Futures Education

It's a Function of Trend

If you could predict the direction of prices with perfect accuracy, you would obviously have no trouble making a fortune in the futures markets. Assuming that you can't, however, an alternative would be to learn the forecasting techniques used by successful traders.
There are two primary techniques used by traders use to forecast future price trends: Fundamental Analysis and Technical Analysis. Both types of analysis are interested in establishing the direction of price movement over time or the trend. We will explore both types of analysis and explain their importance in establishing a position (long or short) in your futures trading.

Fundamental Analysis

Fundamental analysis is based on market economics, or factors that affect the supply and demand of the underlying commodity. Fundamental analysis applies to all futures markets including commodities, financials, and equities.

Supply & Demand

Most significant price move in the history of futures trading has been the result of fundamental factors. At the most basic level, the fundamental analyst tries to estimate how much of the commodity will be available and how much demand there will be for it. In other words, the fundamental analyst tries to measure supply and demand.
The basic rules for understanding supply and demand are simple. When supply, or the availability of the commodity is high, and the demand for the commodity is low, prices trend lower. When the supply is low and the demand is high, then prices will trend higher.
It is much easier to quantify supply than it is demand. Supply is a function of crop rates per acre, or amount of dirt that is processed in a mine, or the number of crates of oranges sitting in a warehouse.
We assume that demand doesn't change as quickly as supply. Assuming there are no innovations in the use of the underlying commodity, we assume that the demand curve is fairly consistent month over month, year over year. In other words the demand for orange juice won't change much between 2008 and 2009 unless there is a revolutionary innovation like a car engine that runs on orange juice.
By focusing on one side of the supply and demand equation, it is easier to understand the level or degree by which price will change. By holding demand constant you can construct a model that can reasonably forecast prices. Consider the following chart showing the current supply and demand for orange juice. By holding the demand curve constant you can see where price should go given any changes in supply.
The supply of a commodity is determined by three basic factors: current production levels, the number of imports, and any supply inventory currently available. Supply levels change based on consumption, which is the sum of domestic use and exports.
The fundamental analyst who is considering the supply side of the equation would consider all factors affecting production, imports and current inventory. For example, in the agriculture industry, plant intentions, yield per acre, probability of crop disease, price of competing commodities, distribution of government loans and grants, and the current supply on hand would all be factors to consider. These same data would also be considered for foreign growing areas to evaluate the potential U.S. imports or exports.

Government Reports

The primary source of fundamental data is the government. Days on which key reports are released can present real trading opportunities due to the resulting dramatic swings in price. If these official reports are in line with the market's expectations, the impact on market prices will be minimal. When actual figures vary from expectations, market prices can respond dramatically.
To take advantage of these opportunities, you must understand the meaning and potential impact of the report, as well as the market's prior expectations. Some brokers pride themselves on their ability to assist you in assessing this information. Some exchanges provide intraday market commentary, which usually includes information from the reports and the impact on the markets.
It's also important to keep in mind that price volatility is usually higher on release dates. Even if you don't intend to trade based on a given number, you may find the value of any open positions changing significantly on these days. Of course, this could work to your benefit or your detriment. In any event, it's important to understand the impact of the major reports and other critical events, regardless of whether or not you intend to trade on fundamental information.
Like any trading method, fundamental analysis has its limitations. Key statistics can be reported inaccurately, resulting in your subjective interpretation of the information being incorrect. New data is always filtering through the markets and creating price changes. Opportunities can come and go before you even have a chance to react. And while one piece of information may point clearly in one price direction, other factors can combine to drive prices the other way.
Although forecasting futures prices is clearly tricky business, all traders face the same set of challenges. It's probably best to concentrate at first on only one or two related futures markets. Since so many factors can influence prices, limiting your efforts in this way will make fundamental analysis a much more manageable task.

Technical Analysis

Technical analysis is another technique. There are two primary differences between using technical analysis and fundamental analysis to measure price trends. First, fundamental analysis is characterized by a great deal of subjective information, and second, it is used to forecast price movement over a longer time period. Technical analysis deals with only three pieces of information: price, volume and open interest and can be used to forecast prices over the short or long term.
Some traders use technical analysis exclusively to make trading decisions, while others use some combination of fundamental and technical analysis to determine if they want to be long or short and to time their trades.
The technical analyst works on the primary assumption that all available information is already reflected in the price. In simple terms, this means that if there is any information released to the public, traders will assimilate this new information immediately and take action to adjust their positions. They use the resulting changes in price to understand what is likely to happen in the future. To understand this principle, think of how a driver uses the reaction of other drivers to interpret what is coming up on the road. If the driver ahead of you quickly swerves, you immediately interpret this to mean that there is an obstacle coming up and you prepare to swerve yourself.
Unlike the fundamental analyst, the market technician is not concerned with understanding the underlying fundamental news surrounding why the market moved. Rather, the technical analyst, or technician, attempts to predict future price direction by looking at previous patterns of price behavior. For instance, if selling continually occurred at a certain price, the technician would conclude that price point represented "resistance" where sellers would likely emerge in the future to drive prices down. The technician would then sell at that point on the assumptions that prices would drop.
Whereas reports and opinions are tools for the fundamental analyst, the technician uses charts, tables and graphs as his tools of choice. Technicians are able to organize and analyze market data to generate an opinion on the direction of price trends. Traders use charts to identify price trends, special patterns or formations, and areas of support and resistance. Price support occurs where there is sufficient buying of the futures contract to halt a price decline. Resistance, on the other hand, refers to a ceiling where selling pressure can be expected to stop a rally. When the market trades sideways for an extended period of time, it is said to be in a consolidation phase.
Technicians have developed a well-documented study of technical analysis all of which is intended to interpret two things: which direction prices are trending and where the price trend will end (where the market will find support or resistance.)

Price Trends

Trends constitute the most basic and oft repeated pattern in technical analysis. There is little wonder why the age old adage "trade with the trend" still holds its claim on sound investment advice.
In simple terms, analyzing the trend means identifying where the price is currently heading. Futures move in cycles - over different periods of time, the commodity prices could be surging upward, plunging lower, or drifting in a sideways direction giving you the three descriptions of a trend: up, down or sideways.
The simplest, least complicated way to analyze trend is to draw a line starting at a point on the left side of the chart to a point on the right side of the chart (as shown in the chart above.) If the resulting line is angled up, prices are described as trending higher. If the resulting line is angled down, prices are described to be trending lower. If the line is neither up nor down the trend is sideways.
A second, more effective, method of drawing trendlines is to connect market lows or highs - kind of like the dot-to-dot puzzles you played when you were a kid. The markets are always fluctuating between extreme highs and extreme lows. By connecting the extreme conditions you filter out the day-to-day "noise" that distorts a trend. If the last low point is higher than the previous low point, then prices are trending higher (see chart).
If the low points are getting consecutively lower over time, the trend is down (see chart below).

