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Forex Trading Robot – IvyBot  

I don’t know about you, but I remember when my father used to work double shifts at his job in a synthetic rubber factory, trading shifts, working stock, putting himself on autopilot, working like a robot.  He worked way too hard to make better futures for his 4 children, wife and himself.   All his family really wanted was him not more currency.He would work himself so hard just to make extra money but every two weeks that check would come and it always disappointed him.  All he did was get broker and broker and broker.

He’d work and work, double shifts, any extra shifts he could, but the harder he worked the less money he came home with because it would put him into a hight tax bracket.Dad needed and expert adviser to help him see that all the extra work wasn’t worth it. 

Working hard was what his generation did.  Now don’t get me wrong I’m not saying there is anything wrong with working hard, but there wasn’t a choice then, we have a choice now.  Forex trading robots. IvyBot

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Over the last decade, the popularity of options has grown significantly. According to the data compiled by the Options Industry Council, the volume of options contracts traded on U.S. exchanges in 1999 was approximately 507 million. By 2007, that number grew to more than three billion, thus setting an all-time record.

Though futures options are quite risky investments that can only be understood by expert traders options can be very useful to the individual investor as well.

Futures Options can also add value to your portfolio and have several other advantages that are definitely worth noting. A few are outlined below and will help illustrate reasons why options have gained so much popularity in such a relatively short period of time.

The first advantage of options on futures is that they can provide increased cost efficiency. Since they possess great leveraging power, you the investor can obtain a great option position that nearly mimic a futures position but save you unnecessary cost.

The second advantage is that they provide less risk when used correctly. While there are situations where buying options is actually riskier than owning the futures, but they can also be used to reduce the amount of risk incurred. Futures options can be less risky because they require less financial commitment than equities. They are also the most dependable form of hedge which makes them safer than stocks.

The third advantage of futures options is they provide higher potential for returns. This means you can spend a lot less and make nearly the same profit as you would with the underlying futures. This gives you a higher percentage return.

The fourth and final advantage we discuss in this article pertains to the strategic alternatives futures options provide. Options are a very flexible tool and provide many ways to recreate other positions. These positions are known as synthetics. Synthetic positions provide you the investor multiple methods of attaining the same investment goals which can prove extremely useful.

The four points outlined above are the key advantages futures options offer and are a contributing factor to their growing popularity. If used correctly, they can present less risk than straight futures and can actually save you unnecessary costs while providing you the same profit. This is important to consider when selecting a type of investment. You want to get the most out of your money and futures options provide several ways of making this happen. Take the time to review this information before ever making a buying decision. Make sure you understand how you may benefit from the decision you make and what it will mean for you in monetary terms.

Before you decide on a particular investment, consider the key advantages and weigh the risks of each possibility against what you are willing to lose. Be sure you understand how to correctly utilize futures options in order to get the most out of them. You are investing for your future so think wisely and choose carefully. The more you know, the closer you’ll be to a more secure and prosperous future.

There are many ways of trading in the futures commodity markets. One way is to trade options on futures. There are many strategies you can use in trading futures options. You can just buy an option or just sell an option. You can also put on what is called a spread using options. Spread options are when you buy and/or sell more than one option at a time in the same order.

You can buy 2 options or sell 2 options or you can buy one option and sell another option. The options you buy have to be in a different strike price to be considered a spread. If you just purchased 2 of the same options, that would not be a spread. The 2 options would have to be 2 different future option contracts. Let’s look at corn. These are not current prices but just an example. If I purchased 2 $3.00 corn options, that would not be a spread. If I purchased one $3.00 corn option and sold one $3.10 corn option, that would be a spread. I would put this trade on in one order.

Not all spreads have to be in the same contract month or even the same market. When putting on a spread in different months, you could put in an order to buy one option in one month and sell another option in another month at a certain price. These are called calendar spreads as they involve different months.

Now when putting on a spread, you will either have money coming into your account or going out. If your purchased options cost more than the sold options, you would state that you are putting it on for a debit. If you are taking in more with the sold options than you are paying with the purchased options, you are putting the spread on for a credit. I will discuss other types of options strategy using spreads in another article.

Futures contracts as they relate to finance is a simple contract devised to allow someone to ultimately purchase or sell specific commodities that will be delivered at some future time. Generally there are certain dates and time frames which must be met in order to be a valid contract.

These types of transactions are never offered on the usual stock market but you would find them on what is commonly known as the futures exchange. They are not considered to be securities in the strictest sense of the word as stocks or bonds may be. They are a type of derivative.A futures options contract or a commodity option is a derivative as well.

