162. How to Use Multiple Moving Averages for Structure
This video is on how to use multiple moving averages to give structure to the market.
http://youtu.be/GdXk8Fa_RjQ
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162. How to Use Multiple Moving Averages for Structure
This video is on how to use multiple moving averages to give structure to the market.
http://youtu.be/GdXk8Fa_RjQ
162. How to Use Multiple Moving Averages for Structure
This video is on how to use multiple moving averages to give structure to the market.
http://youtu.be/GdXk8Fa_RjQ
163. How to Trade Trends in Any Market
There is AllAbsoluteMarket indicator which is helping to identify the trend and any market condition. Just for information.
Attachment 3311
http://youtu.be/MijzmFkiyNY
164. Up Trading Accuracy by Combining Technical Methods
The next lesson in video trading series which covers what I learned from the INOTV video trading seminar synergetic technical analysis. Fore traders of the stock, futures, and forex markets.
http://youtu.be/jYJxr3aM1Jw
165. 3 Short Term Trading Tips I Learned From Larry Williams
3 Short Term Trading lessons from the video seminar by Larry Williams, Short Term Trading Secrets.
http://youtu.be/CRAMVf35SCs
180. An Introduction to Futures Trading
The first lesson in my new course on trading the futures markets for daytraders and investors in the worlds commodities and financial futures markets.
http://youtu.be/5H1HTvyysZc
181. Introduction to Futures Trading Part 2 - Hedging
An overview of the primary purpose of the futures markets which is to hedge price risk and why this is important to futures traders.
http://youtu.be/PhDCsA1VoAg
182. Introduction to Futures Trading 3 - The Futures Contract
The next lesson in our free video futures trading course which covers how the futures exchange and futures contract standardize the process of hedging.
http://youtu.be/cpTZrTwWKhY
183. Intro to Futrues Trading 4: Futures Contract Details
The next lesson in my free video course on the basics of futures trading, which covers the details of the futures contract that each futrues trader should know.
http://youtu.be/0a7Nhg6Sdxs
184. Online Futures Trading Course Part 5: How Futures Trade
Online futures trading course on how to trade futures covering how futures trade.
http://youtu.be/N6yB4NuewC8
185. How Futures are Traded Part 2
The next lesson in free online video futures trading course which covers how futures are traded.
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What is Futures Trading?
Futures Trading is a form of investment which involves speculating on the price of a commodity going up or down in the future.
What is a commodity? Most commodities you see and use every day of your life:
... All these commodities (and dozens more) are traded between hundreds-of-thousands of investors, every day, all over the world. They are all trying to make a profit by buying a commodity at a low price and selling at a higher price.Futures trading is mainly speculative 'paper' investing, i.e. it is rare for the investors to actually hold the physical commodity, just a piece of paper known as a futures contract.
What is a Futures Contract?
To the uninitiated, the term contract can be a little off-putting but it is mainly used because, like a contract, a futures investment has an expiration date. You don't have to hold the contract until it expires. You can cancel it anytime you like. In fact, many short-term traders only hold their contracts for a few hours - or even minutes!
The expiration dates vary between commodities, and you have to choose which contract fits your market objective.For example, today is June 30th and you think Gold will rise in price until mid-August. The Gold contracts available are February, April, June, August, October and December. As it is the end of June and this contract has already expired, you would probably choose the August or October Gold contract.The nearer (to expiration) contracts are usually more liquid, i.e. there are more traders trading them. Therefore, prices are more true and less likely to jump from one extreme to the other. But if you thought the price of gold would rise until September, you would choose a further-out contract (October in this case) - a September contract doesn't exist.Neither is their a limit on the number of contracts you can trade (within reason - there must be enough buyers or sellers to trade with you.) Many larger traders/investment companies/banks, etc. may trade thousands of contracts at a time!
A Short History of Futures Trading
Before Futures Trading came about, any producer of a commodity (e.g. a farmer growing wheat or corn) found himself at the mercy of a dealer when it came to selling his product. The system needed to be legalised in order that a specified amount and quality of product could be traded between producers and dealers at a specified date.Contracts were drawn up between the two parties specifying a certain amount and quality of a commodity that would be delivered in a particular month...
...Futures trading had begun!
Until twenty years ago, futures markets consisted of only a few farm products, but now they have been joined by a huge number of tradable ‘commodities’. As well as metals like gold, silver and platinum; livestock like pork bellies and cattle; energies like crude oil and natural gas; foodstuffs like coffee and orange juice; and industrials like lumber and cotton, modern futures markets include a wide range of interest-rate instruments, currencies, stocks and other indices such as the Dow Jones, Nasdaq and S&P 500.
In 1878, a central dealing facility was opened in Chicago, USA where farmers and dealers could deal in ‘spot’ grain, i.e., immediately deliver their wheat crop for a cash settlement. Futures trading evolved as farmers and dealers committed to buying and selling future exchanges of the commodity. For example, a dealer would agree to buy 5,000 bushels of a specified quality of wheat from the farmer in June the following year, for a specified price. The farmer knew how much he would be paid in advance, and the dealer knew his costs.
Who Trades Futures?
It didn't take long for businessmen to realise the lucrative investment opportunities available in these markets. They didn't have to buy or sell the ACTUAL commodity (wheat or corn, etc.), just the paper-contract that held the commodity. As long as they exited the contract before the delivery date, the investment would be purely a paper one. This was the start of futures trading speculation and investment, and today, around 97% of futures trading is done by speculators.
There are two main types of Futures trader: 'hedgers' and 'speculators'.
A hedger is a producer of the commodity (e.g. a farmer, an oil company, a mining company) who trades a futures contract to protect himself from future price changes in his product.
For example, if a farmer thinks the price of wheat is going to fall by harvest time, he can sell a futures contract in wheat. (You can enter a trade by selling a futures contract first, and then exit the trade later by buying it.) That way, if the cash price of wheat does fall by harvest time, costing the farmer money, he will make back the cash-loss by profiting on the short-sale of the futures contract. He ‘sold’ at a high price and exited the contract by ‘buying’ at a lower price a few months later, therefore making a profit on the futures trade.
Other hedgers of futures contracts include banks, insurance companies and pension fund companies who use futures to hedge against any fluctuations in the cash price of their products at future dates.
Speculators include independent floor traders and private investors. Usually, they don’t have any connection with the cash commodity and simply try to (a) make a profit buying a futures contract they expect to rise in price or (b) sell a futures contract they expect to fall in price.In other words, they invest in futures in the same way they might invest in stocks and shares - by buying at a low price and selling at a higher price.