Support and Resistance

Support and resistance are price levels at which movement should stop and reverse direction. Think of support and resistance as levels that act as a floor or a ceiling to the price trend. Positive price trends begin at support levels and end at resistance levels. Negative price trends begin at resistance levels and end at support levels.
Support levels are found below the current market price, where buying interest should be able to overcome selling pressure and thus keep the price from going any lower.
Resistance levels are found above the current market price, where selling pressure should be strong enough to overcome buying pressure and thus keep the price from going any higher.
One of two things can happen when a futures contract price approaches a support or resistance level, it can act as a reversal point as in the example below. The futures price drops to a support level reverses and goes back up.
Or, support and resistance levels can reverse roles once they are broken. For example, when the market price rallies up and breaks a resistance level, the former resistance level then becomes a support level when the market later trades back down to that level as in the following chart.
Technicians use two primary reference tools to help them interpret price trends and support and resistance: indicators and price patterns.

Indicators

Traders have used technical indicators since the birth of technical analysis. An indicator is a mathematical calculation that uses a commodity's price data to forecast future prices. Most indicators are used to help determine price trends or points where the trend will reverse, forming support or resistance levels. Common technical analysis indicators in the futures market include the moving average, MACD, and the RSI.

Moving Average

Simply looking for the commodity's overall direction on a chart will give you an idea of its current trend. However, it is a bit subjective and leaves plenty of room for interpretation and faulty analysis. A better, more accepted, way to determine price trend is to use a moving average.
In its simplest form, a moving average is an average of prices calculated over a given period of time. For example, a 10-day moving average takes the last 10 closing prices, adds them up, and divides by 10. On the next day, the oldest price is dropped and the newest price is added. The sum of the "new" set of data is then divided by 10 to obtain a new value. This process is repeated every time new data is introduced to the price chart. The resulting values are either higher, lower or the same as the previous values resulting in an increase, decrease or sideways trend in prices over time. See chart above.
Like the second method of using trendlines, moving averages are said to take the "noise" out of the price movement. This is due in large part to the smoothing effect of a moving average. If an upward trending market suddenly has one day of lower prices, a moving average would factor that day's price in with several other days thus lessening the impact of one trading day on the moving average.
To help identify entry and exit points, moving averages are frequently superimposed onto bar charts. When the market closes above the moving average, a buy signal may be generated. As well, a sell signal may result when the market moves below the moving average. Some traders prefer to see the moving average line actually change direction before declaring a buy or sell signal.
The sensitivity of the moving average line relates directly to the length of time chosen for the average. For instance, a 5-day moving average will be more sensitive and will potentially prompt more buy and sell signals than a 20-day moving average. If the average is too sensitive, you may find yourself jumping in and out of the market too often paying excessive transaction costs. If the moving average is not sensitive enough, you may miss opportunities by identifying buy and sell signals too late.
Moving averages are the basis of many popular trading strategies and tactics. Whether you use moving averages as the basis of your buy or sell signals or whether you simply use them to form a general bias of direction, you will find moving averages a useful companion in your trading.

MACD: Moving Average Convergence and Divergence

Building on the concept that moving averages of different durations provide different levels of sensitivity, traders began using multiple moving averages to quantify a commodity's direction and momentum. The most commonly used indicator using multiple moving averages is the MACD, which stands for Moving Average Convergence and Divergence.
The MACD is a useful indication of a commodity's momentum. Momentum is the result of a daily struggle between buyers and sellers to control a commodity's price direction. Momentum not only measures trend direction but strength as well. When buyers far "outweigh" sellers, then prices will shoot up dramatically. When buyers marginally outweigh sellers, then prices will go up, but slowly. Being able to gauge the general momentum of the market can give you a leg up on validating the likely strength or weakness behind a commodity's trend. Look at the following chart:

The MACD is constructed using two moving averages, which are technically referred to as the "fast line" and the "slow line". These moving averages (MA) can carry different time periods depending on the trader's preference; the most common periods used are 8 and 17 days, or 12 and 26 days, respectively.
Technicians compare the relative direction of both moving average lines to help determine momentum. If the "fast MA" or the moving average with the shorter period, is moving higher with the "slow MA," or the moving average with the longer period, then momentum is strong bullish. Similarly, when the fast MA and the slow MA are moving lower, the market is considered strong bearish. Both MA's heading in the same direction is considered strong momentum.
What if you observe the moving averages moving in different directions? This is your first indication that the momentum of the price trend is weak and the trend is in danger of ending.
A significant interpretation of the MACD is the point where the two moving average lines cross. The crossovers represent major shifts in the commodity's direction and trend. One of the reasons MACD is so useful is because it is relatively straightforward in its interpretation.

• When the fast line crosses above the slow line, momentum has begun to shift in a bullish direction.
• When the fast line crosses below the slow line, momentum has begun to shirt in a bearish direction.

Let's see how the MACD's movement corresponds to a commodity's price chart. Look at the following chart:

The commodity experienced a significant downturn from March through the beginning of August. At the same time, the MACD's concurrent downward trend should have been a clear indicator that selling was the order of the period, and that buying in this environment was a dangerous move. This helps careful investors avoid the common trap of thinking the commodity is a bargain just because it has dropped in price. Remember, price tends to follow its trend, so when price is in a downward trend is likely to continue in that direction - we don't know how long that trend could last.
From mid-August through late October, the commodity made a significant move to the upside. At the same time, the MACD also made a clear move from below its zero line to well above it - providing a strong validation of a trader's opinion that buying the commodity at that time was a good decision.

Stochastic

Stochastic is another technical indicator that is designed to give traders insight to the type and level of sentiment in a commodity. Momentum, as we discussed earlier, can also be equated to sentiment: as the battle between buyers and sellers rages, who is more anxious or eager to win? When buyers are more bullish (or optimistic) than sellers are bearish (or pessimistic), commodities will go up, while increasing pessimism in the face of decreasing optimism leads commodities to drop. In this context, Stochastic is designed to measure how investors in general feel about a commodity. Look at the chart below:

In similar fashion to the MACD, Stochastic uses two moving averages, defined as the "Fast Line" and the "Slow Line". Rather than using the zero line for reference, however, Stochastic uses the upper and lower bands to identify points at which a commodity's trend may be likely to reverse.
As a sentiment indicator, these extremes are referred to by investors as "overbought" or "oversold" areas. Generally speaking, when stochastic moves above the 80 line, the commodity in question is considered overbought; this simply means that buying pressure has pushed the commodity up to the point that buying demand may begin to slow. When stochastic moves below the 20 line, the commodity has dropped into oversold territory, suggesting that anybody that wants to be out of the commodity by now probably is.
Traders often also use a cross above the 20 line as a buying signal, and a cross below the 80 line as a selling signal. This often gives traders the ability to wait until the commodity has actually reversed and confirmed its new direction before taking a trade. The following chart gives us a good look at the correlation between a commodity's movement and stochastic signals.

