Posts Tagged: futures contract

The Legendary Turtle Traders

20 April 2015 - 15:53 pm
 

Have you ever heard of the legendary Turtle traders? Millionaire trader Richard Dennis set off to find out if traders were just born to trade, or if they could be trained to be successful in the markets from scratch. The answer? If they could follow rules they could be successful.

“I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.” -Richard Dennis: Founder of the ‘Turtle Traders’ quoted from the book Market Wizards:

The Turtle system proved that the traders that followed the rules went on to be millionaires and to manage money professionally.

Markets – What to buy or sell

  • The Turtles traded all major futures contracts, metals, currencies, and commodities.
  • The turtles traded multiple markets to diversify risk.

Position Sizing – How much to buy or sell

  • Turtle position sizing was based on a markets volatility using the 20 day exponential moving average of the true range.
  • The Turtles were taught to trade in increments of 1% of total account equity,

Entries – When to buy or sell >> Read More

 
1.  Position adjustments were mostly minor in the CFTC reporting week ending April 14.   Mexican peso futures accounted for the biggest adjustments.  The net position swung from short almost 23k contracts to being long 8.4k, for the first time since early last October.   This was a function of 21.3k new longs being established while the shorts covered 10k contracts.  Technically the dollar appears poised to retest the MXN15.50 area, putting the late longs at risk.
2.  Even though the gross position adjustment were small, speculators added to the gross long and short positions in the euro (5.8k and 2.9k respectively) and the Canadian dollar (0.9k and 1.5k respectively).  While they added to the gross long yen positions (1.5k), the gross short yen positions were essentially unchanged (less than 50 contracts).  Speculators continued to move to the sideline on sterling with both longs and shorts parted (3.6k and 1.9k respectively).

3.  The speculative net short 10-year Treasury was pared by 50k contracts to 112k.  This was more a reflection of new longs being established (48.1k) rather than shorts covering (-2.4k).
4.  The speculative net long light sweet crude oil futures grew by 30.1k contracts to 282.2k.  The longs rose by 7.1k contracts to 528k.  A little more than 23k short contracts were covered, leaving 245.8k.
week ending Apr 14     Commitment of Traders
               (speculative position in 000′s of contracts)
Net Prior Gross LongChangeGross Short Change
Euro-212.0-215.045.35.8257.62.9
Yen-23.1-24.554.81.577.90.0
Sterling-36.0-34.334.0-3.670.0-1.9
Swiss Franc0.20.112.2-0.512.1-0.6
C$-30.6-30.023.00.953.61.5
A$-42.4-40.355.1-0.997.51.3
Mexican Peso8.4-22.963.521.355.2-10.0

 

Banks-Honeymoon Over

19 April 2015 - 17:47 pm
 
India’s banks have been on honeymoon in FY15: strong performance (+50%, 20% outperf), bouquets of macro gains (rates, inflation, currency), and planning for the eco recovery (Three trades – one done, two to go). But the reporting Q will be the settling-in grind that follows a honeymoon: modest earnings/loan growth (12%,11% resp), asset quality pressures and muted guidance. Expect a good marriage for India’s banks and the market (stay OW) but, like most marriages, it won’t be as exciting as the honeymoon.   
 Earnings steam will be modest — It’s going to be a slow earnings Q: +12% profits (+9% pre-prov ex trading), modestly lower than the prev q (13%) and largely driven by private banks (+18%; +4% for PSU’s). While margins should hold (rate cuts only post Q), trading gains could surprise (albeit bond yields flat over the Q). But slack loans, muted fee growth & still high credit costs – earnings won’t be exciting.  
 Growth/quality will define the Q, and the settling in — India’s loan growth challenge (Curious case of credit) will stand short in 4Q: at sub 10% levels, will be a BS drag. More importantly, expect asset deterioration to remain high (PSBs: 5.5%), and in sync with the prev Q (which disappointed). But shouldn’t be ‘worst case’ (or disappoint as much as the last Q): should reflect a bottoming of the asset quality cycle (rather than worsen, or improve). Whatever it does, it will define the Q. 
 Keep an eye out for — There will be surprises: look out for 1) trading gains: positive, in spite of limited yield shifts; 2) PSU wages: wage hikes (15%), pension charges (lower yields) 3) high restructurings 4) stock-specific: HDBK (growth pickup), HDFC (investment gains), ICBK (low guidance & expectations), SBI (Asset quality – given three strong Qs). On surprises, this Q should have its share. 
 Honeymoon over, settling in now, and looks like a good marriage ahead — The Q will fall short of honeymoon expectations, and the current settling in phase will seem damp on headlines & underlying. That said, India’s banks – while starting slow, should have a sustained and extended run ahead.

