Learning Commodities Futures Trading Can Be Interesting, Exciting And Profitable

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For most people, trading in the ‘market’ means buying and selling stocks and bonds. For some, though, this market is slow moving and unexciting and they prefer something with bigger swings and more profit potential. Commodities futures trading is just such a market and more and more people are becoming involved in this area.

Any type of trading is akin to casino gambling in some respects. And, as in gambling, luck plays a role but there are other factors as well. A successful trader, just like a successful gambler will usually utilize some type of system to better his or her odds.

When trading stocks, you’re investing in the equity of a particular company. If the company does well and their underlying stock appreciates you make a profit because your stock is now worth more than when you bought it. If the company does poorly the stock may depreciate or go down in value. Sometimes it will go all the way down to zero, which will leave you with a total loss.

Commodities deals with actual physical products like cocoa, coffee, pork bellies, live cattle, sugar, grain, metals (precious and non-precious) and financial instruments like T-bills. These items constantly fluctuate in value and the current ’spot price’ is a quote relating to the value of the commodity right now. These quotes change continually as the values change.

Commodities can also be traded ‘in the future’. This is done through the use of a futures contract. This is an agreement to buy or sell a certain commodity at a certain price by a certain date in the future (called the delivery date). If you think the price of your chosen commodity will rise between now and the delivery date you want to buy (go long) and then sell the contract back after the price goes up. If you feel the price will be going down you would sell now (go short) and then buy back later at the lower price.

When you BUY a futures contract you are said to be LONG in that commodity. Your hope is that the value of your contract, whether it be for pork bellies or live cattle, will increase between the purchase date and the delivery date. If the market goes up and you sell your contract back you will profit the difference between the purchase price and the selling price. You can also do the reverse, if you feel the market will be going down. You can SELL now, wait for the price to drop, and then buy back and pocket the difference. This is called going SHORT.

Commodities futures trading can be profitable but carries certain risks. It can be a fast moving market and is not for the faint of heart. Huge leverage is available from brokers and just a small investment can allow you to control a large contract. Trade wisely!

Get more details about commodities futures trading today! When you learn how to trade futures, you will be able to begin taking advantage of the many opportunities that present themselves to you easily!

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Bank Reform Could Discover The Actions Of The Plunge Protection Team

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On the 11th of May, 2010, legislation to authorizes the government to conduct a full scale audit of the Federal Reserve’s emergency-response programs was approved unanimously by the Senate as a piece of the bank reform legislation. Sen. Bernie Sanders said that, “This makes it clear that the Fed can no longer operate under the kind of secrecy it has been operating under.”

The legislation also enables the Government Accountability Office (GAO) to audit any financial institutions that borrowed Fed funds during the financial problems. The legislation goes one step further and enables the GAO to conduct continuing audits of the Fed’s various activities.

This is basically a one time only audit. Why then was the Fed so diametrically opposed to the audit? Maybe it was because one of their “unannounced” activities that will be disclosed is their active participation in the Plunge Protection Team (PPT)?

In January, Charles Biderman, chief executive of TrimTabs Investment Research, charged that the Fed and the Treasury (in conjunction with top Wall Street firms) rigged the stock market rally on a daily basis. Biderman said that a $6 trillion increase in U.S. stock-market capitalization could not be explained from the normal funds flowing into the market. “We cannot identify the source of the new money that pushed stock prices up so far so fast,” Biderman said. Biderman went on to say that the inflow didn’t come from traditional sources such as companies, retail investors, foreign investors, hedge funds or pension funds. “We know that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?”

The Fed denies PPT participation or even that a PPT exists. Yet they have long been known to be a major player in the PPT. When the Fed is audited, they suddenly will be mandated to account for how the underlying funds they control were used, where the funds go each day, to whom, how much and how often. If the Fed was truly responsible for artificially propping up the stock market because of their undercover activities in the PPT, this will now be visible with the audit.