In Example 1, the commodity has reached the top of its trend; the stochastic cross below 80 would provide a good opportunity for investors who owned the commodity at this time to take their profit before the commodity began a steeper, more dramatic drop in Example 2. Example 4 is significant not only for the fact that the commodity crossed all three of its major moving averages to begin a new trend, but also for the cross above the stochastic 20 line, providing another piece of confirmation and greater confidence in the upward trend. Example 6 isn't as dramatic, but the stochastic cross above 20 also corresponds to a good bounce off of the $26 level and a strong move to the upside.
Stochastic crosses around the 80 and 20 line, when compared against a commodity's existing trends, can give you important confirmation of a likely trend reversal. Be careful, however, to make sure that your analysis of the trend gives you the opinion the trend is about to change before checking stochastic. Also, remember that just because stochastic has dropped below 20 or risen above 80 doesn't automatically mean a reversal is imminent. Commodities can maintain upward and downward trends for extended periods of time; in such cases you will often see stochastics oscillate and hover around these lines throughout the duration of the trend. Remember to wait until you see the price of the commodity begin to move in the direction you want with confirmation from the commodity's trend and technical indicators before you try to enter a trade.
Examples 3 and 5 are significant because they don't fit into the traditional stochastic interpretation we have just discussed, but are good examples of how stochastic movement can provide information not only about new trends, but also the strength of existing trends. Notice that in both examples, stochastic never reaches either extreme, instead reversing direction in the middle of its band. In Example 3, stochastic rises to about the 50 line before reversing and moving back towards the 20 line three different times; these mid-band reversals correspond to repeated price bounces lower along the commodity's 20-day moving average, or short-term trend. Example 5 is similar but in the opposite direction: stochastic crosses below the 80 line and heads downward only to reverse and move up between the 80 and 20 line on three separate occasions. These stochastic reversals also correspond to price bounces to the high side of the commodity's upward trend. These can give good indications of opportunities to enter trades in commodities that have already developed a clear trend.

Price Patterns

Do you believe that history repeats itself? If so, you will love using price patterns to help analyze futures. In technical language, a price pattern is a unique formation created by the movement of prices over time. Price patterns are identified using lines that connect common price points (closing prices, highs, lows) over a period of time. Technicians assert that by identifying a price pattern, they are able to forecast the direction and magnitude of the next trend.

There are entire volumes of textbooks written on common price patterns found in the futures market. Here are just a few examples:

Double Top & Bottom

A double bottom occurs when a price drops to a similar price level twice within a certain time period produc ing a pattern that resembles a "W." This is a bullish pattern, and you should buy when the right leg of the "W' passes the middle of the "W" (see chart). In a perfect double bottom, the second decline should normally go slightly lower than the first decline to create a shakeout of jittery traders.
Double bottoms are similar to double tops only instead of forming a pattern that looks like a "W" it forms a pattern that looks like an "M." The double bottom formation is a bearish formation indicating a good time to initiate a short position or to get out of long positions.

Head and Shoulders Top

In this price pattern, the futures price rises to a peak and then declines, then rises above the former peak and again declines, and then rises again, but not to the height of the second peak and again declines a third time. The first and third peaks are shoulders, and the second peak forms the head. This pattern is considered a very bearish indicator.

Cup and Handle

In this pattern price forms a u-shaped cup over a period of time. As price drifts higher on the right side of the u-shaped cup it reaches a resistance level that matches the left brim of the cup. The price starts seeing some selling pressure that forms the down leg of the handle, only to reverse quickly breaking out above the brim completing the handle. This is a bullish price pattern and is used to initiate long futures positions.

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Futures Education

How do I trade futures?

As a futures trader, your trades must be executed through a registered broker like optionsXpress. optionsXpress is a Futures Commission Merchant, or FCM. FCMs are registered with the National Futures Association (NFA) to transact business in the futures markets on behalf of clients like you. When you instruct your broker to make a trade on your behalf, or when you execute a trade through the computer, the FCM is responsible for routing that trade to the appropriate trading exchange, electronic or pit.

Types of Orders

At the most basic level, you can place an order to buy a futures contract (go long) or sell (go short). However, there are many different ways to accomplish your goal of buying or selling through different order types. The most common order types, and the ones you will cover in this course, include: a market order, a limit order, and a stop order. Your decision about which order type to use will depend on your objectives and market conditions.
If you have traded equities or options, you will find there is little difference between the order types in equities versus the order types in futures. Perhaps in more complex orders you will begin to notice differences, but at the introductory level, it is very similar.
Although your broker may offer several different order types, the following are the most common:

Market Order

The most common type of order is the market order. When you enter a market order, you simply state the number of contracts you want to buy or sell in a given delivery month. You do not need to specify price, since your objective is to have the order executed as soon as possible at a price that reflects the next available current bid or offer.
When your market order reaches the trading floor (or the electronic matching engine in the case of computer-based trading) it is executed at the best possible bid/ask price at that moment.

Limit Order

A limit order specifies a price limit at which the order must be executed. In other words, you are telling the market to fill my order at this price or better. The advantage of a limit order is that you know the worst price (limit price) you'll get if the order is executed, and there is a possibility that the price may be better than your limit. The disadvantage is that your order might not get filled if the market doesn't reach that price level or if the trading activity at that price level is limited.

Stop Order

Otherwise referred to as stops, stop orders are not executed until the market reaches a given price, at which time the stop order becomes a market order. Some stop orders are referred to as stop-loss orders, which most often are used as a measure for protecting gains or limiting losses. Many times a trader will put a stop order in at a predetermined level so that if the market moves against the trader's position it will automatically liquidate the position and, to some extent, limit further losses. to some extent
Stop orders can also be used to enter the market. Suppose you expect a bull market only if the price passes through a specified level. In this case, you could enter a buy-stop order to be executed if the market reaches this point. For instance, let's say the mini-sized Dow future was trading at 10,500. You could place a buy stop order at 10,540, and when the market reached that level your order would become a market order to sell.
In addition to the type of order, it is also important to determine the duration of an order. Most orders are day orders and work only during that trading session, expiring at the end of the day. On the other hand, open orders, or good 'til canceled (GTC) orders, work until the contract expires or the customer cancels the order. Fill or kill orders are placed and then immediately canceled if they do not fill. Market on close orders place a market order at the close of the trading day.

Position and Price Limits

In order to maintain orderly markets, futures exchanges typically set both position and price limits. A position limit is the maximum number of contracts that may be held by a single market participant. For most new futures traders, position limits don't play too big a factor in your daily decisions. For example, the position limit for NYMEX gold is 3,000 contracts - it would require a large sum of money to meet the initial and maintenance margin for 3,000 contracts, not to mention the risk exposure you would have with that type of position.

Price limits, also called daily trading limits, define the maximum price range a commodity can trade in one day. Established to keep the futures market from falling or rising too quickly, the daily trading limits keep the markets in an acceptable daily trading range. For example, the CME sets the daily limit of the S&P 500 futures at 5% - meaning if there was ever a price rally or crash that was greater than 5%, the CME would close trading for a specific period of time.
The daily price limits and position limits for futures contracts appear in their individual contract specifications. Position and price limits are changing constantly to reflect current market conditions, so make sure you are aware of any changes that may happen in the futures you are trading.