The actual prices associated with the various commodities vary according to the supply and demand. If the pork belly crop is bad this year the prices will likely be high while there is an over abundance of coco would result in a lower than normal price. The future date is known as the delivery date while the daily bid on the exchange would be the settlement price.

In a nutshell in futures trading, what a contract states is that the holder can take delivery of the commodity at some future date however the futures must be complied with by the settlement date. At the settlement date the seller will deliver the asset to the buyer whether it is coco or pork bellies or whatever. In order to fulfill your obligation prior to the established settlement date you must offset your position by selling if you purchased a futures or buying back if you had a previous short position which ultimately allows you to balance everything out.

An interesting side note here is that if you purchase a futures contract and do nothing and the settlement date arrives you could end up with a yard full of assets that you really did not want. Unlike stocks and bonds we are talking real time products here.

Commodity trading and futures option trading is best done with the help of technical analysis. Technical analysis shows a trader the direction; he should take while dealing with commodities. Whether one should buy or sell is best determined with the help of Technical Analysis. A good trading system will always incorporate methods used in TA within itself.

Technical Analysis Defined

The process of determining the condition of a commodity (based on the historic price) with the help of charting is called Technical Analysis. It combines probability mathematics and statistical information to determine the future price movement of a commodity with probability on your side. For example, if someone were to walk up to a door, and you were told to guess which direction they would go – left or right, whatever you chose, it would be speculation. On the other hand, if they went left, and you followed them, that would be called trend following. Similarly, if a commodity future moves in a direction and you use TA to guide you, you can buy it after it shows a move into a certain direction, and a trend has been confirmed.

Uses Of Technical Analysis

There are many ways TA helps traders in trading  futures options and commodities. The primary principle in TA is to have the ability to follow trends. To be able to do this, one has to be able to catch it early enough. So, you can buy into a commodity if you can confirm that it is in an uptrend. The key point to remember is that TA assumes that price discounts everything.

All movements of market participants are reflected in the price of any commodity at any given point in time. The idea is to buy low and sell high, or vice versa. This sounds simple in theory, but is difficult enough in real life. Imagine knowing that the probability of a commodity will breakout on the upside, but also that it is only a probability, and not a surety.

How Do We Use Technical Analysis?

TA has many different theories. These include common theories and indicators such as moving averages, Fibonacci series, oscillators, Gann Trading theory, Elliot wave theory, and the age-old Candlestick theory from Japan. Many users tend to combine one or more of these theories to get better accuracy in determining the trend more correctly in their favor. One has to remember that probability should to be on our side.

The risk to reward ratio should always be in our favor. A lot of people use TA to help them establish a trend, get the point of a breakout and look for a point to buy or sell a commodity. They also use it to determine their stop-loss, and possible target price. This is an advantage that TA has over any other form of analysis. Being mathematical in nature, it gives you exact figures as to what levels you need to enter and exit a commodity.

Technical Analysis is a powerful tool that needs to be executed with care and discipline. It provides the right foundation you need to determine the price trend of a commodity with more accuracy.

Commodities are an important part of everyday life whether related to food, metals or energy. They can also be a great way for an investor to diversify beyond the tradition of stocks and bonds or to profit from price movements. There are a number of ways to invest in commodities, some of which have been made easy for the average investor. A futures contract or future options provides a popular way to invest in commodities.

A futures contract is an agreement to buy or sell a specific quantity of a commodity at a specified price in the future. Such contracts are available with commodities such as crude oil, gold and natural gas. They may also be bought for agricultural products such as cattle or corn.

Many who participate in the futures markets are commercial or institutional users of the commodities they actually trade. They may then use these markets to take a position that reduces the risk of financial loss when a price change occurs. Individuals who choose to participate are speculators hoping to profit from the price of the futures contract. They usually choose to close out their positions before the contract is due, thus not accepting actual delivery of the particular commodity.

If you decide to invest in a futures contract or future option you will need to open a brokerage account if your broker does not trade futures. You will also be required to fill out a form that acknowledges your understanding of the risks associated with this type of trading. The contract for each commodity needs a minimum deposit that varies with each specific product. This deposit amount depends on the broker and the value of your account will either increase or decrease with the contract value. If the contract value decreases, you will be subject to a margin call and will then need to place more money in your account in order to keep the position open. Because of the huge amounts of leverage, you can receive huge returns or suffer large losses just from small movements in price. This means a futures account can literally double or be wiped out in only minutes.

