Dos and Don’ts for Derivative Traders

Dos and Don’ts for Derivative Traders

1 Do educate yourself first. "Don’t jump in the water if you don’t know how to swim." There are many quality books and trading manuals available that will teach you the dos and don’ts of trading. Use these resources to accumulate a working knowledge of the commodity markets before you start investing your hard earned money. Understand what you’re getting into.

2 Don’t buy into an expensive trading system. These so-called experts, who want to sell you their "trading secrets" for thousands of dollars, will usually leave you too dazed to even keep track of your losses. If someone has a system worth selling for that much, they would keep it a secret! There are many quality instructional trading manuals that sell for a few hundred dollars or less that will contribute much more to your education and long term success.

3 Do have a trading plan. Before ever entering a market, you should know what you can make and what you are risking. From a profit potential standpoint, you want to set preliminary targets and possibly a level to exit the trade. Know how you are going to react to a move in any direction.

4 Do be disciplined. Maintain your original strategy. Trading decisions should be based on sound analysis, not emotion.

5 Don’t ignore fundamentals. Technical trading works. But even the best market formation and trading system can be over-run by a dramatic change in supply and demand. Remember, the law of economics will ultimately decide a commodity’s price. The most successful traders are always aware of current technical and fundamental events.

6 Do use stop-losses. Whenever you enter into a trade, you should already know where you expect that market to go, and what the most is you’d be willing to risk on that trade.

7 Do be patient. Unless you’re "day trading," don’t get in and out of the market too often. New traders especially, tend to enter into a trade based on intermediate- or long-term strategy, but then change their mind back and forth with every tick in the market.

8 Don’t trade from a newspaper. The paper is typically a great place to keep up with local events, and maybe even sell your car. It is not however, good information to use as your trading indicator. Hence the adage, "Buy the rumor, sell the fact."

9 Do expect losses. Even the best traders are wrong sometimes. Don’t get down on yourself. Be disciplined and stick to your long-term trading plan.

10 Do study your losing trades. Learn from your mistakes and misinterpretations. Go back over the trading signals that prompted you to enter the trade. This is how you learn to trade.

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Periodic Table of Commodity Returs – The decade.

Mouse-over a commodity in the key on the right to view its trend through the decade.

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World markets closing at a glance – 16 Jan 10

world market weekly closing 16 jan 10

world market weekly closing 16 jan 101

Gold, commodities are not in bubbles: Jim Rogers

SINGAPORE (Commodity Online): Name the world’s best and most passionate commodities investor. And most of you would come up with the legendary name Jim Rogers. Rogers has his heart and money into commodities, unlike other investors who dabble in stock markets most of the time, and do not spend and invest much in commodities.

Rogers, author such widely-read books like Hot Commodities and A Bull in China, says gold and commodities are not in bubbles as they are being made out by pessimistic investors and analysts. “I don’t know what bubbles these people are talking about. I would advise them to name a commodity that is in bubble,” Rogers told CNBC-TV18 in an interview this week.

So should investors believe Jim Rogers and step up their investments into commodities? Rogers says if you are an investor, commodities are the right and best place to be in. He cites the example of the most quoted commodity—gold—to drive home the point those have invested in the yellow metal have reaped rich dividends in the last one year.

Gold price that used to around $800 per ounce in January 2009, boomed to touch the historic high of $1,227 per ounce in November, 2009. This 10-month boom in gold price has prompted analysts like Jim Rogers to forecast that the yellow metal is further set to hit $2,000 per ounce.

Rogers recently said that he is waiting for the right opportunity to buy gold. “I will buy as and when gold price dips to $1,000 per ounce,” he said adding that he find great investing potential in other precious metals such as silver, platinum and palladium.

So, again, can you relay on Jim Rogers’ great appetite for commodities and invest? Rogers became a Wall Street legend when he and George Soros founded the Quantum Fund years back. Quantum Fund gained 4200%, making him the best known commodities investor in the world.

In 1998, Jim Rogers launched the Rogers International Commodity Index, a composite, US dollar-based, total return index, designed to meet the need for consistent investing in a broad-based international vehicle. The Index represents the value of a basket of commodities consumed in the global economy, ranging from agricultural to energy to metal products.

So Rogers being the most astute investor in commodities, everyone believes when he talks that commodities are not in bubbles. Recently, Rogers lambasted Nouriel Roubini for predicting that gold price is in a bubble that would burst soon. Rogers said Roubini does not have any basic knowledge of gold and commodities markets in the world.

