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futures trading


Day Trading Comex Gold Futures – Contrary to Conventional Wisdom

June 11th, 2018 Filed under Day Trading, Future Trading News, Gold Futures | Comment (0)

Day Trading Comex Gold Futures

(Contrary to Conventional Wisdom)

 

By: John Thorpe, Cannon Trading Senior Broker

Markets are forward looking. Today’s price is as much a reflection of yesterday’s fears, needs , wants and desires as the current reaction to a political leader rattling sabers, or the effect that a surprise Government Report  will have on the prices of a security or commodity.

Contrary to conventional wisdom, Day Traders tend to be well educated and well capitalized.

Risk takers, by any other name, Wildcat oil drillers? Computer geeks working out of their parent’s garage? Mom and Pop managing their hard earned 401k’s; The Day trading approach is not very different from any other investing approach, with one major distinction from other risk takers who operate on a much greater time horizon.  As a day trader, you open an investment and close an investment between sunup and sundown and often many times during a market session.  One of the greatest risks that day traders must avoid is gauging their success or failure within that same sunup to sundown time frame. I like to call this a fiction trap. A fiction trap occurs when the day trader believes that once he has a good day trading, his subsequent days will always yield the same results. The fiction trap results in unrealistic expectations for success.  The Market, like the ocean current, is sometimes similar in repetition, but rarely identical in motion. When risk takers begin the process of assessing a strategy, they do it with the long view in mind.

By taking a longer view of returns, like all other risk takers, you can avoid the fiction trap of unrealistic expectations by incorporating the Rule of 72 into your long-range plans. The Rule of 72 is a formula that tells you how quickly (given a rate of return) it will take for your account size to double. Although your account size can double in one day trading futures, it is rare to hold on to those gains. The Rule of 72 forces you to be patient, emotionally subdued, and in line with long-term goals.

As with any risk taking, timing is key. A day trader needs to become:  a scientist, a student of the discipline, a tester, a collector of data, and an executer of plans.

With any project, the scientist keeps good notes and uses the microscope (technical indicators, charts, et al.) to determine the intersections of volume, price. This approach yields more accurate results than a random approach, such as throwing darts at the WSJ securities settlement page to find the correct asset and the correct position. Doing the homework and creating a practical plan should lead to positive results.

I like day trading in the Futures markets because with no more effort than buying a position, you can just as easily sell to open a new position.  In other words, if you have ever sold a stock or ETF short, you know you can short the asset by requesting from the stock loan department shares of a stock to borrow so you can short it.  Now patiently for an uptick to assume your position. This can be a time-wasting exercise when split-second decision making is required.  For this reason and this reason alone, day trading futures makes far greater sense than day trading stocks or ETF’s.

 

What I want to accomplish with you in this draft is to lay out a blueprint for day trading the NY Comex 100 oz. Gold futures contract, traded electronically through Globex.

 

 Factors Affecting Gold Prices

As part of the road map to the price discovery process, be aware of the London fixing times, or ocean currents, then can determine our Comex Gold prices. You can find charts and data points available like the one below from the U.S. St Louis Fed

https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM

You may find, upon research, that you have an identifiable price pattern around these times in the Comex market equivalents. Allow your research to guide you. These prices from London represent settlement prices for the fabricators, miners, hedgers and speculators from which they close their daily business dealings.  These fixings are as variable as the US Market prices are for gold. The US Market pays attention to the London market, and although not fungible, they are interchangeable in price discovery. London watches Comex and Comex watches London. The auctions are run at 10:30am and 3:00pm London Time for gold and 12:00pm London time for silver. The final auction prices are published to the market as the LBMA Gold Price AM, The LBMA Gold Price PM and the LBMA Silver Price Benchmarks.

Scarcity or the perception of scarcity and lack thereof drives market sentiment.

Markets are forward looking. Today’s   price is as much a reflection of yesterday’s fears as anything else. So we need to anticipate market price impact from Governmental reports, increases and decreases in potential supply or demand,

Central banks have quite a bit to do with the value of the “Yellow Metal” based on how they perceive the underlying economy’s strengths and weaknesses and whether they print money or not, by increasing or decreasing the velocity of the sovereign nations’ cash supply.  When a Central bank adjusts the Nation’s supply of dollars of their native currency, Gold will typically behave reciprocally: More dollars in circulation, value of gold increases, fewer dollars in circulation, the value of gold decreases.