Your Goal in Futures Trading

Your ultimate success in futures trading will hinge largely on your ability to develop good trading habits. Numerous expressions of market wisdom attempt to give guidance. The age old adage "buy low and sell high" may seem a bit vague, but is ultimately your guiding principle when it comes to understanding your goal in futures trading. This may sound obvious, but since it's the only way to earn trading profits, it bears repeating.
Also don't forget that in the futures markets you can easily do the reverse—sell high and buy low. Bulls start their trades with a long (buy) position and bears are initially short (sellers).
For example, if you expected a rally in July wheat futures, you might enter the market with a long (buy) position at $3.50 per bushel. Over the next two weeks, suppose July wheat futures moved up to $3.60. If you offset (closed out) your position at this price by selling July wheat futures, you would realize a gain of $500 (10 cents x 5,000 bushels) per contract.
On the other hand, you might be bearish on T-Note futures. Let's assume you shorted (sold) the December T-Note futures at 102-00. If prices then moved down to 101-00, you could offset (buy back) your December T-Note futures position and make $1,000 (one full point on a $100,000 face value bond) per contract traded.
Boiled down, when you buy low and sell high you are ultimately trying to catch the trend of the market. Trend, or a propensity for prices to move in a general direction, is one of the most fundamental concepts in futures trading. Literally speaking, without the trending nature of the futures market, or any market for that matter, trading would be no different than gambling. The trending characteristic of the market provides you an opportunity to make money, and is the single greatest factor in skewing the odds of success in your favor.

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Buy Call And Buy Put

Consolidate Graphics (CGX)

it's time to buy a good call it ITM or OTM both interesting uptren is happening is a step in the right to buy call for CGX has three times through the peak (Resistance) with the probability that prices will strengthen in the next few days, where prices have a big opportunity to rise.

3M Company(MMM) 
 This is the time to buy put options to stock company 3M (MMM), because the price was valid, and through support (Trough) which occurred on 4 February 2010 and the next day continued price declines, Trough (Support) at the level of $ 79.11 , Then the chance that prices will fall.

Disclaimer! all that concerned with whether the decision to buy or sell is the responsibility of every investor or trader which is an analysis of learning alone. 

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Same Pattern Descanding BNBR

Ascending pattern had formed in mid-May until late July and early August 2009 succeeded in penetrating the price of resistance (Bullish Break) and managed to reach the target price in late August and early September 2009, in Friday trading yesterday February 5, 2010 at the right price support (Trough). If we look at the graph above clearly Ascending patterns are formed again.

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Futures Education

Initial Margin

Initial margin is the amount of money that is needed in your account to purchase (go long) or sell (go short) a futures contract. The concept of initial margin shouldn't be too difficult to understand since it is very common concept in the real estate industry. If you want to buy a home, you put a deposit down with your contract to purchase or to secure the rights to the home. It is the same concept in futures - you put money down to secure the rights to the underlying commodity.
Referring back to gold contracts, remember we calculated the value of a gold contract at roughly $78,000 dollars. Futures would not be so attractive to investors if you had to come up with $78,000 to buy a piece of paper that says you own 100 troy ounces of gold. Both the exchange and your broker set the minimum initial margin that is required to buy futures. Below is a list of the margin requirements set by the NYMEX for gold.

You will notice that the minimum initial margin for non-members (speculators who have not purchased a membership on the exchange) is $7,425.
Generally, futures margins are much less than the 50% minimum required purchase stock on margin. The performance bond (margin) requirements for most futures contracts range between 2% to 15% of the value of the contract, with most in the 5% area. Margin for single-stock futures is set at 20% of the contract value. These initial margin requirements help provide the power of leverage to commodity trading.
If gold is valued at $78,000 and the minimum margin is set at $7,425, you are putting up roughly 9.5% as a deposit. In other words, for less than a 10% down payment you can control $78,000 worth of gold. This is really not much different than putting a 10% down payment on a house and controlling $200,000 worth of home - only the futures prices go up and down much faster than home prices!

Maintenance Margin

Maintenance margin is the minimum balance that must be maintained in a trading account to keep futures contracts.

Maintenance margin requirements are usually smaller than initial margin requirements. Maintenance margin really doesn't come into play unless your account drops due to losses. If the value of your account balance falls below maintenance level then you are required to get the account back into compliance. This is called a margin call - and it is definitely something you want to avoid! You can satisfy a margin call by sending more money to your brokerage account until your account balance meets the maintenance margin requirements. Or you may reduce your position in the commodity, which will decrease the amount of money needed to satisfy the maintenance margin.

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Analysis Share Bakrie & Brothers(BNBR)

Analysis Shares Bakrie & Brothers(BNBR)

  Shares of Bakrie and Brothers in the graphic image is clearly visible in addition to an increase where there are three indicators that provide supporting a strong signal to buy the first indicators of change parabolicsar've seen a trend from bearish to bullish candlestick which has successfully touched, the second indicator is the MACD line color blue line that was cut from the bottom in red is an accurate signal to buy, and the third indicator stochastic indicator is valid also the intersection where the blue line to cut the red line from the bottom has occurred, and also had passed the line is 20 percent accurate buy signal. Meanwhile, Peak or resistance is penetrated at the level of 87, if we look at the graph there are two resistance will try to penetrate the resistance 100 and 110, for we are a better trader trading for short term only.Limits for the price we buy Rp90, - to Rp 93, - minimum profit if we loose Rp100 shares at prices of 7.5% and the maximum was 11.11% not bad!, But if we are able to take off in 110 profit the minimum maximum 18.2% and 22.22%, I hope his goals achieved.
Disclaimer! making an investment decision to either buy or sell is the responsibility of each individual, traders and investors, which this analysis is simply learning.
                                                   

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Futures Education

Ticks, Multipliers, and Contract Value

Since futures cover a vast array of underlying products, each contract is structured differently. The structure of a futures contract is commonly referred to as the contract specifications and you will want to become familiar with these details before you trade. Besides defining the quantity and quality of what you are trading, the contract specifications will help you understand the value of the contract by providing the minimum price fluctuation and the contract multiplier.
Information on contract specification is not too difficult to find. On the website of the exchange where a futures contract trades, you will find a link to a list of the exchange-listed products. From the list, select the futures contract you wish to learn about and select "contract specifications." Here, you will find all the details you need to understand the contract value and tick size.
Here is a copy of the contract specifications for the S&P 500 futures traded on the Chicago Mercantile Exchange:
The first thing you notice is the trade unit. This refers to the quantity of the underlying product that is being traded. In the example of the S&P 500 traded on the CME, you are actually trading $250 times the underlying S&P 500 index. As of this writing, the S&P 500 index is 970, which means every contract of the S&P 500 index controls $242,500 of the underlying stock in the S&P 500 index (970 * $250.)
The trade unit for gold is more straightforward. Here is a snapshot of the contract specifications for gold from the New York Mercantile Exchange. You will notice that gold trades for 100 troy ounces - no need to do any math here!
The next thing you need to understand is how futures are quoted. Referring back to the gold specification, you will notice that gold is quoted in "U.S. dollars and cents per troy ounce." In other words, when you look at a quote for gold, it would look like this: $780.20. The total contract value is calculated by taking the contract quantity (100 troy ounces) times the quote, ($780.20) which for gold would be $78,020. When you buy a gold futures contract, you actually control $78,020 worth of gold. Obviously, with futures and leverage, you don't have to actually have $78,000 in your account. You will learn about margin here in a bit.
Now that you have a grasp on how the contract is quoted, you need to understand the minimum price fluctuations, otherwise known as a tick size. The term tick size, or simply tick, dates back to the days of the old ticker tape machines, which were the original means of conveying price information from the trading floor. Traders use the word tick to express the contract's smallest price movement or quote from the ticker tape machine.
You should remember that the tick is different for every commodity. For example, a tick in gold is $0.1, or ten cents. The contract size of gold is 100 troy ounces. To calculate the value of a tick, you would multiply 100 x $0.10 = $10. So, every time you see the price of gold move up or down $0.10, you know that means it's a $10 gain or loss. A $1 move in the price of gold would represent $100 per contract.
Another term you will likely hear in the futures language is the word multiplier, which is just another word for tick value. You can quickly determine the value of a day's price movement by multiplying the movement in ticks by the multiplier. For example, suppose the multiplier on the mini-sized Dow future is $5. If the Dow future moved up 10 ticks in one day, one long contract would have gained $50 in value (10 index ticks x $5 multiplier = $50).
Margin requirements typically are a percentage of the contract value, so that is why initial and maintenance margin requirements can change frequently.

