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Trading Styles in Futures: Concepts for Futures Traders

Posted on by Ilan

Futures trading is a dynamic and complex field that offers numerous strategies to accommodate different trading styles and objectives. Futures traders must understand the various approaches and tools available to them to make informed decisions and optimize their trading performance. This article provides a detailed exploration of several key trading strategies and concepts in futures trading, including swing trading, momentum trading, calendar spread futures trading, butterfly spread, high-frequency futures trading, crack spread, statistical arbitrage, and the impact of low margin rates on futures trading.

Trading Styles in Futures

1. Swing Trading in Futures

Definition and Overview

Swing trading is a popular trading strategy in the futures market that involves holding positions for several days or even weeks to capitalize on short- to medium-term price movements. Unlike day trading, where positions are closed within the same trading day, swing traders aim to capture the “swings” in the market—short-term price fluctuations caused by market volatility.

How Swing Trading Works

Swing traders typically use technical analysis to identify potential entry and exit points. They look for patterns such as head and shoulders, flags, and triangles to predict price movements. Swing traders may also use indicators like moving averages, RSI (Relative Strength Index), and MACD (Moving Average Convergence Divergence) to confirm their predictions.

The key to successful swing trading lies in timing. Traders must be able to accurately predict when a trend will start and end, which requires a deep understanding of market dynamics and the ability to interpret chart patterns.

Advantages of Swing Trading
  • Flexibility: Swing trading allows traders to maintain a regular job or pursue other interests because it does not require constant monitoring of the markets.
  • Lower Transaction Costs: Since positions are held for longer periods compared to day trading, swing traders incur fewer transaction costs.
  • Potential for High Returns: By capturing significant price movements, swing traders can achieve substantial returns over time.
Disadvantages of Swing Trading
  • Overnight Risk: Holding positions overnight exposes swing traders to risks from unexpected market events, such as geopolitical developments or economic announcements, that can lead to significant price gaps.
  • Requires Patience: Swing trading requires patience, as traders must wait for the right market conditions to enter and exit trades.
Best Practices for Swing Trading
  • Use Stop-Loss Orders: To manage risk, swing traders should always use stop-loss orders to limit potential losses.
  • Stay Informed: Swing traders must stay informed about market news and events that could impact their positions.
  • Focus on Liquid Markets: Trading in highly liquid futures markets ensures that positions can be easily entered and exited without significant price slippage.

2. Momentum Trading in Futures

Definition and Overview

Momentum trading is a strategy based on the idea that assets that have been performing well will continue to do so in the near future, while assets that have been underperforming will continue to decline. Momentum traders aim to capitalize on the continuation of existing trends by entering trades in the direction of the momentum.

How Momentum Trading Works

Momentum traders use technical indicators like the Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), and the Momentum Indicator to identify trends and assess their strength. Once a trend is identified, momentum traders enter positions in the direction of the trend, holding the position until signs of a reversal or a slowdown in momentum appear.

Advantages of Momentum Trading
  • Potential for Quick Profits: Momentum trading can generate quick profits if the trader accurately identifies and capitalizes on strong trends.
  • Clear Entry and Exit Signals: Momentum indicators provide clear signals for entering and exiting trades, making the strategy easier to implement for traders who are skilled in technical analysis.
Disadvantages of Momentum Trading
  • High Risk of Reversals: Momentum trading carries the risk of sudden trend reversals, which can result in significant losses if the trader is not quick to react.
  • Requires Constant Monitoring: Momentum traders need to closely monitor the market to act swiftly when trends begin to reverse.
Best Practices for Momentum Trading
  • Trade in Active Markets: Momentum trading works best in highly active markets where trends are strong and persistent.
  • Use Multiple Indicators: Relying on a combination of momentum indicators can help traders confirm trends and reduce the risk of false signals.
  • Set Tight Stop-Losses: To manage risk, momentum traders should set tight stop-losses to protect against sudden reversals.

3. Calendar Spread Futures Trading

Definition and Overview

Calendar spread futures trading, also known as a time spread or horizontal spread, involves simultaneously buying and selling futures contracts on the same underlying asset but with different expiration dates. This strategy is used to profit from changes in the price difference (spread) between the two contracts.

How Calendar Spread Trading Works

In a calendar spread, the trader typically buys a futures contract with a longer expiration date and sells a futures contract with a shorter expiration date, or vice versa. The idea is to profit from the change in the spread between the two contracts as market conditions evolve. The spread can widen or narrow based on factors such as supply and demand, seasonality, or changes in market sentiment.

Advantages of Calendar Spread Trading
  • Reduced Risk: Calendar spreads generally have lower risk compared to outright futures positions because the trader is exposed to the price difference between the two contracts rather than the full price movement of the underlying asset.
  • Lower Margin Requirements: Because the risk is lower, margin requirements for calendar spreads are typically lower than for outright futures positions.
Disadvantages of Calendar Spread Trading
  • Complexity: Calendar spreads can be more complex to manage than simple long or short futures positions, as traders need to understand the factors that influence the spread.
  • Limited Profit Potential: The profit potential in calendar spread trading is generally lower than in outright futures trading because the price movement of the spread is typically smaller than the movement of the underlying asset.
Best Practices for Calendar Spread Trading
  • Monitor Market Conditions: Traders need to stay informed about market conditions that can affect the spread, such as changes in supply and demand or seasonal trends.
  • Use Technical Analysis: Technical analysis can help traders identify opportunities in calendar spreads by analyzing historical spread patterns.