The Three pillars of trading

18 April 2015 - 12:23 pm
 

Money Management: You must make your trades as fixed as possible. Trade with the same risk, capital, units, percentage, and in the same type markets to manage risk most effectively.

Methodology: Choose a method that works for you and your personality. (Dow Theory, technical indicators, patterns, price and volume, etc) Once you have a methodology to your trading, test it in the real world, in real time, either with micro trades or paper trade. You need a sample size to judge its efficacy.

Trader Psychology: Manage your hope, greed, fear, and pain to stay in the game.

 

While the Chinese are long to bed, futures continue to trade on their exuberant stock market… and it’s going south in a hurry. As we noted earlier, the catalyst appears to be a regulatory decision to increase the number of ‘shortable’ securities (and follow-through from PBOC’s day prior demands of brokers to monitor margin trading). Both of these actions were taken as ‘signals’ that policymakers may be getting nervous about the ebullient wealth creation… Chinese stock futures are now down almost 7% – the 2nd biggest drop in 7 years

It appears the 4% rally post-crappy-GDP print was a little too far too fast.. >> Read More

 

No apparent headlines as the European close looms and DAX Futures just plunged on heavy volume…

 

 US equities are rolling over on this as-yet-unexplained weakness..

 
There were two significant (more than 10k contract change in gross currency position) adjustments in the CFTC reporting week ending April 7.  The gross short euro position was trimmed by 13.6k contracts, leaving 254.7k.   The gross short Australian dollar position increased by 16k contracts to 96.2k.  The gross short Aussie position is the second largest after the euro among the currency futures we track.   Nine of the fourteen gross positions track were adjusted by less than 4k contracts.
2. Positioning adjustment fell into one of two groups.  The first is about reducing exposures.  Gross long and short positions fell in the euro, Swiss franc, and Mexican peso.  The second was about increasing exposures.  Gross long and short positions rose for the yen, sterling, Canadian and Australian dollars.
3.  The speculative net short 10-year Treasury futures position increased by 48k contracts to 162k.   This was a function of both long cutting (34.1k contracts to 329.4k) and shorts growing (14.5k contracts to 491.8k).
4.  Speculators hold 252k net long light sweet crude oil future contracts.  This is a 25.3k contract increase over the past week.  The actual increase in gross long positions accounts for 20% of the net adjustment, with short covering accounting for the lion’s share.
week ending Apr 7     Commitment of Traders
               (speculative position in 000′s of contracts)
Net Prior Gross LongChangeGross Short Change
Euro-215.0-227.039.4-2.3254.7-13.6
Yen-24.5-23.953.38.977.89.4
Sterling-34.3-36.637.62.571.90.2
Swiss Franc0.10.712.7-0.912.6-0.3
C$-30.0-29.622.13.352.13.7
A$-40.3-24.455.90.196.216.0
Mexican Peso-22.9-30.342.1-1.165.1-8.5