Margin

The word "margin" means something different in futures than it does in stocks. In stocks it means that you're borrowing money and paying interest to hold a position. In futures, margin is the amount of money you have to put up to control a futures contract.
Futures margin rates are set by the futures exchanges, though some brokerages will add an extra premium to the exchange minimum rate in order to lower their risk exposure. Margin is set based on risk. The more a contract moves in price, the more you will expect to "put up" to meet the margin requirements.
The margin required for a futures contract is better described as a performance bond or good faith deposit. The levels are set by the exchanges based on volatility (market conditions) and can change at any time.
Once your position is established, you are required to keep a "maintenance margin" amount in your account for each contract you hold or risk having your position liquidated.
There are three basic types of margin requirements in futures: Initial Margin, Maintenance Margin and Overnight Margin.

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Futures Education

The Contract

Futures are simply contracts, or obligations, to buy or sell an underlying product, or commodity, at some point in the future at a price agreed upon today. As time passes, the value of a futures contract increases or decreases relative to the cash price of the underlying commodity.

The early days of the futures industry were quite inefficient and chaotic. The problem was the lack of structure to the forward contracts that were bought and sold. If it were that way today, you would find lawyers and appraisers sitting along the sides of the exchange. The lawyers would carefully review every contract to determine what was being bought or sold, how much, and when delivery was to take place. In general, the attorney would make sure the contract was legitimate. After getting through the attorneys, the contract would then have to go to an appraiser to put a value to the contract. The appraiser would have a list of all the contracts that had been bought or sold in the past, and would find a similar one to provide an appraisal of the contract. Then you could take the contract and try to find a buyer or seller, who would take the opposite side.

Fortunately, those days are in the past and we have a wonderful system of standardization that makes futures trading much simpler! Standardization is to futures as traffic laws are to roads, providing structure and rules so we can quickly and efficiently navigate the industry. Standardization makes futures contracts easy to trade. Trading futures is like exchanging apples for apples. They are standardized as to terms of the contract such as the quantity and grade of commodity that is acceptable and when and where it can be delivered.

Let's go through some general points of a futures contract.

Obligation to Buy or Sell

Similar to stock options, there are two parties associated with each contract: the buyer and the seller. Unlike stock options, however, where the seller has an obligation and the buyer does NOT, futures contracts obligate both the buyer and the seller. The seller has an obligation to deliver a specific amount of product at a set time in the future. The buyer has an obligation to take delivery and pay for the product. The key word is "obligation."

Nobody likes the word obligation, and chances are you have now toned down your enthusiasm. However, these obligations kick in only when you don't close out, or offset, your position before expiration. Long before the truckloads of pork bellies are delivered to your doorstep, speculators, like you and I, will offset the position. This simply means that if you bought one contract of pork bellies, you "offset" your position by selling one contract of pork bellies. In math terms it looks like this: +1 -1 = 0. No delivery - as long as you do it before expiration!

At this point everyone asks, "What happens if I forget and don't offset before expiration, will I get a truckload of pork bellies?" The answer is always no! First of all, no one is going to deliver commodities without a whole lot of paperwork and mutual consent. Second, your broker has systems in place to avoid such predicaments. Your broker will simply "roll" you over into the next expiration - this is done by selling your expiring contract and buying a new longer-term contract. Or, your broker may just offset your position, leaving you flat. This is one of those "fine print" points you will want to follow up on with your broker. Less than 2% of all futures contracts are actually delivered - and 99% of those are for commercial use!

The Underlying Product or Commodity

The word commodity is defined very broadly to include underlying products such as physical commodities, financial instruments, foreign currencies or stock indexes. As mentioned before, commodities are standardized in two ways: the quantity and grade or quality.

Every futures contract specifies a certain quantity of the commodity. For example, one CME Euro FX contract represents 125,000 Euro. CBOT Soybean contracts are for 5,000 bushels of soybeans. The COMEX gold contract represents 100 troy ounces. This type of standardization makes it possible for buyers and sellers to know exactly how much of a commodity they are trading.

Another aspect of commodity futures contracts that is standardized is the quality of the underlying commodity. For example, silver contracts represent 5,000 troy ounces of 99.99% pure silver in ingot form. Crude Oil traded on the New York Mercantile is 1,000 barrels of light sweet crude (a specific grade of U.S. oil). There is also a Brent sweet crude contract which is an entirely different grade of oil.

Whether it's a silver or currency futures contract, you know exactly how much and what grade of commodity you are trading.

Price

Price is the only variable when it comes to futures contracts. When you buy a futures contract, you agree to buy the underlying commodity at a price traded today for future delivery. By putting money down on the contract, you lock in the price.

This will be better understood with an example.

Suppose you own a small regional airplane business. You are afraid that oil prices will skyrocket in the near future. You are currently paying $2.00 a gallon for gas, a by-product of crude oil, and it would sure be nice to lock in that price for the next six months.

You can - sort of. You go to the futures market and buy a crude oil futures contract that expires in six months. The price you pay for the crude oil futures contract will be at or very near today's crude oil price of $60 a barrel.

Over time it turns out you were correct in your speculation of oil prices. In three months, oil has increased to over $70 a barrel. The price you are paying at the pump to fill your plane has increased from $2 to $2.50, so you are losing money every time you fill the airplane. However, the value of your futures contract has increased and now you can sell it for $70 a barrel - making over $10 on 1,000 barrels of oil! With the profits made in the oil futures, you more than covered the increase in the price of gasoline.

There is often confusion when it comes to the differences between futures and equity options. Both are contractual agreements between a buyer and seller. Both define the quantity of the underlying product. The difference comes in how they specify price. Option contracts lock in a future price for delivery; in other words, you determine what price you want to pay in the future and pay a premium today for the right to buy the product in the future at the strike (pre-determined) price. Futures are different. Futures lock in today's price for future delivery.

Let's go back to our example of the airline company.

There is a difference between how options and futures traders would structure the same objective. The options trader would say, "I want to buy crude oil in the future at $58 a barrel." The options trader would choose an option that expires in 6 months with a $58 strike price, and pay a premium of $4 for the contract. If the price of crude oil goes up to $70, the option would be worth $12 minus the original premium of $4. In other words, the option would be worth $8 a barrel.

One big difference between options and futures, however, is how the contracts are valued at expiration. If, at expiration, the option is at or out of the money, there is no value left in the option. If a futures contract is lower than your original price, however, there is still value in the contract.

Back to the airline example:

What happens if crude oil dropped to $57 a barrel? The options trader's position is completely worthless - the option is out of the money.

