Fed Focus.

http://www.tradingday.com/c/afterhourstrading/fah.html?http://money.cnn.com/data/premarket/

(1) Bond prices fall,inflation rises.

(2) Stocks fall,GDP growth decreases.industrial commodity price soften.

(3) Property price falls.

(4) Recession.

(5) Bond price rises.

(6) Inflation falls.

(7) Short term rates fall.

(8) Economic Recovery.

(9) Stock rises.

(10)Bond price falls.

(11)Inflation rises.

Global credit crisis

http://www.minyanville.com/articles/credit+crisis-Europe-China-U.S.-global/index/a/14286/from/yahoo

Tracking the Dow movement on Friday.

The Dow slide nearly 60 over points during the first hour of trading in reaction to the commentary by Allan Greenspan on the health of the US economy which is heading towards a recession.

But traders on Wall Street are putting this news aside and are bullish towards what the Fed will offer to another rates cut at the FOMC meeting later end of month.

The Dow close with a white candlestick depicting that the bullish strength is still intact.

The super DOw is still resilient and managed to hold on to its strength on this last day of 3rd Quarter.

Both the candlestick were formed side-by side and its a profit-taking.

Traders are betting on any hints at FOMC minutes reading on 9/10/07 Tuesday with regards to rates cutting again.So meantime the index will be holding around this range.

Stormy Dow ahead!

Tracking the Dow Movement on Thursday.


A bullish spillover from yesterday despite the report of a plunge in new home sales in August,the biggest year-on-year drop in nearly 37 years as quoted by the US Commerce Department.Meanwhile the unemployment insurance claim fell by 15,000 to 298,000 implying the drag from housing doesn't drag into the labour market.I think the figures from housing is going to cause jitters and rattled investors after they have digested the news.This should be very bearish for the market but it was offset by the good unemploment figures.Looking at the intraday chart,the opening was a long white candlestick and the closing was a bullish spinning candlestick lying in a congestion zone.It's not having enough oxygen to ascend further to the peak so might as well plant the victory flag here. http://www.tradingday.com/c/candlesticks/

The Thursday candlestick is spinning within the shadow (the wick) of Wednesday's candle.
Will it blow-out the lighted candle tonight and leave everyone in darkness again...yeah!!! possibly.
Allan Greenspan ex-Fed Chairman in BBC 4 commentary:"US risks of Imminent RECESSION getting higher.http://www.bloomberg.com/apps/news?pid=20601087&sid=aSvlyOApMals&refer=home

How The Financial Markets Work.

You probably take for granted that you can buy or sell a share or stock at a moment's notice. Place an order with the broker and within seconds it is executed. Have you ever stopped to wonder how this is possible. Whenever an instrument is bought or sold there must be someone on the other end of the transaction. If you wanted to buy 100 shares of McDonalds you must find a willing seller and visa versa. It is very unlikely that you are always going to find someone who is interested in buying or selling the same quantity at exactly the same time - this just does not happen. So - how does it work? This is where the MARKET MAKER comes in!!

The market maker is like a wholesaler. Customers arrive and leave all day long, some returning goods to the warehouse, others leaving with new purchases from 9.00 am until 5.00 pm every weekday. The difference with this operation is that the wholesaler only has one item to trade, which are all identical. These items are continually bought and sold. The only responsibility that the wholesaler has is that he must keep his doors open during market hours, and he is responsible for setting the prices, second by second and hour by hour. He makes his money by buying at a lower price and selling at a higher price. This is known as the spread and has two components - a bid price and an ask price. He makes his money on the difference between the two which is his profit. This may only be pence or cents, but when you are dealing in 100's of millions of shares it is a vast amount of money.

Now - let me ask you a question - what happens when a customer comes in for a large buy order, but there are insufficient goods available. A normal wholesaler in the real world would buy in more goods from the manufacturer to fulfil the order. Our wholesaler does not have this option, he has to encourage people to sell to him, otherwise he has nothing to offer his customers. So what does he do? ( here's a clue - he sets his own prices for the market !!!) He has two options available. Firstly he could move his prices down fast and frighten people into panic selling. Alternatively he could move his prices up quickly, and encourage people to take some profits and selling. Lets assume that he decides to take the first course of action and he moves his prices down fast ( probably on the basis of some fictitious piece of news or gossip, or even a world event)

Surprised? - you shouldn't be. This happens every hour of every day of every week in all markets around the world. Is this market manipulation - yes of course it is. It also explains why markets fall faster than they rise - in the fall the wholesaler is in a hurry to get new supplies of goods, on the way back up he is taking his time making profits. This technique is known as ' shaking the tree' for obvious reasons!!! Naturally he cannot frighten everyone too much, otherwise he could end up with too many sellers and not enough buyers (he could of course have moved the prices up to encourage some clients to sell and take their profit - there is always more than one way to skin a cat!!!!)

The wholesaler is of course the MARKET MAKER. They are professional traders. They are licensed and regulated and have been approved to 'make a market' in the shares you wish to buy and sell. They are usually large internationally banking organisations, usually with thousands or tens of thousands of employees worldwide. Some of them will be household names others you will never have heard of, but they all have one thing in common - they make vast amounts of money. As you can now see (I hope) the market makers are in a unique and privileged position, of being able to see both sides of the market (supply and demand). They also have the unique advantage of being able to set their prices accordingly. Now - I don't want you to run away with the idea that the entire market is rigged, it is not, as no one market maker could achieve this on their own, but you do need to understand how they use windows of opportunity and a variety of trading conditions to manipulate prices.

