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There are three main reasons for trading futures and they are: Speculation - Many traders trade the futures market solely for the purpose of speculation. When prices move without such a discernible series, prices are said to be trading side ways in a range or trendless.

It represents the consensus of their expectations. In addition to the three types of trends, Dow then went on to further qualify the trend by saying that the trend has three phases.

This originally, as the name implies, was simply: banks and large institutions exchanging information about the current rate at which their clients or themselves were prepared to buy or sell a currency. Once he has come up with his evaluation he can determine if he thinks the currency is undervalued or overvalued against a given currency.

The channel on a 4-hour chart may be different from that on another time period. The way that it most commonly works is, your broker will ask you to download their dealing station software.

Similar to futures, options can give the holder protection against adverse price moves. You can use any reliable on line charting service you want.

If you are at all serious about this game, approach it professionally. When you buy stocks you essentially own a little share of the company you just bought.

This is your money and you are responsible for it. The Market Has Three main Trends.

This is referred to as the intrinsic value. THE TREND IS YOUR FRIEND The price chart of a security may appear like a random distribution, but this is not so.

After a while, buying becomes exhausted and is overwhelmed by selling and profit taking. Once levels of support or resistance have been violated then invariably these reverse their roles, so that previous support becomes resistance and previous resistance becomes support.

Stock exchanges are physical locations where market participants are brought together in once place. For intraday trading you need to see every bid and offer made.

This is because regardless of how many times the coin is tossed each event is independent. The validity of a trend line is dependent on its duration and the number of times it has been successfully tested.

You will often hear the term INTERBANK discussed in FX terminology. The historical trend of a security will tend to repeat.

I have two main arguments of why technical analysis works when applied correctly to trading any financial market and they are simple. There are so many charting services out there that it would be hard to mention anyone in particular.

They may decide that the Euro will appreciate against the US Dollar and take what is called a long position in Euro. Forex is often abbreviated to FX.

My interpretation of the Dow theory above is very brief as it is beyond this book to delve to deeply into any one particular subject. They may decide that the Euro will appreciate against the US Dollar and take what is called a long position in Euro.

The point in all of this is that I think it is a good idea for people to trade something they either like, have an interest in or at least are familiar with. Many companies have to import or exports goods to different countries all around the world.

Forex is one of the fastest growing areas for news traders to get started. When investor expectations change, they often do so abruptly.

Even though the mighty US dominates many markets most of Spot Forex is still traded through London in Great Britain. They examine the charts for information on the future direction of the markets.

The main point I want you to take away from the Dow theory is that there are three types of trends, a primary trend, a secondary trend and minor trends. Buy when you really meant to sell and so on; it cost nothing at this stage.

The Difference Between Cash And Futures Prices. Up trend line.

Have a look at the two charts below. If you are following a particular stock and it is trading at $10 then that is a fair value of that stock.

THE TREND IS YOUR FRIEND The price chart of a security may appear like a random distribution, but this is not so. The development of support and resistance levels is probably the most noticeable and reoccurring event on price charts.

Three Different Trading Methods In this section of the course I want to introduce you to three simple trading tactics. So let’s go over the basics.

When you buy stocks you essentially own a little share of the company you just bought. Unwittingly he is in fact trading currencies.

Some times the price will just keep going through support and resistance and sometimes it will come back to test its previous support or resistance line. The channel on a 4-hour chart may be different from that on another time period.

Technical analysts look at charts the same way a doctor would look at x-rays. The minor trend is like a small stream, which runs this way and that but is headed, in the general direction of the river.

In up trends, every time price drops to the up trend line and then resume their advance, the trend line has acted as support to the price up trend. This tends to lead to a very liquid market and thus a desirable market to trade.

You will notice that I have two R3’s and that’s because they are the same level. Imagine that you have in your hands a shiny new penny.

It is primarily traded through banks, brokers, dealers, financial institutions and private individuals. At this stage it may seem that the buyer of the option has all the cards but don’t forget the seller of the option receives the money for granting the option.

For every book that there is on making money trading there is probably an opposite book explaining why it can’t be done. You will be asked for personal information and given forms to fill in.

When investor expectations change, they often do so abruptly. This second correction often takes more time than the first to complete the corrective process.

Why Would You Trade Futures? If you are at all serious about this game, approach it professionally.

You may be thinking by this stage that this theory is rubbish. If you are going to trade intraday you will need real time charts with no delay.

Note how when prices rose above the resistance level they did so decisively. Changes in interest rates, government announcements, etc.

The loan in the margined account is collateralized by the security. If the interest rates are raised in one country how will that effect the market you are in?

Technical analysis is the study of market action, mainly through the use of charts and indicators to forecast the future price of a security. Policies that are implemented by governments and central banks can play a major roll in the FX market.

If the Euro does in fact gain ground against the US Dollar they will have made a profit. Regardless of what the fundamentals are saying, the price you see is the price you get.

You need to understand the basics of how the market work before I can start to introduce more advance concepts such as trading methods and systems. This tends to lead to a very liquid market and thus a desirable market to trade.

We are starting to get into some technical expressions here but just bear with me, as we will explain all these terms as we progress. Have a look at the two charts below.

Some times the price will just keep going through support and resistance and sometimes it will come back to test its previous support or resistance line. It is primarily traded through banks, brokers, dealers, financial institutions and private individuals.

You will however find that most of the brokers and banks use centralized feeds to insure reliability of quote. Should back up here slightly and mention that in 1884 Dow published his first stock market average of 11 stocks.

A property developer may take the option on a piece of land he wants to develop. You can use any reliable on line charting service you want.

If you want to have full access to reports on particular shares and be able to ask for advice from the broker, then you would normally opt for a full service broker. If you are following a particular stock and it is trading at $10 then that is a fair value of that stock.

Policies that are implemented by governments and central banks can play a major roll in the FX market. They will be more than happy to supply this to you and you can then choose one based on personal choice or location.

If it where not possible to make money trading because the markets are inherently random, then why do so many traders make money? When a major support level is about to break there are normally thousand of traders with some technical training who are aware of this and exploit the situation.

Here’s is where we start to have some fun. The insurance company on the other hand has the obligation to pay you should you should you exercise that right in exchange for accepting your premium each month.

When I mention securities it encompasses everything that can be traded. Regardless of how you want to trade the markets you need an approach.

The best way to demonstrate this is with a game. Unlike many markets the FX market is open 24 hours per day.

For markets that have volume I would expect to see a sudden increase in volume to help confirm the breakout. This tremendous turnover is more than the combined turnover of all the worlds' stock markets on any given day.