Similarly, last week, Rogers blasted short-sell guru Jim Chanos for predicting that Chinese economy is in a bubble that would burst anytime now. Rogers hit back saying people like Chanos who did not know the spelling of China some years back are now pretending to be experts on China.

"China is not in a bubble. But the Chinese economy needs to cool,” he said.

“I am delighted to see what China did because some of the real estate in China was getting into a serious bubble. It’s good for China and therefore good for most of us. They need to cool off their economy. They cannot get it too strong but China does not control the commodities market by any stretch of the imagination,” Jim Rogers said.

On gold, Rogers told CNBC: “Gold made an all time high recently but everything else is still very depressed compared to its all time high. What kind of bubble are you talking about? Name one commodity that is in a bubble and all time high except gold.”

Rogers further stated:

“I own crude. I don’t think I would buy it right now. It’s gone up a lot in the last 12 months. I own all commodities. They are the best place to be. If the world economy gets better, commodities are going to lead the way because there are shortages developing in most commodities.”

“If the world economy does not get better then commodities are good place to be because they are printing so much money all over the world. So I would rather be in commodities, in just about anything. What is this bubble we are talking about? Cotton is 60% below its all time high and silver is 70% below.”.

Gold Monthly / Fortnight Pivot Points

GOLD Pivot Points Monthly – Jan 2010
1/8/10 7:07 PM
M High	M Low	M Close	M Open
1227.50	1075.20	1096.20	1099.00
Formula #1: Previous Day’s H + L + C
S4	S3	S2	S1	Pivot	R1	R2	R3	R4
676.07	828.37	980.67	1038.43	1132.97	1190.73	1285.27	1437.57	1589.87
Formula #2: Previous Day’s H + L + T O
S4	S3	S2	S1	Pivot	R1	R2	R3	R4
677.00	829.30	981.60	1040.30	1133.90	1192.60	1286.20	1438.50	1590.80
Formula #3: Previous Day’s H + L + C + T O
S4	S3	S2	S1	Pivot	R1	R2	R3	R4
667.58	819.88	972.18	1021.45	1124.48	1173.75	1276.78	1429.08	1581.375
GOLD Pivot Points Fortnight – 04 to 15 Jan 2010
1/8/10 7:33 PM
F High	F Low	F Close	F Open
1142.90	1075.20	1104.80	1099.00
Formula #1: Previous Day’s Hi + Lo + Close
S4	S3	S2	S1	Pivot	R1	R2	R3	R4
904.53	972.23	1039.93	1072.37	1107.63	1140.07	1175.33	1243.03	1310.73
Formula #2: Previous Day’s Hi + Lo + Today’s Open
S4	S3	S2	S1	Pivot	R1	R2	R3	R4
902.60	970.30	1038.00	1068.50	1105.70	1136.20	1173.40	1241.10	1308.80
Formula #3: Previous Day’s Hi + Lo + Close + Today’s Open
S4	S3	S2	S1	Pivot	R1	R2	R3	R4
902.38	970.08	1037.78	1068.05	1105.48	1135.75	1173.18	1240.88	1308.575

