Posts Tagged: futures contract

 

The last time large speculators were as aggressively buying silver as last week was September 1997. The net long non-commercial positioning in Silver futures, according to the CFTC rose almost 22,000 contracts last week to a 3-month high (which is closing in on the ‘longest’ since 2005). Gold, not be out-precious’d also saw major buying. Net speculative longs in gold added over 45,000 contracts – the most since July 2005 - lifting net long positions to their highest in 3 months. Perhaps, just perhaps, as Alhambra’s Jeffrey Snider notes, this is due to Yellen putting the ‘dollar’ back on suicide watch.

 Large speculators increased Silver net long position to $4.4bn from $2.4bn notional.

 Large speculators increased their net long gold exposure to $14.8bn from $9.2bn notional.

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I think more than anything it has to be discipline. Because as important as finding a suitable methodology, developing a strategy, sound risk management, and position sizing is, it will be for nothing if you don’t have the discipline to consistently execute it and follow your rules.

Discipline is an integral part of all trading, whether systematic or discretionary, day trading or buy-and-hold, across all asset classes. I don’t believe you can be consistently successful without it.

Risk control based on risk per trade, risk control based on sector, risk control based on total portfolio.

You must know how much you can lose on a given trade, and the maximum loss to your entire portfolio at any one time. Only then can you take the necessary measures to manage these risks.

Almost equally important is correct trading psychology. Being able to accept trades that do not work. Staying focused and strong in the complete uncertainty of trading.

Because even the best trading system will have losing periods and this is when you need to remain discipline and continue executing your trades.

A trader must have many different ingredients to be successful in trading, but what is absolutely critical is that you must love the type of trading you do.

Many people think they have a passion for trading but the reality of trading; watching charts, managing risk all day, is not as exciting as many believe. If you are a day trader then you must actively enjoy this process.

If not, you must find another form of trading (or profession) that suits your style. That might be swing trading, automated trading, systems trading, whatever. But what you must have is passion!

 

1.  Creating a trading plan forces the trader to select a trading style. Will you be a day trader, position trader, or long term trend follower? You have to choose.

2.  You will have no choice but to do your homework, study charts, and read the books of other traders who made money in the markets, and discover what works.

3.  Entries will become crystal clear when you see them because you will know exactly what you are looking for.

4.  You will learn to look for what the market is offering, and not become overly obsessed with one stock, commodity, currency, or market direction.

5. You will know exactly when it is time to get out of a trade whether you are stopped out or use a trailing stop. (You may even have a price target).

6.  A trading plan should stop you from over trading because it will limit you in your entries by giving you specific parameters.

7.  You will easily be able to keep track of your trades and understand why they win or lose.

8.  It will enable you to focus like a laser on trading.

9.  A good trading plan will convert you from a gambler to a casino operator with the odds on your side.

10.  The only way to be a great trader is to have a great trading plan.
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2 Ways to Fail at Trading

20 May 2015 - 19:51 pm
 

Misunderstanding how trading works. Trading is a game of probabilities. No matter what methodology you are using—fundamental, macro or technical; highly quantitative, intuitive, seat of pants, or blend; long term, short term, daytrading—at the end of the day, the expected value of your trades has to be positive, or you aren’t going to make money. There is no free lunch. Though you may get lucky (or unlucky) on a set of trades, over a large set of trades, the Law of Large Numbers rules with an iron fist. There is no way to “game” the system. You can’t take small trades with tiny risk, you can’t sell time premium, you can’t find some magic technical pattern. Yes, all of these things can be part of a working methodology, but that methodology has to have a positive expectancy. To put it simply, it has to work. (Now, you can see that points 1-4 are really basically the same point!)

 Be overconfident. Markets punish hubris and overconfidence with remarkable consistency. (Victor Niederhoffer has written poignantly on this subject.) Overconfidence can hit in many ways. Industry statistics show that most small trading accounts lose money, so, you have to ask yourself, why will you be different? (Hint: answers like “I have a passion for markets. I was successful in this business or this sport. I’m a driven, detail-oriented person,” are probably not strong enough answers. Dig deep. Why will you succeed where so many others have tried and failed?) Overconfidence can creep in in other ways too. After a long string of winning trades, some traders are tempted to get more aggressive and increase their risk… and now they are trading too big, so bad things happen. There’s a sweet spot here—you have to have a degree of confidence, you can’t be afraid, but you have to stay humble. If you don’t, the market will make you humble, one way or another.

Traders warn on gold liquidity

19 May 2015 - 11:00 am
 

A few years ago London’s precious metals traders would arrive at their desks to find the phones flashing. On the other end of the line were rival banks looking to buy and sell gold. Today, the trading floors are a lot quieter.

Not only is most trading screen-based but there has been a decline in bank-to-bank activity — the anchor of the over-the-counter (OTC) bullion market — as many institutions have scaled back or exited commodities.

This has made the gold market more frenetic and pushed up the costs of hedging and doing larger trades, according to market participants.

“If you’re just transacting in small sizes then probably you have benefited from the changes as you can transact directly through a bank’s electronic platform,” says one veteran trader.