4. Butterfly Spread in Futures Trading

Definition and Overview

A butterfly spread is a neutral options strategy that combines a bull spread and a bear spread. It involves buying and selling options with three different strike prices but with the same expiration date. In futures trading, a similar strategy can be applied using futures contracts.

How Butterfly Spread Trading Works

A typical butterfly spread in futures trading might involve buying one futures contract at a lower price, selling two contracts at a middle price, and buying one contract at a higher price. The goal is to profit from the price of the underlying asset remaining close to the middle strike price at expiration. The strategy profits if the underlying asset’s price is close to the middle strike price and losses are minimized if the price moves significantly in either direction.

Advantages of Butterfly Spread Trading
  • Limited Risk: The maximum loss is limited to the initial cost of setting up the spread.
  • Potential for High Reward: If the market price ends up near the middle strike price, the potential reward can be high relative to the risk.
Disadvantages of Butterfly Spread Trading
  • Limited Profit Potential: While the risk is limited, so is the profit potential, which is capped by the distance between the middle and outer strike prices.
  • Requires Precise Market Prediction: To profit from a butterfly spread, the trader must accurately predict that the market will remain within a narrow price range.
Best Practices for Butterfly Spread Trading
  • Use in Low Volatility Markets: Butterfly spreads work best in markets where volatility is low and prices are expected to remain stable.
  • Monitor Implied Volatility: Changes in implied volatility can affect the pricing of the options or futures contracts used in the butterfly spread, so traders should keep an eye on volatility levels.

5. High-Frequency Futures Trading

Definition and Overview

High-frequency trading (HFT) is a type of algorithmic trading characterized by the use of powerful computers to execute a large number of orders at extremely high speeds. In futures trading, HFT involves placing and executing orders within fractions of a second to take advantage of small price discrepancies in the market.

How High-Frequency Trading Works

HFT firms use sophisticated algorithms to analyze market data and execute trades at lightning speeds. These algorithms are designed to identify and exploit inefficiencies in the market, such as temporary price discrepancies between different exchanges or financial instruments. The profits per trade are usually very small, but the high volume of trades can result in significant overall profits.

Advantages of High-Frequency Trading
  • High Profit Potential: HFT can generate significant profits due to the sheer volume of trades executed.
  • Market Efficiency: HFT contributes to market efficiency by quickly correcting price discrepancies.
Disadvantages of High-Frequency Trading
  • Requires Advanced Technology: HFT requires significant investment in technology and infrastructure, including powerful computers and high-speed internet connections.
  • High Risk: The high speed and volume of trades mean that small errors in the algorithm can lead to substantial losses.
Best Practices for High-Frequency Trading
  • Develop Robust Algorithms: The success of HFT depends on the quality of the algorithms used, so it’s essential to invest in the development and testing of robust trading algorithms.
  • Monitor Latency: In HFT, even milliseconds can make a difference, so traders need to minimize latency in their trading systems.

6. Crack Spread in Futures Trading

Definition and Overview

The crack spread is a trading strategy used in the energy markets, particularly in oil and gas futures. It involves taking positions in the futures of crude oil and refined products like gasoline and heating oil to profit from the price difference (spread) between crude oil and its refined products.

How Crack Spread Trading Works

A typical crack spread trade involves buying or selling crude oil futures while simultaneously selling or buying futures contracts for refined products. The trader profits from changes in the spread between the price of crude oil and the prices of its refined products. For example, if the price of gasoline increases relative to crude oil, the spread widens, and a trader holding a long crack spread position would profit.

Advantages of Crack Spread Trading
  • Hedge Against Refining Margins: For companies involved in refining, the crack spread can serve as a hedge against fluctuations in refining margins.
  • Speculative Opportunities: Traders can speculate on the future direction of the spread based on factors such as seasonal demand, refinery outages, and changes in crude oil supply.
Disadvantages of Crack Spread Trading
  • Complexity: Understanding the relationship between crude oil and its refined products requires specialized knowledge of the energy markets.
  • Volatility: The crack spread can be highly volatile, leading to significant risks if not managed properly.
Best Practices for Crack Spread Trading
  • Stay Informed About the Energy Markets: Traders need to be aware of factors that can affect the supply and demand for crude oil and refined products, such as geopolitical events, weather patterns, and refinery capacity.
  • Use Risk Management Tools: Given the volatility of the crack spread, it’s essential to use risk management tools like stop-loss orders to protect against adverse price movements.

7. Statistical Arbitrage in Futures Trading

Definition and Overview

Statistical arbitrage (stat arb) is a trading strategy that uses mathematical models to identify and exploit price inefficiencies in the market. In futures trading, statistical arbitrage involves trading pairs or groups of futures contracts that have historically shown a statistical relationship, with the expectation that any deviations from this relationship will eventually revert to the mean.

How Statistical Arbitrage Works

Stat arb traders use historical price data and statistical models to identify pairs of futures contracts that are expected to move together. When the price of one contract deviates from its expected relationship with the other, the trader takes a long position in the undervalued contract and a short position in the overvalued contract. The positions are then held until the prices converge, at which point the trader closes the positions for a profit.

