Posts Tagged: futures contract

Trader Types and Personalities

29 July 2014 - 14:09 pm
  • Scalpers
    • High energy, short attention spans.
    • Usually former athletes, tennis and hockey players make the best traders.
    • Able to play both offense and defense simultaneously, and able to think a few steps ahead of the game.
  • Spreaders / Option Traders
    • Quick and flexible thinkers, able to look at numbers and figure risk and value instantaneously.
    • Not in the market to take risk, methodically search for mathematical anomalies and lock in profits immediately.
  • Position Traders
    • Energy level almost nonexistent.
    • Put on passive positions, ride the winners, cut losers.
    • As a position trader, your brains are working all the time, and you keep looking for an informational edge that might drive the market one way or the other.

1. There were three significant position adjustments (more than 10k contracts) in the latest Commitment of Traders report covering the week ending July 22. There was a 24.2k contract jump in the gross short euro position to 147k contracts. This is the largest gross short position since September 2012. Gross long sterling positions were culled by a little more than 14k contracts to just under 72k. The gross long peso position grew by a 12k contracts to almost 99k. Of the remaining 11 gross positions we track, ten changed by less than 4k contracts. 

2. Although weekly position adjustments have been small, net positions are significant. The net short euro position of almost 89k contracts is the largest since late-2012. The almost 54k net short yen contracts are the least since late May. The net long sterling position of 27.5k contracts is the smallest since late March. The net Swiss franc position of 7.4k contracts is the largest since 2013. Speculators are long a net 20.6k Canadian dollar futures contracts, and that is the largest since February 2013.

3. Of the seven currency futures we track, the gross long position was generally added to in the last reporting period. The exceptions were the euro that saw a small liquidation (1.4k contracts) and sterling, which as we noted above experienced a large decline (14.2k contracts) in gross longs. There was not a clear pattern among the gross short positions.

4. The net short 10-year Treasury bond futures was reduced to 38.2k contracts from a net short 53.6k contracts the previous period. However, this does not reflect fewer gross shorts. To the contrary, the gross short position increased by 26.4k contracts to 505.6k. The gross longs stuck to their guns and added almost 42k contracts to 467.4k. The reduced net short position was the result of new longs were added to more than new shorts.

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4 Types of Problems For Traders

24 July 2014 - 18:33 pm

1) Problems of training and experience - Many traders put their money at risk well before they have developed their own trading styles based on the identification of an objective edge in the marketplace. They are not emotionally prepared to handle risk and reward, and they are not sufficiently steeped in markets to separate randomness from meaningful market patterns. They are like beginning golfers who decide to enter a competitive tournament. Their frustrations are the result of lack of preparation and experience. The answer to these problems is to develop a training program that helps you develop confidence and competence in identifying meaningful market patterns and acting upon those. Online trading rooms, where you can observe experienced traders apply their skills, are helpful for this purpose.

2) Problems of changing markets - When traders have had consistent success, but suddenly lose money with consistency, a reasonable hypothesis is that markets have changed and what once was an edge no longer is profitable. This happened to many momentum traders after the late 1990s bull market, and it also has been the case for many scalpers after volatility came out of the stock indices. Here the challenge is to remake one’s trading, either by retaining the core strategy and seeking other markets with opportunity or by finding new strategies for one’s market. The answer to these problems is to reduce your trading size and re-enter a learning curve to become acquainted with new markets and methods. Figuring out how you learned the markets initially will help you identify steps you need to take to relearn new patterns. 

3) Situational emotional problems - These are emotional stresses that are recent in origin and that interfere with decision making and performance. Some of these stresses might pertain to trading, such as frustration after a slump or loss. Some might stem from one’s personal life, as in a relationship breakup or increased financial pressures due to a new home or child. Very often these problems create performance anxieties by putting the making of money ahead of the placing of good trades. The answer to these problems is to seek out short-term counseling to help you gain perspective on the problems and cope with them effectively. 

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Making money in the financial markets is not only challenging but just surviving an account blow up is also a win for many new traders. There is one thing that ultimately determines your success in the markets. It is not your stock picking skills, your trend following or even trading a robust method. The dividing line between the winners and the losers in trading and investing is risk management. If you trade all in and risk it all over an over you will eventually blow up your account, and the funny thing is that it will likely be on your ‘can’t miss’ trade that is just way to obvious to everyone and is a crowded trade. Traders that believe have 10 losing trades in a row are impossible will discover it is very possible. Each trade should be large enough to return enough to make it worth your while, but small enough to make it inconsequential to your results in the long term. Trading small not only eliminates the financial risk of account ruin that is ever present in a market environment that is not conducive to your methodology but small risks also keep your logical brain in control of your trading and your emotions on the side lines.Nothing is more painful in my opinion than to build up an account during a great string of wins only to give it back with a string of losses in a different market environment. Small bets and staying out when he market waves get wild is a great formula to avoid big draw downs. You can still win big when you are right by letting a winner run but always lose small when you are wrong. The bet size on each trade will make or break ever trader at some point usually sooner than later. >> Read More


Britain, as the rest of the world, is facing a water crisis, leading some experts to predict that by the end of the decade H2O will be traded on financial markets like other finite commodities such as crude oil, or iron ore.

Although the Environment Agency says the past six months have been the wettest on record, summer hosepipe bans remain a possibility, partly because of historic inconsistencies in infrastructure investment. However, changing weather patterns and rising demand for water resources spell a potentially more nightmarish scenario within the next 20 years.

Britain is not alone in facing what could become a catastrophic deficit in fresh water. Unless radical steps are taken to ensure the global economy has enough water to meet all our needs then draconian measures such as rationing cannot be ruled out in the future.