Most futures contracts also have options that are associated with them. These futures options still let you invest in the futures contract by, but limit any loss you may incur to the option’s cost. Since options are derivatives, they usually do not move point-for-point with the futures contract.

There are, however, advantages to buying futures contracts. One is that the leverage they provide allows for large profits for those who are on the right side of the trade. Another is minimum-deposit accounts control full size contracts an individual investor ordinarily would not be able to afford.

Before investing in a futures contract make sure you understand the risk involved. Know, too, that there are advantages like the ones mentioned above that can make these contracts very profitable for you.

When people speak of future option or commodity option trading, they think of the risks involved. There are risks involved when buying and selling options. When buying an option, the risk is how much you paid for the options. There is limited risk involved in buying an option. In selling futures options, there is unlimited risk involved because if the option goes “in the money” you have the potential for unlimited loss.

For example, if the underlying futures market was trading at 3.00 and I sold a 3.50 call option, this option is not yet in the money. It is “out of the money”. If the futures hits 3.50, then the option is “at the money”. Once it goes beyond 3.50, it is in the money. If I sold the commodity option and the futures eventually goes to 5.50, then it has 2.00 worth of “real value” or intrinsic value. So we can lose more than we expected. Some people only buy options for this reason.

When buying futures options though, you are paying premium and this is risk as well. The chance that you will be in the money and recover your premium payment is the risk involved. There is unlimited potential with limited risk. But the disadvantage is that the options usually expire worthless. Leverage is the reason people buy futures options. You can control  the underlying futures with a smaller investment and less risk than by buying or selling the futures contract. I am paying a premium to do this and I am also trading time as well. Meaning, I only have until the option expires to be correct, so time is a factor in futures options trading also.

Futures options sellers are trading the fact the an option will not be profitable for the option buyer before a certain time frame. Hopefully the futures option will expire worthless or lose value before the expiration of the option.

I will write about other techniques in another article. There are many ways to trade futures options. You can buy an option or sell an option or you can put on a credit spread where you do both.

The most successful floor traders are those that have the most experiance, this is no coincidence and should be a pointer for those who aspire to become a good trader. Day trading can be likened to being a sportsman, such as a golf pro or tennis champion, you need to be trained and in good physical shape. Skills are needed which must be developed over time and practiced until they become 2nd nature. If you want to learn how to day trade you must be prepared to put in the effort. Here are a few of the key skills that you must develop as a trader.

1. Technical analysis can be used for futures as well as the more standard stocks, options and bonds that most people trade. This can give you a large edge over other traders who have not taken the time to study the charts support and resistance areas, trendline and patterns. Learning technical analysis is really a must do if you want to trade futures successfully.

2. This is a very basic point but is very important, always have your trading plan prepared before you enter a trade, never try and create it on the fly, you will be much too emotional. Make sure that you have an entry and exit point in your plan.

3. Keep your losses small!, this is the one thing that every trader must do if they want to stay in the game for a long time. By doing this you will preserve your capital allowing you to trade another day. Your small wins will compensate your small losses allowing your big wins to give you an overall profit

4. Over trading is a big mistake that a lot of amateurs make. Professionals tend to be more patient and wait for the better opportunities to come along, this is called cherry picking and takes both patience and discipline. These are essential skills that you must develop.

5. This is a big day trading tip, it is important that you track all your trades and review them to see where you are making the mistakes. This is quite hard work, but this is what separates the professionals from the amateurs. Unless you do this you will keep on making the same mistakes. The best way to do this is to keep both a daily and weekly log.

6. Only trade when you are both physically and mentally prepared. This is often overlooked but is very important. Do you think a golf star can win a game when they are tired and mentally not focused?, it’s unlikely. Being prepared means getting a good nights sleep, having your trading station and charts well prepared before the market opens, taking the time each day to review your trading plan and rules. Finally you must have the mental frame of mind and confidence that you are going to be successful today in your trading.

7. If you are new to trading futures take the time to paper trade until you are very confident that you are going to make money. You will know when you are ready because you will start to hate paper trading knowing that you could be making real cash profits on a consistent basis.

Remember that the markets only trend for about 20-35% of the time, the rest is either sideways or very choppy, if you want to do trend trading to win you must be fully prepared when the opportunities arise.

A lot of people have made a lot of money trading commodity futures and commodity options. It offers a person scope to earn a huge sum of money with a very limited trading capital investment. How have these people done it? Well, I don’t know if I can answer that question just yet, but here are your beginner’s guidelines to commodity trading.

