Jan 04

Trading Strategies And Tips For Binary Options

Trading strategies and tips for binary options is information gathered by one who is determined, disciplined and has the drive to put a blueprint to together and follows it in detail, every time a trade is made. Rules are very important to follow when dealing with any amount of money you are trading to make a profit. Veering off your plan of action can lead to disaster. A basic outline should consist of having general knowledge of technical analysis, bankroll management, and risk management. Consider this your foundation for making trades.

1. Technical Analysis.

Knowing how to read a chart to make money, would be a good starting point, when trading binary options. Set up your chart so that it is easy on your eyes as you stream through data to make trades. Knowing how to use your indicators and oscillators could be vital tools when it comes down to placing your trade. Entry points in the market well separate anyone from a winning trade and losing trade. Any successful trader utilizes the tools in front of him.

2. Bankroll Management.

Knowing how to use manage your money is very important when trading. For example, if you deposit $1000 into your broker account, it’s safe to say you should only trade with 5% of your deposit. This comes out to be $50 a trade. Now if you like you can divide that into any amount and get more trades. For example you can do 2 trades at $25, or you can do 5 trades at $10.

3. Risk Management.

To some traders, risk in binary options is considered low. Every trader knows the rate of return on their money, if they win the trade, and if they lose a trade, they know what is lost, at the striking price. This may not be the case when you are making a trade on an upward trend that is for sure in the money, and at the last seconds, reverses and you miss out on your profit by one pip. We have all experienced this, and it raises the risk because it wasn’t suppose to happen. Entry points are very important and must be practiced repeatedly to reduce the risk and increase your chances for winning more trades.

Learning trading strategies and tips for trading binary options could be beneficial for anyone who is willing to be a successful trader. This does not happen over night. Putting in the time is inevitable. If it were easy, everyone would be doing it and making money.

Jan 04

Preparing for the New Trump Economy

Well, now that that’s over with, where to next?

Truthfully, I’m disappointed the Fed raised interest rates last week. I expected as much, though I saw reasons why a rate hike would be ill-advised and should have been avoided.

There are simply too many deleterious impacts on massively indebted U.S. consumers, American multinational companies slammed by the strengthening dollar and emerging market economies that have taken on trillions in dollar-denominated debt that’s getting more and more costly. Those impacts will come home to roost soon enough…

Now we’re supposedly on the march toward three more rate hikes in 2017. Maybe – though doubtful. But we shall see.

The stock market certainly got what it thought it wanted, then promptly went nowhere.

Bonds flagged.

The dollar rallied.

Cheerleaders claim we’re on the road to even higher stock prices – never mind that rising interest rates have historically meant falling stock market valuations (more on that in an upcoming dispatch).

But we’re still left with the question: Where to next?

I have an idea, and you’ll want to own commodities if I’m right.

Having bullied Yellen for a rate hike, Wall Street is now waiting for the Day After – January 21. It will be like no other day after a presidential inauguration in modern history.

So many promises/threats are waiting to either unfold or fizzle. Which Donald Trump will show up to his first day on the job? Wall Street’s directional future depends on that answer.

The Threat of Stagflation

If Candidate Trump arrives, then we have economic challenges that will torment the market.

Immigrants who make up a goodly portion of the service-sector workforce will be rounded up and summarily dispatched back to their homelands – a massive disruption to restaurant back-of-house operations, the construction industry, agriculture, hoteling, landscape companies, etc. That’s inflationary and a significant brake on economic growth.

Chinese manufacturers/exporters face stiff tariffs as Candidate Trump executes his belief that China is manipulating its currency. That, too, is inflationary and will see China lash out with similar tariffs that hit U.S. exporters, leading to layoffs here at home.

U.S. companies also face punitive measures for trying to remain competitive globally by opening production facilities overseas (made all the more important because of the anti-competitive impacts of the strong dollar). That will hit corporate profit margins and lead to declining stock prices and job losses at home.

Meanwhile, infrastructure spending combined with proposed tax cuts means a fresh round of hell for budget deficits and America’s debt. That’s stagflationary because the rising cost of government debt payments takes productive capital out of the economy, while infrastructure projects dump money into the economy which will be chasing goods and services – i.e., rising demand (which will be happening even as all the other inflationary moves unfold).

So, Candidate Trump arriving to work on Day One could present quite the problem for stocks and bonds, since inflation erodes corporate profits and the value of current bond yields.