The stated purpose of the Plunge Protection Team was to prevent another instance of 1987 “Black Monday”. The PPT has the U.S. Treasury at its beck and call. They can manipulate the stock markets through derivative trading. Wikipedia explains derivatives as “a financial instrument – or more simply, an agreement between two people or two parties – that has a value determined by the price of something else (called the underlying).” As early on as 2001, the Guardian stated using derivatives, the Fed was prepared to artificially support Wall Street. “A secretive committee – the Working Group on Financial Markets, dubbed ‘the plunge protection team’ – includes bankers as well as representatives of the New York Stock Exchange, Nasdaq and the US Treasury. It is ready to co-ordinate intervention by the Federal Reserve on an unprecedented scale.”

The Fed, supported by the banks, will buy equities from mutual funds and other institutional sellers if there is evidence of panic selling in the wake of last week’s carnage.

The PPT used the U.S. Treasury assets to artificially increase the prices of commodities and stocks through derivative trading. Executive Order 12631 signed by Ronald Reagan gave the Fed the authority to establish a “Working Group” on Financial Matters. The “Working Group” consists of 1) the Chairman of the Board of Governors of the Federal Reserve 2) the Secretary of the Treasury ) 4) the Chairman of the Commodity Fuures Trading Commission 3) the Chairman of the Securities and Exchange Commission.This “Working Group” has lately been extended to include large brokerage firms such as Goldman Sachs.

Last February, 2010, New York Post writer, John Crudele said “the PWG (President’s Working Group) could have encouraged the misconception that the stock market was a lot less risky than it really was. In that sense, the PWG would have been instrumental in inflating the stock bubble that burst in 2008, costing a lot of Americans their savings. The PWG operates in total secrecy. It’s been suspected that under Hank Paulson, the former chairman of Goldman Sachs who left the Treasury secretary post last year, Wall Street kingpins were brought into the circle. The reasoning: Market participants, as Paulson liked to call them, could best help fix problems. At the same time, they would be free to use these invaluable connections with the PWG for their benefit as well.”

Now for the first time ever, the Fed is going to be audited by the GAO and the Plunge Protection Team exposed. What will this mean to the stock market? Does it mean that for once the stock market will have to stand on its own, make it or not, without the artificial support of the Treasury and without their awareness, the US taxpayer. Former Federal Reserve Board member Robert Heller said that “Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market (through derivatives), thereby stabilizing the market as a whole.”

The bank reform bill just passed by the Senate and House curtails usage of derivatives, the main tool used by the Fed and the PPT. “We are sending a clear message to Wall Street, the party is over. Never again will reckless behavior on the part of the few threaten the fiscal stability of our people,” said House Speaker Nancy Pelosi. “The legislation will finally protect Main Street from the worst of Wall Street.”

Could this be the reason that the Fed severely opposed bank reform, especially the section dealing directly with Fed oversight?

Barbara Cohen has been a professional day trader for over 10 years. She has trained hundreds in trading Futures with Shadowtraders day trading systems. As the CIO, Barbara moderates Shadowtraders daily live trading chat room. Before you purchase any trading software, make sure you attend Shadowtraders Monday Night Webinar, and hosted by Barbara Cohen

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Who Needs Bank Reform…Send Goldman Sachs To Prison

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On April 27, Goldman Sachs CEO Lloyd Blankfein was questioned by Senator Levin and other members of the Senate Subcommittee on Investigations about his company’s activities regarding sales of CDO’s. When asked over and over again if selling securities you consider worthless is ethical, Blankfein refused to answer the question and responded, “Senator, there is a lot in your question…and I am sure we will spend a lot of time on different parts of it.” Levin repeatedly questioned him, attempting to get Blankfein to take responsibility for what his company had done, and Blankfein said, contemptuously, “In the context of market- making, that is not a conflict. Clients shouldn’t care what our views are.”

Congress wants Bank Reform, more laws that these bankers and brokerages will ignore. We already have laws against what Goldman Sachs did. The SEC needs to enforce the laws they already broke and send these people to prison. What they did was fraud, and people go to prison for fraud. Send them to prison now.

