out of stocks and into the Risk-Off assets like gold and bonds.
Stocks tend to fall in times of economic uncertainty or fear. These same factors push investors towards the safety trades (Risk-Off) high quality bonds and precious metals. As more money goes from risk-on to risk-off, stocks will continue to fall and the safety trades will rise. The move by investors to select the safety of gold and bonds compared to the volatility of stocks will result in these risk plays to moving in opposite directions.
Let’s take a look at the chart below for a visual of what looks to be unfolding…
http://www.thegoldandoilguy.com/arti...isk-On-Off.png
How to Trade These Markets:
While these markets look to be starting to reverse trends, it is critical that we understand how the market moves during reversals and understand position/money management.
Getting short stocks and long precious metals in the long run could work out very well, but if you understand the price action that typically happens during reversals you know that the stock market will become choppy and we could see the recent highs tested or possibly even a new high made before price actually starts a down trend. And the opposite situation for gold and bonds. Drawdowns can be huge when investing and why I don’t just change position directions when the first sign of a trend change shows up on the chart.
Price reversals are a process, not an event. So it is important to follow along using a short term time frame like the daily chart and play the intermediate trends that last 4-12 weeks in length. By doing this, you are trading in the direction of the most active cycle in the stock market and positioned properly as new a trend starts.
What I am looking for in the next week or two:
1. Stocks to trade sideways or drift higher for 3-6 days, then I will be looking to get short. Again, cycle, sentiment, and momentum analysis must remain down for me to short the market. If they turn back up I will remain in cash until a setup for another short or long entry forms.
2. Gold remains in a down trend but is starting to breakout to the upside. I do have concerns with the daily chart patterns for both gold and silver, so next week will be critical for them. We will be using some ETF Trading Strategies to take advantage of these moves.
3. Bond prices (not yields) look to be forming a bottom “W” pattern. They have had a big run in the last few weeks and are now testing resistance. I think a long bond position is slowly starting to unfold but if we look at the futures price charts for both bonds and gold, they have not yet broken to the upside and have more work to do. As mentioned before ETFs are not really the best tool for charting but I show them because they what the masses follow and trade.
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SP 500 Elliott Wave Forecast Unfolding As We Projected, What Is Next?
David A. Banister
Back on January 15th we wrote an article and also a elliott wave forecast for both the public and our subscribers showing a likely top at a maximum of 1868 on the SP 500.* We said that Elliott Wave Major 3 of Primary Wave 3 would top no higher than that level. In fact, we can go back to September 4th 2013 and we projected a Major 3 high as 1822-1829. Turns out we were only about 1% off 4 months in advance of projecting that high, and once again we are on track here with Major 4 commencing from Major 3 highs.
Below is the Major 3 chart we sent out on September 12th in public articles and private reports
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We simply use Fibonacci analysis of wave patterns which are based on human behavioural tendencies that go back centuries. Elliott Wave Theory is often hard to put into practice, so sometimes it gets a bad name. However, a bad steak at a restaurant doesn’t mean you never have steak again right? The practitioner must hone his or her skills over time and work to improve accuracy.
Our view is pretty simple in that the Major wave 3 was 583 points going from 1267 to 1850, the double top.
Below is the chart we did on January 15th in advance of this top:
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We now know in hindsight that we topped out at 1850. So what we want to do is simply take the 583 point rally of 1267 to 1850 (major 2 lows to Major 3 highs) and compute a retracement. We use 23.6%, 31.2%, and 38% Fibonacci figures to come up with estimates. Those come in at 1713 on the shallow end of a correction (wave 4) and 1628 on the lower end. (See chart below)
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Now, assuming we are on track… once this Major 3 completes we will see a Major wave 5 of Primary wave 3 taking us to all-time highs. This will then complete Primary wave 3 of this 5 primary wave bull cycle and then larger Primary wave 4 corrections will ensue from those highs. We will know we are wrong in our degrees of wave counts if we pierce the 1628 level on the downside. That would indicate Primary 3 topped out 1850 and we are in Primary 4, which is not our current view.
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ETF Trading Strategies for Gold, Silver, Miners and Natural Gas
It was another wild session…
The SP500 continued to rally and is pushing extreme overbought conditions today. Our net short ETF trading strategy on the SP500 is close to getting stopped out as the trend is on the verge of turning back up if sellers do not step in tomorrow. We are under water on this trade and unfortunately we lose when trends reverse as that is just part of trading. The trend remains down and we could get a miracle tomorrow to save the day. only time will tell.