The Advantages of Trading Futures
Trading futures contracts have several advantages over other investments:
1. Futures are highly leveraged investments. To ‘own’ a futures contract an investor only has to put up a small fraction of the value of the contract (usually around 10%) as ‘margin’. In other words, the investor can trade a much larger amount of the commodity than if he bought it outright, so if he has predicted the market movement correctly, his profits will be multiplied (ten-fold on a 10% deposit). This is an excellent return compared to buying a physical commodity like gold bars, coins or mining stocks.
The margin required to hold a futures contract is not a down payment but a form of security bond. If the market goes against the trader's position, he may lose some, all, or possibly more than the margin he has put up. But if the market goes with the trader's position, he makes a profit and he gets his margin back.
For example, say you believe gold in undervalued and you think prices will rise. You have $3000 to invest - enough to purchase:
Two months later, gold has rocketed 20%. Your 10 ounces of gold and your company shares would now be worth $3600 - a $600 profit; 20% of $3000. But your futures contracts are now worth a staggering $72,000 - 20% up on $60,000.
Instead of a measly $600 profit, you've made a massive $12,000 profit!
2. Speculating with futures contracts is basically a paper investment. You don’t have to literally store 3 tons of gold in your garden shed, 15,000 litres of orange juice in your driveway, or have 500 live hogs running around your back garden!
The actual commodity being traded in the contract is only exchanged on the rare occasions when delivery of the contract takes place (i.e. between producers and dealers – the 'hedgers' mentioned earlier on). In the case of a speculator (such as yourself), a futures trade is purely a paper transaction and the term 'contract' is only used mainly because of the expiration date being similar to a ‘contract’.
3. An investor can make money more quickly on a futures trade. Firstly, because he is trading with around ten-times as much of the commodity secured with his margin, and secondly, because futures markets tend to move more quickly than cash markets. (Similarly, an investor can lose money more quickly if his judgement is incorrect, although losses can be minimised with Stop-Loss Orders. My trading method specialises in placing stop-loss orders to maximum effect.)
4. Futures trading markets are usually fairer than other markets (like stocks and shares) because it is harder to get ‘inside information’. The open out-cry trading pits -- lots of men in yellow jackets waving their hands in the air shouting "Buy! Buy!" or "Sell! Sell!" -- offers a very public, efficient market place. Also, any official market reports are released at the end of a trading session so everyone has a chance to take them into account before trading begins again the following day.
5. Most futures markets are very liquid, i.e. there are huge amounts of contracts traded every day. This ensures that market orders can be placed very quickly as there are always buyers and sellers of a commodity. For this reason, it is unusual for prices to suddenly jump to a completely different level, especially on the nearer contracts (those which will expire in the next few weeks or months).
6. Commission charges are small compared to other investments and are paid after the position has ended.
Commissions vary widely depending on the level of service given by the broker. Online trading commissions can be as low as $5 per side. Full service brokers who can advise on positions can be around $40-$50 per trade. Managed trading commissions, where a broker controls entering and exiting positions at his discretion, can be up to $200 per trade.
http://youtu.be/s5wyuM-WLRc
188. Trading the E Mini S&P Futures Contract
Why Leverage is the Biggest Advantage and the Biggest Disadvantage
The main advantage and disadvantage in futures trading is the leverage involved. (You can hold a very large amount of a commodity for a small deposit so any gains and losses are multiplied.) This is the main difference between futures trading and, say, speculating with stocks and shares.
For example, you have $3000 to invest. You could buy $3000 of shares in an Oil Mining Company, buying them outright. Or this $3000 may be sufficient margin (a goodwill "security bond") to buy a couple of Crude Oil futures contracts worth $30,000.
The price of Crude Oil drops 10%. If this effects the price of your mining stocks by 10%, you would lose $300 (10% of $3000). But this 10% fall on the value of your Crude Oil futures contracts would lose $3000 (10% of $30,000). In other words, all of your initial stake would be lost trading the futures rather than only 10% of your capital trading the shares.
But, with Stop-Loss Orders you will always know how much money you are risking in any trade.
A Stop Loss Order is a pre-determined exiting point which automatically exits your position should the market go against you. In the above example, you may only decide to risk $1000 on the Crude Oil futures contracts. You would place a stop loss just under the market price and if the market dropped slightly, your position would be exited for the $1000 loss.
So Leverage is great if the market goes in your predicted direction - you could quickly double, treble or quadruple your initial stake. But if the market goes against you, you could lose a lot of money just as quickly. All of your initial stake (your margin) could be wiped out in a few days. And in some cases, you may have to pay more money to your broker if the margin you have put up is less than the loss of your trade.
How to Protect Profits with Stop-Loss Orders
As mentioned above, losses can accumulate just as quickly as profits in futures trading. Nearly every successful trader uses Stop-Loss Orders in his trading to ensure profits are 'locked in' and losses are minimised.
How do Stop-Losses work?
A stop-loss is usually placed when a trade is entered, although it can be entered or moved at any time. It is placed slightly below or above the current market price, depending on whether you are buying or selling.
For example, say Pork Bellies is trading at $55.00 and you think prices are about to rise. You decide to buy one Pork Bellies contract, but you don't want to risk more than $800 on the trade. A one-cent move in the market is worth $4.00 on a pork bellies futures contract so, therefore, you would place your stop at $53.00 (200 cents away from the current price x $4 per point = $800).
You can also move a stop-loss order to protect any profits you accumulate.
Taking the Pork Bellies example: Two weeks later, bellies are now trading at $65.00. You are now up $4000 (1000 cents of movement x $4). To protect these profits, you can raise your stop-loss simply by calling your broker. Say you place it at $63.00, you have locked it a profit of at least $3200 and now risk $800 to your new stop level.
But what if the market went against you? Going back to the original position when you bought at $55.00 with a stop at $53.00: what happens if the market suddenly tumbles down to $51.00 during the day? Your trade would automatically be 'stopped out' at your stop level of $53.00 for an $800 loss. The fact that the market closed the day at $51.00 is irrelevant as you are now out of the market. (Had you not used a stop-loss and viewed the market at the end of the day, you would have large losses on your hands!)
The same would happen if the market reached $65.00 and you had raised your stop to $63.00: If the market fell from here, say to $62.80, you would be stopped out at $63.00 and would have a profit of $3200. Even if the market suddenly reversed here and rose to $79.00, this would be irrelevant as you are now out of the market.
This last example would be annoying because if you hadn't been stopped out, you would now be $9600 in profit. But you were stopped out at your $63.00 stop. The market only went 20-cents under this and reversed!
It is for this reason that some traders don't use stops: they have been stopped out in the past JUST when the market was about to go their way.
The solution is not to abandon using stops as this is EXTREMELY RISKY. The solution is to use stops effectively.