Globally, the problem of water scarcity is growing at an alarming rate. By 2050, experts predict a 55pc increase in the amount of water required to meet demand from rising populations, food production and industry. To avoid serious shortfalls the world will need to invest an estimated $1.8 trillion (£1.05 trillion) over the next 20 years that could ultimately deliver $3  trillion in benefits for the global economy, according to estimates by the United Nations.

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Now, let’s get practical. Answer the following five questions, and you have a trend following trading system:

1. What market do you buy or sell at any time?
2. How much of a market do you buy or sell at any time?
3. When do you buy or sell a market?
4. When do you get out of a losing position?
5. When do you get out of a winning position?

Said another way (Bill Eckhardt inspired):

1. What is the state of the market?
2. What is the volatility of the market?
3. What is the equity being traded?
4. What is the system or the trading orientation?
5. What is the risk aversion of the trader or client?

You want to be black or white with this. You do not want gray. If you can accept that mentality, you have got it.


 China’s central bank has approved the launch of the country’s first iron ore and thermal coal swap contracts, two industry sources said on Monday, giving industry participants new financial tools to hedge the risk of volatile prices.

China is the world’s top iron ore and coal consumer. The launch of the two swap contracts marks China’s latest effort to gain influence over the benchmark pricing of a key commodity.

The move could pose a threat to the cash-settled iron ore and thermal coal swaps contracts cleared by the Singapore Exchange and CME Group. >> Read More


1. There were two significant position adjustments in the latest CFTC Commitment of Traders report for the week ending July 8.   The first was a 13.3k-contract reduction of gross sterling longs.  AT 86.6k contracts still, it is still the largest gross long position among the currency futures.  In fact, it remains larger than the combined gross long position of the euro, yen and Swiss franc.  The second  was a 13.5k contract increase in gross long Canadian dollar futures to 58.2k contracts.   This is the largest gross long Canadian dollar position in nearly 18 months.    The gross long position has more than doubled since late May.  These late longs are vulnerable as we saw before the weekend as the Canadian dollar sold off despite a jobs report that saw the most full-time positions increase in five months. 

2.  The 9.9k contract cut of gross long speculative Australian dollar position to 66.7k contracts was just shy of our subjective 10k threshold.  This is a modest pullback from the 15-month high seen in the prior period.  Gross long yen positions were cut by 7.6k contracts to stand at 11.2k.  This is the third lowest in ten years and the other two were recorded this year.    In terms of positioning, what would cause the greatest distress is for sterling-yen to sell-off.

3.  There was a clear bias in cutting longs currency futures positions.  The Canadian dollar was the sole exception. 

4.  During the five day reporting period, the US 10-year yields moved from 2.54% to 2.69% and then fell back to 2.55%.  In the futures market, it was the gross longs that felt the pain.  They were cut by 27.8k contracts and stood at 376.7k contracts at the end of the reporting period.  The shorts were virtually unchanged at 473.4k contracts

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Many times, good traders make the right trade but still lose, but it is okay because they will win in the long term because their method is tested, their risk is managed, and their mind set is right for long term trading success. They have developed the skills of a successful trader. Other times a new trader with no skills makes a trade based on a hunch and wins big, the danger is that the new trader will confuse luck with skill. The delusion begins with winning on a few trades, the new trader trades bigger, and bigger, until their luck runs out and they are wiped out. We need to all keep a good understanding of whether we traded will the right skill set or we just got lucky.

Traders with skill have large gains after 100 trades and are relatively quiet, traders that were lucky have huge gains after a few trades and are very loud, then very quiet for the next few trades that usually bring their account to zero.

Traders with skill risk 1% to 2% of their trading capital per trade and win in the long term, traders that are just lucky risk the majority of their account for a few big wins in the short term but lose in the long term when their luck runs out.

Traders with skill use a successful method with different stocks, currencies, commodities, future markets while traders with just luck are only successful with one lucky pick in one of those markets and when its up trend ends their winning streak ends. >> Read More

Universal Lessons

11 July 2014 - 15:50 pm

What follows are some of the most well-known investment disciplines along with a lesson or two from each that every investor should be able to use in their own strategy.

Focused Value Investing: Buying stocks that are underpriced in relation to their intrinsic value.
Lesson(s): It’s important to invest from the perspective that stocks represent an ownership interest in a business. You get your share of corporate profits from the stocks you own and over the long-term the value of the business should be reflected in the stock price.

Quantitative Investing: Using a systematic, mathematical approach to make buy and sell decisions within a portfolio.
Lesson(s): A rules-based, objective approach to investing is a great way to take out the emotions which can trip up so many investors and introduce biases into the investment process. Automating good decisions can reduce costly mistakes.

Technical Analysis: Studying charts, past prices and volume for security and market analysis by using patterns.
Lesson(s): An understanding of the history of the financial markets is extremely important to be able to define your tolerance for risk and gain the correct perspective on what couldhappen in terms of gains and losses. And at the end of the day markets rise and fall because of supply and demand.

Index Investing: Owning the entire market/index at a low cost.
Lesson(s): Beating the market is hard. Keeping your expenses, activity and turnover to a minimum is a prudent way to earn your fair share of the market’s return over time. >> Read More

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Our site is objectively in letter and spirit, based on pure Technical Analysis. All other content(s), viz., International News, Indian Business News, Investment Psychology, Cartoons, Caricatures, etc are all to give additional ambiance and make the reader more enlightening. As the markets are super dynamic by very nature, you are assumed to be exercising discretion and constraint as per your emotional, financial and other resources. This blog will never ever create rumors or have any intention for bad propaganda. We report rumors and hear-say but never create the same. This is for your information and assessment. For more information please read our Risk Disclaimer and Terms of Use.

Technically Yours,
Team ASR,
Baroda, India.