A More Moderate Approach

If Presidential Trump shows up, we have a slightly brighter path to tomorrow – though economic challenges still exist.

Presidential Trump will not provoke a trade war, saving America from another losing battle, while limiting inflationary stresses at home and saving U.S. multinationals from the pain of rapid profit deterioration (nearly half the S&P 500’s sales and profits come from overseas).

Nor will Presidential Trump deport 11 million illegal immigrants starting on the Day After, preventing mass pain across service-sector industries, inside American wallets and across the broad economy in general.

Nor will he impose punitive measures on American companies that are desperate to remain competitive in a modern global economy. That will preserve corporate profits and limit the impact on stock prices.

Presidential Trump will, however, pursue his infrastructure spending plan, no matter what. And that will be inflationary… which means it’s time to add “hard commodities” to your portfolio – and, in particular, industrial commodities, or “base metals,” as they’re called, such as copper, nickel, aluminum and whatnot.

The Winner for 2017…

Inflation will drive the price of commodities higher, as will increasing demand which will stem from U.S. infrastructure spending, since new roads and bridges and airports and whatever project is on the docket require an abundance of industrial metals.

One of the single best hard commodity opportunities for 2017 is the PowerShares Deutsche Bank Base Metals ETF (NYSE Arca: DBB), an exchange-traded fund (ETF) that, among its peers, has the best track record over the last five years.

This particular ETF is tied to copper, zinc and aluminum, and its returns are based on the performance of futures contracts in those three metals. As a way to gain basic exposure to rising prices for some of the most widely used base metals, this fund is fine.

As with all such hard commodity ETFs, however, the returns are impacted by the fund’s continual need to roll over the futures contracts it owns from one month to the next.

So that’s where we stand – Wall Street waiting to see which Donald Trump shows up. But whichever one it is, it’s a Trump who’s likely to be quite the tailwind for commodity investments.

Jan 04

The Big Oil Comeback

Every week brings another spate of headlines about the heavy blows soon to rain down on the energy sector…

“The Oil Collapse ‘Death Spiral'” is coming soon…

And… “Oil Prices Might Never Recover.”

Apparently, very soon, we will all ditch our gasoline-fueled cars and trucks for Tesla knockoffs. The slow-growth U.S. economy and the rising number of wind- and solar-energy installations around the world will supposedly finish the job.

Boom! Petroleum is “the new coal.”

Don’t believe it. In fact, we may well be entering a new golden era for oil investing – all because of a certain country in Asia with a five-letter name…

If you want to know which economy will have the single largest impact on the global price of oil – and why we will continue to look at the oil sector as an important part of any investment strategy – all you have to do is look at what’s happening in India.

India – with a population of 1.3 billion and a gross domestic product (GDP) growth trend that’s now rising at a faster pace than China (7.5% versus 6.9% in 2015) – is still in the early stages of a massive love affair with crude. And considering that it needs to import about 80% of what it consumes, it’s a love affair that’s growing literally by the month.

In September, oil imports rose nearly 12% compared to year-ago levels. It was the same in August (a 9% increase) when the country brought in a record of nearly 19 million metric tons of crude – the equivalent of nearly 4.5 million barrels a day. By comparison, China, with a more developed economy and nearly 1.4 billion people, imports around 6 million barrels a day.

As the International Energy Agency (IEA) recently noted: “India is taking over from China as the main growth market for oil.”

At the current pace, the country is on track to raise yearly imports by 7% for the second time in a row, having doubled its crude oil imports in a decade’s time.

What’s driving all the demand?

It’s a familiar story – a small, but rising middle class (which makes up about a fifth of India’s population now, say demographers, but is expected to swell to more than 40% by 2030).

And new cars. Lots and lots of new cars.

In 2015, passenger car sales rose nearly 10% to more than 2 million units, the fastest pace in five years. One of India’s largest carmakers, Maruti Suzuki, recently predicted annual sales would hit 5 million a year by the end of this decade.

Keep in mind, all of this is occurring against a backdrop in which the IEA, in its World Energy Investment 2016 report, said current oil wells around the globe are depleting by an average of about 9% a year. Discoveries of new oil reserves are “dropping to levels not seen in the last 60 years.”

Of course, it’s important to ask whether electric-vehicle sales might become a bigger factor and perhaps drain off India’s surging oil demand.