(In fast moving markets it is sometimes impossible for brokers to get your orders exited exactly on your stop loss limits. They are legally required to do their best, but if the price in the trading pit suddenly jumps over your limit, you may be required to settle the difference. In the above scenario, the price of Pork Bellies could open trading at $62.50, fifty cents through your stop at $63.00. Your broker would have to exit your trade here and, in fact, you would lose $1000, $200 more than your anticipated $800.)
Where to Get Market Information
Commodity prices can change direction much faster than other investments, such as company stocks. Therefore, it is important for traders to stay on top of market announcements. Professional traders may use a wide number of techniques to do this, using fundamental information and technical indicators.
Fundamental data may include government reports of weather, crop sizes, livestock numbers, producer’s figures, money supply and interest rates. Other fundamental news that could affect a commodity might be news of an outbreak of war.
Technical indicators are mathematical tools used to plot market prices and behaviour patterns on a graph. These can include trend lines, over-bought and over-sold indicators, moving averages, momentum indicators, Elliott wave analysis and Gann theory.
Some traders use just one of these basic methods religiously, disregarding the other completely. Others use a combination of the two.
Many investors, especially smaller investors, devise their own trading method or purchase one from another trader. (Be careful not to buy a system that has been over-optimised and curve-fitted to fit past data. Many times, I have seen systems claiming 80%+ winning trades on past data, but when I have run the system on current prices, the results are breakeven at best!)
They normally paper trade the method (i.e. they follow the markets but only pretend to place the trades) for a few months to make sure the method works for them before placing any actual trades.
Tracking price charts and keeping up with fundamental data is a difficult full-time job – some large organisations employ dozens of staff to follow market moves. And some traders, especially those on the market floor, may only hold a position for a few hours or even minutes.
So where does this leave the small, independent investor who would like to trade in the lucrative futures markets?
Many trade on a daily or weekly basis, i.e. they note or 'download' market prices at the end of each trading day and make their decisions from this data. Often, they will leave a trade on for at least a few weeks (possibly months). This is a much SAFER way of trading because any fluctuations are ridden out and less panic-buying or selling is involved.
http://youtu.be/V0Xc84sGz6E
190. How to Trade Futures - The Limit Order
The next lesson in our free futures trading course which teaches traders how to trade futures using a limit order.
Futures Contracts for Beginners
If you have a limited amount of capital to invest, you probably can't afford to trade the larger contracts like the Nasdaq and S&P500 as a slight percentage move could be worth thousands of dollars. But there are still plenty of smaller and less expensive contracts you can trade.All futures contracts have standardised amounts of the commodity which are held by them. For example, if you buy a single pork bellies contract, you are ‘holding’ the value of 40,000lbs of pork bellies. If you sell a single soybeans contract you are betting on the value of 5000 bushels of soybeans.Each point-move on a particular contract is worth a specific amount, and these amounts vary between contracts. For example, a 1-cent move on a Pork Bellies contract is worth $4, so a move in the market from $60.00 to $61.50 would be worth $600 per contract ($4 x 150 cents). In Soybeans, a 1-cent move in the market is worth $50 so a jump from $500 to $505 is worth $250 ($50 x 5c).
Some contracts are worth a lot more than others, especially if they are trading at historically high prices. For example, at the time of writing, the Nasdaq Index moved up around 10% last month – worth nearly $50,000 per contract! (It is at an all time high, 20 times higher than 10 years ago.) But Wheat dropped around 10% per contract - worth about $1250 per contract. (It is at its lowest price for years.)
Beginners need to first establish if they can afford to trade the commodity - if they have enough margin in their account to cover the trade, and if they can afford a sizeable move against their position. (Some traders such as Larry Williams and Tom Basso feel that risking approximately 3% to 5% of total trading capital on a position is about right. Remember too, that these traders are some of the best in the world - if you are a beginning trader, you should be careful risking that much!) Your broker will probably give you a list of dollar-per-point ratios for all the different contracts, as well as their commission and margin requirements.A trader also needs to establish the risk/reward of trading on any particular commodity - how much you are risking to your stop loss and how much you intend to win to your target price. (Alternatively, work out the average loss and profit made by your trading system to find the expectancy of a trade's profits.)It is also important for traders to spread the risk of trading by using different types of commodity. For example, just because you have enough capital to trade 5 contracts, don't buy five energy contracts just because they have the largest risk/reward ratio. Instead, spread your risk by trading some grains, some metal, some energy, some livestock and some currency (if they are potentially rewarding).
You may also buy or sell more than one contract on each commodity to keep the risk balanced. For example, a Pork Bellies contract may be worth a lot more than a Soybeans contract. You may decide to buy two Pork Bellies contracts and six Soybeans contracts to keep the values held on each market about equal.None of your trades should risk more than 5% of your trading capital if possible. (And in "trading capital", I mean money you can afford to, and are prepared to LOSE!) That way, you would have to lose 20 trades in a row in order to get wiped out.
Futures Trading Alternatives
Speculating on the commodity markets can certainly be an excellent form of investment. But it can require a large amount of capital to speculate effectively on the futures markets. To set up the smallest futures account normally requires at least $5000, and many brokers require proof that you can afford to pay any losses greater than the funds in your account. (In case the market suddenly drops below your stop-loss level.)
Also, even the smallest futures contracts require at least $1000-$3000 in margin for you to hold them. This means a speculator with a $5000 account may only be able to trade one or two markets at a time. Many top traders recommend spreading your risk between several markets at a time. And, as mentioned above, you should only risk up to 5% of your trading capital on any position.So if you haven't got $20,000 or $100,000 to speculate with, what are your options?
Smaller Futures Contracts
Most of the widely traded futures contracts are large contracts traded on the Chicago Board of Trade, The Chicago Mercantile Exchange or the New York Mercantile Exchange. But there are also other exchanges that trade much smaller futures contracts.
For example, the MIDAM exchange (Mid-America) trades most of the major commodity and currency markets but under smaller contracts. Typically they hold one-fifth to one-half the amount of the commodity of the more popular contracts meaning the risks and margin requirements are a lot less.
Other exchanges around the world trade smaller futures contracts of various commodities, such as Brent Crude Oil on the LPE, London Wheat on LIFFE, and Copper, Aluminium and Tin on the LME.
http://youtu.be/XC49i-hbrjk
191. Video Futures Trading Course - The Stop Order
How to Protect Profits with Stop-Loss Orders
Losses can accumulate just as quickly as profits in futures trading. Nearly every successful trader uses Stop-Loss Orders in his trading to ensure profits are 'locked in' and losses are minimised.How do Stop-Losses work?
A stop-loss is usually placed when a trade is entered, although it can be entered or moved at any time. It is placed slightly below or above the current market price, depending on whether you are buying or selling.