“The issue is if you want to transact in a decent size, which used to be 100,000 to 200,000 ounces. That has become harder to get away with without influencing the price unduly.”

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1.  There were four gross speculative position adjustments in the Commitment of Traders reporting week ending My 12.  The gross short euro position was reduced by 17.9k contracts.  It was the third consecutive decline.  It stands at 222.4k contracts now, almost a 50k reduction since peaking in late-March.  The gross short yen position was cut by 11.6k contracts,  about three-quarters of what was added in the prior week.  There are still 61.4k short contracts in speculative hands.  Both the gross long and short Mexican peso positions were adjusted by 10k contracts or more.  The longs grew by 10k contracts to 34k, while the gross shorts were cut by 13.1k contracts, leaving 61.1k.  

2.  The clear pattern among speculators was to reduce gross short currency futures positions.  The only exception was sterling, where the short position rose by 9.2k contracts to 68.3.  The gross short sterling position in the second largest behind the euro.  It is rather surprising given the post-election euphoria.   The gross longs were mixed, with euros, yen, and Canadian dollars pared.  However, these position adjustments paled in comparison to the changes of the gross shorts.  

  1.   Speculators extended the Swiss franc and Australian dollars net long positions.  In both cases, it was more a reflection of shorts covering than new longs being establish.  
  1.  The net long speculative light sweet crude oil position as shaved by 5.5k contracts to 320.2k. Longs were cut by 18.3k contracts (to 512.4k), and the shorts were cut by 12.8 contracts (to 192.2k). 

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You wanna be right? Or make money?

16 May 2015 - 19:15 pm
 

We all have ego. Everyone likes to be right, likes to be seen as intelligent, and likes to be a winner. We all hate to lose, and we hate to be wrong; traders, as a group, tend to be more competitive than the average person. These personality traits are part of what allows a trader to face the market every day—a person without exceptional self-confidence would not be able to operate in the market environment.

Like so many things, ego is both a strength and a weakness for traders. When it goes awry, things go badly wrong. Excessive ego can lead traders to the point where they are fighting the market, or where they hold a position at a significant loss because they are convinced the market is wrong. It is not possible to make consistent money fighting the market, so ego must be subjugated to the realities of the marketplace.

One of the big problems is that, for many traders, the need to be right is at least as strong as the drive to make money—many traders find that the pain of being wrong is greater than the pain of losing money. You often have minutes or seconds to evaluate a market and make a snap decision. You know you are making a decision without all the important information, so it would be logical if it were easy to let go of that decision once it was made. >> Read More

 

Having lost its mantle as largest economy in the world to China… and world’s biggest oil importer (again to China), ‘exceptional’ USA appears to have just lost its Number 1 status in financial market depth to China also

 China’s Financial Futures Exchange CSI-300 futures contract has now traded more on average than the massively liquid S&P 500 e-mini contract for the last month…

 

Of course, with millions of new retail trading accounts every week in China, we suspect this ‘false dawn’ of activity will not be quite as exuberant as we have seen for 6 months.

 

Charts: Bloomberg

 

One of the Chinese funds reckoned to be behind a precipitous fall in the price of copper at the start of the year has not followed its peers and closed its bearish bets on the industrial metal.

Chaos Ternary Futures, a unit of Shanghai Chaos, remains the biggest holder of short contracts on the Shanghai Futures Exchange, with 24,679 contracts, equivalent to 123,395 tonnes of the red metal, up from 9,996 contracts at the beginning of the year. Short contracts are bets that the price will fall.

The January sell-off highlighted the power of Chinese funds in global commodities markets. They helped push the metal down to a five and half year low of $5,400 a tonne, using a period of weak demand before Chinese new year to execute their trade.

However, the copper price has rebounded strongly since then. Boosted by a weaker US dollar and a number of supply disruptions, which have hit output at several of the world’s biggest copper mines, it has risen 19 per cent since January.

On Tuesday, copper for delivery in three months on the London Metal Exchange was trading up $43 at $6,424 a tonne.

>> Read More

 

That will be six years and two months, then.

The UK’s central bank has kept borrowing costs on hold at 0.5 per cent, having now not changed the benchmark rate since March 2009.

The UK economy has grown for nine consecutive quarters, on a quarter on quarter basis, although in the three months to March the rate of expansion slowed to an unexpectedly low 0.3 per cent. Unemployment has also dropped to 5.8 per cent, which is far below the 8.4 per cent it reached in December 2011.

That means City economists are expecting borrowing costs to rise sooner rather than later.

But consumer price inflation has also stalled to zero, thanks to sharply lower oil prices and a supermarket price war.

And the risk of prices falling, which would dissuade people from buying cars or washing machines in the belief they will be cheaper in future, has been enough to hold the BoE back from raising rates this month.

Separately, the BoE, which pumped liquidity into the financial system during the credit crunch in January 2009 by buying securities such as UK government bonds, committed, as usual, to maintaining this pile of purchased assets at £375bn.

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Technically Yours,
Team ASR,
Baroda, India.