The futures contract, on the other hand, still has value - albeit a loss. If the price of the contract is $57 a barrel and the futures trader paid $60 a barrel, the futures trader is losing $3 a barrel on a 1,000-barrel futures contract.

The only similarity between a futures contract and an options contract is that they both have an expiration date. But a futures contract does not "waste away" like an options contract.

The futures markets exist for the purposes of price discovery (speculation) and the transference of risk (hedging.) They are an excellent way to express your own opinion about where the price of a commodity is heading.

Expiration

Like options, futures contracts expire at a certain date in the future. For example, a June 2009 futures contract will expire sometime during the month of June in 2009 (depending on exchange rules). As with other elements of the contract, a standardized expiration date makes it easier for investors to focus solely on price discovery.

The Underlying Commodity

The futures market is growing in popularity as a financial instrument, as well as in the number of products offered. More than just a wheat and barley market, futures now include underlying products such as interest rates, energy, currencies, equity indexes, metals and more.

Due to the incredible growth, and in an attempt to keep the industry organized, the futures industry has divided futures into three broad categories: Commodities (including Ags and Metals), Financial, and Equities. These broad classifications are broken down into subgroups in much the same way the equities market breaks industries like retail down to industry groups like apparel.

In this section we cover the three broad classifications of futures and break them down into their smaller subgroups.

Commodity Futures

The term commodity can be confusing to new futures traders. The futures market is often referred to as a commodities market. The underlying product can also be generically referred to as a commodity. For example, "commodity trading advisor" is used to define an individual or firm who operates a managed futures program, even though many of them trade exclusively in the financial futures markets such as interest rates or stock indexes.

More specifically, commodities are known as physical assets. They include natural resources, chemicals and physical products you can touch, taste, smell, grow, mine, consume or deliver. Corn, gold, crude oil and coffee are all commodities.

The most popular commodity futures can be broken down into several subgroups: metals, energy, grains, livestock, and food and fiber.

Metals As one of the most fundamental building blocks of an economy, metals are used in myriad ways to support many different industries, from construction to production and financial to retail. The major metals futures contracts include copper, gold, platinum, palladium and silver. Many factors, including supply and demand, geopolitical and economic policy, affect the price of metals. As a general rule, metals are listed primarily on the New York Mercantile Exchange and through the Globex electronic exchange.

Energy

Given the world's appetite for oil, energy futures can be an exciting place to trade. The most popular energy futures include crude oil, RBOB gasoline, heating oil and natural gas. These natural resource markets have become one of the most important gauges of world economic and political developments, and are therefore heavily influenced by disruptions in energy-producing nations. Energy futures are also traded on the New York Mercantile Exchange and Globex.

Grains

Grains and soybeans are essential to food and feed supplies. The major futures contracts in this category are corn, soybeans, soybean oil, soybean meal and wheat. Grain prices are especially sensitive to weather conditions in growing areas at key times during a crop's development, as well as economic conditions that affect demand. Reports from the U.S. Department of Agriculture are closely watched, summarizing key factors influencing supply and demand including current production and carryover supply from the prior season. Grain commodities are generally traded on the Chicago Board of Trade, Kansas City Board of Trade, and Minneapolis Grain Exchange.

Livestock

Commodity futures on live cattle, feeder cattle, lean hogs and pork bellies are another class of commodities. Their prices are affected by consumer demand, competing protein sources, price of feed, and factors that influence the number of animals born and sent to market, such as disease and weather. Livestock futures are generally traded on the Chicago Mercantile Exchange.

Food and Fiber

If you've ever watched the movie "Trading Places" you'll be familiar with this class of commodities, which includes cocoa, coffee, cotton, sugar and the ever infamous frozen concentrated orange juice. In addition to global consumer demand, the usual growing factors such as disease, insects and drought affect prices for all of these commodities. International exchange rates affect all of these global products, as well as factors like tariffs and geopolitical events in producing nations. These markets are traded at the New York Mercantile Exchange and ICE.

Financial Futures

Financial futures are futures contracts where the underlying products are financial instruments such as interest rates or equity (stock) indexes. Like all futures markets, a financial futures contract specifies an exact quantity of the underlying financial instrument at a market-determined price that can be settled via cash or physical delivery, depending on the instrument.

Financial futures were developed amid a rapidly growing trend toward globalization in the world's economic landscape starting in the early 1970s. They were designed to meet new needs and risks that businesses, governments, and individuals faced amid changing capital flows. Even though they have a shorter history than agricultural futures, they now dominate the exchange-traded product offerings. Today, the majority of activity in futures globally takes place in contracts on financial investments, and futures exchanges are continually on the lookout for new successes in this category.

Financial futures fall into two subgroups: interest rates and equity indexes.

Interest Rates

As the hub of all economic and financial performance, interest rates have become an increasingly more important factor in the U.S. financial system. Interest rate futures products encompass a range of short-term instruments, such as the Federal funds rate (an overnight inter-bank lending rate), and long-term products, such as the 30-year U.S. Treasury bond.

Equity Indexes

Recent years have brought a surge of interest in equity index futures as an alternative investment choice to exchange traded funds, and equity index options. Stock index futures contracts were introduced in the United States in 1982, nine years after listed options investing began at the Chicago Board Options Exchange, the securities offshoot of the Chicago Board of Trade. Interestingly, the CBOT had come up with the idea of futures on stocks as a way to diversify its product line, although futures on individual stocks were many more years in coming. However, shortly thereafter, the Chicago Mercantile Exchange introduced the S&P 500 index, which quickly became the market leader and continues to dominate U.S. stock index futures trading today. A number of stock index futures and options contracts are now available to futures traders, covering all areas of the market. The most popular major index futures contracts include the S&P 500 Index, the Nasdaq 100 Index, the Dow Jones Industrial Average, ISE Sector Indexes, and Volatility futures.

Single Stock Futures

Single-stock futures combine the best elements of two popular and useful financial investments–futures trading and stock investing. SSF's can be used as speculative or hedging vehicles with unique characteristics and potential benefits, and provide an alternate method for financing equity transactions.

Currency Futures

When it comes to international investing, investment managers, corporations and private investors trade currency futures, also known as foreign exchange, forex or simply FX, to manage the risks and capture potential opportunities associated with forex rate fluctuations.

When trading currency you don't actually trade one currency, but a pair based on the relationship between the two. For example, if you wanted to buy Euro, then you would sell or give up your dollars and buy Euro. You would profit if the dollar weakens and the Euro strengthens. A number of factors go into determining the "strength" or "weakness" of a currency versus another, but it usually comes down to comparing the economy of one nation to that of another. Generally, expanding economies have stronger currencies, while recessionary economies have weaker currencies.

As you can see the futures market is enormous. Don't get overwhelmed though. There are more stocks than there are futures and you seem to get by just fine. Most futures traders will specialize in one area or another. The adage "Jack of all Trades, Master of None" isn't a description of a futures trader! One key to futures success is knowing as much as possible about the underlying commodity.

Symbols

In order to understand the futures markets, it is essential to become familiar with basic terminology and operations. While trading rules and procedures at each futures exchange vary slightly, terms tend to be used consistently by all U.S. exchanges - especially when it comes how each futures contract is identified.