For example, say Pork Bellies is trading at $55.00 and you think prices are about to rise. You decide to buy one Pork Bellies contract, but you don't want to risk more than $800 on the trade. A one-cent move in the market is worth $4.00 on a pork bellies futures contract so, therefore, you would place your stop at $53.00 (200 cents away from the current price x $4 per point = $800).
You can also move a stop-loss order to protect any profits you accumulate.
Taking the Pork Bellies example: Two weeks later, bellies are now trading at $65.00. You are now up $4000 (1000 cents of movement x $4). To protect these profits, you can raise your stop-loss simply by calling your broker. Say you place it at $63.00, you have locked it a profit of at least $3200 and now risk $800 to your new stop level.
But what if the market went against you? Going back to the original position when you bought at $55.00 with a stop at $53.00: what happens if the market suddenly tumbles down to $51.00 during the day? Your trade would automatically be 'stopped out' at your stop level of $53.00 for an $800 loss. The fact that the market closed the day at $51.00 is irrelevant as you are now out of the market. (Had you not used a stop-loss and viewed the market at the end of the day, you would have large losses on your hands!)
The same would happen if the market reached $65.00 and you had raised your stop to $63.00: If the market fell from here, say to $62.80, you would be stopped out at $63.00 and would have a profit of $3200. Even if the market suddenly reversed here and rose to $79.00, this would be irrelevant as you are now out of the market.
This last example would be annoying because if you hadn't been stopped out, you would now be $9600 in profit. But you were stopped out at your $63.00 stop. The market only went 20-cents under this and reversed!
It is for this reason that some traders don't use stops: they have been stopped out in the past JUST when the market was about to go their way.
The solution is not to abandon using stops as this is EXTREMELY RISKY. The solution is to use stops effectively.
(In fast moving markets it is sometimes impossible for brokers to get your orders exited exactly on your stop loss limits. They are legally required to do their best, but if the price in the trading pit suddenly jumps over your limit, you may be required to settle the difference. In the above scenario, the price of Pork Bellies could open trading at $62.50, fifty cents through your stop at $63.00. Your broker would have to exit your trade here and, in fact, you would lose $1000, $200 more than your anticipated $800.)
http://youtu.be/VKC2ejFweSs
192. Using Market, Stop, and Limits to Close Futures Trades
Through the control offered by the exchanges, and government regulation, trading in the commodities markets does offer some limited protection from manipulation. The use of prudent orders does also offer some protection from loss.
The Short Futures Position
This simply means taking a short position in the hope that the futures price will go down. There is nothing to borrow and return when you take a short position since delivery, if it ever takes place, doesn't become an issue until some time in the future.
Limit and Stop-Loss Orders
"Limit orders" are common in the futures markets. In such cases, the customer instructs the broker to buy or sell only if the price of the contract he is holding, or wishes to hold, reaches a certain point. Limit orders are usually considered good only during a specific trading session, but they may also be marked "G.T.C." good till canceled.
Maximum Daily Price Moves
Sometimes futures prices in certain markets will move sharply in one direction or the other following very important news extremely bad weather in a growing area or a political upheaval, for instance. To provide for more orderly markets, the exchanges have definite daily trading limits on most contracts.
Most futures exchanges use formulas to increase a contract's daily trading limit if that limit has been reached for a specific number of consecutive trading days. Also. in some markets, trading limits are removed prior to expiration of the nearby futures contract. For other contracts, including stock index and foreign currency futures, no trading limits exist.
The Commodity Exchange Act
Trading in futures is regulated by the Commodity Futures Trading Commission, an independent agency of the United States government. The CFTC administers and enforces the Commodity Exchange Act.
http://youtu.be/sXUbdsHdNSw
193. How to Place a Trailing Stop in the Futures Market
For this example lets say that we have defined our trailing stop conditions on the platform like we just looked at with the following conditions: The Stop Condition will be set to 10, the Trailing Condition will be Set to 5, and the Distance Condition will be set to 10. The first thing that it is important to keep in mind here, is that each of the numbers we have set here, represent the number of ticks, which as we have discussed in previous lessons, is the minimum movement that a futures contract can make. As we have also discussed, the value of a 1 tick move in the market varies from market to market, so make sure you know how much a 1 tick move is in the market that you are trading, before using the trailing stop.
For this example we are going to be using the E Mini S&P contract, where a 1 tick move in the market is .25 points. With this in mind a movement from 800 to 801 for example, represents a 4 tick move in the market.
Now that we understand this, for this example we are going to say that I am buying 1 contract of the E Mini S&P, at a current market price of 808.50. As I had the auto box checked as we just covered, the first thing that is going to happen, is a stop order to sell 1 contract is going to be placed 10 ticks behind the market, at a price of 806.00. To quickly go through the math here, .25 which is a 1 tick move in the E Mini S&P, times 10, equals 2.50, and the execution price of 808.50 - 2.50 gives me the price level of a 10 tick stop which is 806.00.
If, for example, the market moves lower from there, then nothing is going to happen with my stop order, unless the market trades down to 806.00, in which case the stop order will turn into a market order, and I will be closed out of my position at the next available price.
If however the market trades up to 809.75, which is 5 ticks above my entry price, and the condition that I have set in the "Trailing Condition" portion of the trailing stop, then the trailing portion of my stop order will activate. At this point, my stop is going to move automatically from its original price of 806.00, to 807.25, which is 10 ticks behind the current market price, and the amount that I set for the "Distance" condition of the order.
If the market then trades lower from there, to for example 809.00, then my stop will not move, and will remain at 807.25. If however the market trades higher from there at any point, to 810.00 for example, then my stop is going to move up tick for tick behind the market, so that it is always 10 ticks behind the market, which would be 807.50 if the market moved to 810.00.
The math can look a little tricky at first but if you pause the video here and go over this slide a couple of times you should see that it is actually very basic.
http://youtu.be/Th9vh67nPP0
194. How Trading On Margin in Futures Works
Trading on margin very simply means the ability to control a certain size position without having to put up the full value of that position in cash. Margin allows a trader to magnify both the potential gains, and the potential losses on an account. In this lesson we are going to cover margin as it relates to futures trading, so if you need a basic overview of how trading on margin works, see the links below this video for more information.
There are two primary advantages of trading futures over trading stocks which relate specifically to margin. The first, is that futures traders generally have access to much lower margin requirements than most stock traders. Generally the maximum leverage available in the stock market is 4 to 1, meaning that you have to put up at least 25% of the value of the position in order to remain in the trade, which would magnify your gain or loss by 4 times, compared to a position without margin. In the futures market, intraday margin levels can go to 100 to 1 or greater. This means that a trader only needs to maintain as little as 1% of the position value, in order to remain in the trade, potentially magnifying gains and losses on a trade by up to 100 times. While the ability to magnify potential gains is generally seen as an advantage to futures traders, it also comes with an added level of responsibility, as loss potential is also magnified by the same amount.
