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Written by Barry Desautels
Aside from trading terms and miscellaneous vocabulary, the real traders’ language is in the charts. This is where the orders are recorded causing the buy or sell signals to appear. Charts are used to track many things, but in the trading business, they are used to record a variety of different price movements, with a constant connection to time. Understanding the meaning of chart signals allows buy or sell orders to be placed and trades executed.
Regular price movement for individual stocks, stock indexes, commodity prices, futures, and currencies are some of the more common instruments for which information is readily available. The actual signals are supplied by the exchange where the trades take place. For instance, the Chicago Mercantile Exchange, or CME, carries the S&P 500 E-mini index, among others, and through a massive computer system, the signals are broadcast and utilized by the trading community.
Chart reading is part of the life long process traders undertake that allows them to understand and enjoy trading. It is a big part of the passion we all have for this business. Studying signals usually begins with a book or E-course, and involves the basics. Standard reversal signals are the easiest to learn because it’s simple to see a directional price change. It also happens quite often in a volatile market. In fact, it’s the only signal some traders use.
Transitioning from books to live market means learning to focus and concentrate. Signals occur quickly and new traders must be ready to move fast. Not hesitating is something you learn early so you don’t fall behind the market. Jumping into a trade late is not recommended, while being decisive takes practice, and doesn’t change. You either are in or you are out, and the same mental awareness is needed for every trade.
When the decision is made to become a trader, an individual soon realizes that embracing chart signals and what they say is critical to moving forward. Knowledge and experience are valuable assets under any circumstance, and setting a personal goal to attain both is an enjoyable and worthwhile undertaking. Learning takes place every day, a little at a time, and ultimately leads to achieving long term success.
http://www.chartreaders.com/blog
Written by Barry Desautels
I’ve recently taken a break from trading in order to focus on writing and on some other investments that need attention. While I do miss the day to day price action and the commentary, I’m finding some things out that I need to work on.
Discipline has been talked about a lot in trading, and it is a big part of life whether we’re on a fast track, slow track, or no track. In order to survive at our most basic level, we all need to learn something about discipline. It’s almost a craft that needs to be practiced and studied.
I’ve long been a fan of day books and lists, and planning every detail. The problem is, getting bogged down in the details can happen easily and often. It takes practice and persistance to achieve listed goals and even more determination to do it consistently. Distractions and disturbances can plague those of us not involved with a traditional boss in a traditional workplace, holding down a nice, regular paying job.
In a review of where I should be according to my plan, and where I am in reality, I see a discipline problem. It’s not as if I’m just sitting around. I still work ten hours or more a day, most days of the week, including weekends. I have numerous projects started, many not finished, waiting for research, or just plain stalled. It happens!
But what is the answer? In my case, I need to rework the priorities and sharpen the focus. If writing articles is top of the list, than a higher completion rate would be a worthy goal. In research, again, a limit on the scope would provide an opportunity to establish how far I go into each topic. There is no advantage to gathering information that never gets used. What is gathered needs to be filed or indexed or stored so it can be easily retrieved.
Skimming the surface can be fun and supply lots of ideas and things to follow up or expand on. However, the nuts and bolts are what make things work, not the shiny paint on the outside that grabs our attention. Fewer topics, greater effort, and more concentration seem to be the direction that will lead to more meaningful production.
It’s never too late to make adjustments in life. By ramping up the discipline just a little bit, I expect to see positive change both long and short term.
Merry Christmas and Best Wishes in 2010!
http://www.chartreaders.com/blog
Written by Barry Desautels
In tough economic times many people find themselves unemployed. It’s not a pleasant experience, but if it’s your reality, taking a pro-active stance is a positive choice. Emini education is a viable alternative. It is not a get rich quick scheme and it is not free. For those unfamiliar, the eminis are a series of futures contracts traded online. The focus here is the S&P500 E-mini at the Chicago Mercantile Exchange, or CME. Trading online is for those who love a challenge and love to learn. You will require hi-speed internet, a computer with at least a 15 inch screen, and a solid training program. Eminis are not something you can learn over a weekend, so finding a reputable program is important.