Natural Gas ETF Trading Strategies: This morning we closed out our natural gas trade for a big profit of roughly 18-20% depending where you entered and placed your stop. I have had a several emails from members wanting to add to their position yesterday, and another bunch today saying they still hold their position in natural gas cause they think price will continue to move in their favor. Technically, closing out our trade today was the proper thing to do. We followed our rules and the trade managed it’s self perfectly. While natural gas could continue to sell down in the long run, wanting to hold your position or add to a trade that is up 40% without any real pullbacks is the sign of a GREEDY trader. General rule is, if you do not take profits on a trade, the market will simply take them back, its that simple.
ETF Trading Strategy for DGAZ Pays out 20% return!
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Chris Vermeulen
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2 Attachment(s)
Silver Trade & Automated Trading System for Investors
Silver Global Price Forecast: The Sterling Opportunity
Precious metals were under pressure last year, but investors continued to accumulate silver while gold had a record amount outflow selling.
We can see this by looking at the physically backed iShares Silver Trust SLV is up 25 million ounces Oct. 31, 2013 since January 2013. While physical holdings in the SPDR Gold Shares GLD shrunk by 28 million in 2013.
Investment demand for silver now accounts for 24% of overall demand, up from only 4% in 2003 after the introduction of ETFs as a liquid trading source. Additionally, silver investors typically include small investors, whereas large institutional investors have steered toward gold ETFs.
Unlike gold… silver is consumed by industrial and medical usage. Silver’s relative affordability and industrial usage is helping bolster silver demand.
Silver is used in consumer electronics like touch screens found in smart phones and tablets, medical equipment. As such, silver has proven virtually indispensable in almost all electronic devices.
According to the CPM Group., industrial demand should reach 838 million ounces, up about 3% year-over-year. It is important to know that silver’s global mining production shows a pathetic 2.8% during the past 10 years, which will not be enough to supply this new electronic age we live in.
So regardless of the state of the global economy, real demand for all of these electronics, demand in the 21st century might mean that silver’s industrial demand could grow at a faster rate than mine supply in the years to come.
If we look as what Asia is doing, demand continued to grow for physical metal. We can now add other nations, like Turkey or Argentina of silver and gold purchasers. If it weren't for the fact that the Indian government has been trying to profit from its gold market with a 10% tax which has virtually stopped gold buying in India compared to what it was a couple years ago. I think gold would be trading much higher and teach the paper shorts a lesson or two regarding why gold and silver are not just commodities, but in fact are money.
In 2010 we saw India’s silver imports surge 235% over the previous year and 2010 was a huge year for silver. I feel as though the silver market is setting up for something even bigger this time around as the markets technical patterns combined with India’s 284% in silver imports last year will spark the next major rally in silver.
See the chart below for a visual of 2010 rally in silver:
Attachment 5567
Start of 2014 rally in silver?
Attachment 5568
The bull market in silver and gold during the 1970s took silver up 30 times and gold up over 20 times. If you were to compare the precious metals bull of the 70s with the recent bull market that began 12 years ago, we could see gold over 5,000 an ounce and silver at roughly 130.
During the metals peak in 1980 nearly everyone was trying to get some exposure to these investments. The 2011 highs do not look at all like the 1980 top, so I do not believe that we have seen the parabolic blow-off top often associated with the end of a commodity bull market.
The list of reasons to buy silver is long and diverse. Perhaps the most significant, is the need for the central banks to keep real interest rates below the rate of inflation. This is one the oldest tricks in the book to spark inflation.
Another reason I think silver should be owned is because of a possible short squeeze. The manipulation of silver is very controversial no doubt. What we do know is that the number of paper claims on physical metal has exploded over the course of the past four decades. This is probably the only fact worth focusing on and someday this will catch up with the price of silver and price could go ballistic.
Why Silver Should Rally Aggressively:
- China’s insatiable demand for the white metal continues growing
- India’s demand in 2013 more than doubled from the previous year and consumes 20% of all silver production.
- Silver’s global mining production shows a pathetic 2.8% during the past 10 years
- Yearly Consumption/Production ratio demonstrates acute deficits
- Unlike gold… silver is consumed by industrial and medical usage
- Chinese solar demand is expected to grow several hundred percent and silver is used and not easily recovered from this product.
