By Guest Blogger Jennifer Gorton from ForexIndicators
As an investor or trader, picking a time frame on which you plan to hold your assets is entirely up to you. There are many people out there that wish to close out their positions at the end of each day to avoid the risk of major market news effecting an open position. Recently, markets will move drastically during the overnight period due to new stories from around the world occurring during that time. If other markets like Asia and Europe are selling off there is a good chance that the U.S. stock exchanges will open lower and those who have held positions overnight will lose money. There are other traders who will take this risk because they are buying the asset to be held for longer than a few days.
If you are looking to become a short to intermediate term trader but do not want the risk of a big overnight move, trading commodities and currencies is a better option. The average investor can trade the commodities market, by way of the CME Globex electronic exchange, 23 hours a day 5 days a week. The currency markets are open 24 hours a day 5 days a week, giving you that one extra hour to place trades. Trading of commodities products and currency pairs after normal market hours will allow the trader to monitor his position in real time and close it out if necessary at anytime the market is open. He or she will not have to wait until the next day’s open outcry session when the price of the commodity he is holding might have fallen. This can allow the investor to have an intermediate time horizon for holding his investments with the safety of being able to trade most hours of the day. Many potential trades that people see occurring take time to develop. Sure you can make a few dollars day trading throughout the day but having to always watch the market might not be what you are looking for. The average investor will not want to day trade because of work related issues. They will not want to sacrifice their salary job to become a full time intraday stock trader.
The intermediate and short term investment style is for those who have a good idea but do not want to be at the computers all day. Commodities and currency trading allow you to have that investment mindset with the additional benefit of being able to have orders executed when you are asleep if necessary. Programming your trading software with predetermined buy and sell orders will allow you the ability to stop out a position if it starts to move against you. The same would also be true if hit your profit target at 2AM when you are asleep; letting your computer do all the work is the way to execute orders. Both commodities and currency brokers will allow their clients to submit limit orders at prices they want to buy and sell. This technique for the short to intermediate trader is widely used. Having a stop loss number where you will close your position and a profit target where you will take profit is a must. The various brokers will offer free forex indicators and free commodities indicators that can help you decide at what price these order should be placed. Along with the charting software that your broker will allow you to download, short to intermediate trading is the preferred style of investing. Using commodities and the foreign exchange market as a vehicle to trade is perhaps safer than the equities market because of the hours it is made available for trading to the average investor.
Showing posts with label trading commodities with elliott wave. Show all posts
Showing posts with label trading commodities with elliott wave. Show all posts
Wednesday, June 09, 2010
Monday, October 12, 2009
Robert Prechter Shares Why Fundamental Analysis is for Losers
OK, maybe a bit of a sensationalist headline, I'll admit :)
I used to be a fundamental only kind of guy, leaving the technicals and chart reading to the spooks and mystics...only to become a wannabe chart reader myself :)
In truth, I see great value in both types of analysis, so I don't want to downplay either side. Fundamentals are good for telling you what you should be looking at...and technicals can help with the timing of your move. You can buy something that's fundamentally cheap - but if it gets even cheaper, and you lose money, then your fundamental analysis didn't really help you!
On the flip side, playing the technicals only can also be a dangerous game of musical chairs. To Prechter's credit, he does a fine job of combining technicals with investor sentiment, which I think is a real secret weapon of his in finding turning points in markets.
Without further adieu - please enjoy this Robert Prechter interview on technical analysis, and, of course, the wave principle!
***
October 12, 2009
By Elliott Wave International
As the major stock markets turned down in late 2007 and then started to rally in March 2009, many people who believed in fundamental analysis have begun to question its validity.
Famed technical analyst and Elliott wave expert Robert Prechter has long called for the bear market we are now in the midst of. (He views the rally of 2009 to be a bear-market rally not the beginning of a new bull market.) But over the years, his methods of technical analysis have been criticized. Here are his most succinct arguments as to why wave analysis outdoes competing forms of analysis.