The second advantage of trading futures over stocks as it relates to margin, is that you do not have to pay for the use of margin as you would in the stock market. While you only have to put up a portion of the trade value when trading on margin in the stock market, ultimately the full position value is needed to place the trade. Because of this stock traders must borrow the rest of the trade value from their broker, and as this is a loan, they pay interest on the money they borrow. In the futures market, margin is seen as more of a "performance bond" or as money that you have to put up to make sure that you can make good on any losses incurred on a trade. Because of this you are not required to have the full position amount in order to place a trade in the futures market, which means there is no interest paid when trading on margin.
There are several other nuances as it relates to margin that it is important to understand when trading futures. Firstly, unlike in the stock market where margin requirements are generally the same for most actively traded stocks, in the futures market margin requirements differ depending on what futures contract you are trading. The reason why is because in the futures market, margin requirements are set based on volatility and position size, meaning that the more volatile a futures contract is, the higher the margin requirement is generally going to be.
Just as in the stock market there is an initial and a maintenance margin requirement for futures contracts, meaning that you must have a certain amount of money in your account to initiate a new position, and then a certain amount of money in your account to continue to hold or "maintain" the position once it is initiated. These levels are set by the exchange and while a broker can require a higher margin level than the minimums set by the exchange most do not. Lastly, it is important to understand here that these initial and maintenance margin requirements apply only to positions which are held overnight, and most futures brokers offer a lower margin requirement to traders who open and close positions within the same trading day.
As an example, the current initial margin for holding an E Mini S&P contract overnight as set by the futures exchange is $6,188, and the current maintenance level is $4,950. The daytrading margin as set by the Apex Futures is $500 for both the initial and the maintenance margin.
So as most traders open and close their positions within the same trading day when trading the E Mini S&P, they need to have at least $500 in their account when trading with Apex in order to initiate and maintain a position, per contract traded. If a trader is planning to hold an Emini S&P contract overnight, as of this lesson they will need to have at least $6,188 in their account in order to initiate the position, and at least $4,950 in their account in order to maintain the position. If the trader drops below these levels then the broker has the right to liquidate their positions, and/or they will get a telephone call from the firms margin desk, to arrange to have additional funds to be deposited into the account.
While overnight margins are set by the exchange and generally the same from broker to broker, daytrading margins are set by the broker and therefore vary widely. One of the reasons why I have chosen to recommend Apex Futures, is because they offer $500 daytrading margins, which are among the lowest in the industry. Keep in mind however that leverage is a sword that cuts both ways, so while increased leverage amplifies the potential gain on a position, it also amplifies the potential losses.
Lastly it is important to keep in mind that although it is not a super common occurrence, margin requirements can be changed by the broker or the exchange at any time due to increased volatility in the markets. It is important to understand here that if requirements are raised, then traders will be required to have the set maintenance margin amount for existing positions, as well as any new positions which are initiated.
http://youtu.be/6wvTkBV0CCg
195. Online Futures Trading Transaction Costs
This is next lesson in free online futures trading course which covers transaction costs that traders pay when trading futures.
A futures contract is an obligation to buy or sell a commodity at or before a given date in the future, at a price agreed upon today. While the term “commodity” is usually used when referring to contracts like corn, or silver, it is also defined to include financial instruments and stock indexes. One of the benefits to the futures industry is that contracts are traded on an organized and regulated exchange to provide the facilities to buyers and sellers.
Exchange-traded futures provide several important economic benefits, but one of the most important is the ability to transfer or manage the price risk of commodities and financial instruments. A simple example would be a baker who is concerned with a price increase in wheat, could hedge his risk by buying a futures contract in wheat.
Not all futures contracts provide for physical delivery, some call for an eventual cash settlement. In most cases, the obligation to buy or sell is offset by liquidating the position. For example, if you buy 1 S&P500 e-mini contract, you would simply sell 1 S&P500 e-mini contract to offset the position. The profit or loss from the trade is the difference between the buy and sell price, less transaction costs. Gains and losses on futures contracts are calculated on a daily basis and reflected on the brokerage statement each night. This process is known as daily cash settlement.
US futures trading is regulated by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). The CFTC is an independent federal agency based in Washington, DC that adopts and enforces regulations under the Commodity Exchange Act and monitors industry self-regulatory organizations. The NFA, whose principal office is in Chicago, is an industry-wide self-regulatory organization whose programs include registration of industry professionals, auditing of certain registrants, and arbitration.
http://youtu.be/E1ZMtdMxja0
196. Futures Trading Course - What Makes Up a Futures Price?
The next lesson in free futures trading course which covers what makes up the price of the futures contract.
http://youtu.be/_neWOkX-n4o
197. Contango, Backwardation, and The Futures Curve
The next lesson in free futures trading course which discusses contango, backwardation, and the futures curve.
http://youtu.be/qo9VLVsefaM
198. Free Video Futures Course - What is Basis?
The next lesson in free video futures course which covers basis in the futures market.
http://youtu.be/pydLcm6aLrs
199. Futures Trading - Bull Spreads and Bear Spreads
The next lesson in free futures trading course which covers bull spreads and bear spreads in the futures market.
http://youtu.be/pl54bu4CAE0
200. Volume and Open Interest in Futures Trading
The next lesson in free online futures video trading course covering open interest and volume in the futures market.
http://youtu.be/ykilg7olI-k
201. The Commitment of Traders (COT) Report
The next lesson in free futures trading course which covers the commitment of traders report.
http://youtu.be/q40U3I_CCQ8
202. Futures Trading Price Limits
The next lesson in online video futures trading course which covers futures trading price limits.
http://youtu.be/B374qnJ7OW0
A Simple Explanation of the Economic Crisis in the US
This video offers a simple explanation of the economic crisis in the US, its causes, and potential solutions as well.
http://youtu.be/JjlY1Sk8d-Q
Metatrader 4 Platform Overview
A new series which covers how to use the Metatrader 4 platform to trade the forex market.
http://youtu.be/z85oQej5wQY
The US Economic Crisis: Inflation vs. Deflation
A look at inflation and deflation, the key issues in any economic crisis, and how understanding how those issues are playing out will help individuals develop a strategy for preserving and growing their wealth in the US economic crisis.
http://youtu.be/HLXhqME809E
The Case for Gold in an Economic Crisis
This video explains the logic behind why gold is an investment tool and store of wealth in an economic crisis, and thus can help individuals grow their purchasing power in terms of great economic uncertainty -- particularly in a currency crisis.
http://youtu.be/df9HYIwy1Ro
PRODUCER PRICE INDEX
Talking Points
- PPI stands for the Producer Price Index.