- Investment demand for silver up 20% and will go ballistic…once the present consolidation ends
- Currency Devaluation Contagion will soon engulf the world, thus fueling all precious metals higher
- Mexico is considering making Silver the national currency…rather than the fiat peso
- Arizona and Utah legalized the use Gold & Silver As Currency and South Carolina & Colorado are going down this road
- A growing number of states are seeking shiny new currencies made of silver and gold
- Sales of US Minted Silver coins are at all-time record highs despite the recent correction in bullion value
- Silver and gold are both a commodity and financial assets
- Low interest rates in western nations bolster inflation
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Price Erosion of 3x Leveraged Natural Gas ETFs
Here is a perfect example showing how 3x leveraged ETF funds can lose value over a short period of time while the underlying investment is deep in our favor by 5% and should have our ETF in our favor by 15%). But instead we are under water by a few percent still…
http://www.thegoldandoilguy.com/arti...4/02/ng-3x.png
This is a prime example of why I don’t trade 3x ETFs that often. And when you actually run the numbers on how much leverage you actually get with 3x ETFs its actually the same or less than if you just bought a single ETF with the same amount of capital and margin… 3X ETFs require you to have 90% margin, while a single ETF only requires you 30%. It’s a little complicated to crunch the numbers and explain but know that 3x ETFs are nothing special when you do the math for both long term and short term trades.
For example, if you wanted to buy $1000 worth of a 3x ETF, the margin requirements on these fund are 90% meaning you must have $900 in your MARGIN account to trade this position. But if you wanted to trade say a single ETF where the margin is only say 30% for a non levegeage fund, you can technically trade the same position size with the same amount of money WITHOUT the 3x leveraged fund price decay we all know is terrible in these highly leveraged funds.
So if you wanted a position to match the power of the $1000 3x leveraged ETF position but using the single ETF, you would only need to buy $3000 worth of the single ETF, but because its only 30% margin requirement. This may be confusing, the only point im trying to make here is that you can get almost the same trade using a single ETF simply because of the margin requirements between the two types of ETF funds. Most individuals do not realize the crazy margin required for 3x ETFs and its likely the reason most traders get margin calls with trading these funds.
Long story short, if today’s price action is a reversal day it will only take another big down day for us to be deep in the money on our inverse ETFs.
The Next Trading Session Is another Big Sell Off in our Favor – Current Live Trade
This is a continuation of yesterday’s post talking about how we needed another big down day for the ETF catch up to the natural gas price action.
Today Nat Gas is down another 10% and has sent our 3x leveraged ETF fund deep in the money with subscribers traded up over 18% in only a couple trading sessions.
http://www.thegoldandoilguy.com/arti...02/ng-Gain.png
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Gold Forecast ETF Trading Newsletter
Hey everyone,
I have had a few emails asking about our silver position and why we are not moving our protective stops and taking more profits similar to how we are trading Natural Gas.
These are great questions and here are my thoughts:
Depending on your outlook and trading/investing type you will either be looking at silver as a quick trade to lock in gains, or as a early entry point into silver as precious metals start to form a basing pattern. What you do is up to you as I cannot give individual investment advice.
We/I did take some profits off the table and move our stop up last week for a portion of this position (1/3rd) and we moved our stops to breakeven. As shown in this morning video gold, silver and miners still have a LOT of work to do to build this basing pattern and it may take a few months yet. If you did not watch*today’s*video then do so for a visual.
I am more of a short term trader which is why I sold 1/3rd of our position last week. My brain/emotions demand I lock in profits when the market gives us a quick move in our favor. That being said, I really like the*precious metals sector and feel we are getting in early and at a great price. If this basing pattern holds up and price continues to rally in our favor this year, it means we will be deep in the money on this position and can add a lot more money upon the next setup in gold, silver or miners with less risk because of our profit*cushion on this first silver trade.
So I am holding the balance of my silver position *with a breakeven stop looking for the longer term trend to pick up speed in the coming months.
If you are a short term trader, then do what you have to do and tighten your stops.
I hope this helps?
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Feb 26th- Gold Due for Pullback Wave 2?
A pullback in Gold today to 1320’s from the 1348 high. We had been looking at about 1350 plus minus as an initial objective off the 1181 pivot lows for the truncated 5th wave of the bear cycle. We can see support at $1300 for spot Gold right now in the charts in terms of keeping it simple.
Now lets keep in mind we just rallied from 1181 to 1348, or about 167 points which is quite a rally. Indeed, February is often a short term cycle low for Gold and has been in years past.
A normal corrective wave 2 would be anywhere from 38% on the low end to 61% on the higher end as likely.
Using some basic math, 38% of 167 points is $64 an ounce, giving* a possible pivot target of $1284 plus minus a few.