Advantages of Statistical Arbitrage
  • Market Neutrality: Because statistical arbitrage involves taking both long and short positions, it is generally market-neutral, meaning it is less affected by overall market direction.
  • Diversification: Statistical arbitrage strategies can be applied across multiple asset classes, providing opportunities for diversification.
Disadvantages of Statistical Arbitrage
  • Requires Advanced Analytical Skills: Implementing a statistical arbitrage strategy requires a deep understanding of statistical methods and access to large datasets.
  • Execution Risk: The success of statistical arbitrage depends on the accurate execution of trades, and small delays or errors can lead to losses.
Best Practices for Statistical Arbitrage
  • Use Robust Statistical Models: The key to successful stat arb trading is the accuracy of the statistical models used to identify trading opportunities.
  • Continuously Monitor Positions: Market conditions can change rapidly, so it’s important to continuously monitor positions and adjust the strategy as needed.

8. What Low Margin Rates on Futures Means for Your Trading

Definition and Overview

Margin is the amount of money required to open and maintain a futures position. It acts as a good faith deposit to ensure that the trader can cover potential losses. Low margin rates mean that traders need to put up less capital to control a larger position in the futures market.

Impact of Low Margin Rates on Futures Trading

Low margin rates can have a significant impact on futures trading by increasing leverage. With lower margins, traders can control larger positions with a smaller initial investment, which can amplify both potential profits and potential losses.

Advantages of Low Margin Rates
  • Increased Leverage: Lower margin requirements allow traders to leverage their capital more effectively, potentially leading to higher returns on investment.
  • Greater Market Access: Lower margins make futures trading accessible to a wider range of traders, including those with smaller account balances.
Disadvantages of Low Margin Rates
  • Higher Risk: While low margin rates increase potential profits, they also increase the risk of substantial losses. Traders need to be careful not to over-leverage their positions.
  • Margin Calls: If the market moves against a highly leveraged position, traders may face margin calls, requiring them to deposit additional funds or liquidate positions at a loss.
Best Practices for Trading with Low Margin Rates
  • Manage Leverage Carefully: Traders should be cautious about over-leveraging their positions and should always have a clear risk management plan in place.
  • Use Stop-Loss Orders: To protect against large losses, traders should use stop-loss orders to automatically close positions if the market moves against them.

Futures trading offers a wide array of strategies and approaches, each with its own set of advantages and challenges. Whether you are engaging in swing trading, momentum trading, calendar spread trading, or any of the other strategies discussed, it is crucial to have a deep understanding of the market dynamics and to implement effective risk management practices. Additionally, the impact of low margin rates cannot be overstated, as they can significantly influence the risk and return profile of your trading activities.

By mastering these strategies and understanding the underlying concepts, futures traders can better navigate the complexities of the market and increase their chances of success. Each strategy requires a unique set of skills and knowledge, and the choice of strategy should align with the trader’s individual goals, risk tolerance, and market outlook.

For more information, click here.

Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

Standard and Poor’s 500 Futures

Posted on by Ilan

Standard and Poor’s 500 futures, commonly referred to as S&P 500 futures, are financial derivatives that derive their value from the S&P 500 Index. The S&P 500 Index itself is a benchmark index composed of 500 of the largest publicly traded companies in the United States, representing a broad spectrum of industries. The S&P 500 futures contract is a key tool for investors, traders, and institutions, allowing them to speculate on or hedge against future price movements of the S&P 500 Index.

These futures contracts are traded on the Chicago Mercantile Exchange (CME) and are among the most actively traded futures contracts in the world. The importance of S&P 500 futures cannot be overstated; they serve as a barometer of market sentiment and are often used to gauge the market’s reaction to economic data, corporate earnings, and geopolitical events.

Standard and Poor’s 500 Futures

The Mechanics of S&P 500 Futures

Contract Specifications

The S&P 500 futures contract (mini) has specific characteristics that traders must understand:

  • Contract Size: The value of the contract is derived by multiplying the S&P 500 Index value by $50. For instance, if the S&P 500 Index is trading at 4,000, the notional value of one futures contract is $200,000 (4,000 x $50).
  • Tick Size: The minimum price movement is 0.25 index points, equivalent to $12.50 per contract.
  • Expiration: S&P 500 futures contracts expire quarterly, on the third Friday of March, June, September, and December.
  • Settlement: The contracts are settled in cash, meaning no physical delivery of assets occurs. Instead, the difference between the contract price and the index level at expiration is paid in cash.

Types of S&P 500 Futures

There are various types of S&P 500 futures contracts:

  1. Standard E-Mini S&P 500 Futures: These are the most commonly traded contracts and are often used by institutional investors.
  2. Micro E-mini S&P 500 Futures: An even smaller contract, at one-tenth the size of the E-mini, introduced to provide an affordable option for individual traders.

Role of S&P 500 Futures in the Financial Markets

Hedging and Speculation

S&P 500 futures play a critical role in the financial markets by allowing participants to hedge their positions or speculate on future price movements:

  • Hedging: Investors with significant exposure to U.S. equities use S&P 500 futures to hedge against potential losses. For example, a portfolio manager holding a large position in U.S. stocks might short S&P 500 futures to offset potential declines in the market.
  • Speculation: Traders speculate on the direction of the S&P 500 Index by taking long or short positions in futures contracts. This speculative activity provides liquidity to the market and helps in price discovery.