- PPI comes out the second week of each month.
- Forex traders can use PPI as a leading indicator to forecast consumer inflation measured by the Consumer Price Index (CPI)
In the 1950’s gasoline was $0.27, apartment rent was $42/month and a movie ticket was $0.48. In addition, the US dollar was worth 9 times what is worth now. Inflation reduces domestic buying power and that is why central banks fight so hard to beat back inflation by raising the interest rate. Forex traders are well aware that interest rates are the main driver of currency movement. Investors seek higher yields and will migrate capital from low yielding assets and currencies to high yielding assets and currencies. This is why traders pay special attention to the Producer Price Index because it alerts them to the rise and fall of inflation which could, in turn, lead to a rise and fall of currency rates.
http://media.dailyfx.com/illustratio..._Picture_2.png
What is PPI?
Released monthly in the second week of each month, the Producer Price Index (PPI) is an indicator used to measure the average change in selling price, over time, received for finished goods.Retailers that have to pay more for finished goods may have to pass on higher costs to consumers. This measurement of price change from the view of the seller can be a leading indicator for consumer inflation that is measured by the Consumer Price Index (CPI). PPI examines three production areas; commodity-based, industrial-based, and stage-of-processing-based companies. Released by the Bureau of Labor Statistics, PPI is created using data collected from a mailed survey of retailers selected randomly.
Traders can see changes in PPI expressed in a percentage change from the previous year or month to month.
http://media.dailyfx.com/illustratio..._Picture_1.png
Why Look at PPI?
Forex traders use the Producer Price Index to find the direction of prices and a measurement of inflation. Rising prices in the form of inflation lowers the purchasing power of a country’s currency because consumers can buy less goods and services for each unit of currency. This decrease in consumer buying power usually triggers a central bank response to raise interest rates. A rising PPI could indicate that consumer prices could rise leading to higher interest rates. The increase in interest rates stimulates the demand for that currency as investors chase yield. This inflow of capital results in a higher exchange rate. On the other hand, a stable or falling PPI insures that interest rates will remain low. This results in a lower relative currency exchange rate. As you can see, using the information found in PPI can give traders an advantage when seeking out strong and weak currencies.
http://youtu.be/ueVhRmEE1NI
26 Sam Seiden Webinars
Below are links to 26 Sam Seiden Webinars (updated 9 April 2011) which provide hours of clear and concise tutoring on how to trade supply and demand zones. These freely available webinars are produced and hosted by FXstreet.com, owner of those videos, who kindly let me publish the list here.
- Trading and Analysis (added April 2011)
- Rule Based Market Timing (added April 2011)
- Trading The All Star Entry (added April 2011)
- Breakout Trading in Forex
- Supply and Demand Strategy Application
- Identifying High Probability Turning Points
- Forex Swing Trading With Supply and Demand Analysis
- Currency trading with Forex Futures
- Supply, Demand and Bollinger Bands
- Live Trading and Analysis
- Identifying Swing Trading Opportunities in the Forex Market
- An Important Rule To Consider When Scanning For Trading Opportunities In Forex
- Rule based trading for short and longer term Forex traders
- Multiple Time Frame Analysis
- Low Risk Breakout Trading in Forex
- Rule Based Short Term Trading In Forex
- Trade What Is Real, Not What You Feel: Quantifying Supply and Demand in The Forex Markets
- Conventional Chart Patterns and Forex
- Short term Forex Trading Strategies, Breakouts and Reversals
- MONTHLY WEBINAR: Understanding The Creation Of Candles In Forex Trading
- Capture reversal points with the use of indicators and oscillators
- Forex Swing Trading, Low Risk / High Reward Trading
- Understanding The Exact Process Behind The Movement In Price
- Using CCI and Stochastics For Long and Short Term Forex Trading
- Multiple Low Risk Forex Entries With Support and Resistance
- Supply and Demand Trading with Mechanical Indicators and Oscillators in the Forex Markets
01: NON FARM PAYROLL (Part 1)- ECONOMIC REPORTS FOR ALL MARKETS
This is the 1st video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this and the next lesson, we cover the Employment Situation Report, also known as Non Farm Payroll.
Non-farm Payrolls (metatrader5.com)
Non-farm Payrolls is the assessment of the total number of employees recorded in payrolls.
This is a very strong indicator that shows the change in employment in the country. The growth of this indicator characterizes the increase in employment and leads to the growth of the dollar. It is considered an indicator tending to move the market. There is a rule of thumb that an increase in its value by 200,000 per month equates to an increase in GDP by 3.0%.
- Release Frequency: monthly.
- Release Schedule: 08:30 EST, the first Friday of the month.
- Source: Bureau of Labor Statistics, U.S. Department of Labor.
FF forum economic calendar :
- Source : Bureau of Labor Statistics
- Measures : Change in the number of employed people during the previous month, excluding the farming industry
- Usual Effect : Actual > Forecast = Good for currency
- Frequency : Released monthly, usually on the first Friday after the month ends
- Why Traders Care : Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity
- Also Called : Non-Farm Payrolls, NFP, Employment Change
mql5 forum thread : Non-Farm Employment Strategy
AUDUSD M5 with 45 pips in profit (by equity) for NFP :
Attachment 4878
EURUSD M5 : 87 pips price movement by NFP news event :
Attachment 4879
NZDUSD M5 : 37 pips price movement by USD - Non-Farm Employment Change :
Attachment 4880
Trading EURUSD during NFP :
Attachment 4881
USDCAD M5 with NFP :
Attachment 4882
http://youtu.be/NadnAVsHbU8]01: NON FARM PAYROLL (Part 1) - YouTube
02: NON FARM PAYROLL (Part 2)- ECONOMIC REPORTS FOR ALL MARKETS
This is the 2nd video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this and the next lessons, we cover the Employment Situation Report, also known as Non Farm Payroll.
http://youtu.be/0AWcadjQX-Y
03: TWO MORE UNEMPLOYMENT REPORTS
This is the 3nd video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the ADP Unemployment Report and the Weekly Claims for Unemployment Insurance Report.
Jobless Claims (metatrader5.com)
There are two types of Jobless Claims - Initial Claims, when a person applies for a benefit for the first time in five years, and the total number. Initial claims are more important. Both figures show weekly changes in the number of jobless claims.
These figures do not always reflect the real state of events. They are sometimes distorted by short-term factors, such as federal or local holidays. This indicator can give an idea of what Non-farm payrolls will be next time. For example, if during a month the value of Jobless Claims consistently decreases, then it is likely that the value of Non-farm payrolls will be large. It has a limited impact on the market. Reducing of the number of jobless claims is a favorable factor for the growth of the dollar.
- Release Frequency: weekly.
- Release Schedule: 08:30 EST, every Thursday.