The Basics

When you trade in commodity futures, you don’t actually buy something. Instead you buy its future contract purely on the assumption that the price of the commodity is likely to move upward in the immediate future before the expiry of the contract. You buy to gain profit from this increase in price. For example, if you buy gold futures at $650 now, and the price at the expiry of the contract is $660, you would have made $10 on the commodity futures contract without actually trading in or buying any gold.

People choose to trade in commodity futures and futures options because it offers them an opportunity to get very large leverage on their invested capital. If, for example, you had about $20,000 you would be able to buy an S & P 500 stock future of the index. The same in actual equity stock could cost you $350,000. So, you get leverage of 17 times on your $20,000 if you invest in futures. This has huge ramifications where return on investment is concerned. If you make $20,000 dollars on an upward trend on this contract, you would have ended up with a 100% profit on your investment! This is as opposed to investing in actual stock worth $350,000 and getting $20,000 as return on investment. Puts things in perspective, doesn’t it?

What Are The Risks Involved?

However it’s not all roses out there or everyone would be trading and doing nothing else. The truth is that there are many inherent risks in doing commodity futures trading too. The key is the risk to reward ratio. A lot of people are not as concerned about the return on their money as they are of their invested money returning. Greater the risk, the greater is the return. Of course, if you’re wrong, you lose just a few thousand dollars trading carefully over a long period of time, whereas if you don’t have the luxury of patience, you may lose a fortune quickly in just a few large trades.

Hence, one must remember that there is a huge risk of loss in commodity futures trading. To limit this loss, people use what is known as a ‘stop’ or a ‘stoploss’. These are orders placed to square off your position if it turns against you in any trade to limit your loss. These are considered an essential part of commodity futures trading, as you never know what unforeseen event lurks ahead that has the potential to wipe out a large chunk of your invested capital. To make money, one has to accept that you will lose money also. If you have a good trading system, and use stops in your trades, you are sure to succeed over time.

Sometimes markets move so fast that your stop loss will not be hit. This is due to the broker not being able to trade the market for you because of these limit moves. It is for this reason, many only choose futures options. 

Commodity futures hold immense potential in making for you huge amounts of money. However, one needs to be careful, and invest funds wisely and with patience.

The stochastic oscillator was developed in the late fifties by George Lane. It is an oscillator which shows momentum in a commodity by comparing the current day’s close to the high/low ranges over a specified amount of days. Consistent closings near the higher side of the range indicates buying pressure while a close consistently on the lower side of the range indicates weakness and selling pressure. It shows whether a commodity is overbought or oversold. The calculation of the formula is as follows:

%K = (Recent Close-Lowest Low (n) / Highest High (n) – Lowest Low (n)) x 100

%D = 3 period moving average of %K

And (n) = the number of periods used for calculations

Hence, a 20 day stochastic oscillator would take the most recent close, the highest high of the last 20 days as well as the lowest low of the last 20 days. The general time period used here is the 14 time period. These formulas are given here for clarification only. One rarely ever needs to calculate these values manually, as the software used for charting will automatically plot it straight on your commodities chart.

Stochastic Oscillator – How Do We Use It?

Essentially, Stochastic Oscillators have three types. Fast, full and slow. By default, most trading software tends to use the fast one. Here, the oscillator comprises of two lines. The first one is %K which measures the raw momentum of the commodity. As discussed earlier, %D is just a simple moving average of %K, but is still more important than %K. Generally, it is seen that the %K line is the faster line, and the %D line is the slower one. A trader needs to look out for %D line and price both moving to either overbought territory, or the oversold territory. One can sell the commodity when it moves above 80, and then crosses over to begin moving down again and buy when it reaches 20 and begins to move up again. The slow or full stochastic oscillators are smoother, as compared to the fast stochastic. However, it is important to remember that just because the oscillator shows that it is above 80 does not mean that it is overbought. It may well continue to trend upwards a long time after that.

Divergences

Sometimes, something unusual happens. There is sometimes a divergence between the prices and the stochastic oscillator. When prices are moving up the oscillator is showing that it is oversold, and vice versa. This tells us that the current trend is losing steam. So, if the commodity moves up, but the %D is going down, this would be a bearish sign. However, it must be noted that the signal is not considered a divergence till %K line moves across the %D line in a direction opposite to the price. One has to be careful with the stochastic oscillator as there are a lot of whipsaw possibilities. Divergence trades are best taken when the oscillator moves below 80 once, moves back up again, and gives a double top formation to move down again below 80.

It is not advised to use this oscillator by itself for commodity and commodity options trading. It is always better to get verification from as many different indicators, but this indicator will give you a very good idea about the trend momentum of a commodity.