So bottom line? We remain bullish long term, short term we may have a minor wave 2 pullback to work off some of this 167 dollar rally in Gold, and 1284 is a 38% fib pivot and 1300 is traditional support.
May just need to take a rest here for a bit… otherwise we maintain for now our $1550 target for 2014.
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http://feeds.feedburner.com/~r/TheMa...~4/l5cy-8_cVAY
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The Dow & Transport ETF Play & The Dow Theory
The Dow Theory could be in play here with the broad market. When both the Transports (IYT) and the Dow Industrials (DIA) cannot make higher highs and start making lower lows the market has topped according to Dow Theory.*We are watching the transports closely because the Dow chart has already made a lower low and now e are waiting for the Transports to do the same.*They have both made lower highs if this current rally stalls here. This will be important in the next few weeks to help calculate the markets next major move and if there will be a trend change.
http://www.thegoldandoilguy.com/arti.../02/trans2.png
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Keys to Investor Success – Elliott Wave Theory
Elliott Wave Theory – Plenty of people will freely offer you advice on how to spend or invest your money. “Buy low and sell high,” they’ll tell you, “that’s really all there is to it!” And while there is a core truth to the statement, the real secret is in knowing how to spot the highs and lows, and thus, when to do your buying and selling. Sadly, that’s the part of the equation that most of the advice givers you’ll run across are content to leave you in the dark about.
The reality is that no matter how many times you are told differently, there is no ‘magic bullet.’ There is no plan, no series of steps you can follow that will, with absolute certainty, bring you wealth. If you happen across anyone who says otherwise, you can rely on the fact that he or she has an agenda, and that at least part of that agenda involves convincing you to open your wallet.
In the place of a surefire way to make profits, what is there? Where can you turn, and what kinds of things should you be looking for?
The answers to those questions aren’t as glamorous sounding as the promises made by those who just want to take your money, but they are much more effective. Things like careful, meticulous research. Market trend analysis. Paying close attention to extrinsic factors that could impact whatever industry you’re planning to invest in, and of course, Elliott wave theory. If you’ve never heard of the Elliott wave, you owe it to yourself to learn more about it.
Postulated by Ralph Nelson Elliott in the late 1930’s, it is essentially a psychological approach to investing that identifies specific stimuli that large groups tend to respond to in the same way. By identifying these stimuli, it then becomes possible to predict which direction the market will likely move, and as he outlined in his book “The Wave Principle,” market prices tend to unfold in specific patterns or ‘waves.’
The fact that many of the most successful Wall Street investors and portfolio managers use this type of trend analysis in their own decision making process should be compelling evidence that you should consider doing the same. No, it’s not perfect, and it is certainly not a guarantee, but it provides a strong framework of probability that, when combined with other research and analysis, can lead to consistently good decisions, and at the end of the day, that’s what investing is all about. Consistently good decision making.
We use Elliott Wave Theory in real time by looking at the larger patterns of the SP 500 index for example. We deploy Fibonacci math analysis to prior up and down legs in the markets to determine where we are in an Elliott Wave pattern. This helps us decide if to be aggressive when the markets correct, go short the market, or to do nothing for example. It also prevents us from making panic type decisions, whether that be in chasing a hot stock too higher or selling something too low before a reversal. We also can use Elliott Wave Theory to help us determine when to be aggressive in selling or buying, on either side of a trade.
For many, its not practical to employ Elliott Wave analysis with individual stocks and trading, but it can be done with experience. We instead use a combination of big picture views like weekly charts, Wave patterns within those weekly views, and then zoom in to shorter term technical to determine ultimate timing for entry and exit. This type of big picture view coupled with micro analysis of the charts gives us more clarity and better results.
One of our favorite patterns for example is the “ABC” pattern. Partially taken from Elliott Wave Theory, we mix in a few of our own ingredients to help with timing entries and exits. This is where you have an initial massive rally or the “A” wave pattern. Say a stock like TSLA goes from $30 to $180 per share, which it did. The B wave is what you wait for and using Fibonacci analysis and Elliott Wave Theory we can calculate a good entry point on the B wave correction. TSLA dropped from $180 to about $ 120, retracing roughly 38% (Fibonacci retracement) of the rally $30 to $180. The B wave bottomed out as everyone was negative on the stock and sentiment was bearish. That is when you get long for the “C” wave. The C wave is when the stock regains momentum, good news starts to unfold, and sentiment turns bullish. We can often calculate the B wave as it relates often to the A wave amplitude. Example is the TSLA “A” wave was 150 points, so the C wave will be about the same or more.