All futures contracts are assigned a unique one or two-letter code that identifies the contract and the underlying commodity. This abbreviation, or ticker symbol, is used by the clearing platforms to process all transactions. For instance, the symbol for the Dow future is DJ, while the symbol for the mini-sized Dow future is YM. This symbol is important when you trade electronically because if you enter the wrong symbol, you could trade the wrong contract.

In addition to the contract code, you also need to know the expiration month and year code. For instance, the month code for March is H. So if you were trading the March Dow future in 2009 the code would be DJ H9.

To find a futures symbol take 1) commodity root 2) letter for month 3) last digit for year. Here is a list of the month codes for your convenience: (globex)

F = January	K = May	U(P) = September
G = February	M(I) = June	V = October
H(C) = March	N = July	X =November
J = April	Q = August	Z(T) = December

Before you trade, be sure to contact your broker to make sure you have the right symbols, since different platforms and brokerages may vary slightly in how to enter them into their computer systems.

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Futures Education

What Are Futures?

Welcome to the futures market - and relax - it's not as complicated as you might think!
The futures market can provide opportunities that other financial markets simply cannot offer. If you were to write down the perfect investment, it would probably go something like this. I wish I could invest in:

I wish I could invest in:

• A product that would always be in high demand.
• Something that can't be ruined by a greedy CEO and Board of Directors.
• Something that would move enough to make lots of money every day.
• Something where I didn't have to put very much money down but could still make a huge return!
• Something I could buy or sell whenever I wanted - not just 9-5pm!
• Something that would always go up in value.

Yes, we have seen this wish list before, and we have some good news for you and some bad. The bad first. Unfortunately, such an investment does not exist - it's the always going up part that ruins it every time. The good news is that there is an investment that comes pretty close: futures!
The futures market provides unparalleled access to the most basic and in-demand products in the world. Among the many investment opportunities in the futures market are commodities such as gold, oil, wheat, and orange juice (these are the kinds of products that are always in demand!). It also includes currencies such as the US Dollar, British Pound, and Japanese Yen (also high demand!). It also includes financial market indexes such as the Dow Jones Industrial Average, Nasdaq Composite, and the S&P 500 (again high demand!).
When you trade the stock market, you have a lot to consider in terms of who is running a company, what the company offers, whether the product or service has longevity, how the company performs in different economic cycles, etc.
In the futures market, you deal with the world's most basic and fundamental products. Rather than worrying about who is running a particular aluminum company or whether they will be in business next year, you can just buy aluminum - with a level of comfort knowing there is always a market and use for aluminum.
Every day, banks deposit and lend money to customers. Instead of finding a bank with a strong fundamental balance sheet and solid management, why not invest in the product a bank makes its living from - currency. As you may be aware from recent world events, the values of currencies are constantly fluctuating, creating the opportunity to make money from the ever-changing value of money.
When it comes to success, mutual fund managers have one major challenge in life - to provide a better return than the market index. Some are successful, while others fail. Market indexes provide a baseline or fundamental benchmark for performance in the financial world. You could give your money to a money manager and give them a crack at outperforming the markets - or you could just invest in the over 25 different index futures! Chances are good that these indexes will still be ticking when your money manager has come and gone!
In addition to these advantages, futures have many other benefits over other financial instruments, including:

Leverage

Futures are one of the most efficient investment vehicles in existence. What do we mean? Simply stated, with futures you can make a large investment with a small amount of money. This concept is known as "leverage." Leverage can be a boon to investors on the winning side of the market, as gains can be greater with futures than with other investments (this is how you invest in something that doesn't require a lot of money but still has upside potential). However, leverage can be a double-edged sword, inflicting a lot of pain if you are on the losing side of the trade.

Diversification

With leverage, a little bit of money goes a long way. This means that excess funds in your account could be used for other purposes, including investing in other assets. Diversification is a good thing when it comes to investing since it helps to average things out! Portfolio diversification is something we will cover in detail later in the course.

Volatility

Futures are known for their considerable price movement, which is another key benefit. Like leverage, volatility can work for or against you. However, most traders want markets that move - and futures move! Just take a look at where the price of crude oil has gone over the last year, and you'll see what we mean (didn't you want an investment that moves enough to make lots of money every day?).

Trading Hours

Most futures markets today trade around the clock. It's easy to get in and out of positions in popular and liquid futures markets, and you can do so at the click of a button, with lightning-fast speed. Futures markets are investor-friendly, and that has helped drive the incredible growth these markets have experienced in recent years.

Tax Benefits

Not only do investors like futures, the IRS smiles favorably on this market as well. Futures enjoy unique tax treatment not available to the equities market. Generally, securities transactions are taxed as either short-term capital gains, or more favorably as long-term capital gains. Futures transactions, however, are simply lumped together and reported on a single Form 1099 at year-end. Profits are then taxed at the "60/40" rate - 60 percent taxed at the favorable long-term rate and 40 percent taxed at the short-term rate. We're not tax advisors, so please consult your tax specialist about your individual circumstances.

Information

In the futures market, supply and demand form the basis of price direction - not quarterly earnings, corporate filings or management changes. Instead, the data that moves futures markets often comes from government reports that are found in the public domain. For example, the U.S. Department of Agriculture estimates crop sizes and international demand for wheat, corn and soybeans. The economy also plays an important role in futures pricing, and most economic reports are also public domain and come from central banks and various government agencies.

Not a Whole New World

Unfortunately, many people have never heard of futures trading or, worse, they have heard of futures and the stories have not been pretty. Put the horror stories aside for a moment and consider this: every time you invest you assume some level of risk. Futures are no exception. You can and many people do lose money investing in futures. However, just like any risky venture, there are steps you can take to minimize your risk.
First and foremost, if you have ever traded stocks or options, you'll want to keep in mind what you have learned related to risk, portfolio management, discipline and emotional control. In fact, many of the concepts and knowledge you have gained trading stocks and options will translate nicely to futures. Concepts such as long and short, order types, margin, etc. all have similarities to futures trading.
Another similarity between equities and futures trading is the fundamental objective. When buying stocks or options, your objective is to buy when prices are low and sell when prices are high. This is the same objective in the futures market. There are some twists in "how" to buy low and sell high, but the objective is the same (the twists will be explained in greater detail in Module 3).
Futures traders are also able to build on the skills they have learned trading stocks and options. Concepts such as discipline, trading plan, psychology, etc. all play a role in your success as a futures trader.
A review of the characteristics of successful futures traders reveals three common factors that have more influence on their success than any other:

• Financial Resources
• Knowledge
• Discipline

The futures market can be risky, but people just like you are able to manage the risk and find success trading futures. How do they do it?

Financial Resources

First, they have money. More specifically, they have enough money to stay in the markets long enough to make money. Experienced traders will try to get specific and tell you that you need $10,000 to $30,000 to get started. Rather than giving a specific dollar figure, it is important to understand why futures traders need significant financial resources to be successful.
Most futures traders will experience a drawdown - a streak of losing trades that reduces the capital in one's trading account. Your account must be large enough to withstand the inevitable drawdown. Drawdowns are perfectly correlated to the amount of risk you take on each trade. If you are swinging for the fences, you'll have larger drawdowns. If you are looking for small but consistent profits, you will have smaller drawdowns.