Commodity Daily – A World of Possibilities Market Update – 07 Jan 10

07/01/2010 15:16
** P D HIGH = Previous Day High, P D LOW = Previous Day Low, P CLOSE = Previous Day Close
IF "COMMODITY" & "+ / -" BOTH COLOMN ARE IN "RED" = BEARISH & IF "GREEN" = BULLISH
** SELL Signal = If price close below PIVOT POINT or Previous Day Low ** BUY Signal = If price close above PIVOT POINT or Previous Day High
S = Support , R = Resistance
COMEX
COMMODITY	P D HIGH	P D LOW	CURRENT	S4	S3	S2	S1	PIOVT	R1	R2	R3	R4	+ / –
GOLD FEB 10	1141.00	1116.80	1132.00	1060.73	1084.93	1109.13	1125.65	1133.33	1149.85	1157.53	1181.73	1205.93	17.80
SILVER MAR 10	18.25	17.76	18.08	16.63	17.12	17.61	17.95	18.10	18.44	18.59	19.08	19.57	0.38
CRUDE DEC 09	83.52	80.85	82.55	74.68	77.35	80.02	81.85	82.69	84.52	85.36	88.03	90.70	1.41
LME
COPPER 3 M	7742.00	7500.00	7660.00	6878.50	7120.50	7362.50	7467.00	7604.50	7709.00	7846.50	8088.50	8330.50	175.00
NICKEL 3 M	19400.00	18655.00	19155.00	16731.25	17476.25	18221.25	18532.50	18966.25	19277.50	19711.25	20456.25	21201.25	445.00
TIN 3 M	17825.00	17400.00	17825.00	16362.50	16787.50	17212.50	17450.00	17637.50	17875.00	18062.50	18487.50	18912.50	450.00
CURRENCIES
USDINR	46.1963	45.8500	45.8550	44.8980	45.2443	45.5906	45.6776	45.9369	46.0239	46.2832	46.6295	46.9758	-0.3885
USDSGD	1.3986	1.3938	1.3961	1.3813	1.3861	1.3909	1.3927	1.3956	1.3974	1.4004	1.4052	1.4100	-0.0008
EURUSD	1.4416	1.4284	1.4368	1.3978	1.4111	1.4244	1.4338	1.4377	1.4471	1.4510	1.4643	1.4776	0.0013
GBPUSD	1.6064	1.5938	1.5972	1.5621	1.5747	1.5873	1.5933	1.5999	1.6059	1.6124	1.6250	1.6376	-0.0008
SGDINR	33.1375	32.8419	32.8505	32.0442	32.3398	32.6354	32.7246	32.9311	33.0203	33.2267	33.5223	33.8180	-0.2620
ASIAN & AMERICAN MARKETS
BSE	17790.33	17636.71	17594.43	17249.21	17402.83	17556.45	17629.80	17710.07	17783.42	17863.69	18017.31	18170.93	14.89
NSE	5310.85	5260.05	5252.80	5131.23	5182.03	5232.83	5256.40	5283.63	5307.20	5334.43	5385.23	5436.03	3.90
STRAITS TIMES	2937.98	2919.74	2911.17	2876.51	2894.75	2912.99	2924.47	2931.23	2942.71	2949.47	2967.71	2985.95	10.21
HANG SENG	22514.79	22277.13	22222.07	21726.18	21963.84	22201.50	22363.52	22439.16	22601.18	22676.82	22914.48	23152.14	137.09
DOW	10594.99	10546.55	10573.68	10424.67	10473.11	10521.55	10544.98	10569.99	10593.42	10618.43	10666.87	10715.31	1.66
NASDAQ	2314.07	2295.68	2301.09	2249.47	2267.86	2286.25	2295.21	2304.64	2313.60	2323.03	2341.42	2359.81	-7.62

China to control gold prices in 2010

How will India’s reluctance to continue its gold buying spree affect the global bullion market? This is the question haunting many analysts across the globe as the world’s numero uno consumer of gold, India, posts a huge fall in gold imports in 2009.

But, the ray of hope for the bullion market is that China has fast emerged as the leader in gold buying. In fact, in 2009 China has pipped India to the post in gold purchases.

Chinese New Year gold rush has already begun, and robust demand looks likely to continue through 2010. So, in the coming years, analysts will be watching China, instead of India, to make their decisions on investments in gold.

China’s gold purchases have grown 10% from 2008’s record in volume terms, rising 26% by value to equal $13.5 billion or more.

On recent trends, that would equate to more than 2% of China’s famously massive household savings (up from 1% ten years ago) and account for almost one ounce in every eight sold worldwide.

According to GFMS, physical gold purchases by mainland Chinese households in 2009 was already running 19% ahead of India’s private demand for Q1-Q3.

Given China’s continued economic growth private gold consumption in Q4 most likely remained very robust. Whereas India’s private gold off-take during Oct-December continued to shrink in the face of record-high prices.

Indian bank and wholesale dealers have reported below-market bids from their clients throughout the autumn. Imports were 54% lower from 2008’s already disastrous finish.

Fourth-quarter Chinese consumption should be in the range of 116 tonnes. The running total to end-September was 315 tonnes. It is likely to finish full-year at 431-443 tonnes.