What is the definition of fraud? Wikipedia defines fraud as “an intentional deception made for personal gain or to damage another individual.” How does that apply here? Take a look at what these banks and brokerages really did. Bank and brokerages were in the business of selling CDOs, and in its heyday in 2007, sales were over $500 billion. These sales were made to individuals, pensions funds, 401k’s, etc. For example, the California Public Employees’ Retirement System, the nation’s largest public pension fund, invested $140 million. A pension fund must put its cash in very conservative, non-risk investments, these are retirement funds after all.

And what is a CDO? Wikipedia says that a CDO is “a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets.” The relevant words are UNDERLYING ASSETS. Banks and brokerages had thousands of mortgages from individuals, both sub-prime and prime, the managers totaled their overall value, placed them into “packages,” and sold them to unsuspecting investors as AAA rated securities. These packages were “collateralized” because they had a collateral (asset) underlying them (mortgages). CDOs were first invented to give the economy liquidity by having banks and brokerages sell off their mortgage debts, thereby freeing up capital to loan. Seems ok, true?

Had banks and brokerages stopped there, no one would have said a word. Package your debt and sell it off to another institutional investor. Fine. But greed is a horrible human characteristic. Banks and brokerages took these same mortgages and packaged them again and again and again into CDOs, until finally, for many of these CDOs, there were no longer any assets underlying them. The fact that fewer and fewer CDOs were able to find insurance should have been a sign to the banks and brokerages that CDOs should not be sold, and certainly not sold to pension funds, IRAs, or retirement accounts. When the mortgages that were originally associated with these CDOs began to default because there were no real assets unlying them, so many smaller investors life savings were wiped out.

This is not the only time CDOs were packaged and sold as AAA investments. Banks and brokerages previously packaged student loans in the same manner and sold them as AAA rate securities to pensioners. These brokerages knew that the student loans default rate was very high. And only 2 years ago, banks and brokerages were selling auction rate securities to those who were retired, claiming them to be tax-free money market accounts. They told their clients they were in cash! That was $300 million fraud.

The problem with fraud from banks and brokerages is that no one from the company goes to prison. Instead of prison, the SEC fines them for violating the law. With auction rate securities, which was clearly fraud, the brokerages received expensive fines. Wachovia Securities paid $40 million in fines for example. Brokerages and banks believe fines are a cost of doing business. Most companies believe that payroll, rent, and advertising are a cost of doing business. But brokerages and banks consider getting fined for fraud is just the cost of doing business.

Put them in prison. If the SEC put them in prison, we wouldn’t need bank reform. The laws are already in place and being broken by these firms. Bank reform just adds more laws they will get around. These firms have an “above the law” mentality. That was very clear at the Senate Subcommittee hearing. Why pass more laws they will just ignore. The answer is simple…send them to prison and have Bubba as their cell mate. Let Bubba show them a little “extra-curricular activity.” The SEC should stand on its own 2 feet and put these guys in prison. We don’t need bank reform, we just need a few lifers in prison to set these bankers straight.

Barbara Cohen has been a professional day trader for over 10 years. She has trained hundreds of students to trade the Futures Market with Shadowtraders trading systems. As the CIO, Barbara moderates Shadowtraders daily online trading chatroom. Before you purchase any trading education, make sure you attend Shadowtraders Monday Night Webinar, and hosted by Barbara Cohen

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How To Earn Extra Income Without A Part Time Job

Have you been looking for a way to earn some part time income in the evening. This is not income from some sales job, driving your car delivering pizzas, or working at a job. To make this money, the only thing you need is access to the internet and a personal computer . Actually, this is income you can make while watching TV at night.

Most of us know about day trading, buying and selling equities in the same trading day. So what is Nite Trading? The Market is already closed.

Surf up nite trading on the internet and all that you find is a little information regarding a company called Knight Trading Group.

What then is nite trading?

Nite trading is about trading currencies, and recently, trading the Futures Market with the Futures of the Forex.