Market Sentiment Indicator

S&P 500 futures are often seen as a proxy for market sentiment. The futures market operates nearly 24 hours a day, allowing investors to react to events outside of regular trading hours. For example, if S&P 500 futures are trading lower overnight, it might indicate that the market will open down the next day, reflecting negative sentiment.

Geopolitical Events and S&P 500 Futures

The Iranian-Israeli Conflict: A Case Study

The recent escalation in the Iranian-Israeli conflict serves as a pertinent example of how geopolitical events can impact S&P 500 futures. On April 1, Iranian military commanders were killed in an airstrike on its embassy in Damascus, Syria. In retaliation, Iran launched a series of missile and drone attacks on Israel on April 14. Despite the severity of the situation, the initial market reaction was relatively measured, with S&P 500 futures trading up 0.3%.

Historical Context of Geopolitical Events

Historically, geopolitical events have led to modest selloffs in equity markets, followed by a quick recovery. This pattern suggests that while markets react to geopolitical uncertainties, the long-term impact is often limited unless the event significantly disrupts global economic conditions. For instance, during the Yom Kippur War in 1973, the subsequent OPEC oil embargo caused a severe market downturn, but such instances are rare.

Initial Market Reaction

The initial 0.3% uptick in S&P 500 futures following Iran’s attack on Israel could be seen as a relief rally. Investors may have anticipated a more severe escalation, but the measured response from both Iran and Israel, including Iran’s advance warning and Israel’s successful defense, likely mitigated immediate concerns. This reaction underscores the importance of market psychology and investor sentiment in shaping short-term price movements.

Positioning and Portfolio Strategy

In response to the conflict, investment strategy teams have advocated for a slightly defensive posture across portfolios. This approach reflects a cautious stance, acknowledging the potential for further volatility without overreacting to the initial shock. Maintaining such a posture allows investors to manage risk while remaining flexible to adjust their positions as the situation evolves.

The Broader Implications of Geopolitical Risks

Energy Markets and Inflation

One of the critical concerns during geopolitical conflicts, especially in the Middle East, is the impact on energy markets. The Straits of Hormuz, a vital chokepoint for global oil shipments, could become a flashpoint in the conflict, potentially disrupting global energy supplies. Such a disruption would likely lead to higher oil prices, contributing to inflationary pressures worldwide.

However, the U.S. is better positioned to withstand energy shocks today than it was during the 1970s. The U.S. has become the world’s largest producer of oil and natural gas, reducing its dependence on foreign energy. As a result, while a significant escalation in the conflict could drive up energy prices, the systemic risk to the U.S. economy may be lower than in previous decades.

Interest Rates and Fixed Income Markets

Geopolitical events also affect fixed income markets, particularly U.S. Treasury yields. In times of crisis, investors often seek the safety of U.S. Treasuries, leading to lower yields. However, this dynamic can be complicated by inflationary pressures stemming from higher energy prices, which might push yields higher. The outcome depends on the balance between risk aversion and inflation expectations.

S&P 500 Futures in a Full-Blown War Scenario

If the Iranian-Israeli conflict were to escalate into a full-blown war, the implications for S&P 500 futures would be significant. The immediate reaction would likely be a sharp selloff in equity markets as investors flee to safety. The extent of the selloff would depend on various factors, including the duration of the conflict, its impact on global energy supplies, and the broader economic ramifications.

Potential Market Scenarios

  1. Short-Term Volatility: In the early stages of a full-blown conflict, S&P 500 futures could experience extreme volatility. Investors might react to each new development, with futures swinging widely based on news flow. This environment would be challenging for both traders and long-term investors, requiring a nimble approach to managing positions.
  2. Flight to Safety: As uncertainty grows, there would likely be a significant shift towards safe-haven assets, including U.S. Treasuries and gold. S&P 500 futures might see sustained pressure as investors reduce their exposure to riskier assets.
  3. Energy Shock and Inflation: A prolonged conflict that disrupts oil shipments through the Straits of Hormuz could lead to an energy shock, driving up oil prices and fueling inflation. This scenario could force central banks to reconsider their monetary policies, potentially leading to higher interest rates, which would further weigh on equity markets.
  4. Recovery and Repositioning: If the conflict de-escalates or concludes, markets may begin to recover as uncertainty diminishes. However, the speed and extent of the recovery would depend on the lasting economic impact of the conflict. Investors might reposition their portfolios, gradually increasing exposure to equities as confidence returns.

Strategic Considerations for Investors

In a full-blown war scenario, maintaining a defensive posture would be prudent. Investors should focus on preserving capital and managing risk rather than chasing returns. Diversification across asset classes, including exposure to safe-haven assets, would be essential. Additionally, staying informed and agile would allow investors to adjust their positions as the situation evolves.

S&P 500 futures are a critical component of the global financial markets, offering investors a tool to hedge against or speculate on future market movements. The recent Iranian-Israeli conflict highlights the sensitivity of these futures to geopolitical events. While the initial market reaction was relatively muted, the situation underscores the importance of understanding the broader implications of such conflicts on markets.