The answer, I’m sure, is yes. But when is anyone’s guess. As India’s Economic Times noted, the country has 400 million people with no access to reliable electrical power. And even in major cities, outages have been common because of a lack of investment in India’s power grid in prior decades. Without reliable power, even the fastest-charging, longest-range electric car or motorcycle is useless.

The situation is starting to change in India, but it’s going to take decades. In the meantime, oil remains the only practical game in town for investors and as a foundation for India’s rapidly developing economy.

Jan 04

Futures – Advantages and Disadvantages

Before I can tell you the advantages and disadvantages of trading futures, it’s important to understand how it differs from trading stocks.

When you buy a stock, you own part of the company. That is, you share ownership with other investors. That’s why we say you buy shares.

Trading futures, on the other hand, requires a contract to buy or sell the commodity in the future. That’s why they are called futures.

You can buy or sell those futures contracts as easily as trading stocks. For that matter, you don’t even have to lay out the money. However, you do tie up resources in the form of margin.

The problem is that the margin held is nowhere near the actual value of the commodity if you were to purchase it. This is known as the Notional Value. It’s calculated as the market value multiplied by the leverage.

Okay, I just threw you two more terms that need definition:

The market value is the price that traders are willing to pay. In general, this is determined by supply and demand. The leverage is the number of units of the future index.

For example, the E-Mini SP& 500 Futures has a leverage of 50. As of this writing it’s trading near a market value of 2100. Multiply that by the leverage (50) and you get $105,000. That’s the Notional Value of the E-Mini S&P.

As you can see, if you buy one E-Mini S&P contract, you are controlling $105,000 in value. However, unlike stocks, you don’t own it. You just have a contract to buy or sell it, depending if you went long or short.

Low Margin Required

What did you actually pay? That’s known as the margin that the broker requires you to hold while that trade is active. It varies, but it’s around $5,000.

If you bought a stock valued at $105,000 you’d have to pay $105,000. If you used margin, it would still require a payment of half of that. The advantage with futures is that you only tie up a small fraction.

However, the disadvantage is that you need to know what you’re doing. If you let a Futures trade get away from you, you are liable for a huge investment. Remember, it’s a contract.

That’s why traders buy and sell Futures contracts without actually ever buying the commodity.

What’s the disadvantage?

When trading futures you have to apply your due diligence in knowing the notional value of the future contract.

If you don’t pay attention to the Notional Value, and a trade keeps going against you and you don’t close the trade at a small loss, it can get out of hand.

You could end up losing a lot of money in a short time. If you reach the limits of your margin, your broker will close the trade if you don’t. That means you’ve been taken out of the market and you may not have the resources to get back in. Game over!

For this reason, you need to stay small. Don’t add to bad trades hoping to lower your cost bases. Rather, just admit that you were wrong and you’ll be around to play another day when an opportunity arises.

Advantages?

There are many, and these are the reasons why I love futures over stocks. The rest of this article will briefly list the advantages with trading futures.

Trading Long and Short

Going short with Futures is just as easy as going long. It’s just a matter of deciding in which direction you think the market is headed.

No Day Trading Limits

There is no day trading limit with Futures. Stocks can only be traded three times in a day before the IRS considers you a day trader. Futures can be bought and sold any number of times in a day, allowing one to take quick profits and benefit from intraday swings.

No Wash Sales Penalties

The IRS does not penalize you for taking a loss and reentering the same trade within 30 days. When this is done with stocks it is considered a wash sale and you lose the benefit of deducting the loss unless you can carry it forward to a future gain on the same stock.

The reason why it’s not penalized for Futures is because Futures pricing are recorded as Marked to Market. I won’t get into that here. You can always do a Google search for the term if interested.

Trading 24 hours

Futures trade nearly around the clock, except on weekends and short periods in between for exchange record keeping.

European Style Trading

Stock Options follow the American Style that can be exercised anytime. When trading stock options, one needs to be careful to avoid being exercised if the option is in the money.

Most Futures Options trade European Style, which can’t be exercised before expiration. There are some exceptions, especially with weeklies. That’s beyond the scope of this article though.

Tax Advantage

Futures and Options on Futures are treated according to IRS Section 1256. That provides a tax advantage since 60% of all gains are considered Long Term. This is true even if held for just a few seconds.

 

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