Learn the Wave Principle and Other Forms of Technical Analysis. Elliott Wave International has just released The Ultimate Technical Analysis Handbook. This FREE 50-page ebook is dedicated solely to teaching reformed fundamentals followers to incorporate technical analysis into their own investing decisions. Learn more and download your free copy here.
*****
Excerpted from Prechter's Perspective, re-issued 2004
Robert Prechter: Well, let me begin my answer with a quote from a national financial magazine dated October 1977. "Over the last few years, the Wave Principle has gathered too much of a following and, therefore, it has less value today. Almost invariably, you can write off a technique when it gets too much of a following." How does this statement look in light of the decade that followed it? "Elliott" had one of its greatest successes. Like the Energizer Bunny, it keeps going and going. And I believe its next success will be its biggest ever. The Principle itself is undoubtedly on an upward spiral of acceptance: three steps forward and two steps back.
Now let's suppose that a large number of educated people accepted the Wave Principle, which is not an impossible idea for, say, a thousand years from now. There would still be room for differences of opinion on the market and the future. And there are countless other factors. Even people who practice the craft don't necessarily take action when they get a signal. Unconscious doubt and worry often foil people's actions. Very few traders have the emotional strength to turn even good analysis into profits.
Q: The Wave Principle is intrinsically contrarian. Does it have some built-in defense against becoming the consensus?
RP: I think so. The Wave Principle is a description of natural human behavior. This is what human beings are; this is part of their nature -- how they behave. In order for markets to continue to go through these stages, a part of human nature must be to believe that such theories of mass psychology are incapable of being true -- that is, something not worth examining. They must be primed to accept bullish arguments at tops and bearish arguments at bottoms. That means they have to be ever open to bogus theories of market behavior. How else will they create the patterns that fear, greed and hope produce?
Q: How big is the pool of analysts who rely on the Wave Principle?
RP: I think there are quite a few people who are proficient in applying Elliott to past and present markets, say, perhaps 1% of all technical analysts, which is a pretty good number of people, I suppose. A lot of those are my subscribers, and they learned it through studying the Theorist. However, as far as the number of people proficient at applying the Wave Principle for forecasting market turns, which is significantly more difficult than applying it in real time, I think there are very few.
Q: This has been the basis of some criticism. To quote one critic, "relying on arcane methods does have one advantage. Interpreting the linear squiggles is left in the hands of the major heir to Elliott's work." How do you respond to those who contend that the complexity of the theory is a cover that allows you to retain the Wave Principle as your personal theory?
RP: With regard to any supposed self-serving secrecy, not only did I co-author a book on how to apply the Wave Principle, as well as reprint Elliott's writings against protest from practitioners, but also I continually go into great -- some might say excruciating -- detail in each issue of The Elliott Wave Theorist explaining exactly what I think the market has done and will do, and why I think it. If there is any market letter that has educated potential competitors, it is mine. The reason is that the study of markets is more important to me than exclusivity, secrecy or power.
Q: Another common approach critics take when they try to dismiss Elliott as bunk is to refer to you as a mystic or a numerologist.
RP: A mystic believe in things for which there is no evidence, only desire. I do not consider myself to be a mystic at all. My approach is objective. The empirical basis of Elliott's discovery speaks to that fact. So do the results of the trading competition [Editor's note: Bob Prechter won the Trading Championship in options in 1984 with a stunning 444% gain. The next closest competitor showed an 84% gain.] Not once during any month since the independent rating services have been following market timers has a timer using a numerological approach such as "Gann" analysis ever placed in the top 10 rankings. Just as would be expected, such methods don't work!
The true mystics are those who believe, for instance, that current economic performance is a basis upon which to predict stock market prices. There is no evidence for it. They just feel comfortable with the idea, so they espouse it.
Q: So you say that the challenge to validity is on the other side?