Geopolitical risks can lead to short-term volatility, but history suggests that markets often recover quickly once the situation stabilizes. However, in a scenario where the conflict escalates into a full-blown war, the impact on S&P 500 futures could be severe, with potential repercussions for global energy markets, inflation, and interest rates.

For investors, navigating these uncertain times requires a balanced approach, combining a defensive posture with the flexibility to adapt as circumstances change. By staying informed and maintaining a diversified portfolio, investors can manage risk and position themselves for long-term success in the face of geopolitical challenges.

For more information, click here.

Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

 

Labor Day 2024 Holiday Schedule for CME Exchange Hours

Posted on by Ilan

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Labor Day 2024

Labor Day 2024 Holiday Schedule for CME Exchange Hours (including Globex & ICE Exchange)

Labor Day 2024

*Dates and times are subject to change

If you have any questions, please call the CME Global Command Center at +1 800 438 8616, in Europe at +44 800 898 013 or in Asia at +65 6532 5010

Globex® Labor Day Holiday Schedule for CME Exchange Hours (including Globex & ICE Exchange)

More details at: http://www.cmegroup.com/tools-information/holiday-calendar.html 

Detailed holiday hours for ICE Futures: https://www.theice.com/holiday-hours

The above sources were compiled from sources believed to be reliable. Cannon Trading assumes no responsibility for any errors or omissions.  It is meant as an alert to events that may affect trading strategies and is not necessarily complete.  The closing times for certain contracts may have been rescheduled.

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

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* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Key Economic Indicators Shake Markets as Fed Decision Looms

Posted on by Ilan
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Listen to our Market Recap Podcasts on Apple Podcasts

 

C91

 

Movers and shakers!

By Mark O’Brien, Senior Broker

General:   

 

So far this week, two of three important measures of the U.S. economy have been released: Tuesday’s Producer Price Index and today’s Consumer Price Index, both from the Labor Department and both providing the latest inflation data.  Tuesday’s report measuring average price changes seen by producers and manufacturers showed wholesale inflation slowing, up just 0.1% month-over-month and falling to 2.2% year-over-year.

 

The Consumer Price Index (CPI), a broad-based measure of prices for goods and services, increased 0.2% for the month, putting the 12-month inflation rate at 2.9%, its lowest since March 2021.  Excluding food and energy, core CPI came in at a 0.2% monthly rise and a 3.2% annual rate

 

Many analysts have been calling for the Federal Reserve to start lowering borrowing costs given the descendent inflationary readings this year, to which Central Bank chairman Jerome Powell has replied consistently after every FOMC meeting, to paraphrase, “patience.”

 

According the CME Group FedWatch tool, there is now a ±64% probability that the Fed will lower the Federal target rate range by 25 basis points down to 5.00-5.25% at their September FOMC meeting.  Including tomorrow’s Retail Sales report from the U.S. Census Bureau, there are numerous events on the horizon to give the Fed. more to think about:

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Metals: 

 

A powerful workers union is behind a current labor strike in Chile.  Because it’s virtually paralyzed the world’s largest copper mine – producing nearly 5% of the world’s copper in 2023 – keep an eye on those developments and the futures contract with the informal PhD in economics.  December copper prices are near 5-month lows, just above $4.00/lb. after falling over $1.00/lb from a May 20 close at $5.0185 – a $25,000 per contract move.

 

 

Energies:  

 

U.S. natural gas futures rose today for the sixth time in seven sessions ahead of tomorrow’s  weekly inventory report that’s expected to chip away further at the large storage surplus.  September futures have traded ±27 cents (±$2,700) off its Aug. 5 close of $1.942 /MMBtu., up to $2.216 /MMBtu.

 

 

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Daily Levels for August 15th, 2024

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Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)
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Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

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* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Market Movers & Shakers: PPI, Retail Sales, and Fed Insights

Posted on by Ilan
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C90

 

Movers and shakers!

By John Thorpe, Senior Broker

 

Today’s News:

US Producer Price Index (PPI) Headline Recap

 

**US July Producer Price Index (PPI) Final Demand: +0.1%; expected +0.2%

**US July Producer Price Index, ex. Food & Energy (PPI): 0.0%; expected +0.2%

**US July Personal Consumption: 0.0%

 

**US June PPI Final Demand unrevised: +0.2% from +0.2%

 

 

Redbook Weekly US Retail Sales Headline Recap

 

**Redbook Weekly US Retail Sales were +4.7% in the first week of August 2024 vs August 2023

**Redbook Weekly US Retail Sales were +4.7% in the week ending August 10 vs yr ago week

 

Atlanta Fed President Bostic

Atlanta Fed President Bostic: has gained more confidence with recent inflation data, but wants to see a little bit more data

 

 

 

 

 

Watch Tomorrow:

 

US July consumer price index (CPI) data is forecast by analysts up +0.2% month-to-month, which compares to the previous month’s -0.1%. Core CPI on monthly terms is expected +0.2% in July compared to the prior month’s +0.1%. The data will be released at 7:30 am CT Wednesday morning. CPI on annualized terms is forecast up +3.0% from the year ago month, the core year-over-year figure is expected up +3.2%.

 

 

Earnings:

 

CISCO after the close.