Trading currencies is a never ending cash market in which traders trade small fluctuations in foreign rates on world-wide currencies. Currency trading happens through a world-wide system of international brokers, corporations, banking institutions, and smaller players investing one currency vs another. Trading currencies has no physical exchange like financial equity markets(NYSE, NASDAQ). Trading takes place nearly 24 hours every day. It is very liquid with thousands of contracts traded daily. There are always traders eager to trade currencies.

Until recently, most individual investors who day trade foreign money primarily traded Forex. For bigger investors, such as institutions and hedge funds, this makes logical sense, given that the Forex has a daily volume of $1.9 trillion. But for smaller investors attempting to trade 5-10 contracts instead of 2-400, the Forex Market may not be advisable. There is a market tailored to the needs of individual traders…the Futures of the Forex.

From the time that they first began trading in 1972 inside the Chicago Mercantile Exchange (CME), currency futures have undergone important changes. At the time these contracts were created, 99% of the trades were generated by Market pros from the CME. The Futures Market was influenced by trained veterans screaming in the open outcry pits. But with the arrival of trading online, the Futures of the Forex was no longer limited to a handful of pit traders.

The number of Forex Futures traders is increasing daily, especially since the new rules proposed for the Forex Market in January 2010 by the Commodity Futures Trading Commission (CFTC).

Given the new rules, Forex brokers and traders going forward may only invest with a maximum 1:10 leverage. This means they have to keep at a minimum, 10% of the transaction as collateral (margin). Before, leverage was 1:100. Procedure changes such as these notably reduce trade size that investors can enter. Reducing leverage means fewer profits for larger investors and hedge funds. For US traders, brokerages will see their profit margins reduced as smaller trade size equals fewer commissions from spread. For example , currency trading with 1:100 leverage, $100,000 USD for 2 pips = $20 commission for the brokerage. Enter 1:10 leverage. That investment is $10,000 (1:10), and that’s only $2 for the brokerage.

The new Forex rules may also stop the Market’s shifting to ECN execution. Forex clearing firms can’t handle small trades and generally won’t process trades of fewer than 100,000 USD. This may result in US brokers most likely having to do their own clearing for individual investors, serving as their own Market Maker, making profits on bid/ask spreads. For individual investors, this would be a deal killer.

This is not the first time the CFTC has proposed significant changes to Forex trading. Each time they propose new rules, they add another stop to the US Forex Market, forcing more and more Forex business offshore. As a result, Forex trading is better done using offshore broker accounts that are not restricted by the CFTC rule rules. Foreign accounts work for larger investors. But for smaller investors who may need quick access to their money domestically,trading Forex is becoming more and more difficult.

Enter the Futures of the Forex. Then what is the benefit to investors trading Currency Futures instead of Spot Forex?

With trading Futures currencies, there are smaller spreads between the bid (what you can buy the contract for) and the ask (what you can sell it for), just 1 tick, or 1 price movement. When the new CFTC change goes through and Clearing firms refuse to clear smaller investor trades, domestic brokers will be serving as the Clearing firm and wind up being the Market Maker . The spread between the bid and ask in Forex positions may become significant, certainly more than 1 tick. Brokerages could be making money on the spread alone, at the expense of the smaller investors profit.

With Forex Futures, there are no interest charges or rollover fees daily. Transaction costs are round turn, not both in and out. In reality, brokerage commissions + exchange + regulatory + transaction charges are fewer than the Forex PIP spread.

Take a look at an example of trading 1 Forex USD/EUR contract instead of 1 Forex Futures contract, with a contract size of $100,000 worth of euros. For a round turn, futures commission and related fees are $5/contract, the average fee by many brokerage firms . A Forex trader with a 100,000 full-lot-size contract pays 2 PIPs for each transaction, or $20 per round turn trade.