Most of the professional traders sit in the middle of the market, looking at both sides of the market. They will know precisely the balance of supply and demand at any one time. Naturally this information will never be available to you, but there is a way to interpret it from a chart using one single indicator. That one indicator is VOLUME. Whilst they will use every piece of news, world event, rumour and gossip to manipulate prices and the markets, this is one piece of information that they cannot hide (although even this they delay on larger orders).

Volume shows the activity of trading during the particular time period chosen which can be anything from 1 minute to 1 year. However, volume on its own does not tell us much, other than the number of securities traded in the period. Comparing one day with another tells us a little more, and it is then not difficult to see whether today's volume is high, low or average. If you have 20 people standing in a row, it is easy to see who is the tallest, shortest, and those of average height. However, add the volume to the price spread for the time period, and suddenly using common sense and the knowledge above, you can begin to start reading the market.

Tracking The Dow Movement on Wednesday.

Why are the market-makers always using the last one-hour of trading to fulfill their agendas?Nearly three-quarter of the trading day are filled with doji-stars,not a good sign.They are taking profit,mind you tomorrow is the End of 3rd quarter ...the end of Triple Witching!

It's a shaven bottom candlestick.Will be another continuation spillover of the bullish trend.

Why Investing Is The Key To Financial Success.

What is making some people rich and other poor?

It's not the amount of money they make nor the number of cars they have.It's the way they spend their money.The poor and the middle class spend it all on liabilities, the rich are spending it for assets.
They are investing their money in assets which bring them more and more perpetual income.Investing means to buy things which bring money in your pocket. Everything else is spending and buying liabilities.

High Yield Investing... What's that?
Most people never touch high yield investments in their lives. These are the poor and the middle class. The middle class buys conventional investments - bank deposits, CDs or bonds, but usually don't go further.
High yield investing is everything which can achieve significantly better return than the conventional investments. It could be Stock Trading, Real Estate, Mutual Funds, Managed Accounts, Business or something else. It's not about how you call it. It's about how much you can make when you put your money to work for you.

The High Yield Investing Means High Risk
It's always like that in life. No pain, no gain. If you want your money to bring you good profits, you need to allow them play their game. The good investors know which opportunities are too risky for their goals or which are too conservative.
The good investor researches the best opportunities and knows when to enter and when to exit.The good investor does a lot of research.
The poor and the middle class work for money. The rich have their money work for them.
Tracking the Dow Movement On Tuesday 25/9/07


Overnight bears continue its exodus in the early open lasting for 7 minutes before a powerful spinning bottom was noticed at 9.45am.Thereafter the trend stabilised above the Moving average,a sure good sign that the bulls are in control.In the final minute were 3 ascending soldiers getting ready to move forward again tomorrow.


It's spinning again near the Moving Average.Time to move into position as it will cover back the previous day candlestick.

What are the characteristics of a winner.

The Principles of character.

1) Always concentrate on the process that creates winning not the result of winning.

2) Make money and decisions from your skills,not your ability to see through a crystal ball.Never predict the market.Invest time developing the skills and abilities necessary to profit from the environment.

3) it is never the markets---it is always you.Statistics and society may predict,but you alone determine whether you will succeed or fail.You alone are in control and take responsibility for your performance and your life.There are always tremendous opportunities in the markets.It is not always what happens,it is what you do with what happens that makes the difference between profit and loss.

4) Every event holds the seed of a positive message or meaning.Seize each day and each loss and mistakes as an opportunity to learn and grow not as evidence of your inadequacy.

5) Seek to embody the true spirit of competition...."to conspire together"...never try to be better than someone else but never cease to try to be the best you can be.

6) treat investing as if it were farming,not cramming---no easy shortcuts.Seek to study new methods and tools for farming your skills and understandings,not too many tips and predictions.

7) Develop a love and respect for trading the free markets and individual liberty and initiative---profits are just the gravy.

Tracking the Dow Movement on Monday 24/9/07

The Dow gaps-up open by 1.38 of a point.That's not so bullish.The next ten minute it started forming a shooting star.

Notice also the formation of a "double top" by 11:15am.

Traders have to run for their lives.

The trading day ends with a very bearish spinning bottom,driiling the ground to go down under.
http://www.forexrealm.com/technical-analysis/graphical-methods/candlestick-patterns.html

The TRIPLE WITCHING day which happens FOUR times a year namely March,June,September and December.

This is the time when equity options,index options,index -futures options contracts expire in each quarter often leading to greater market volatility and trading activity.

Behold!!!the Monday candlestick pattern has formed a "bearish engulfing" and the witch is selling the bad poisonous apples! Runnnnn!

Why trade in early part of the day?

Early birds catches the worm.
The morning session of trading is the most profitable time of the day where liquidity is abundant with the buyers and sellers which provides the volatility.Any overnight positions held can be stop running.The imbalance of orders will result in a "bounce"
The beginning of the day's trend or counter trend can be immediately identified in the event there are optimistic or pessimistic news events impacting the markets.
Profits won can be protected and later move in to a smaller position.Try to capture the scalp,take the money and leave.You still have the afternoon.Mistakes can quickly be rectified.Any loss taken later in the day is harder to recoup due to time constraints.

Time and Price.
When the time is right,the price will move.Most trades are profitable almost immediately.If there is no positive moves,you opt to be wrong.By using time and price,your trading will improve.

Trending and non-trending.
Accept the notion that the market is often trendless so shift psychology 180 degree.The big day comes on the heels of a non-trending day.They are quiet in advance of any importamt news report.Sometimes they're quiet in the morning and trending in the afternoon.The opening price should provide some clue.