10 Things Traders Must Quantify

10 April 2015 - 16:15 pm
 
  1. What exactly is your entry signal going to be? What technical indicators will trigger you to enter a trade?
  2. What will the perceived edge for your entries be based on? Will you quantify your entries edge with back testing of through trading principles?
  3. Will you wait for an initial move in the direction of your trade entry or will you enter based on a technical indicator trigger?
  4. How will you trade in different market environments and trends? Will you have better odds of success buying dips in bull markets and shorting strength in down trends?
  5. What is the risk/reward ratio for the trade you want to take? How much are you willing to risk if the trade is a loser? How much could you make if you are right? Is it worth it?
  6. What are the probabilities that this entry will be a winning trade based on past historical price data and charts? With the winning percentage in mind how big do the winners have to be and how small do you have to keep the losers for the trading system to be profitable?
  7. Where should your stop loss be? At what price level will your entry be wrong and signal you to exit the trade with a loss?
  8. How big of a position size should you take based on your stop level and total capital you are willing to risk on this one trade?
  9. Is your position size small enough to enable you to hold the trade without emotions effecting your ability to follow your trading plan?
  10. When you open this trade in addition to your other positions, how much of your total trading capital is now exposed to loss if all trades went against you at the same time?

12 Signs You’re in a Bad Trade

07 April 2015 - 16:27 pm
 
  1. Your entry is based on your opinion not a valid signal.
  2. Your bet is that a trend will change with no reason behind the bet.
  3. You are entering out of greed after a big move.
  4. If you are wrong about the trade you will suffer a huge loss.
  5. You enter a trade with no stop loss.
  6. You enter a trade with no exit strategy to bank any profits.
  7. You enter based on someone’s opinion.
  8. You enter a trade because you are bored.
  9. You are trading a market you have done zero back testing or chart studies on.
  10. You are trading futures or option contracts you do not understand.
  11. You are trading with confidence even though you have zero confidence.
  12. You have no idea what the hell you are doing.
 
1.  There was only one significant (10k+) gross position adjustment among speculative accounts, and that was a 16.7k cut in the gross short yen positions.  As of March 31, 68.3k speculative gross short yen contracts remain open, which is the smallest since last July.  In early December 2014, there were 153k gross short contracts.  This has seen the net short position fall sharply.  In the last week alone it was nearly halved to 23.9k contracts (from 45.9k).  
2.  The net speculative Swiss franc position swung back to a small long (0.7k contracts).  Throughout the month of March, it has been back and forth, long and short on alternating weeks.  Over the past week, it was more a function of shorts covering (3.6k contracts) than new gross longs being established (1.1k contracts).  
3.  The overall pattern among the speculative participants in the futures market is to reduce exposures.  Of the 14 gross positions we track, all but four were reduced.  The exception were  in the small increases in gross yen (5.3k contracts),  Swiss franc (1.1k contracts), Australian dollar (3.7k contracts) and the Mexican peso (8.2k contracts). 
4.  The speculative net short US 10-year Treasury note futures position fell to 114k contracts form 180k.  This was more a function of short covering (52.9k contracts) rather than new speculative longs being established (13.1k contracts).  
5.  The speculative net long light sweet crude oil futures increased by 19.8k contracts to 226.7k.  Speculators reduced gross short positions by 17.4k, leaving 289.3k contracts. The gross long position edged 2.4k contracts higher to 516.0.   

È

week ending Mar 31       Commitment of Traders    
               (speculative position in 000′s of contracts)   
 Net Prior Gross LongChangeGross Short Change  
Euro-227.0-221.041.7-8.4268.3-2.8  
Yen-23.9-45.944.45.368.3-16.7  
Sterling-36.6-38.635.1-0.871.8-2.7  
Swiss Franc0.7-4.013.71.113.0-3.6  
C$-29.6-32.718.8-0.448.4-3.6  
A$-24.4-28.455.83.780.1-0.3  
Mexican Peso-30.3-41.143.38.273.6-2.6  
      

Reader Discretion & Risk Disclaimer

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.