There is another difference as well. To profit from a Forex trade, the currency price must move beyond the number of PIPs that your brokerage takes upfront . If the broker takes 2 PIPs upfront, then the price must move at least 3 PIPs so that the trade can be profitable to the investor. With Futures, the investor makes money even if the price only moves 1 tick (1 price movement). The profit may be smaller on the first tick as a result of commissions, but at least the investor makes something . With Forex, the initial price movements entirely belong to the broker. Forex traders always say… Forex has no commission. They ignore the fact that the broker takes the first PIPs in compensation.

It is a given that the Forex market has a lot more currency pairs to trade than Forex Futures. But the major currency pairs can still be traded in the Futures Market, including: 6A (Australian Dollar), 6B (British Pound), 6C (Canadian Dollar), 6E (Euro), 6J (Japanese Yen). Before deciding to trade Forex currencies, individual traders should check out trading currency Futures.

Currency trading is hot for nite trading no matter where in the world a traders are living. With the various time zones worldwide, when Australian (6A) and Japanese (6J) traders are day trading, Americans can be nite trading in the US (7:30-1:30 EST). At 3:00am EST, the Europeans begin trading (6E) Conversely, when Americans are day trading, Australians and Asians can enjoy nite trading the very same instruments.

Barbara Cohen has been a professional day trader for over 10 years. She has trained hundreds of day traders to trade the Futures Market with Shadowtraders trading system. As the CIO, Barbara moderates Shadowtraders daily online trading chatroom. Before you purchase any trading seminar, make sure you attend Shadowtraders Monday Night Webinar

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What Is A CDO And Why Should I Care?

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There are influences in the economy above and beyond the basics of traditional economic theory. These influences consist of the world of shadow banking.

The public would be wise to become very intimate to the games afoot. The alphabet soup of derivatives first must be made comprehensible to be controlled.

The warning signs were clear that nothing good would come from the development of Collateralized Debt Obligations, CDOs. I was fortunate to have been in banking and in a group which voiced serious concerns over the development of crazier and crazier esoteric instruments. They were to be peddled as “same as cash” but were in fact far from that. By July 07 the auctions for these began to fail as financial institutions backed away.

For the bankers the bigger fool theory was the rage by then. Systematically, the institutions such as Merrill Lynch, and Wachovia Securities dumped millions of dollars of these into the hands of unsuspecting companies, and even retirees to get them out of their holding before the wheels fell totally off the cart.

The instruments were created by companies such as Blackrock and Nuveen. By mid-February 08 the market for these seized up entirely. We are talking about a 300 billion dollar market freezing up.

When the CDOs froze, retirees among others found their economic lives were at a standstill. Complaints poured into the Office of Financial Regulation.

Of course, no on e in the industry had really done anything wrong. The result was that at least a number of small investors got back their principal.

The press ignored the story. It must be a coincidence that the wrong-doers were also major sponsors.

It took the total melt-down in September 2008 to get the press to cover the issue.There has been more than a little speculation that patronage by Wall Street of the major media outlets was the censoring influence on the media. The appearance of the Bernanke and Paulson in Congress on Sept 23, 2008, with the demand for 700 billion dollars to wall street finally got some attention.

It is not my ideal of accountability to have the taxpayer pay for the financial excesses of the financial institutions.

The market shook shortly after the Presidential Election. Rumors flew that the market was not pleased at the idea that bonuses could be impacted.

For example, Dick Fuld of Lehman Brothers was know to be facing a cut. His bonuses in 2007 had been a cool 34 million.

Clearly Rand’s notion of enlightened self-interest did not trump raw greed for the banking industry. For more on Rand, see Objectivism and the 1957 novel “Atlas Shrugged”.This all plays nicely into the capital C Conspiracy Theorists who are ready to gloat over the “I told ya so’s”.

These “Too big to fail” are not national institutions. They are international. The idea of a sovereign nation is a thing of the past.

Is this to be the new world? Wait and see.

James Horne has been a securities analyst for over 10 years. He is CEO of Pure Reason LLC, the home of Shadowtraders. His voice has been heard by hundreds of students learning to trade Futures with Shadowtraders online day trading strategies. Before you buy any trading software, make sure you attend Shadowtraders Monday Night Webinar, and hosted by Barbara Cohen

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