Volatility.
It's the clue to the kind of trading day.Market rarely goes quiet after a chaotic open.It also offers a fading chance.

Act On Knowledge.
Always train yourself to act.Try not to miss all the good trades and ensure bad ones will not occur.

Rules of the Gaps.
On LOWER gaps,look to SELL in the gaps.
On HIGHER gaps,look to BUY in the gaps.
On SHARPLY LOWER gaps,SELL IMMEDIATELY.
On SHARPLY HIGHER gaps,BUY IMMEDIATELY.

Opening Gaps.
When filled may be trendless,when not filled often trending.

Gaps and time.
When unfilled after ten-minutes,you often have a trend.GAP is a powerful magnet.LOOK to enter in first 30 minutes of trading and if possible sooner.
You will often know if you are correct immediately.
"Better to embrace chance than chase"

Putting STOPS.
It's a bad idea in early going and can be a bad idea entirely.Price swing of 100 points are uncommon nowadays.

Setup a Defense Perimeter.
The Moving Average (SUPPORT and RESISTANCE) are you key element in this counter attack.
The more time you have in trading,the more chances you are able to manoeuvre.
Beware of Stop-Running violation of support or resistance.

Can Friday's Dow Index still sustain next week?

Tracking the Dow Movement on Friday












It closes 2.52 points below the Moving Averages.Looks like a graveyard doji.http://stockcharts.com/school/doku.php? id=chart_school:chart_analysis:introduction_to_candlesticks during the last minute of trade.Despite Dow in the positive terittory,the intraday movement shows sign of many small dojis and bears outnumbered the bulls.

Next week we have Consumer Confidence figure (Tuesday),the Final GDP report & jobless claims (Thursday) and Consumer sentiment (Friday).It's the end of 3rd Quarter and caution ahead!Friday's candlestick seems like a short-covering and not sustainable.

Helpful tips for online daytrading beginners.

Day Trading is a very lucrative field and there are many millionaires that have made their money by trading stocks, currency, bonds, and investing in mutual funds. Day Trading is clearly a phenomenon of our times. It is one of the most popular forms of trading because the only components you need are a computer and an Internet connection.

What is Day Trading?

Day trading simply means not holding any position beyond the current trading day; i.e. closing all outstanding positions by the end of the session putting you 100% into cash overnight. Some of the more commonly day-traded financial instruments are stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures.

But don't be fooled by all the glory of day trading. Day trading is extremely risky and can result in substantial financial losses in a very short period of time. You won't learn online day trading in a single day.

Trading is like most business: it requires commitment and perseverance. It is necessary to plan your trading business and prepare a proper strategy for achieving success at online day trading.

Here are some tips that will help you to succeed with online day trading:

Never get emotionally involved in your trades.
Go to seminars on online day trading, use simulations if possible and practice reading market indicators.
Don't make the mistake of plunging into any form of online day trading without spending the time to learn what you're doing.
Make sure that no one trade is really going to affect your day trading float, positively or negatively.
If you profit large sums of money, stop trading. Do not gamble it away by trying to gain even larger profits.
Characteristics of Successful Traders
If you want to succeed with online day trading, then you should do exactly what the professional traders do:
Winning traders understand that winning in the markets means "cash flow".
Successful traders use different online day trading strategies are on different days and on different markets.
Successful traders know that trying to hit a home run is a sure way to get burned.
Successful traders make decisions based on fact and analysis.
Most successful day traders have a true love or passion about their online day trading activities.
In Conclusion
Although online day trading is risky, it does have big rewards if you know how to play in this game. Plan your trade and trade your plan. Cut losses short. Learning the technicalities of trading takes time but it's possible to master it.

Tracking the Dow Movement on Thursday.


It's a profit-taking day!!!The theme play "INFLATION FEAR" coupled with weak USD & the surging oil price at above 82 dollars per barrel.The weakening of dollar will result in imported goods more costly.Therefore the dollar has no more attractiveness to hold.It will cause an adjustment in all assets classes in US dollar denominated. As for the market,not to be despair!There are many noticeable long white candles signifying the presence of many fresh bulls.One minute to closing,notice a small dragonfly resting at the bottom.http://www.litwick.com/indicators/1114.html






The Dow on Thursday was in a romantic mood,holding hands side-by-side within the previous day body.Possibility exchanging wedding gold-rings & performing their ballroom dancing.Happiness is ahead for the couples.
http://www.leavittbrothers.com/education/candlestick_patterns/bull/side_by_side_white_lines_bullish.cfm

About trading high priced stocks.

Many people have a hard time sticking to their stop-loss on stocks priced above the $60 to $70 range. These stocks can suddenly move 25 cents or more in a few seconds, triggering and speeding beyond the stop-loss.

Because the stock’s price can jump so quickly, the trader thinks that he will take his stop-loss when the price moves back a bit, which never happens. Suddenly, a couple of minutes later, the position has broken past his stop-loss by more than 50 cents, and the trader feels that he cannot take a loss that large.

So he waits, and then he is down more than 1 point and he takes the stop-loss at the maximum level of pain. (Of course, after the trader takes the stop at maximum pain, it begins to trade in his desired direction!)

This same trader will stick to his rules more easily on a slower-moving $20 stock. Lower-priced stocks tend not to move so quickly that a trader decides he cannot take a loss that large. A heavy-volume $20 stock moves more slowly and allows the trader to get out of his position closer to the actual stop-loss price.
Stocks that have different average daily volumes also tend to act in their own way.