During large chunks of the 20th century, the world’s central banks were net suppliers of gold. After spending their early history accumulating gold to back up national currencies, central banks sold more gold than they purchased after the U.S. dollar became the de facto world reserve currency under the Bretton Woods Agreement.

In recent years, however, the trend has changed. Central banks have become net demanders of gold, which puts upward pressure on both production and retail costs. As some sovereign currency markets are in a constant to variable state of flux and turmoil due to political upheaval or disequilibrium in their balance of trade and payments, investors residing in these countries buy gold to use as a safe haven asset to offset the risk of holding their assets in their sovereign currency.

As with any worthwhile endeavor, a true student of any process understands addtional  research should be done to thoroughly understand the potential  risks and rewards from either day trading or position trading, or with equal vigor, engaging in short term or longer term investing of any kind.

As Greek philosopher Aristotle thoughtfully observed and written for us to learn from over 2000 years ago,  “Bring your desires down to your present means. Increase them only when your increased means permit.”

What Aristotle was saying (as it applies to investing) is to use risk capital only. Risk capital is capital that, if lost in the pursuit of reward, will not impact negatively your ability to take care financially of any of your current obligations, nor will it negatively impact your current lifestyle. This statement is also true for day traders to focus on the risk they are taking on in their own accounts. Just because you had a few good days trading doesn’t necessarily mean you should put more of your account at risk and increase the size of your trades exponentially. This happens all too often and turns successful day traders into unsuccessful traders in the intermediate term, and in many cases these traders end their trading because what was once a growing account with a tempered approach becomes one great big washout.

  1. No distractions, clear the table, shut the door, unplug your devices-FOCUS
  2. Perspective- where has the market been ( long term and intermediate term charts and try to identify the reason for large price moves in either direction
  3. Just because the market is open 23 hours, don’t try to physically trade the market for 23 hours, your money will burn out faster than you will. A quote I like is “the Market can remain irrational for longer than I can be solvent”
  4. Define your daytrading timeframe. (for example: 8am-10am, 2pm-4 pm), set it, and stick to it for at least 30 trading days. Markets have the tendency to behave similarly day in and day out during the same time frames. Remember, like currents in an ocean, markets are sometimes similar in repetition, but rarely identical in motion.
  5. Research – Know the market you are trading. Research it, understand what makes it move. Who the players are in the cash market.
  6. Stay informed – Know the recent daily dollar volatility of the market you are trading. I like to take the past 30 to 45 days for the Aug  Comex 100oz Gold contract. For example, I recently used 30 trading days and arrived at $1220.00. I took the distance between the high and low of each full day, totaled them, added 30 data points together for an average daily range and multiplied that by the value of a tick in the gold  ($10.00)
  7. With my trading platform I have the ability to adjust the time frame to include only the time I  have set aside to view the market. In my research I  will also have a full daily chart

a weekly chart

And a monthly chart

of August Comex Gold  which will show me the critical areas of technical support that I can apply intraday to my abbreviated chart.

Why is dollar volatility Important? (see above) – You can manage your expectations here; you now know you shouldn’t expect to make 2,000.00 on a single trade and you can better gauge how many contracts, and how much risk you can take, on each trade. You now have a template of recent activity to better judge expected volatility without having to utilize an expensive add-on or chart indicator.

8) Call – Please speak with your broker on the phone to determine the appropriate amount of risk capital you need to trade your plan in the Gold Futures Market.

The Comex Gold Contract trades in Chicago through a registered Broker. www.cannontrading.com

Gold Contract specs are as follows:

Quoted in Dollars and Cents per Troy OZ.

Minimum price fluctuation: $0.10 per troy oz.

Symbol GC or GGC

Initial margin requirement: $3,410.00

Maintenance requirement: $3,100.00

Hours traded: 6pm EST Sunday, through to Friday at 5pm EST with an hour break each day between 5pm and 6 pm EST

As always, lean on your broker for guidance, call him or her and discuss what your risk tolerance levels are. Where to use stop loss orders or options to hedge your trading plan to ensure you leave yourself with a fighting chance.