When TSLA recently ran up to about $270 per share, we were in uber bullish “C” wave mode, and we had run up $150 (Same as the A wave) from $120 to $270. That is when you know it’s a good time to start peeling off shares. Often though, the C wave will be 150-161% of A wave, so TSLA may not have completed it’s run just yet.
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Knowing when to enter and exit a position whether your time frame is short, intermediate, or longer… can often be identified with good Elliott Wave Theory practices. Your results and your portfolio will appreciate it, just look at our ATP track record from April 1 2013 to March 3rd 2014 inclusive of all closed out swing positions.
We incorporated Elliott Wave Theory into our stock picking starting last April and you can see the results:
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Limitations of the Elliott Wave
A large number of investors rely on Elliott wave theory as part of their market trend analysis to help them make good decisions, and it is a very good, very accurate tool. *But it is merely one tool, and as with anything, it is unwise to become over reliant on any single tool or methodology.
At the root, Elliott wave theory revolves around the idea that by and large, people tend to react to stimuli in the same, predictable ways, and that by identifying the stimuli (either specifically or in broad categories), it then becomes possible to predict market movements. Its namesake, Ralph Nelson Elliott, developed the theory and the analytic tools that surround it in the 1930’s, proposing that market prices unfold in accordance with specific patterns.
Although the theory has an enormous number of practitioners, and although it is used as part of the analytic methodology of a number of the most successful fund managers in the business, it is not without its critics and drawbacks. Of those criticisms, there are three primary ones, and they must be understood before deciding if this particular analytic tool is right for you.
The first of the three objections is simply that the theory contradicts the Efficient Market Hypothesis. The counter argument goes that if Elliott’s theory were true and correct then all investors wise to the “trick” would act on it, and in doing so, destroy the very waves they had measured and discovered.
The second is simply an observation that wave principle in general is too vague to be of specific use since it cannot consistently identify when a wave begins or ends, and that forecasts using this methodology are prone to subjective revision.
Finally, there are some who believe that the principle is “too dated” to be of use, or even applicable in today’s markets. That technological, governmental, regulatory, economic and social changes have all occurred since the theory was first put forward, but that the theory itself remains unchanged and thus, unable to adapt to its new environment, or serve as a reliable predictor.
Despite these objections, it should again be noted that many of the top performing fund managers use the theory as part of their own analysis, and it is hard to argue with their success. Whichever side of the fence you’re on regarding the methodology, one thing remains clear. It is unwise to place absolute faith or reliance in any single method, but as part of a larger set of analytic tools, and despite the various criticisms leveled against it, it is impossible to deny its record of success.
What we do at TheMarketTrendForecast.com is add additional technical analysis tools to our Elliott Wave views to keep ourselves in check. We also tend not to try to label every single squiggle or wave pattern as they occur. Taking a more big picture approach in our opinion works better than getting bogged down in the short term wave counts and details. Often, using a weekly chart can be of help in identifying obvious patterns, which is what I call “zooming out”. We also look at sentiment indicators such as the investment advisor surveys, or what we see on the cover of major media publications for example.
In addition, we use Fibonacci analysis of prior wave patterns to help identify the most likely foreward scenarios. If we feel that a view we have is getting off track, instead of staying stubborn we will quickly analyze other potential wave counts to see if perhaps we were off the tracks, and then quickly re-adjust and get back up on the rails. We are also not fans of having multiple alternate counts, as that only serves to confuse the investor. Taking one quick example, the first Primary Elliott Wave of this Bull Market from 2009 was 704 points.
Our opinion then was that Primary wave 3 which we have beginning at 1074 would have to be 704 points multiplied by a Fibonacci 1.618% factor as most likely. From that calculation we can work backwards in our other wave patterns to identify where we are at. Elliott Wave Theory in our opinion was a working blueprint, but not a bible either. You can take the basics of Elliott Wave Theory and then add in a few more elements to improve your results.
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George W Bush Says Average Investors Need an Automated Trading System
He mentions that traders and investors need a level playing field to be successful and the only way to do this is with the use of an automated trading system.
http://youtu.be/XEWbk8PkuIE
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Explaining Gold Options
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Gold Options Trading
Gold options allow investors to buy or sell gold bullion at a future date (date of delivery) at a set price. The quantity of gold, date of delivery, and price are all preset. As the name implies, trading gold with options is merely an option, not a requirement, so investors are not obliged to either buy or sell gold at the end of a contract.
Options shouldn’t be confused with futures contract. While options and futures work the same way (both having a pre-determined price and expiration), the futures contract is an obligation and therefore should be upheld. The difference between gold options and gold futures will be further explained below.