Let’s say we have two stocks, both trading at $30 a share. The first stock has a tight spread and an average daily volume of over 8 million shares a day. The other stock trades an average of 500,000 shares a day with a much wider spread. The movement of these two stocks is completely different. Your ability to keep a tight stop-loss or to exit easily a winning trade greatly varies.

This does not mean that you should only trade liquid stocks that trade more than 8 million shares a day. It means that everyone has a unique personality, and some personalities can trade illiquid stocks better than liquid stocks. But traders without experience cannot exit losing or winning trades in an illiquid stock accurately. New traders should wait to trade illiquid stocks until they have experience with order routing and order fills.


Tracking the Dow Movement on Wednesday.

The last one hour of trading shows the dow under heavy profit-taking so the party is quite possibily going to a halt.

As news of an impending rates cut was disseminated in the second session of Tuesday trading,the follow through on Wednesday was quite weak,only a small white body.It might be that the bulls are sitting down to analyze the pros & cons of the big rate discount.The market is going to see how jobless claims report on Thursday going to react.

Finally the Fed 'bite the bullet-it's suicidal"

The Fed's announcement of a half percentage point cut in rates to 4.75% tiggered an international stock market rally today.

This is not cooling the economy but to try and avoid an impending recession.

But the underlying tone is still "some risks of inflation" Previously the tightening of credit conditions has caused disruptions in the financial markets and has the potential to intensify the housing correction and restrain economic growth.

So the ripples effect is now being contained but the effects of this rate cut towards the economy is yet to be seen in months ahead.

The Fed has a tough time deciding:-
Rogers Says US in Recession, Fed Should Raise Rates: Video Sept. ...
Rogers Says US in Recession, Fed Should Raise Rates: Video Sept. 18 (Bloomberg)-- Jim Rogers, chairman of Beeland Interests Inc ... - 2007-09-18

Hear what Fund Manager,Marc Faber says:-

Marc Faber Says Fed Rate Cut Would Be `Suicidal': Video Sept. 18 ...
Marc Faber Says Fed Rate Cut Would Be `Suicidal': Video Sept. 18 (Bloomberg) --Marc Faber, managing director at Marc Faber Ltd. ... - 2007-09-18

Tracking the Dow Movement on Tuesday.

Noticed the Dow index spiked up at 2:10pm EST upon the announcement of rate cut.A long white bullish marobozu.The strong infantry & calvary of armies with helicopter ben gunship advanced aggressively and ended the day near the peak.The victory flag has not been planted yet.

It's a sigh of relief and celebration for the world financial market today.A good timing of speech by the Fed's committee!

How To use The PIVOT Point Trading.

Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.

The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance levels calculated from that are collectively known as pivot levels.

Every day the market you are following has an open, high, low and a close for the day (some markets like forex are 24 hours but generally use 5pm EST as the open and close). This information basically contains all the data you need to use pivot points.

The reason pivot points are so popular is that they are predictive as opposed to lagging. You use the information of the previous day to calculate potential turning points for the day you are about to trade (present day).

Because so many traders follow pivot points you will often find that the market reacts at these levels. This give you an opportunity to trade.

If you would rather work the pivot points out by yourself, the formula I use is below:

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

As you can see from the above formula, just by having the previous days high, low and close you eventually finish up with 7 points, 3 resistance levels, 3 support levels and the actual pivot point.
If the market opens above the pivot point then the bias for the day is long trades.
If the market opens below the pivot point then the bias for the day is for short trades.
The three most important pivot points are R1, S1 and the actual pivot point.

The general idea behind trading pivot points are to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.

A perfect set would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position.

Unfortunately life is not that simple and we have to deal with each trading day the best way we can.

Tracking The Dow Movement on Monday.

The Dow closed down 39.10 points at 13,403.43.Overall bears were in control of the market.There were couple of "shooting stars" http://www.fxwords.com/b/bearish-evening-star-candlestick.html The last half hour trading saw the bears hammering near to the pivot-point of the day depicting a continuation of profit taking spillover.Best entry point below the M.A.V.

On Friday,the candlestick is shape like a "hangman"http://www.streetauthority.com/terms/hammer-hangman-candles.asp

The dow index will be temporary stalled and a market play within the lower line shadow was cleverly executed on Monday trading.This clearly denotes how the market has been controlled by the market-makers.

Successful daytraders stay neutral.

Staying neutral means to be emotionally detached from your day trading decisions.

Neutral to Gains & losses
You probably know guys for whom the world sucks if they take a loss of $100 and if they make $1000 they are on top of the world. They are definitely not neutral.

If you are like that, then your day trading will almost certainly be driven by fear and greed; if you are down $100 you probably don’t want to take a loss, just because you know that you will suffer emotionally. If you are up $1000 you might want more, even though you should just take profits. Or you might end up taking profits way too early because you are afraid that the position might turn against you. This is not good day trading.

The professional day traders don’t let the day-today oscillations in their account faze them. The results of one week don’t matter much, not even the monthly results. It’s just a small blip of time in their day trading career. The day-to-day oscillations actually don’t matter much.

Emotional ups and downs are pretty normal for beginner day traders. If these emotions influence your day trading decisions too much, then I would strongly advise you to go back to paper trading in order to gain the confidence you need to not let those oscillations affect you too much.

Neutral To Price Movements.
Staying neutral in day trading also means to see the price movements like they really are, not how you want them to be.

You probably know the situation where a trade is going against you, and you start looking for other reasons why it is still a good trade and you should hold it. This is very dangerous for day traders, since it leads people to breaking their stops — and losing big.