- Source: U.S. Department of Labor.
============
FF forum economic calendar :
- Source : Department of Labor
- Measures : The number of individuals who filed for unemployment insurance for the first time during the past week
- Usual Effect : Actual < Forecast = Good for currency
- Frequency : Released weekly, 5 days after the week ends
- Why Traders Care : Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy
- Also Called : Initial Claims, Unemployment Claims
============
EURUSD M5 : 14 pips price movement by USD - Unemployment Claims :
Attachment 5123
============
EURUSD M5 : 24 pips price movement by USD - Unemployment Claims :
Attachment 5124
============
USDJPY M5 : 34 pips price movement by USD - Unemployment Claims :
Attachment 5125
============
USDCHF M5 : price movement by USD - Unemployment Claims :
Attachment 5126
============
http://youtu.be/dQ9GnL9On0o
04: PRODUCER PRICE INDEX
This is the 4th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the Producer Price Index
Talking Points
- PPI stands for the Producer Price Index.
- PPI comes out the second week of each month.
- Forex traders can use PPI as a leading indicator to forecast consumer inflation measured by the Consumer Price Index (CPI)
In the 1950’s gasoline was $0.27, apartment rent was $42/month and a movie ticket was $0.48. In addition, the US dollar was worth 9 times what is worth now. Inflation reduces domestic buying power and that is why central banks fight so hard to beat back inflation by raising the interest rate. Forex traders are well aware that interest rates are the main driver of currency movement. Investors seek higher yields and will migrate capital from low yielding assets and currencies to high yielding assets and currencies. This is why traders pay special attention to the Producer Price Index because it alerts them to the rise and fall of inflation which could, in turn, lead to a rise and fall of currency rates.
Attachment 5252
What is PPI?
Released monthly in the second week of each month, the Producer Price Index (PPI) is an indicator used to measure the average change in selling price, over time, received for finished goods.Retailers that have to pay more for finished goods may have to pass on higher costs to consumers. This measurement of price change from the view of the seller can be a leading indicator for consumer inflation that is measured by the Consumer Price Index (CPI). PPI examines three production areas; commodity-based, industrial-based, and stage-of-processing-based companies. Released by the Bureau of Labor Statistics, PPI is created using data collected from a mailed survey of retailers selected randomly.
Traders can see changes in PPI expressed in a percentage change from the previous year or month to month.
Why Look at PPI?
Forex traders use the Producer Price Index to find the direction of prices and a measurement of inflation. Rising prices in the form of inflation lowers the purchasing power of a country’s currency because consumers can buy less goods and services for each unit of currency. This decrease in consumer buying power usually triggers a central bank response to raise interest rates. A rising PPI could indicate that consumer prices could rise leading to higher interest rates. The increase in interest rates stimulates the demand for that currency as investors chase yield. This inflow of capital results in a higher exchange rate. On the other hand, a stable or falling PPI insures that interest rates will remain low. This results in a lower relative currency exchange rate. As you can see, using the information found in PPI can give traders an advantage when seeking out strong and weak currencies.
http://youtu.be/ueVhRmEE1NI
05: ISM MANUFACTURING
This is the 5th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the ISM Manufacturing report.
ISM Index (Institute of Supply Management's index, former NAPM — National Association of Purchasing Managers) is the index of business activity.
ISM figures above 50 are usually considered as an indicator of expansion, while values below 50 indicate contraction. Typically, when ISM approaches 60 investors begin to worry about possible economic overheating, inflation increase and the corresponding measures (raising rates) by the Federal Reserve Bank. Figures below 40 entail talks about recession.
ISM is released just before unemployment data are announced, and is often used to refine data by Bureau of Labor Statistics.
- Release Frequency: monthly.
- Release Schedule: 10:00 EST, the first business day of the month.
- Source: Institute for Supply Management.
- Source : Institute for Supply Management
- Measures : Level of a diffusion index based on surveyed purchasing managers in the manufacturing industry
- Usual Effect : actual > forecast = good for currency
- Frequency : Released monthly, on the first business day after the month ends
- Why Traders Care : It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy
- Also Called : Manufacturing ISM Report On Business
How Forex News Traders Use ISM Numbers (adapted from dailyfx article)
- The Institute for Supply Management (ISM) was founded in 1915 and is the first supply management institute in the world.
- Servicing 40,000 business professionals in more than 90 countries, ISM focuses on supply chain management.
- Forex traders rely heavily on ISM’s release their Purchasing Managers Index (PMI) on the first business day of each month to gauge economic growth.
NZDUSD M5 : 17 pips prrice movement by USD ISM Manufacturing PMI :
http://c.mql5cdn.com/3/28/nzdusd-m5-...ment-by__1.png
What is ISM?
A country’s economy is as strong as its supply chain. The Institute for Supply Management (ISM) measures the economic activity from both the manufacturing side as well as the service side. Formed in 1915, ISM is the first management institute in the world with over 40,000 members in 90 countries. Since it can draw from information gathered from the surveying its large membership of purchasing managers, the ISM economic news releases are carefully watched by Forex traders around the world as a reliable guide to economic activity.
http://c.mql5cdn.com/3/28/How_Forex_...y_4piwjdiy.png
ISM Surveys
ISM publishes three surveys; manufacturing, construction, and services. Published on the first business day of the month, the ISM Purchasing Managers Index (PMI) is compiled from surveys of 400 manufacturing purchasing managers. These purchasing managers from different sectors represent five different fields; inventories and employment, speed of supplier deliveries, production level, and new orders from customers.
XAUUSD M5 : 3345 pips price movement by USD - ISM Non-Manufacturing PMI news event :
http://c.mql5cdn.com/3/28/xauusd-m5-...ovement-by.png
In addition, ISM construction PMI is released on the second business day of the month, followed by services on the third business day. Forex traders will look to these releases to determine the risks at any given time in the market.
EURUSD M5 : 37 pips price movement by USD - ISM Non-Manufacturing PMI news event :
http://c.mql5cdn.com/3/28/eurusd-m5-...ovement-by.png
Forex Market Impact
The Manufacturing and Non-manufacturing PMI’s are big market movers. When these reports come out at 10:30 AM ET, currencies can become very volatile. Since these economic releases are based on the previous month’s historical data gathered directly from industry professionals, Forex traders can determine if the US economy is expanding or contracting.
Forex traders will compare the previous month’s number with the forecasted number that economists have published. If the released PMI number is better than the previous number and higher than the forecasted number, the US dollar tends to rally. This is where fundamental and technical analysis comes together to create a trade setup.