Gold Option Exchanges
Investors who wish to deal in gold options can purchase contracts at the New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM). NYMEX gold options are traded per 100 troy ounces of gold, while TOCOM gold options are traded per 1000 grams of gold. These numbers are the minimum purchase requirements before a contract can be made and cannot be lowered due to any circumstances.
Call and Put Options
With gold options, investors can partake in two different trading classes called calls and puts. It’s technically just buying and selling. Calls are made by investors who think that gold prices will be bullish in the future. On the other hand, puts are made when gold investors predict that gold prices will be bearish. Having good fundamental and technical analysis skills are necessary in order to make a decent call and put decisions. Technical analysis is examining patterns on price charts in order to make a good inference on gold’s price movements. For closer inspection on this, refer to Bullion Vault’s live price graph to see today’s gold price patterns. However, fundamental analysis is aided by being up-to-date with the news and current events that can affect the price movements of gold.
Gold Options vs. Gold Futures
Apart from the option/obligation explanation, there are other things that differentiate gold options from options. Here are some of them:
Minimal losses
Investment losses in futures trading can be felt immediately due to their margin requirements. It’s also possible for traders to lose more money than they intended because of this. Although, options buyers know exactly what they’re getting. Before investing with options, they know how much they’re getting in the end and their maximum possible loss.
Leverage Benefits
It’s easier to gain leverage in options because the premium payable in it is much lower than the minimum required from investors to deal in underlying gold futures. Having leverage may induce reduced profits but at least it won’t be as big as when having borrowed funds in futures.
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Gold and Silver Prices may be on the Rise Soon
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Based on the Elliot Wave Theory and other indicators, the next wave for a rise in price may be coming.
An article found on the website NASDAQ back in October of 2013 indicated that the stock market was following the trend of the Elliot Wave Theory. If it had applied the theory correctly, it may have been possible for investors to manage their risks a little better during that period.
Just like stocks, the correct implementation of the Elliot Wave Theory may be helpful when it comes to trading in precious metals such as gold. An article found on Forbes starts off by illustrating how the theory may be applied to the past price performance of gold. And by looking at past information, it goes on to indicate that a 5-year trend may be established to help guide investors.
Historically, gold and silver were much closer to each other in value. So it wasn’t surprising that when the price of gold went up, so did silver. This relationship most likely made it easier for investors as they could apply the Elliot Wave Theory to gold and get a similar outlook for silver and vice versa.
Possible Upward Trend
Just like gold, the price of silver has been trading at a sideways range of the past few weeks. However, an article written by Vice-president for Business Development Miguel Perez-Santalla suggests that the long-term price chart for silver may be ready to break out. This sentiment may be echoed in a separate article
entitled “Gold and Silver Ready To Rumble Higher?” where a new wave pattern may be apparent for the precious metals.
Furthermore, a discussion with Perez-Santalla stated that the number of buyers of precious metals has increased by as much as 85% at BullionVault. This may indicate that people are still concerned about the stability of countries around world, such as those within Europe. With the price of gold expected to test the USD 1,700 barrier, you can find more on silver here for those interested in a different investment.
Gold and silver have seen their prices rise and drop over the years. However, the application of the Elliot Wave Theory and other indicators may point to a coming rise in prices.
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See more here.
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Strategies for July Earnings Season
It’s July earning season and stock rotation time, do you have a plan?
This period of time in the market always brings rotation from 2nd quarter leaders to new 3rd quarter leaders. The 4th of July light holiday week trading tends to have an upside bias. Then when the following week of trading begins in July we see more volatility as investors brace for quarterly reports and outlooks ahead. Already we are seeing early drops in prior market leaders as we begin full July trading, and a sell off in small cap biotechs on Monday.
The most volatile periods in the market tend to be in January, April, July, and October and as you can guess those are all quarterly report periods for US listed stocks. Traders are betting on good earnings reports, and even the shorts are betting on bad earnings reports from company to company. Often the best strategy is to avoid holding a stock into an earnings report, and instead perhaps trade into the earnings report but make sure you are out 1-2 days prior. Maybe they report a great quarter and the stock spikes, but in many cases you can get crushed for 10, 15, 20% losses or more following a conference call with a bad outlook. A company can report a great 2nd quarter but the outlook is not strong for the 2nd half, or the profit margins were not quite what Wall Street wanted, or the earnings didn’t beat by enough. Instead, look to buy a good stock after a post earnings pullback and consolidation whether the report was “good” or “bad”. Don’t get burned trying to speculate, speculators lose money in the markets… trade smart!