As a day trader, your entry and exit criteria has to be absolutely clear before you make a trade. Switching strategies while you are in a trade is one of the worst things you can do. You can always find a reason for your position to go up or down, but you don’t see the actual price movement anymore. You are shifting from reaction to prediction! A day trader should under no circumstance try to predict future price movements.

As day traders we have to play the actual price movement, not what we think the movement should be! Please leave prediction to investors, you are day trading.

A lot of times I see day traders taking positions in stocks they know very well fundamentally. They mix day trading with investing. This is also very dangerous. While there might be reasons to enter a position for a short-term trade they often end up holding it as an investment if it goes against them.

Let's take a well-known example

Just think about Enron.

Yes, there were points during the Enron sell off where a trade would have been justified. Even I held Enron for a short recovery from about $8.5 to $10. The problem is, that if you base your entry on the belief that the company is cheap and it has to recover, you will be more and more inclined to hold your position or even add to it once it goes lower. The stronger your opinion on a stock, the harder it is to make decisions based on the actual price movement.
Day traders should not do this. I would strongly advise you to have a separate account for fundamentally based trades. A day trading account gives you too much leverage, making it very tempting to take risks that are way too high!!
I am not saying that it is not good to have expectations as a day trader; everyone should know what his potential trades are most likely going to do. Should those expectations be wrong, though, then a day trader has to accept that — and react according to what is really happening.

Do You Know How The Fed Pumps UP The Money Supply?

Recent news reports announce that Federal Reserve has "pumped" money into the economy, without making clear what this means. Do you know how the Federal Reserve "pumps" money into the economy?

You might be wondering how this matters to you. The fact is that the more you understand how governments control money, the better you will be able to take control of your own economic situation, especially in a global economy.

One of the primary functions of a government is to control the amount of money in the system. Every nation has a central bank. In the United States, the central bank is the Federal Reserve. The central banks pay attention to the condition of the current economic conditions, and then take actions to either heat up or cool down the economy.

The news media use colorful language to say that the Fed is "pumping money" into the economy to calm fears of an economic panic. In other situations, the media refer to actions of the Fed intended to "drain money" from the system. Even though the media report that the Fed "pumps" money or "drains" money, they don't explain clearly how the Fed does this.

How exactly does the Fed increase or decrease the amount of money? First, let's make clear that Fed does not pump more money into the system by printing more currency. Currency is not the same as money.

The Fed can control the money supply with several methods. One method involves the reserve requirements for banks. A bank must keep a portion of its deposits on reserve. In other words, the bank can only loan out a percentage of its deposits as loans. The percentage it cannot loan out is the reserve.

If you deposit $1,000 in the bank, the bank makes money by loaning out most of your $1,000 to other customers. However, the bank cannot loan the full $1,000 amount.The Federal Reserve sets the reserve requirements for banks. The banks must keep 3-10% of customer deposits on reserve. This means that the bank needs to keep on reserve only 3-10% of your $1,000. With a 10% reserve, the bank must keep $100 on reserve. That means it can loan out the remaining $900. With a 3% reserve, the bank must keep only $30 on reserve. It is allowed to loan out the remaining $970.

The Fed can use the reserve requirements to control the amount of money banks have available to loan. If the Fed wants to increase the amount of money in the economy, it reduces the reserve requirements.If it wants to decrease the amount of money, it increases reserve requirements. This is how the Fed "pumps" money into the system and "drains" money from the system.

With a lower reserve requirement, the bank has more money to loan.With a higher reserve requirement, the bank has less money to loan.This is the difference between loaning out 97% of its deposits with a 3% reserve rate and 90% of its deposits with a 10% reserve rate. The changes in reserve rates increase and decrease the money supply.

So, the reserve requirement is one way that the Fed controls the amount of money in the economic system. This is why it is not exactly accurate to claim that the Fed "pumps" more money into the system. The banks are the ones pumping more money into the system, and they do that because the Fed reduced the reserve requirement.

If you deposit $1,000 in the bank, the bank makes money by loaning out most of your $1,000 to other customers. However, the bank cannot loan the full $1,000 amount. The Federal Reserve sets the reserve requirements for banks. The banks must keep 3-10% of customer deposits on reserve.

This means that the bank needs to keep on reserve only 3-10% of your $1,000. With a 10% reserve, the bank must keep $100 on reserve. That means it can loan out the remaining $900. With a 3% reserve, the bank must keep only $30 on reserve. It is allowed to loan out the remaining $970.

The Fed can use the reserve requirements to control the amount of money banks have available to loan. If the Fed wants to increase the amount of money in the economy, it reduces the reserve requirements. If it wants to decrease the amount of money, it increases reserve requirements. This is how the Fed "pumps" money into the system and "drains" money from the system.

With a lower reserve requirement, the bank has more money to loan. With a higher reserve requirement, the bank has less money to loan. This is the difference between loaning out 97% of its deposits with a 3% reserve rate and 90% of its deposits with a 10% reserve rate.

The changes in reserve rates increase and decrease the money supply. So, the reserve requirement is one way that the Fed controls the amount of money in the economic system. This is why it is not exactly accurate to claim that the Fed "pumps" more money into the system. The banks are the ones pumping more money into the system, and they do that because the Fed reduced the reserve requirement.

Tracking the Dow Movement on Friday.

The previous overnight last minute closing with a hammer top was realized at the opening bell today.With an early low,the market set itself on a bullish trail.The last half hour trading was still bullish except for profit taking which happens within the body of the white bar.














The bullish trend is still intact.

Some ideas about Technical Analysis.

Making decisions in stocks or securities investment consists of two categories:-

1) Fundamental Analysis.