The offer should include a detailed E-course to get you the basics. Depending on your available time, 2-3 weeks of study will get you enough understanding to allow you to advance to a beginner trading room. Make sure the offer includes a room. The trading room is where you will become familiar with charts, a trading platform, and actual live market trading. Of course as a novice, you will start out paper trading, which is live market, without a connection to the broker. It’s called simulated trading, and this is where the fun begins. There are hundreds of lessons to be learned in sim, and through attending daily sessions in the trading room with a professional moderator, you advance to the next level.
Your time to go live with real money is a personal decision, with the help of the moderator. They should be available to answer any questions you have either online, or via email or telephone, and they will help you with your decision.
The last, and not the least important thing you really need to commit is time. Once again, a good emini education never stops. The learning is continuous, and life long, so be prepared to spend more than just a couple of months doing this. Most people find it a lot of fun. The hours are very flexible, particularily with the S&P emini, so you can trade as little or as much as you like.
Remember, a strong desire to learn, a good program, and your committment to time will ensure your emini education is full of fun and profitable.
http://www.chartreaders.com/blog
Written by Barry Desautels
This is a true story. It doesn’t have anything to do with my regular beat, writing about trading, and studying business, and emini education, but I think it’s worth telling.
In Vancouver, there is a coffee shop, one of hundreds along the east end of Main St. It’s open long days, and long hours, and most of the staff are students, starving artists, single moms, but all young up and comers.
Traffic is brisk and the customers are a mixture of young and old from many different directions in life. This isn’t a heavily branded chain store. It’s typical of the dozens of independents. Newspapers are free to read, organic everything, old wooden floors, sidewalk tables under a canopy, a great place to hang out.
On Saturday last, the crew chief and her assistant arrived at 05:30 for a 6 am opening. Shortly after 6 a young man from Newfoundland came in and provided some entertainment for a few minutes with a story or two in his native tongue. Everyone was smiling and laughing and enjoying themselves.
The morning became a routine shift. The regulars came and went, some new faces appeared, and it stayed busy. An older gentleman, quiet and reserved came in. He could have been a professor, maybe a producer of some kind, and he had an air of dignity about him. He doesn’t come in often, but the staff remember him.
When he left, he handed the young lady at the till a five dollar bill, tightly rolled, like a cigarette. It went in the tip jar, they exchanged a thank you and good-byes and he left.
The early shift ends at 2 pm, and as is the custom, the crew get to split the contents of the jar. You can imagine the surprise on their faces when they unrolled the five dollar tip and found a hundred dollar bill inside. For the young students, it was a wonderful act of kindness.
To the gentleman, from a father and his daughter, Thank You, and may God Bless you.
http://www.chartreaders.com/blog
Written by Barry Desautels
The next time you walk through your local hardware store or building supply center, notice the variety of products for sale and the volume available. Try to imagine what it must be like to select, order, organize, and maintain such a large number of items. If the store is part of a national chain, think about the task that faces management every day. What sells, what doesn’t, what gets returned, how does it get there? All of these functions can be loosely described as supply management, and in large companies, many hundreds of staff are involved in this process.
The Institute of Supply Management (ISM) is a non-profit association based in Tempe, Arizona, in the United States. It was founded in 1915, and today, membership exceeds 40,000, making it the largest supply management association in the world. The institute has developed dozens of measurement tools and standard procedures for such things as purchasing, inventory control, material management, transportation and logistics, as well as warehousing, distribution, planning and forecasting. This evolution has created the supply management profession responsible for trillions of dollars worth of business transactions every year.
The report is an economic forecast arrived at by surveying 300 purchasing managers in the manufacturing sector in the U.S., once a month. The index is representative of 20 industries in 50 states, and is made up of 5 components equally weighted at 20% each. The information covers new orders, production, employment, supplier deliveries, and inventories. An index result of over 50 indicates growth or expansion, under 50 represents contraction, with 50 even indicating a balance between growth and no growth.
The report for October,2009, issued today, November 02, yielded a PMI of 55.7%. (PMI=Purchase Managers Index). This was the third consecutive month of expansion, and overall economic growth was up for the sixth month in a row. Of industries surveyed, 13 out of 18 reported growth, with all index commodities up in price.
The depth of this report, along with ease of understanding and straight forward presentation, make it a leading economic indicator. It can be a significant market mover.
http://www.chartreaders.com/blog
Written by Barry Desautels
The Existing Home Sales report is issued by the National Association of Realtors around the 25th of each month, and is based on transaction closings in the United States. Home sales are defined as single family homes, townhomes, condominiums and co-ops from each of four regions, the Northeast, Midwest, South, and West. All figures are seasonally adjusted.