See more here.
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Algorithmic Trading Canada: Algo Trading Firm Located In Canada
LOOKING FOR AN ALGORITHMIC TRADING SYSTEM THAT DOES ALL THE WORK FOR YOU IN CANADA?
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If you are an investor or trader who lives or works in within Canada and you are interested in algorithmic trading Canada, automatic investing Canada, and automated trading Canada, then look no further. AlgoTrades Systems is a Canadian company located in Ontario, just north of Toronto.
If you live in one of these Canadian provinces you can use their algorithmic trading system: Ontario, Quebec, Alberta, Nova Scotia, Saskatchewan, Manitoba, New Brunswick, Newfoundland and Labrador, Prince Edward Island (PEI), and even the North West Territories, and Nunavut.
Unfortunately if you are interested in algorithmic trading and live in British Columbia, you are out of luck. British Columbia is the only location in the world that does not allow algorithmic trading (automated trading systems) for their residents. So much for a free country…
Research shows that the United States (USA) is number one for people searching algorithmic trading systems, with India being second, and Canada third. I was blown away that Canada was #3 for algorithmic trading.
ALGOTRADES ALLOWS YOU TO FREE YOURSELF – WE DO THE HEAVY LIFTING FOR YOU
Say goodbye to searching for hot stocks, figuring out technical patterns, or even reading market opinions. AlgoTrades does all the searching, timing and investing for you using our advanced algorithmic trading systems.
You only have to hook up your trading account – it is very simple and only takes a few minutes – and then you can finally relax while we let sophisticated algorithms take profits out of the market for you.
The number of algorithmic traders in some of Canada’s largest cities are vast within these top cities: Vancouver, Calgary, Edmonton, Ottawa, Toronto, Montreal, Winnipeg, Hamilton, Kitchener, Camebridge, Waterloo, St. Catharines, Oshawa, Whitby, Carlington, Victoria, Windsor, Saskatoon, Regina, St. Johns, Sherbrooke, Barrie, Kelowna, and Halifax.
See more here.
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Keeping It Simple, Why Short Traders Are Losing Money This Week
One thing I have talked about several times which cannot be understated is that is the tendency for investors to believe that complex trading ideas and automated trading systems are better than simple, logical ones.
At first thought this notion is completely understandable. After all, if an idea is fairly simple, how could it possibly be “a secret” and investors not using it yet?
Successful trading and investing is not about how good you look or how impressive you sound in videos. It’s about what, when and how you do it. It does not matter if you are placing the trades yourself or using an automated trading system. What, when and how the investment is traded is all that matters.
It’s known that highly intelligent people struggle with the markets because they believe intelligence will improve their trading results. The reality is, they do not thing simple trade setups and strategies that look like they will make easy money, will work. Why? Because they think that the market is complex and thus trades should not be simple to spot and time, therefore the simple ideas should not work.
In all fairness “simple trading” is not really that simple. Successful trading requires the right kind of simplicity, in the right amount at just the right time. This is what creates the highly profitable investors and automated trading systems.
Why The Short Traders Are Losing Money This Week:
They are fighting a bull market which is still pointing to higher prices.
Take a look at the chart below of the SP500 futures index. You will notice the bars are color coded; this is done by my automated trading system which identifies the market trend which trades should be trading in line with.
The stock market remains in a full blown bull market. Investors should remain long for time being. On ther other hand active investors should be trading with the current market trend which is shown on the chart.
Market corrections within a bull market are sharp and short lived. As an active investor you will be luckly to catch one or two short trades during these pullbacks before the uptrend is retaken.
It is imporatnt to know that eventually one of these bull market corrections will be the staw that breaks the camels back, and kick starts a new bear market. This his why I always move to cash and look to short each of these corrections. We just never know WHEN a full blown bear market will start. If you are holding your positions through these corrections and think you’re a great investor, just wait until the market does acutally breakdown and most of your gains are gone before you realize it. I will admit, its very easy to get lazy with investments after years of rising prices. Lazyness and a the lack of a trading strategy for a falling market is what causes 99% of investors to lose their money.
I believe in trading defensively. Sure it’s more work, takes time to follow, and there are extra trading commission fees, but its a small price to pay to keep the majority of your gains.
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SP500 Monthly Big Picture Analysis
Here is the big picture and trend of the SP500 index. Simple fact is, eventually things are going to get really ugly. By stepping back and looking at this chart, it’s clear the market must still fall substantially in value to break below its critical support trend line and before we can confirm a true bear market is in place.