RP: You're darn right, it is. I am no longer at the point where I feel that I have to justify the objectivity of the Wave Principle. I think the results have done that. Technical analysis is entirely rational and has proved itself. If someone goes back and looks at the record of Elliott wave writers over the decades, he will find a track record of forecasting success that is well beyond a random result of chance. If you can do that, the ball is in the other guy's court. It's up to him to show that this is luck or something. What's more, the only challenge to a theory is a better theory, and I haven't seen a contender yet.
Q: You don't feel that you have been effectively challenged by any fundamental approaches?
RP: I think there's a place for fundamental analysis of individual companies, but I am firmly convinced that you can make a very rational argument showing that fundamental analysis applied to overall market timing is like reading the entrails of goats. In fact, I presented such a critique in The Wave Principle of Human Social Behavior. If you think my ideas as presented here are controversial, just read Chapter 19 of that book.
***
Ed. Note: Robert Prechter, Chartered Market Technician, is the world’s foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.
Monday, September 21, 2009
Robert Prechter's Trading Tips - Guru Reveals His Secrets
Trading is tough - really tough. When you're making money, it feels like the easiest thing in the world. It's a great feeling - almost intoxicating, really. Like you're printing money from nothing!
Then, inevitably, you get cocky. And you lever up. And sooner or later, a trade goes against you...or two, or three. And you lose a lot of money. And it sucks!
Take it from a guy who has gotten pounded during the end of last year and the first half of this year - I've taken some knocks the hard way.
Bob Prechter, who is featured below in this guest article, is someone I recently started tracking. I've been drawn to the zen-like nature in which he's able to look at the markets. I reached the conclusion that a lot of my mistakes could have been presented, had I kept a more level head about me.
See, many of the trades I got into were "less loved" when I found them. Sugar at 8-cents back in 2004. Gold below $700 in 2007. It's all obvious in hindsight, but those really were "easy money" trades - buying an asset that was still relatively unloved, and watching the market warm up to it.
I got burned when I stayed too long at the dance. Buying gold at $1,000 today, when everyone is talking about it, and loving it, is perhaps not the wisest move.
So back to Prechter - that's what I've learned - the importance of being grounded, and of carefully weighing popular sentiment. Because even if fundamentals are good - if EVERYONE knows they are good, then you're really screwed on the long side, because it's all factored into price.
So here are five trading tips and a brief interview with Prechter, along with a link for a free trading eBook at the end of the article.
***
September 21, 2009
By Elliott Wave International
Take it from the person who won the United States Trading Championship with profits of more than 440% in 1984 – there are five things that every successful trader needs to know how to do:- Have a method to trade.
- Have the discipline to follow your method.
- Get real trading experience, instead of only trading on paper.
- Have the mental fortitude to accept the fact that losses are part of the game.
- Have the mental fortitude to accept huge gains.
That trader who won the championship in a record-breaking fashion is Robert Prechter, the founder and president of Elliott Wave International. Once you think you've mastered his 5 tips for how to trade successfully, then the best thing to do is to find a mentor. In this excerpt from the book, Prechter's Perspective, Bob Prechter discusses how sitting at the elbow of a professional trader can make all the difference in learning the trade of trading.
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Elliott Wave International has released part one of their hugely popular How to Spot Trading Opportunities eBook for free. The eBook sells as a two-part set for $129. You can now download part 1 for free. Learn more here.
***
Question: Has any specific trading experience decreased your trading success?
Bob Prechter: Yes. My first trade in 1973 was wildly successful, and I was hardly wrong in my first six years at it. Then I had a big trading loss in 1979, and that taught me more than the wins. The best way to develop an optimal state of mind for trading is to fail a few times first and understand why it happened. When you start, you're better off speculating with small amounts of real money. Using larger amounts of money will bankrupt you early, which, while an excellent lesson, is rather painful. If you want to be a trader, it is good to start young. Then when you lose your first two bundles, you can gain some wisdom and rebound.
Q.: It sounds painful. Is there any way at least to reduce the hard knocks?
Bob Prechter: There is one shortcut to obtaining experience, and that is to find a mentor.
Q.: Did you have a mentor?