Disclaimer: Trading commodity futures and options involves a substantial risk of loss.

The recommendations contained in this letter are of opinion only and do not guarantee any profits.

There is not an actual account trading these recommendations.

Past performances are not necessarily indicative of future results.

 


Seasonality in Futures Trading 2.21.2018

February 20th, 2018 Filed under Future Trading News, Futures Trading | Comment (0)

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Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

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Seasonal Futures Trading

There are seasonal commodity trends that may reoccur within the futures market. This could help guide traders and build a plan for a seasonal futures trading strategies.

Trading Commodity Seasonal Patterns

Every calendar year there are different seasons. It is how we plan our lives. Weather is the first to come to mind, but there are holidays, sports, shopping and many more that help break up the monotony of our day to day patterns. The commodities market is no different. Just as you use a calendar to plan and differentiate Thanksgiving from Opening Day in baseball, you can use the same calendar to blueprint possibly when wheat futures will be high and copper prices low. Traders can use these seasonal patterns to their advantage because it allows a certain degree of predictability of future price movements, rather than being bombarded by an endless stream of often contradictory market noise. Now of course there are other factors too numerous to list that can affect the futures markets, but certain conditions and events reoccur at annual intervals and help traders anticipate where the market is headed.

Seasonality of Futures

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First Full Week of Trading for 2018 1.09.2018

January 8th, 2018 Filed under Future Trading News, Futures Trading | Comment (0)

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Voted #1 Blog and #1 Brokerage Services on TraderPlanet for 2016!!  

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First full week of trading for 2018 started today after 2 short weeks/ followed by two long weekends.

I suspect we should see better volume and perhaps some changes in market direction but SUSPECT is in capital letters….

Until then my advice is to trade what you see and not what you want to see. Focus more on trade management and having a plan for the trade before you enter it.

We are here if you want to chat trading, markets and more!

+ 1 310 859 9572.

Make 2018 a great one!

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Seasonals in Futures Trading 12.20.2017

December 19th, 2017 Filed under Futures Trading | Comment (0)

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Voted #1 Blog and #1 Brokerage Services on TraderPlanet for 2016!!  

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Dear Traders,

Christmas Holiday trading Schedule is now available! 

Trading Commodity Seasonal Patterns

Every calendar year there are different seasons. It is how we plan our lives. Weather is the first to come to mind, but there are holidays, sports, shopping and many more that help break up the monotony of our day to day patterns. The commodities market is no different. Just as you use a calendar to plan and differentiate Thanksgiving from Opening Day in baseball, you can use the same calendar to blueprint possibly when wheat futures will be high and copper prices low. Traders can use these seasonal patterns to their advantage because it allows a certain degree of predictability of future price movements, rather than being bombarded by an endless stream of often contradictory market noise. Now of course there are other factors too numerous to list that can affect the futures markets, but certain conditions and events reoccur at annual intervals and help traders anticipate where the market is headed. Read the rest of this entry »


How to Trade in Futures

October 31st, 2017 Filed under Future Trading News | Comment (0)

Long-term success in futures trading usually doesn’t begin overnight. You need to develop a proven trading technique that – more often as not – works. For new traders, Forbes magazine is a solid source for financial information. In one article, it flatly states, “You would be better off just giving your money to experienced traders . . . it would save on your emotional wear and tear.”

  • First Things First: Research

The only thing more expensive than education is ignorance.
-Benjamin Franklin

  • Time is on your side. As a beginner in futures trading, it’s important to research risks and leverage. You will learn the ins and outs of this exciting marketplace when you work with a trustworthy, experienced online futures trading broker.
  • Part of your research into futures trading is to choose your online futures trading brokerage. The type of guidance you need will change as you learn more about the futures commodities trading market. Hopefully, your brokerage company will mentor your futures trading evolution; as a beginner, you may need a full-service broker. Later, you may opt for lower commissions and fees as you become more knowledgeable and adopt a do-it-yourself approach to online trading. Your considerations include:
  • Brokerage’s reputation for customer service
  • Commission rates you can afford
  • Margin requirements that you can handle
  • Software that is user-friendly and meets your requirements
  • Types of futures in which you are interested

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