Check times below for econ data

 

 

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Daily Levels for August 14th, 2024

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Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)
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Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

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* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

NQ Futures Contract Nasdaq Futures

Posted on by Ilan

The NQ futures contract, also known as the Nasdaq-100 futures contract, is a popular derivative instrument in the financial markets. It allows traders to speculate on the future value of the Nasdaq-100 Index, which comprises 100 of the largest non-financial companies listed on the Nasdaq Stock Market. This contract is pivotal for investors aiming to hedge their portfolios, gain exposure to the tech-heavy index, or leverage trading opportunities. This article delves into the components of the NQ futures contract, including its size, trading hours, participants, and various specifications, with a particular focus on the Mini and Micro Nasdaq futures contracts.

Nasdaq Futures

Components of the Nasdaq-100 Futures Contract

The Nasdaq-100 Index, which the NQ futures contract is based on, includes major technology and innovative companies such as Apple, Microsoft, Amazon, and Tesla. The futures contract provides a means to trade the performance of these companies collectively without directly buying the stocks.

Contract Size

The standard Nasdaq-100 futures contract has a significant size, designed for institutional and professional traders. It represents a substantial notional value, calculated as the index level multiplied by a specific multiplier. For the standard NQ futures contract, the multiplier is 20. Thus, if the Nasdaq-100 Index is at 15,000 points, the notional value of one contract would be:

Contract Trading Hours

The trading hours for the Nasdaq-100 futures contracts are extensive, allowing for nearly round-the-clock trading. This is crucial for managing risks and capitalizing on global market movements.

This extensive trading period covers Asian, European, and American market hours, providing ample opportunities for traders globally.

Who is Trading the Nasdaq-100 Futures?

The Nasdaq-100 futures contract attracts a diverse group of market participants:

  • Institutional Investors: Including hedge funds, pension funds, and mutual funds, these investors use the contract for hedging purposes and to gain exposure to the tech sector without directly buying individual stocks.
  • Professional Traders: Proprietary trading firms and market makers trade these contracts to profit from short-term price movements.
  • Retail Traders: With the introduction of the E-mini and Micro E-mini contracts, retail traders can participate in the market, speculating on price movements or hedging their portfolios.
  • Corporate Treasurers: Companies with significant exposure to the tech sector might use the contracts to hedge against adverse price movements in the Nasdaq-100 Index.

Why Trade the Nasdaq-100 Futures?

The popularity of the Nasdaq-100 futures contracts can be attributed to several factors:

  • Leverage: Futures contracts allow traders to control a large notional value with a relatively small amount of capital, amplifying potential returns (and risks).
  • Liquidity: The Nasdaq-100 futures are highly liquid, ensuring tight bid-ask spreads and ease of entering and exiting positions.
  • Diversification: By trading the index, investors gain exposure to a broad range of leading technology and innovative companies, reducing the risk associated with individual stocks.
  • Hedging: The contracts are an effective tool for hedging against market downturns, protecting the value of investment portfolios.
  • Speculation: Traders can speculate on the direction of the Nasdaq-100 Index, taking advantage of price movements to profit.

History of the Nasdaq-100 Futures Contract

The Nasdaq-100 futures contract was introduced to provide a means for investors to trade the performance of the Nasdaq-100 Index. The history of this contract is intertwined with the evolution of the Nasdaq Stock Market and the growing importance of technology companies in the global economy.

  • 1985: The Nasdaq-100 Index was launched, initially comprising 100 of the largest non-financial companies listed on the Nasdaq Stock Market.
  • 1996: The Chicago Mercantile Exchange (CME) introduced the Nasdaq-100 futures contract, allowing traders to speculate on the future value of the index.
  • 1999: The E-mini Nasdaq-100 futures contract was introduced, providing a smaller-sized contract suitable for individual investors and smaller trading firms.
  • 2019: The CME Group launched the Micro E-mini Nasdaq-100 futures contract, making it accessible to a wider audience, including retail traders.

Over the years, the Nasdaq-100 futures contracts have become a vital part of the financial markets, offering liquidity, leverage, and exposure to the tech-heavy Nasdaq-100 Index.

Contract Specifications in Detail

Margin Requirements

The margin requirements for trading Nasdaq-100 futures vary based on market conditions and the volatility of the underlying index. Initial margin is required to open a position, while maintenance margin must be maintained to keep the position open.

  • Standard NQ Contract: Typically, the initial margin is around $20,000, with maintenance margin slightly lower.

These margins are subject to change and can be higher during periods of increased market volatility.

Expiration and Settlement

Nasdaq-100 futures contracts have quarterly expiration dates: March, June, September, and December. The final settlement is based on the Special Opening Quotation (SOQ) of the Nasdaq-100 Index on the third Friday of the contract month.

Position Limits

To prevent market manipulation and ensure orderly trading, the CME Group imposes position limits on Nasdaq-100 futures contracts. These limits are periodically reviewed and adjusted based on market conditions.

Trading Strategies

Traders employ various strategies when trading Nasdaq-100 futures contracts:

  • Speculation: Taking directional positions based on market analysis and predictions about future price movements.
  • Hedging: Using futures contracts to offset potential losses in a portfolio of stocks or other assets.
  • Spread Trading: Simultaneously buying and selling related futures contracts to profit from changes in the price relationship between them.
  • Arbitrage: Exploiting price discrepancies between the Nasdaq-100 futures and other related instruments.