Do you want to see your nest egg drop 20-30% before you decide to exit? Or do you want to profit from this initial correction when it does happen, and make even more money when the stock market drops for a year or two after taking your account to new all-time highs.
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Keep It Simple Conclusion: Automated Trading Systems?
The good news is that if you keep things simple by following the intermediate trend, like the color coded chart above, you can keep making money as the market rises to ridiculous new highs, and avoid market corrections, and possibly even profit from them.
In my next article I will show you a simple trading strategy that I have used for many years to time stock market bottoms and tops for swing trading. Best part is that the data I use is available online for free.
See more here.
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The Alibaba IPO May Shine, But Gold is Glistening
Scotland voted to remain part of the United Kingdom, Alibaba (BABA) is going to become the United States largest initial public offering (IPO), U.S. stock market indexes are up nearly 2% this week, Treasury yields are near lows, and gold and silver prices are getting bludgeoned in the paper market.
While U.S. financial prognosticators are raving over Alibaba and the IPO, the price action in precious metals and in the broader U.S. equity indexes showed signs of weakness about the time it was announced that Alibaba could start trading in the low to mid eighties.
The gold and silver charts shown below demonstrates the strange price action in silver futures after the announcement regarding Alibaba’s likely price increase at the open of trading in the stock today.
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The chart below shows gold futures prices during the same time frame as the silver chart above.
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The hype surrounding the Alibaba IPO is almost nauseating. However, it may provide an excellent trade entry into a long position in precious metals. Both gold and silver have been under major selling pressure for several weeks.
In silver, the selling pressure started around July 15th of this year and the selling has not stopped. Silver futures prices dropped from roughly $21.50 to $18.50 an ounce in about two months. This represents a near 14% decline in the price of silver over the past 2 months.
Gold prices have also seen strong selling over the same period from July 15th to present. Gold prices fell from around $1,340 per ounce to a recent low slightly below $1,220 per ounce. Gold prices dropped nearly 9%, showing some strong relative strength against silver futures.
We have been watching the precious metals sector very carefully for several weeks and price action seems poised for a bounce as major support is underneath both silver and gold futures here. A break of these levels would trigger some potentially strong selling pushing metals prices considerably lower. The daily chart of gold futures is shown below:
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The $1,180 – $1,200 price level has shown major support for gold futures prices which is clearly depicted on the weekly chart of gold futures shown above. We are contrarian traders and the price action in precious metals is ripe for a potential bounce. We view the opportunity more as a trading opportunity than an investment opportunity for now, but that could change in the longer term.
As an options trader, we will likely use a put credit spread using the gold ETF (GLD) as the underlying asset. The trade will have defined risk and will capitalize on higher gold prices, the passage of time, and reduced volatility in GLD options. Recently the options alert service from TheTechnicalTraders has put up some huge winning trades and the track record has been impressive thus far.
See more here.
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Leading Sectors Breaking Down – Internet & Social Stocks
In July I showed talked about the Russell 2K index and how it was underperforming the broad market. I went on to explain what it likely meant was in store for the US stock market this fall. The outlook was negative, just in case you were wondering…
This week I want to talk about two different sectors that have often lead the broad market in rallies and corrections over the years. These sectors have underperformed the broad market much like that of small cap stocks, and this does not bode well for investors going into fall.
In the analysis below I use Bollinger bands and trendlines. Using only these tools keeps the charts clean and easy to understand. In short, once a trenline has been broken that is the first early warning that a trend may be coming to an end. The second is the break of a Bollinger band.
A combination of these can be taken as a trend reversal and likely the start of a multi week or month correction. This will depend on the chart time frame you are reviewing though. I use a similar method to identify trends with my automated futures trading system.
INTERNET INDEX FUND ANALYSIS
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SOCIAL MEDIA INDEX FUND ANALYSIS
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If you are wondering what exactly these two charts are pointing to… let me share my outlook.
Because we have seen the support trend lines broken to the downside this month, and the fact that price has pushed more than 2 standard deviations from its norm, the odds favor more downside is to come.
From years of experience trading price patterns and breakouts I know that when price breaks to the downs side and triggers fear among its investors it is typically your best time to sell short so you can profit from the falling prices. Fear is the most powerful force in the stock market and it must be traded much differently than when prices are rising.
Although I feel the broad market is still within its uptrend, these two underperforming sectors may just continue to sell lower. Obviously once the broad market rolls over, these sectors should fall even faster to the downside but until then, they could chop around and grind their way down.
See more here.