India’s private demand, in contrast, ran 45% below 2008 levels during the first 9 months of the year, most notably depressed during Q1. Applying the 5-year average ratio of Q4 demand to Q1-Q3 figures (27% added to 264 tonnes), full-year private off-take would come in at 336 tonnes, the lowest total since at least 1991.

source – commodity online

Why America banned gold ownership in 1933

By Glen O. Kirsch
For 5,000 years man has sought gold. It has been said that as much as three-quarters of the earth’s land surface was first explored because of man’s insatiable desire for gold.

Since the dawn of time, one of the major uses for gold was as adornment. It made (and still makes) spectacular jewelry. But very quickly, gold began to assume its primary role – that is, as a reliable and predictable store of value. In other words, as money.

Man’s desire for gold has been surpassed only by his stupidity at trying to manipulate money. There are numerous historical examples of the terrible consequences of this folly. Some historians believe that it was not Attila the Hun who caused the fall of the Roman Empire. Rather, it was the debasement of the gold and silver coinage, through plating, clipping and counterfeiting.

The world then settled into a long period of economic stagnation which we now know as the Dark Ages. This was followed by the Renaissance and the Age of Enlightenment. However, there was nothing enlightened about one “advancement” during this period – the invention of paper money. This was a new twist on man’s age-old effort to manipulate the quantity of money. The results have been disastrous.

The French Revolution in the late 1790s has been linked to a failed debasement of the French franc. History is riddled with the bodies of paper currencies. The errors of the past are repeated again and again.

Sooner or later, almost all governments succumb to the temptation of currency debasement. Like drug addiction, once begun it is hard to stop. Paper currencies make this easy (and computer entries make it easier still). Most governments refuse to stop the flood of fiat currency, even when they know the result will be the debasement (and ultimately the collapse) of their monetary system.

And here comes that lust for gold again. The search for gold fueled the discovery and exploration of North, Central and South America. In the United States, “manifest destiny” did not just happen. It was fueled by the California gold rush in the mid-1800s and in Alaska later that century. The chase was on worldwide, with the world’s largest gold discovery taking place in South Africa in the late 1800s.

So we have this interesting and complicated series of events overlapping – a quest to find more gold and man’s attempt to manipulate money. Throughout the past two centuries, gold and paper money have competed for the primary monetary role.

When I started in the business in the late 1960s, the dollar was as “good as gold.” The U.S. had emerged from two world wars as the strongest economic power on earth. We had accumulated the largest gold stockpile in history. The result was a stable dollar that everyone in the world, it seemed, preferred to their own currency.

With the system working so well, government just couldn’t leave well enough alone.

In 1933, FDR banned gold ownership for U.S. citizens. Millions of gold coins were confiscated and melted down. The ban lasted for 42 years, with the right to own gold finally restored in 1975. It has taken many years for some Americans to recognize the essential role gold should play in a portfolio. But still, most Americans do not appreciate gold as an asset class.

I can remember the collapse of the London gold pool in 1968. A gold buyer at that time was generally an immigrant from Europe, many of whom remembered the German hyper-inflation of the 1920s. The Reich Mark had failed and another paper money experiment bit the dust. Gold prevailed. That was a classic example of gold working in a crisis.

But, we don’t have to look back that far to see how gold can be the ultimate money. Back in the 1970s, I was a CEO of Deak-Perera (Washington), Inc. in Washington, DC. They were the premier foreign currency exchange company at the time, with outlets in virtually every major gateway city and airport in the U.S.

When the flood of refugees from Vietnam began pouring into the United States, the State Department asked Deak-Perera to become the exclusive foreign exchange/precious metals dealer at the various refugee camps. We would eventually purchase literally tons of gold from refugees, many of whom arrived with all their worldly possessions jammed into a suitcase or small bag. Some people presented stacks of piasters, Vietnam’s former currency. We had to tell them that their paper money was absolutely worthless.

Others had been wise enough to put their trust in gold. Many refugees clutched small golden wafers, called taels, which were popular throughout Southeast Asia. When they presented their taels, we were able to exchange their gold for U.S. dollars on the spot. Their foresight gave them the wherewithal to begin a new life in the United States.

The lesson is clear: In a monetary crisis, gold is the very best insurance you can have. This is true whether it’s the gradual erosion of purchasing power, as we are seeing now with the U.S. dollar, or the sudden, catastrophic plunge of a currency due to economic, social or political unrest which has occurred many other times in many other countries.

Gold works. It has before, it will again. Make sure you heed this lesson of history.

Glen O. Kirsch is Executive Vice President of Asset Strategies International INC