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It involves analyzing the characteristics of a company in order to estimates its intrinsic value.

2) Technical Analysis.

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Market players don't care one bit about the "value" of a company or commodity.

Technicians or chartist are only interested in the price movements in the market.

Technical analysis just studies supply and demand in a market in an attempt to determine what direction or trend will continue in the future,i.e. the emotions of the markets by studying the market itself as opposed to its components.

The field of technical analysis is based on 3 assumptions:-

1) THE MARKET DISCOUNTS EVERYTHING.

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-the stock's price reflects everything that has or could affect the company including fundamental factors.

-the broader economic factors & market psychology are all being priced into the stock removing the need to actually consider the factors separately.

2) PRICE MOVES IN TRENDS.

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-Always follow the trend.Most technical strategies are based on this assumption.

3) HISTORY TENDS TO REPEAT ITSELF.

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-Market players tend to provide consistent reaction to similar market stimuli over time.

COMPARISON BETWEEN TECHNICAL & FUNDAMENTAL ANALYSIS.

-both are Two main schools of thoughts.

-A fundamental anaylst tries to determine a company's value by looking at the balance sheet,cash flow and income statement.So if the price of stock trades below its intrinsic value,it's a good investment.

-Technicians believe that all the info's they need about a stock can be found in its chart.

TIME HORIZON BETWEEN THE TWO.

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-Fundamental analysis takes a relatively long-term approach to analyzing the market.

-Technical analysis can use a timeframe of weeks,days,or even minutes.

Therefore the nature of investing style varies.

For a fundamentalist,gains will not be realized untill the stock price rise to its "correct" value but if the short-term market situation goes wrong,then the price of that particular stock will correct itself over the long run or maybe several years.

Furthermore,financial statements are filed quarterly and changes in the earnings per share dom't emerge on a daily basis like price & volume info's.

Fundamentals are the actual characteristic of a business.Hence data used to analyse a stock is generated more slowly than price & volume data used by technical analyst..

Many market participants have great success by combining the two.

Technicians ===trade.

Fundamentalist===invest.

Tracking the Dow Movement on Thursday.

Despite a bullish day,the intra-minute movement shows sign of many spinning dojis'.Many traders are liquidating on strength.In the last hour of trading,a bearish marubozu was identified and the day ended with a hammer top.A sign of bearishness.

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_candlesticks

(High=13,469.27) + (Low=13,292.38) divide by 2 = (Moving Average=13,380.83)

Any follow through correction at MAV level should scrutinise thoroughly and act without hesitation.

The Dow Index Futures is very near expiry and a pullback looks imminent.Index trading is a manipulative & rigged game.The market makers will start their new game of bullishness after the expiry date.

Today the Nikkei Futures contract expires.

A successful DayTrader's state of mind.

As a daytrader we must have a positive state of mind which allows for unhesitating implementation of ones's trading strategy.This will translate into tremendous positive results.

A positive state of mind is the result of consistently processing positive verbal attitudes,beliefs, & images that will enhance one's trading performance.

The following are guides to positive processing:-
1) expect the best of yourself.
2) establish a personal standard of excellence.
3) create an internal atmosphere for success based on visual,auditory,feeling imagenary that enhances performance.
4) communicate positively & effectively......with yourself! Be yourself a positive resourceful & self-empowering.
5) Rehearse a system of personal beliefs that can enhance your state of mind immediately.

The psychological skills that are necessary to day trade successfully requires ongoing commitment & conditioning.

I have doing my own plotting of intraday chart and technical analysis from the day I started working at the stock-exchange as a trading room boy during the open outcry-system.

Technical analysis is a very important tool which you'll require.It's an important weaponary arsenal for your warfare in the stock jungle!

Even the control panel of a fighter-jet or a submarine needs plotting of a direction of some kind without which it'll be lost in the unknown.

It is not however in my opinion as important as working then the psychological & attitudinal issues of trading in general & day trading in particular.

"The Tao of Trading"......by Robert Koppel.
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Every trader knows that market truth & practise are visceral,not cerebral.Market wisdom like Samurai truth,is practical truth that can only be utilized & realized in action.It can never reside on the level of mere theory.

Don't be misled into trading that anyone can just walk to the trading room,sit down and click off some trades & be profitable. Day trading is a serious business. It is a profession & like other professionals it requires trading experience.

Your success in day trading relies on your willingness to dedicate yourself and your attitudes to learn the techniques required to be successful.

Tracking the Dow Movement on Wednesday.


An early LOW open signify overnight profit-taking & soon the bulls start charging again.There are many powerful long white candlestick bar with intermittent correction which shows that the market is still healthy.See the last 30 minutes trading,a long white candle with doji spin on top,this is called a shooting star...you must run!At the close is an inverted hammer...this is beautiful...the market is still intact and will continue. http://www.actionforex.com/articles_library/technical_analysis_articles/candlesticks_charts_explained_200605107114/











A bearish spinning top....so a mild correction is on the card but the support line is 13,227.56.

About psychological skills in successful trading.

THE PSYCHOLOGICAL SKILLS NECESSARY TO BECOME A SUCCESSFUL DAYTRADER
are as follows:-

1) COMPELLING PERSONAL MOTIVATION.
-posses the intensity to do whatever it takes to win.
-overcome bad day or temporary setback.
-stick to trading plans.
-not allowing a momentary impulse based on fear & greed to control your decisions.

Many day traders live & die on a roller coaster of inhibiting emotion.This is not the soil in which effective trading flowers.