The NQ futures contract, encompassing the standard, E-mini, and Micro E-mini Nasdaq-100 futures, plays a crucial role in the financial markets. Its appeal lies in the ability to gain leveraged exposure to the tech-heavy Nasdaq-100 Index, the liquidity it provides, and its utility for hedging and speculative purposes. Understanding the components, specifications, trading hours, and strategies associated with these contracts is essential for anyone looking to participate in this dynamic segment of the futures market. Whether you’re an institutional investor, professional trader, or retail participant, the Nasdaq-100 futures contracts offer a versatile tool for managing risk and capitalizing on market opportunities.

For more information, click here.

Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

Stock Index Futures Ride the Rollercoaster as PPI Looms Tomorrow

Posted on by Ilan
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Stock index futures continue with “zig zag” type of volatility with large swings both ways.

Tomorrow we have PPI.

I suspect the current behavior will continue a bit longer as there is quite a bit of uncertainty.

 

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Daily Levels for August 13th, 2024

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Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)
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Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

3b644da2 2bee 4d39 8d98 5208a20bec39

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Future S&P Trade S&P 500 Index Futures

Posted on by Ilan

Trading Standard and Poor’s 500 (S&P 500) index futures is highly appealing to various investors and traders. Known as ES futures, these contracts are among the most traded financial instruments globally. Here are the top ten reasons to consider trading S&P 500 futures:

Future S&P Trade

  • Diversification Trading S&P 500 index futures allows investors to gain exposure to a broad market, as the index includes 500 of the largest U.S. companies across various industries. This diversity mitigates the risk associated with individual stocks or sectors. A single S&P 500 futures contract effectively represents a varied portfolio, simplifying diversified investment through one transaction.
  • High Liquidity S&P 500 futures are renowned for their high liquidity. The high volume of transactions ensures swift execution of trades, reducing the cost of entering and exiting positions. This liquidity results in tighter bid-ask spreads and ensures that large orders can be filled without significantly impacting the price, making it ideal for investors of all sizes.
  • Leverage One of the most compelling aspects of trading S&P 500 futures is the leverage available. Futures contracts allow traders to control a substantial amount of equity with a relatively small capital outlay. This leverage can amplify profits if the market moves favorably but can also amplify losses, highlighting the importance of risk management.
  • Cost Efficiency Futures trading can be more cost-effective than buying the individual stocks that comprise the index. Commissions and transaction fees are generally lower in futures trading compared to equity markets. Additionally, as margined products, traders do not need to pay the full value of the exposure to benefit from its performance.
  • Hedging Investors with a portfolio of U.S. stocks can use S&P 500 index futures to hedge against potential downturns in the broader market. By short selling futures, they can protect their portfolios from market volatility or anticipated declines, making futures an excellent risk management tool, especially in uncertain market conditions.
  • Speculation Traders can speculate on the direction of the U.S. economy or the stock market by trading S&P 500 futures. Whether anticipating a rise or fall, these futures provide an efficient means to position accordingly and profit from movements in the index.
  • No Short-Selling Restrictions Unlike the stock market, where short selling has restrictions, S&P 500 futures traders can go long or short freely. This flexibility allows them to act on bearish market outlooks as easily as bullish ones, which is particularly valuable during market corrections or bear markets.
  • Nearly 24-Hour Trading The S&P 500 futures market operates nearly 24 hours a day during weekdays, allowing traders to react to news and economic events globally. This continuous trading window provides a significant advantage in managing positions and capitalizing on global economic events that may affect the U.S. market.
  • Transparency and Fairness The futures market is highly regulated, offering a level of transparency that ensures a fair trading environment. S&P 500 futures prices reflect a broad consensus influenced by widespread information, including economic indicators, market sentiment, and political events, making it one of the fairest investment vehicles.
  • Access to Advanced Trading Strategies Trading S&P 500 futures enables the use of sophisticated trading strategies such as spreads, straddles, and strangles, which can manage risk and enhance potential returns. These strategies can be particularly beneficial in a futures market where price movements can be significant.

S&P 500 Index Futures are financial contracts that obligate the buyer to purchase, and the seller to sell, a specified amount of the S&P 500 Index at a future date and at a predetermined price. The S&P 500 Index itself is a benchmark of U.S. equities, representing the performance of 500 of the largest publicly traded companies in the U.S., covering various sectors of the economy.

  • Underlying Asset: The S&P 500 Index, which is a broad representation of the U.S. stock market and includes large-cap companies across various sectors.
  • Contract Size: Typically, futures contracts are based on a notional amount of the index. For example, each point movement in the S&P 500 Index futures contract corresponds to a set monetary value, such as $50 per point for the standard S&P 500 futures.
  • E-Mini S&P 500: A smaller version of the standard S&P 500 futures contract, known as the E-Mini S&P 500, is popular among traders due to its lower margin requirements and reduced contract size, making it more accessible for individual traders and smaller institutions.

Why Traders and Institutions Trade S&P 500 Index Futures

  • Liquidity: S&P 500 futures are among the most actively traded futures contracts, providing high liquidity. This liquidity ensures that traders can enter and exit positions with ease, often at tight bid-ask spreads.
  • Arbitrage Opportunities: Institutional traders use S&P 500 futures to exploit price discrepancies between the futures market and the underlying spot market. This can involve strategies like cash-and-carry arbitrage, where traders simultaneously buy or sell the index in the spot market and take the opposite position in the futures market.
  • Market Sentiment: Futures on the S&P 500 Index can be used to gauge market sentiment and investor expectations about future market movements. The futures prices reflect collective market expectations and can offer insights into potential market trends.