Bob Prechter: In 1979, I sat with a professional trader for about a year. The most important thing he taught me was to keep trades small relative to your capital. It reduces the emotional factor.
Q.: How would one select a mentor?
Bob Prechter: The best way to select one is to find a person who is doing exactly what you would like to do for a living, then get to know him well enough to ask if he will tutor you or at least let you watch while he works. Locate someone who has proved himself over the years to be a successful trader or investor, and go visit him. Listen to him. Sit down with him, if possible, for six months. Watch what he does. More important, watch what he doesn't do. Finding a guy who knows what he is doing is the best lesson you could ever have. You will undoubtedly find that he is very friendly as well, since his runaway ego of yesteryear, which undoubtedly got him involved in the markets in the first place, has long since been humbled, matured by the experience of trading. He will usually welcome the opportunity to tell you what he knows.
Free 47-page eBook: How to Spot Trading Opportunities
Elliott Wave International has released part one of their hugely popular How to Spot Trading Opportunities eBook for free. The eBook sells as a two-part set for $129. You can now download part 1 for free. Learn more here.
Robert Prechter, Chartered Market Technician, is the world's foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.
Wednesday, August 26, 2009
Bob Prechter's Newsletter, Free - The Depression is Young
The newsletter that I most look forward to these days is Bob Prechter's...his views are unique, insightful, and I'm really starting to believe he's one of the only guys with a clue right now!
It's important to mention that while Prechter is extremely bearish now, he's by no means a perma-bear. I tend to discount folks who are perenially bearish - because even a broken clock is right twice a day! I want to follow the "gurus" who get the bullish and bearish angles right, at the right time.
I just got done reading Prechter's Elliott Wave Principle book, which I'll be doing a review on soon in this space. It's a great read - written in the late 70's, Prechter used it to outline his case for a massive bull market to come.
With the DOW floundering below 1000, and many financial types speculating that the US economy was in a state of permantent plateau/decline, Prechter put an aggressive 3000 price target on the DOW in what he predicted would be "the mother of all bull markets." Of course the bull ran much higher and longer than even Prechter envisioned, but as far as I can find, he made the most aggressive, correct call, during that time period. (Other examples are greatly appreciated!)
With that, here's a free excerpt from Prechter's latest newsletter - with an opportunity from EWI to get your hands on the entire piece. Enjoy!
***
August 26, 2009By Bob Prechter
The following is an excerpt from Robert Prechter's Elliott Wave Theorist. Elliott Wave International is currently offering Bob's recent Elliott Wave Theorist, free.
On February 23, EWT called for the S&P to bottom in the 600s and then begin a sharp rally, the biggest since the 2007 high. The S&P bottomed at 667 on March 6. Then the stock market and commodities went almost straight up for three months as the dollar fell.
On March 18, Treasury bonds had their biggest up day ever, thanks to the Fed’s initiating its T-bond buying program. The next day, EWT reiterated our bearish stance on Treasury bonds. T-bond futures declined relentlessly from the previous day’s high at 130-15 to a low of 111-21 on June 11.
That’s when there were indications of impending trend changes. The June 11 issue called for interim tops in stocks, metals and oil and a temporary bottom in the dollar. The Dow topped that day and fell nearly 800 points; silver reversed and fell from $16 to $12.45; gold slid about $90; and oil, which had just doubled, reversed and fell from $73.38 to $58.32. The dollar simultaneously rallied and traced out a triangle for wave 4. Bonds bounced as well. As far as I can tell, our scenarios at all degrees are all on track.
Corrective patterns can be complex, so we should hesitate to be too specific about the shape this bear market rally will take. But from lows on July 8 (intraday) and 10 (close), the stock market may have begun the second phase of advance that will fulfill our ideal scenario for a three-wave (up-down-up) rally. In concert with rising stocks, bonds have started another declining wave, and the dollar appears to have turned down in wave 5 (see chart in the June issue), heading toward its final low. Although commodities should bounce, their wave patterns suggest that many key commodities will fail to make new highs this year in this second and final phase of partial recovery in the overall financial markets.