2) GOAL SETTING.
-goals give direction & focus to trading plans as well.
-know what you are trying to accomplish if you want excellent result.
-must be able to answer without qualification.

3) CONFIDENCE.
-self-trust & being in control.
-expect results based on hard work,discipline & an effective (tested & proven) methodology.

4) ANXIETY CONTROL.
-Day traders main anxiety---fear of failure.
- Perfectionist traders concerned about what others think.
-Traders should focus on applying their methodology,mentally rehearse the mechanics of the trade & convince themselves that trading is not about proving anything to anybody.
-If you are a perfectionist,the more you focus on your methodology,the more you'll feel in control of your anxiety.

Another source of trading anxiety is....fear of success.Traders may lose control & engage in euphoric trading while in fact doubting themselves.

Be in relaxed mode when trading.If you fear losing control,focus on your specific methodology & expect small losses.

5) FOCUS.
-well analyzed & strategical trade ( based on probability)
-automatic execution.( based on highly concentrated focus & confidence)
-successful day trade results.( whether the trade makes profit or loss)

6) STATE OF MIND MANAGEMENT.
-constantly trade from a state of mind that allows you to maintain high level of self-esteem,unshakable confidence & laser straight focus.

This state of mind is characterized by relaxation focus without anxiety,self-trust & resourcefulness.

TRACKING THE DOW MOVEMENT.

Looks like distribution in the final hour of trading with selling pressure.It ends with short covering and a spinning top.Might spill over next day!
http://www.candlesticker.com/Cs03.asp













A bullish candlestick.Any pullback the next day should cover till the half-body due to profit-taking.

Develop a Love & respect for trading!

THE PRINCIPLES OF CHARACTER.

1) Concentrate on the process that creates winning not the result of winning.

2) Make money & decisions from your skills,not your ability to see thru a crystal ball.Never predict the market.Invest time developing the skills and abilities necessary to profit from the environment.

3) It is never the markets---it is always you.Statistics & society may predict,but you alone determine whether you will succeed or fail.You alone are in control take responsibility for your performance & your life.There are always tremendous opportunities in the markets.It is always tremendous opportunities in the markets.It is not always what happens,it is what you do with what happens that makes the difference between profit & loss.

4)Every event holds the seed of a positive message or meaning.Seize each day & each loss & mistakes as an opportunity to learn & grow not as evidence of your inadequacy.

5) Seek to embody the true spirit of competition."to conspire together"..."never try to be better than someone else but never cease to try to be the best you can be"

6) Treat Investing as if it were farming,not cramming.---no easy shortcuts.Seek to study new methods & tools for farming your skills & understanding,not tips & predictions.

7) Develop a love & respect for trading the free markets & individual liberty & initiative---profits are just the gravy.

8) Become a voracious learner,reader & knowledge seeker.The more you learn the more you earn.

9) Do not seek riches,seek "REAL WEALTH".Real wealth is not money or material goods,it is the creative & productive force,the indomitable spirit inside everyone----KNOWLEDGE----source of feeling of certainty,confidence,abundance & security.

10) Understand & believe that investing & trading create & add real value to humankind.

TRACKING THE DOW MOVEMENT,WHAT I SEE IT!

The last two hours of trading saw four companies of advancing troops with no enemy fire until the last hour when all amoury and soldiers were recalled back to their barracks.It ended with a DOJI STAR.(A symbol of decision making)Looks like the captain is briefing the troops and getting replenishment for the next onslaught positively."IT'S A SPINNING BULLISH BOTTOM"

AHOy!!!!!!!IT'S A MORNING STAR,,,,,,,,captain is leading the troops.Soldiers..all system go.Let's head north and corner all weak position holders.

I'm in now,taking LONG Position for my index futures.

http://www.daytradersbulletin.com/html/cs28.html

Take Profit Rules.

*Do not let profit run into a loss.

1) Exit on hitting chart resistance line or your price objective.

2) On sighting bearish reversal pattern.

3) Take windfall profits if stock sudden spike-up in price.Don't even try to find out the reasons.
You barely get the real ones.

4) It'll be easier to do this if your expectations are not so high or when you are on "contra".Any
sudden drop could wipe out your instant gains.

5) Use trailing stops to protect profits i.e: A protective order placed just below the price your
stock is doing.

6) Stagger your profit targets.Take partial profits as market advance half or one-third and
the remaining balance to fight the market.

7) Sell-stay out if price closed below your support line.

IMPORTANT LIST OF DISCIPLINE TRADERS.

1) Accumulate surplus after winning trades and use only in emergency or times of panic.

2) Do not get in when in doubt.

3) Never overtrade.Use stop-loss order.

4) Do not close trades without a good reason.

5) They never buy to get dividends.

6) They never buy just because the price of the stock is low or sell short just because the price is
high.

7) Avoid increasing their trades.After a long period of success or a period of profitable trades.

8) They distribute their risks equally. They trade 4-5 stocks if possible avoid tying up all their
capital in any one stock.

9) They never limit or fix a buying or selling price.They trade at market price.

10) They are careful about pyramiding at the wrong time.They wait until a stock is active and
has crossed resistance levels before buying more.

11) They divide their trading capital into ten equal parts & never risk more than one-tenth of
their capital on any one trade.

12) Spreading the risks and has access to trading capital.

GOOD TRADERS DON'T NEED REASONS..........BUT BAD TRADERS DO.

When market goes your way,you don't care why.When you are losing you need excuse and a
reason why! Do your own research. If you are wrong get out! Don't waste emotional energy looking "WHY" .Your broker may lend you a shoulder to cry on.Don't expect more sympathy unless you keep on trading.