S&P 500 Index Futures play a crucial role in the financial markets by providing a flexible, cost-effective, and efficient way to hedge, speculate, and gain exposure to the U.S. stock market. With their high liquidity and leverage, these futures contracts cater to both institutional investors and individual traders, facilitating a wide range of trading strategies and market insights.

Try the FREE E-Futures International Platform Trading S&P 500 futures offers numerous benefits, from diversification and liquidity to cost efficiency and flexibility. Whether you aim to hedge other investments, leverage positions, or speculate on market movements, S&P 500 futures are a valuable tool for achieving a broad range of financial goals. Conduct thorough research and consider your financial condition and strategy before engaging in futures trading. For more information, click here.

Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

Weekly Newsletter: 25 Options Strategies, Soymeal Outlook, NQ Automated System

Posted on by Ilan
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Subscribe to our YouTube Channel

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Cannon Futures Weekly Letter Issue # 1204

In this issue:
  • Important Notices – Earnings, PPI, CPI, Iran/Israel, USDA Crop
  • Futures 101 – 25 Options Strategies
  • Hot Market of the Week – December Soymeal
  • Broker’s Trading System of the Week – Mini NQ Day Trading System
  • Trading Levels for Next Week
  • Trading Reports for Next Week

 

  • Important Notices – Next Week Highlights:
    • Monday, Aug. 12 

      ·        “The crop report:” USDA World Supply & Demand, U.S. Crop Production

       

      Tuesday, Aug. 13

       

      ·        Producer Price Index / Core PPI

       

      ·        Notable Quarterly Earnings:

       

      → Home Depot (Mkt. Cap.: ±247B)

       

      Wednesday, Aug 14

       

      ·        Consumer Price Index / Core CPI

       

      ·        Notable Quarterly Earnings:

       

      → Tencent ADR (Mkt. Cap.: ±437B)

      → Cisco (Mkt. Cap.: ±184B)

      → UBS Group (Mkt. Cap.: ±92B)

       

      Thursday, Aug. 15

       

      ·        Initial Jobless Claims

       

      ·        Retail Sales

       

      ·        Industrial Production / Capacity Utilization

       

      ·        Empire Mfg. Survey

       

      ·        Philadelphia Fed. Manufacturing Survey

       

      ·        Notable Quarterly Earnings:

       

      → Walmart (Mkt. Cap.: ±546B)

      → Alibaba (Mkt. Cap.: ±190B)

      → Applied Materials (Mkt. Cap.: ±159B)

      → Deere & Co. (Mkt. Cap.: ±95B)

       

      Friday, Aug. 16

       

      • ·        Consumer Sentiment

 

 

  • Futures 101: 25 Proven Strategies for Trading Options

    If you are currently trading options on futures or are interested in exploring them further, check out our newly updated trading guide, featuring 25 commonly used options strategies, including butterflies, straddles, strangles, backspread and conversions. Each strategy includes an illustration demonstrating the effect of time decay on the total option premium involved in the position.

    Options on futures rank among our most versatile risk management tools, and are offered on most of our products. Whether you trade options for purposes of hedging or speculating, you can limit your risk to the amount you paid up-front for the option while maintaining your exposure to beneficial price movements. To learn more about CME Group options, you can also visit our Options page

    Complete the simple form and you will receive a link to download the 25 Proven Strategies brochure immediately. This eBook is free to you and no-obligation. Learn about the 25 Proven Strategies for trading options on CME Group Futures for FREE!

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  • Hot Market of the Week – December Soymeal

Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.

December Weekly Soymeal

The weekly chart in soybean meal failed to close its gap objective and reversed lower with a possible outside week lower developing. At this point, follow through to the downside into new sustained lows would project a run to the third PriceCount objective to the $296 area.
PriceCounts – Not about where we’ve been , but where we might be going next!
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The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.

   Broker’s Trading System of the Week

With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.

Boston A – Mini NASDAQ

PRODUCT

NQ – Mini NQ

SYSTEM TYPE
Intraday
Recommended Cannon Trading Starting Capital
$35,000
COST
USD 55 / monthly

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The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to receive daily support & resistance levels?
Yes
S
No
S

Daily Levels for August 12th 2024

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Trading Reports for Next Week

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First Notice (FN), Last trading (LT) Days for the Week:
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Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Markets in Flux: Will Friday Bring Stability?

Posted on by Ilan
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Subscribe to our YouTube Channel
Listen to our Market Recap Podcasts on Apple Podcasts

 

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Will the Markets “relax” a bit on Friday?

The V type of moves from one day to another does not make much sense….

For example, metals and stock index futures sold off extremely hard yesterday on the last hour of trading, YET an hour later on the reopen started a V shape type of reversal….

Make sure you have a game plan in mind and you have preset stops in your order entry ( my opinion) as the markets are moving way too fast to take the approach of ” “let see what the market does…”

 

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Daily Levels for August 9th, 2024

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Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)
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Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

3b644da2 2bee 4d39 8d98 5208a20bec39

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.