Housing inventory fell by 10.8% at the end of August of this year, to 3.62 million units which represents an 8.5 month supply. Earlier this year supply was being quoted at over 10 months, so things are improving. The national median price in August was $177,700 USD., down 12.5% from August 2008, due in part to downward pressure from the large number of distressed homes on the market.
Most readers probably get excited when they hear the word statistics, and even more elated when they get the chance to actually read and study them. Here is a brief look at September 2009 from the report issued October 23:
Northwest Median price $237,700. That price is 7.0% below the median for a year earlier.
Midwest Median price $147,600, 1.0% below the median from September 2008.
South Median price $153,500 for a 7.6% decline from September 2008.
West Median $219,000, a full 15% below the previous year.
According to the NAR, housing inventory at September 30 was 3.63 million units which now represents a 7.8 month supply. The national median price was quoted at $174,900 USD., which they say is 8.5% below September 2008. Existing home sales were actually up 9.4% in September this year for an annually adjusted rate of 5.57 million units, the highest level in 2 years. Sales were helped somewhat by the $8000 U.S. Government tax credit for first time buyers.
In Canada, existing home sales are also on the rise, with Vancouver, Toronto, and Calgary being the most active. According to the Canadian Real Estate Association, the national average price rose to $327,736 Cdn., which is up 11% from the July-September 2008 period. Low interest rates and greater consumer confidence were helping to draw more buyers into the market. Inventories are also declining in Canada, although with prices moving up, sellers could become motivated and have an impact on supply.
Housing prices and sales volume from the many areas of the country provide a number of ongoing stats. that can move the market. Observation and awareness of this information needs to be included in the day traders toolbox, helping to contribute to the edge we all need to succeed.
http://www.chartreaders.com/blog
Written by Barry Desautels
Everyone has stood in a mall at one time or another, watching the crowds of people, or sat in front of their TV looking at long lines of traffic, enduring the daily commute. Crowds of people are crowds of consumers. They are the anonymous masses who make the world go around, and what they think and feel matters a whole lot to the business world. Thus we have surveys and polls and tracking procedures to help business react to the moods and cater to the wants and needs of these most important people.
The Consumer Sentiment Index is one such survey. It was created by George Katona at the University of Michigan in the late 1940′s and is still being produced after all those years. The index consists of 50 core questions, asked of 500 U.S. consumers, by telephone, once a month. The surveys longivity would certainly attest to the value derived from these conversations.
The telephone Q&A is designed to reveal consumer attitudes on personal finances, personal spending habits, opinions on the current economic climate and an overall general consensus on what the average person is thinking and doing in the particular period of time. This data is tabulated and used by business to determine future marketing and manufacturing initiatives. Using the standardized value of 100, the current sentiment fell from 73.5 in September to 69.4 in early October, which was a larger decrease than was anticipated. The September reading was the highest since January 2008, up a full 8 points.
Obviously if consumer sentiment is buoyant, business and investment optimism could rise and take the price of markets with them. The opposite can also be true if sentiment is negative. The release of this report warrants caution by traders.
http://www.chartreaders.com/blog
Written by Barry Desautels
Predicting price movement and direction is a challenge faced by all traders. There are a number of news events that will move the market, however the severity or size of the movement is unpredictable. Most traders will stand aside 10 or 15 minutes before and after these announcements.
Non-Farm Payroll is a monthly report on the employment situation in the United States. It is produced by the Bureau of Labor Statistics at the U.S. Dept. of Labor in Washington, and is a detailed summary of non-farm payroll employment. Some of the employment areas in the report include construction, manufacturing, service, health care, government employment, and transportation.
The September data shows all areas declining except for health care which increased by 19,000 jobs. The largest declines were in construction, manufacturing, retail trade, and government. Since the start of the recession in December 2007, the report states the number of unemployed across the U.S. has increased to 15.1 million. Overall unemployment stands at 9.8%.
Among the areas being reported, construction job losses were the largest at 64,000 in September, followed by government at 53,000, manufacturing with 51,000 and the service sector lost 39,000 jobs.