"IF one share turns bad....SELL IT!
IF WHOLE market turns bad - SELL EVERYTHING - Although it is worth remembering that
a SECOND chance often occurs."

The Myth of Daytrading.

Day traders need to know when news is going to be released, because many markets react to news releases in erratic ways (such as very quick, large moves, in both directions).

Day traders refers to the practice of buying and selling of financial instruments within the same trading day such that all positions will usually (not necessarily always) be closed before the market close of the trading day.

Financial instruments such as stocks,stock options,currencies and a host of futures contracts such as equity index futures,interest rate futures,and commodity futures are the most common products.

Many day traders are bank or investment firm employee working as specialist in equity investment and fund management.

However,day trading has become increasingly popular among casual traders due to advance in technology,changes in legislation,and the popularity of the internet.

Day traders usually trade on borrowed money, hoping that they will reap higher profits through leverage, but running the risk of higher losses too.

While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.

Here are some of the facts that every investor should know about day trading:

Be prepared to suffer early losses.

Day traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading.

Day traders do not "invest"

Day traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.

Day trading is an extremely stressful and expensive full-time job.

Day traders must watch the market continuously during the day at their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any day trader should know up front how much they need to make to cover expenses and break even.

Trading on margins are borrowed money.

Borrowing money to trade in stocks is always a risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Day traders should understand how margin works, how much time they'll have to meet a margin call, and the potential for getting in over their heads.

Don't believe claims of easy profits

Don't believe advertising claims that promise quick and sure profits from day trading. Before you start trading with a firm, make sure you know how many clients have lost money and how many have made profits. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance.

Watch out for "hot tips" and "expert advice" from newsletters and websites catering to day traders

Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee. Once again, don't believe any claims that trumpet the easy profits of day trading. Check out these sources thoroughly and ask them if they have been paid to make their recommendations.

Remember that "educational" seminars, classes, and books about day trading may not be objective.

Find out whether a seminar speaker, an instructor teaching a class, or an author of a publication about day trading stands to profit if you start day trading.

Above all,day trader must approach the markets with a totally mecenary attitude,"Rambo Style",seeking to make each day a winner.
Trading tools differ in their applications and resolutions.
Another caveat:-remember that complex interactions between traders personality,time frame orientation,personal factors affecting the traders,timing indicators and many other influences may yield markedly different results in each case.Traders are not like artist.

Another important note is NOT to be overgeared in order to sustain your long term presence in the market.Trade in SMALL LOTS and not to be overly confidence which WILL normally result in big-blows like that of Mike Tyson!My experience tells.The market is a RIGGED game,as the joker card is always in the hands of the banker.

Quotable Quotes:-

No matter how good your timing is by virtue of correctly interpreting all the major indicators,you still have to choose the right stock & this is where all the strategies are employed,the fusion of timing with choice buying or selling the right stock,at the right time.....
The timing might be right but the wrong stock was purchased.The right stock might be bought at the right time but sold at the wrong time,cancelling out all the advantages of the early success.
(J.E.Granville)

How To Minimise Losses The Next Time You Invest.

When it comes to investment, some people are not very sure what kind of risk and returns they are exposed. Most of the times, returns are discussed in depth but when it comes to returns, people do not pay special attention. If you have a sound financial knowledge, I am sure you will calculate all the risk that you will be exposed. In short, one will be automatically exposed to risk when one made an investment.

Risk can be classified into two categories.

Systematic risk; represents risk that is common to all assets. It cannot be diversified away. The other type of risk is unsystematic risk; represents risk that is unique to an asset and can be diversified away.

Examples of systematic risks are interest risk, inflation risk, market risk, exchange risk and reinvestment risk. On the other hand, examples of an unsystematic risk are country risk, liquidity risk, business risk, default or credit risk, industry risk and financial risk.

As you can see, risk is a word that has a lot of meaning to it. You will need to consider the risk you will be taking. Choosing an investment vehicle is not an easy task as it requires you to do a thorough homework. A mistake in you risk assessment can cause a huge lost.

The main idea of investment is to reduce the lost and increase the returns. There is no point if you make small returns conservatively but at one point, you make a huge lost. Risk can be reduced not eliminated.

If you are not sure of what kind of risk you are exposed to, it is better that you do not invest in that asset. You will need to be sure and confident of your investment.

Be sure to do your research the next time you make an investment. There is no room for mistakes. You do not invest your money in an asset and hope that it will prosper. Hope are for the hopeless. You will need to be actively involved in your investments so that you can avoid unnecessary losses.

TRACKING THE DOW MOVEMENT>

The Dow on Friday slide at the opening bell within minutes without giving any chances.It opens at13360.74 (previous 13363.38) and closes at 13113.38 down 249.97 points(1.87%).Touches the low of 13248.24.

Near to the closing bell were three advancing soldiers and ended with a pullback position half way.The Dow should start low and try to recoup its position again next week.

http://www.investopedia.com/terms/t/three_white_soldiers.asp

The shaven bearish candlestick on Wednesday finally intensify on Friday.The theme play is WORRY.

1) First monthly drop in payroll in 4 years.

2) Prelude to anniversay of Sept 11.

3) Osama Ladin's video-US vunerable to attack.

But the world is not doomed even there's a recession,business as usual.I think the market is trying to dictate to policymakers that the meeting on Sept 18 is "Do it our ways" and have further rates cut.Anyway the Dow Futures are about to expire in a week time and I foresee these hedge-fund people are starting to do their rollovers & create fears so that they can have their best and very best onslaught!This is just temporary.