Weekly Newsletter: Understanding Margins, May Bean Meal Outlook and Automated NQ System
Posted By:- Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
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Cannon Futures Weekly Letter Issue # 1186
In this issue:
- Important Notices – Good Friday Trading Schedule
- Trading Resource of the Week – Understanding Margins
- Hot Market of the Week – May Bean Meal
- Broker’s Trading System of the Week – NQ Intraday System
- Trading Levels for Next Week
- Trading Reports for Next Week
Important Notices –
- 4 Day Trading week, All Mkts closed Good Friday (MKTS closed from Thursday afternoon until Sunday Afternoon)
- 6 Data releases: New home sales, Durable Goods, Consumer Confidence, GDP (Q4 final), Jobless Claims, Chicago PMI
- Grain traders! Big Prospective plantings report Thursday Morning.
- Night Traders, WATCHOUT for volatility Wednesday and Sunday. Fed Speaker Waller: Econ. Outlook 6PM EDT. Jerome Powell Friday Morning 11:30 EDT @SF Monetary Policy Conference.
Trading Resource of the Week : Understanding Margins by CMEgroup.com
Understanding Margin
Securities margin is the money you borrow as a partial down payment, up to 50% of the purchase price, to buy and own a stock, bond, or ETF. This practice is often referred to as buying on margin.
Futures margin is the amount of money that you must deposit and keep on hand with your broker when you open a futures position. It is not a down payment and you do not own the underlying commodity.
Futures margin generally represents a smaller percentage of the notional value of the contract, typically 3-12% per futures contract as opposed to up to 50% of the face value of securities purchased on margin.
Margins Move with the Markets
When markets are changing rapidly and daily price moves become more volatile, market conditions and the clearinghouses’ margin methodology may result in higher margin requirements to account for increased risk.
When market conditions and the margin methodology warrant, margin requirements may be reduced.
Types of Futures Margin
Initial margin is the amount of funds required by CME Clearing to initiate a futures position. While CME Clearing sets the margin amount, your broker may be required to collect additional funds for deposit.
Maintenance margin is the minimum amount that must be maintained at any given time in your account.
If the funds in your account drop below the maintenance margin level, a few things can happen:
- You may receive a margin call where you will be required to add more funds immediately to bring the account back up to the initial margin level.
- If you do not or can not meet the margin call, you may be able to reduce your position in accordance with the amount of funds remaining in your account.
- Your position may be liquidated automatically once it drops below the maintenance margin level.
Summary
Futures margin is the amount of money that you must deposit and keep on hand with your broker when you open a futures position. It is not a down payment, and you do not own the underlying commodity.
The term margin is used across multiple financial markets. However, there is difference between securities margins and futures margins. Understanding these differences is essential, prior to trading futures contracts.
- Hot Market of the Week – May Bean Meal
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.
May Bean Meal
May meal satisfied its first upside PriceCount objective and is correcting lower. At this point, IF the chart can resume its rally with new sustained highs, the second count would project a possible run to the 356.5 area.
PriceCounts – Not about where we’ve been , but where we might be going next!
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.
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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.
PRODUCT
Mini NASDAQ 100
SYSTEM TYPE
Intraday
COST
USD 55 / monthly
Recommended Cannon Trading Starting Capital
$20,000
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.
Daily Levels for March 25th 2024
Trading Reports for Next Week
First Notice (FN), Last trading (LT) Days for the Week:
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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.