Meanwhile, our forecast for a change in people’s attitudes to a less pessimistic outlook is proceeding apace. Here are some of the reports evidencing this change:
More than 90 percent of economists predict the recession will end this year. [The] vast majority pick 3rd quarter as the time. (AP, 5/27)
Manufacturing and housing reports this week may offer signs that the recession-stricken U.S. economy is within months of hitting bottom, economists said. (USA, 6/15)
Fewer people say they’ve prospered over the past year than in decades, a USA TODAY/Gallup Poll finds. Over the past two months, however, expectations for the future have brightened significantly amid rising optimism about a stock market rebound and economic turnaround. “I think the administration is going in the right direction,” says… Now 36% of those surveyed in the Gallup-Healthways well-being poll say the economy is getting better. That’s not exactly head-over-heels exuberance, but it is double the number who felt that way at the beginning of the year and a notable spike in the nation’s frame of mind. Thirty-three percent say they’re satisfied with the way things are going in the United States; in January, just 13% did. (USA, 6/23/09)
If only to confirm the socionomic causality at work, an economist quoted in the article above muses, “The one anomaly in the puzzle is that people shouldn’t be feeling better because the jobs market is so terrible and unemployment is likely to keep rising.” Of course it would be an anomaly, and people should not feel better, if mood were exogenously caused. But it is endogenously regulated, and it precedes social actions, which produce events such as job creation and elimination. That people feel better is evident in our rising sociometer, the stock market. If the rally continues, economists will soon agree that the Fed’s “quantitative easing” and Congress’ massive spending are “working.” Those predicting more inflation and hyperinflation will have the last seeming confirmation of their opinions. Then, a few months from now, some economists will probably express similar puzzlement when the stock market starts plummeting again despite the fact that the economy has improved.
But all of these considerations are temporary. Conditions are relative, and behind the scenes, the depression has been, and still is, grinding away.
For more information, download the FREE 10-page issue of Bob Prechter’s recent Elliott Wave Theorist. It challenges current recovery hype with hard facts, independent analysis, and insightful charts. You’ll find out why the worst is NOT over and what you can do to safeguard your financial future.
Robert Prechter, Chartered Market Technician, is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.
Wednesday, August 12, 2009
Robert Prechter: Dollar's Hit a "Major Bottom"; Get Ready for a Deflationary Depression
Here are a couple of very insightful video interviews with Robert Prechter of Elliott Wave International:
- Part I - Prechter believes the dollar has bottomed, because of the formation in the Elliott Wave pattern, and also the extreme bearish sentiment we're seeing.
- Part II - He explains his deflationary depression hypothesis and why he believes the next big phase thing we'll see will be a massive "credit implosion" - which will set off a mad dash for dollars.
I really love his line:
This is how markets work - they give you a story at the bottom, and a story at the top.
He shared this when asked about the mainstream reaction to the stock market rally (inflation and commodities are back, etc). Prechter believes that markets make the news, not the other way around.
If you enjoy Prechter's insights, they have a lot of great, free content available if you sign up for Club EWI -now's actually a good time to do it, as they're giving away a free Ebook until the end of the week.
We will, of course, continue to cover his analysis here - I'm a big fan and an EWI subscriber myself. And I have a sneaking suspicion that as crazy as his theories can sound, he might be right on the ball here - it wouldn't be the first time Prechter's contrarian views were correct - so I am listening and following closely.
Recent articles from Bob Prechter:
Sunday, July 19, 2009
Trading With the Wave Principle - Free Video
As regular readers know, I'm starting to get my feet wet with the Elliott Wave Principle...can't yet say I'm a total believer yet, but I am definitely finding some value from the practice.
Here's a free 5-minute primer video by Elliott Wave International's Chief Commodity Analyst Jeffrey Kennedy, as he takes a look at wave theory as it applies to a chart of palladium.
Wave theory can make your head spin, but thus far I've found it very interesting to say the least. I especially am intrigued with how it's inherent goal is to trade counter to popular sentiment.
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