Total employment in non-farm payroll declined by 263,000 in September with almost 20% of the cuts coming from local government (non-education). Improvements actually occurred in construction where job losses averaged 66,000 a month from May to September, and 117,000 per month last winter from November 2008 to April 2009. Manufacturing also improved from 53,000 losses per month June to August, and 51,000 in September. The numbers are not seasonally adjusted.
For new traders the higher job loss numbers mean less consumer spending as disposable income is reduced, which translates to lower corporate earnings and lower stock prices. Higher umemployment also means higher benefit costs to government. These reports are an important part of the economic barometer for any country, but more so for the United States because of its position as the worlds largest consumer group.
The next report will be available in early November.
http://www.chartreaders.com/blog
Written by Barry Desautels
In this age of economic turmoil, severe change is being forced upon a large segment of the population. Corporate bankruptcy, wasteful government spending, lay-offs, and plant closures are items we watch and read about everyday.
What can anyone do? How does a person protect themselves and their family? One way is planning ahead and increasing or expanding individual intellectual net worth. In other words, expand your horizons with continuing education. We are creatures of habit and we resist change. It is far easier to work with one or two years experience, 25 or 30 years in a row, then it is to change. Of course people have hobbies, so we aren’t wasting all our time. We golf, travel, do crafts, but how many plan for the castastrophe of a job loss?
Not many, so when it does happen, it is devastating. It’s also a lot of unnecessary pain. If we plan ahead, and do it from a position of strength, with time on our side, we can be prepared. Even if we never face a loss of income, developing a second, reliable revenue stream makes good sense.
Learning to trade can be the answer. It offers flexible hours, it’s affordable, and readily available. It presents a challenge, no queston about that, but it’s a tremendous learning opportunity. For some, the idea of trading futures seems totally ridiculous, and way off the clock.
But if you think about it for a second, maybe not. It doesn’t require a fancy education. Many working class people have become very successful traders and enjoyed the benefits for years. Trading is a business. As a private trader, you become self-employed, and can take advantage of the many tax breaks your larger corporate brethern use. You gain control of your time and become your own boss. You grow as a person through the learning process, and that will stay with you forever.
So it’s not about whether you can or can’t do it, but whether or not you want to, and can get over the fear and anxiety about doing something completely new. Desire is a powerful emotion, and to step out of the box, people need a very big helping of it on their side. Many of us think nothing of buying a new car, and signing up for three or four years of payments, for something that will be worth far less then it cost when we finally do own it.
Learning to trade is not like buying a new car. It is a beginning, the start of new segment of life, the result of a serious thought process and one that more and more people are embarking on. Your turn is next. See you in the market!
http://www.chartreaders.com/blog
Written by Barry Desautels
The simulator is one of the most effective training devices ever invented. It allows students to practice their trade, whatever it is, without risk, at their convenience, in real time conditions. The aviation industry’s use of simulators is widely known, and is very successful.
The most common way new traders gain proficiency is also by trading “in sim.” The trading platform is connected directly to the exchange so the price action is real, however, there is no connection to a broker, so the wins or losses are “on paper.” This is ideal because it exposes students to the market as it unfolds every day, and ties the chart signals to the buying and selling process.
The simulator allows you to get the feel of trading. In addition to learning to operate the buy/sell functions, you begin to experience the emotions involved. Trading in sim should be treated the same as trading live through a broker. It is the practice of entering and exiting trades, and all the management in between. In order to develop the discipline required when using real money, traders must learn to recognize the symptoms of various levels of emotion. If these emotions aren’t dealt with, the market will show no mercy toward undisciplined or careless behaviour.
For some traders, simulation is a place to return to when habits need adjusting. It’s not uncommon to focus on certain parts of trading at the expense of others. For instance, traders can develop the habit of widening stops in certain market conditions. It works some of the time, but not always. Time in sim can help get the discipline back.
Markets tend to change over time and certain strategies can become less effective. By going into sim and practicing a new approach, traders can maintain an edge. When markets are slow as they tend to be during the summer months, a bit of boredom and complacency can creep up on a trader. Staying in sim during these type of conditions helps avoid “manufacturing” trades and taking foolish risks when using real money.
Trading is a long term game of probabilities and traders need to be seriously dedicated to their craft. It takes time to develop a trading style, learn the discipline, and achieve consistent returns. Simulation is an important tool guiding all traders to success and should be used without hesitation as often as needed.
http://www.chartreaders.com/blog
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