AUDUSD M5 : 21 pips price movement by USD - ISM Non-Manufacturing PMI news event :
http://c.mql5cdn.com/3/28/audusd-m5-...ovement-by.png
In the example above, notice how the better than expected PMI number triggered a US dollar rally against the Euro. As seen in the chart above of the EURUSD, the ISM Non-Manufacturing was not only above 50 but at 55.4, beat the forecasts calling for a drop from 54.4 to 54.0.
When an economic release beats expectations, like in the example above, sharp fast moves can result. In this case, EURUSD dropped 22 pips in 15 minutes. Traders often choose the Euro as the “anti-dollar” to take advantage of capital flows between two of the largest economies.
The Euro zone has a large liquid capital markets which can absorb the huge waves of capital seeking refuge from the U.S. So a weak US ISM Non-Manufacturing number usually leads to a dollar sell-off and a rise in the Euro. Another scenario is when the number released is in line with forecasts and/or unchanged from the previous month, then the US dollar may not react at all to the number.
AUDUSD M5 : 32 pips price movement by USD - ISM Manufacturing PMI :
http://c.mql5cdn.com/3/28/audusd-m5-...ovement-by.png
Overall, an ISM PMI number above 50 indicates that the economy is expanding and is healthy. However, a number below 50 indicates that the economy is weak and contracting. This number is so important that if the PMI is below 50 for two consecutive months, an economy is considered in recession.
PMI’s are also compiled for Euro zone countries by the Markit Group while US regional and national PMIs are compiled by ISM. As you can see, traders have good reason to pay special attention to the important releases from the Institute of Supply Management.
http://youtu.be/Rjoj1DChp_Y
06: DURABLE GOODS
This is the 6th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the Durable Goods report.
Durable Goods Orders (DGO) is an indicator of orders placed for relatively long lasting goods. Durable goods are expected to last more than three years, e.g.: cars, furniture, appliances, etc.
This indicator is important for the market because it gives an idea of the consumers' confidence in the current economic situation. Since durable goods are expensive, the increase in the number of orders for them shows the willingness of consumers to spend their money on them. Thus, the growth of this indicator is a positive factor for economic development and leads to growth of the national currency.
- Release Frequency: monthly.
- Release Schedule: 08:30 EST, the fourth week.
- Source: U.S. Census Bureau of the Department of Commerce.
USDJPY M5 : 47 pips price movement by USD - Durable Goods Orders news event :
Attachment 5412
EURUSD M5 : 32 pips price movement by USD - Durable Goods Orders news event :
Attachment 5413
http://youtu.be/eEQku9p9CJQ
07: CONSUMER PRICE INDEX
The CPI measures the changes in retail prices for goods and services. In the US, it is considered the number one indicator for inflation, and it is one of the main economic reports the Fed uses when determining when to change interest rates.
The consumer price index measures a weighted basket of about 200 commonly purchased goods and services. Each month, the BLS determines the retail prices for these items and compares them to the prices from the previous month to gauge the change in the average cost of living. The data is then grouped into 2 separate indexes.
CPI (W) category is for for wage earners, and clerical workers.
The CPI (U) is for all Urban workers.
The data most economists pay attention to, the main statistics reported in the media, and the information used in this video come from the CPI(U) report.
CPI (W) report for wage earners category, covers about 1/3 of the working population, and is used for things like cost of living adjustments in social security payments.
For each category, an index number is provided that is an ongoing, continuous percent of change in prices from an original start date. For the main categories, this date is 1982 to 1984. In other words, every month they compare prices to what the average prices were in 1982 to 1984, and then add to, or subtract from, the total percentage of change since then.
So again, they add up the prices in the basket of goods, compare it to the prices from 1982 to 1984, generate an index number, and then compare it to the previous index number.
They take the difference between these two numbers, and then divide it by the previous month index number.
The CPI report is issued monthly about 3 weeks after the month being reported.
The report contains one main table, A, and several follow up tables. There are also several short summaries of the data for table A that contain the most important statistics.
The two main statistics reported in the media are the seasonally adjusted percent change for the total index from the previous month, and the non-seasonally adjusted 12 month percent change of the total index.
The first is the one month total change in prices for goods and services throughout the country, adjusted for seasonal factors such as weather conditions. This is the seasonally adjusted inflation rate for one month.
The second is the total change in prices for goods and services for an entire year. This change is not adjusted for seasonal factors, so it more accurately reflects the total change of prices consumers pay. In other words, this is the total inflation rate for a whole year.
In addition, perhaps equally important, is the seasonally adjusted rate of change for all items less food and energy. In this section, items relating to food and energy are removed. Because of the volatility of prices of items in these two categories, some economists feel that by removing these items, one gets a more accurate view of inflation. This category is often referred to as Core CPI.
As I mentioned before, there are several follow up tables at the end of the report. The first table is the change of prices for the entire basket of goods broken down into detail which shows the change of price for individual sections, sectors and commodities.
The 2nd table is the same thing, only the prices and index numbers have been seasonally adjusted.
The third table is the change of prices broken down by different areas.
On table worth mentioning is table 7- the chained consumer price index. This report attempts to take into account substitutions consumers make when prices change in the regular CPI basket of goods ...
http://youtu.be/eCU_M0_ysMk
08: CONSUMER CONFIDENCE INDEX
----------------------
CCI
This index is an attempt to measure consumer optimism. It is calculated since 1967. Its base value is 100. The index is calculated based on the monthly survey of 5,000 families for a number of questions:
- family's financial situation as compared to the previous period;
- The expected financial situation of the family during the year;
- assessment of business conditions in the economy during the year;
- estimate of the expected unemployment and economic recession;
- assessment of home shopping (clothes, furniture, etc.);
The index has a moderate impact on the market because it can fail to reflect the real state of the economy. However, it is traditionally used for predicting trends in employment and the general state of the economy. Growth of the index is a good factor for the national economy and leads to the growth of the dollar.
- Release Frequency: monthly.
- Release Schedule: 10:00 EST, after the 20th of each month.
- Source: the NY-based Conference Board.
----------------------
Attachment 5535
Attachment 5536
Attachment 5537
http://youtu.be/rtsWVUAW7IM
09: INDEX OF CONSUMER SENTIMENT
This is the 9th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover The University of Michigan's Index of Consumer Sentiment.
University of Michigan Consumer Confidence Index
University of Michigan Consumer Confidence Index is the survey of consumers' confidence in the current economic situation. The survey is conducted by the University of Michigan USA. It analyzes the desire of consumers to spend their money. The index is a leading indicator of consumer sentiment.
It has a limited impact on the market. Growth of the index leads to the growth of the dollar.
- Release Frequency: twice a month.
- Release Schedule: 10:00 EST, the second week of the month (preliminary) and in two weeks (final).
- Source: University of Michigan.
Attachment 5705
Attachment 5706
Attachment 5707
http://youtu.be/0Wq6DHEuiCw