Knowledge

The second characteristic of successful futures traders is their trading plan. Rooted in sound financial principles, your trading plan should be simple to follow, simple to understand and simple to implement. If you were to survey the country's most successful futures traders, you would discover that they all use different strategies; in other words each trader has his or her own unique trading plan. A successful trading plan helps you identify a competitive edge in the markets. You will also notice that each trading plan has its own set of flaws. A successful trader's plan should include detailed instructions to compensate for these shortfalls.
Unfortunately, this type of trading plan is not created overnight. There are ample resources available to help you get started creating a simple trading plan (optionsXpress has a repository of professional lectures, forums, and discussions with ideas that will help you). However, the success of your plan depends on refinement. It is refined with time. It is refined with experience. It is refined with knowledge. When you first delve into the futures market, your trading plan must make accommodations for the acquisition of experience and knowledge over time. Time is needed to get over the learning curve. Experience is needed to learn the intricacies of the futures market. Knowledge is needed to understand the definitions, structure and boundaries of the futures market.

Discipline

Finally, if you don't have the discipline to manage your trades according to plan, you won't last very long in the futures market. They say that pride precedes the fall and nowhere is that more true than in the futures market. Your trading plan helps you keep your trading objective. When you fail to use discipline, your trading becomes subjective without rhyme or reason. It will be difficult for you to improve your trading success if every decision you make is according to your whims, passion and emotion. Historically, people who experience large drawdowns in futures do so because of feelings, opinions and not admitting or believing they might be wrong.

Disciplined traders are aware of the following emotional pitfalls and seek to avoid them:

• Trading for the thrill of it
• Trading to make back lost money
• Lack of money management
• Lack of a defined trading plan
• Inability to admit mistakes

Your success in the futures markets has as much to do with your financial, intellectual and emotional preparation as it does with your execution. This course will help you prepare to trade futures, but you will also need to work on preparing yourself in these other ways as well.

The Investor Life Cycle

For many of the reasons we have already mentioned, over time, traders naturally gravitate to the futures market. In fact there is a growth cycle most investors go through as they develop knowledge and understanding of the financial markets.
First investors look toward mutual funds to provide growth and financial independence. For the daring few who choose to progress beyond the mutual funds, they seek the financial returns of the stock market. Traders will generally cut their teeth in this exciting financial market for 2-3 years when they naturally gravitate to the derivatives or options market. Those traders who endure the learning curve of the options market tend find a home in the futures market some 5-7 years into their trading career.
Today, however, investors are trumping the learning curve and short-circuiting the time curve to discover the wonderful opportunities that are available in the futures market much sooner - and for good reason, too.
Today's futures markets have grown beyond the traditional commodities market of yesterday. Today, grains, gold and oil have yielded ground to a broader range of instruments including stocks, indexes, currencies and even carbon emissions futures! Today's futures markets have grown beyond the boundaries of American borders to include a global financial market; futures trading in England, Germany, Japan and Australia has exploded as new global trading networks have evolved.
But what does this mean for you? Traditionally, the futures market was for that elite class of traders with RISK tattooed across the bicep. To set your stress at ease, today's futures trading has made huge strides away from that stigma. Today, new products are being released with variable definitions, sizes, multipliers, etc. You can purchase "mini" futures that reduce your exposure to risk and make investing more palatable.

Who's in charge of the Futures Market?

Like the stock market, the futures market is a highly regulated industry offering excellent protection to individual investors like yourself. Companies or individuals who handle futures money or give futures trading advice must apply for registration through the National Futures Association, a self-regulatory organization approved by the U.S. Commodity Futures Trading Commission, or CFTC.
In 1974, Congress created the CFTC as an independent pseudo-governmental agency with the mandate to regulate commodity futures and options markets in the United States.
When the CFTC was created, the majority of futures trading took place in the agricultural sector, which is why this industry is often referred to as the "commodities" industry. Today, the futures industry has become increasingly varied to encompass a vast array of highly diverse specialties including agriculture, metals, consumer staples, currencies, financial indexes, stock equities, and more.
The CFTC assures the economic utility of the futures markets by encouraging competitiveness and efficiency, protecting market participants against fraud, manipulation, abusive trading practices, and by ensuring the financial integrity of the clearing process. Through effective oversight, the CFTC enables the futures markets to serve the important function of providing a means for price discovery and offsetting price risk.
The CFTC's mission is to protect market users and the public from fraud, manipulation, and abusive practices related to the purchase and sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and futures options markets.

The CFTC seeks to protect customers by:

• requiring companies and individuals to disclose market risks and past performance information to prospective customers,
• requiring that customer funds be kept in accounts separate from those maintained by the firm for its own use, and
• requiring customer accounts to be adjusted to reflect the current market value at the close of trading each day.

The CFTC also monitors registrant supervision systems, internal controls, and sales practice compliance programs.
In addition to federally mandated regulation offered by the CFTC, the futures industry also self-regulates through the National Futures Association, or NFA. The NFA develops rules, programs and services that safeguard market integrity, protect investors and help firms and representatives meet the CFTC's regulatory standards.
In today's global financial markets, it is important to identify companies that are registered with the NFA and instruments that are created and managed under the CFTC's jurisdiction. The global financial markets have literally opened access to a whole new set of challenges related to regulating the global futures market.

Dispute Resolution

If you have a dispute arising out of your commodity futures or options account, first try to resolve the problem with your broker and his or her supervisor at the firm that employs or guarantees the broker.

If that fails, commodity futures customers have several options for resolving disputes:

• The CFTC Reparations program
• NFA sponsored arbitration
• Civil court litigation

In selecting a particular approach, you may want to consider the cost, length of time involved, and whether or not the assistance of an attorney is required.

Where are futures traded?

Futures, like stocks, are traded on exchanges. A commodity exchange is an organized market where traders meet to buy or sell various futures contracts. The exchange may be a physical location, like the Chicago Mercantile Exchange, or it may be an electronic gathering place such as GLOBEX. Either way, the exchange acts as an important part of the futures industry by:

• Providing an organized location (physical or electronic) for trading futures
• Regulating the trading practices of their members
• Gathering and transmitting price information
• Gathering and governing commodities traded on the exchange
• Supervising warehouses that store the underlying commodities
• Providing a means for settling disputes between members

History of the Futures Market

It is helpful to begin a discussion on the futures market with a historical sketch. Commodity markets have existed for centuries around the world because producers and buyers of commodities, such as rice, wheat, oil and other items have needed a centralized place to trade. In those days, cash transactions were most common, but occasionally a "forward" type arrangement was also made - deals to deliver and pay for something in the future at a price agreed upon in the present. There are records, for example, of "forward" agreements related to the rice markets in seventeenth century Japan; most scholars agree that forward arrangements actually date back much farther in time.
The immediate predecessors of futures contracts were "to arrive" contracts. These were simple agreements to purchase designated goods when they arrived by ship, and they were used for centuries when shipping was the primary mode of international trade.
The first organized grain futures trading in the U.S. began in places such as New York City and Buffalo, but the development of "modern" futures, which are a unique type of forward agreement, began in Chicago in the 1840s. With the construction of the railroads, Chicago began to emerge as a center for transportation between Midwestern producers and East Coast population centers. The city was a natural hub for trade, but the trading that took place was inefficient and unorganized until a group of Chicago-based businessmen formed the Board of Trade of the City of Chicago in 1848. The Board was a member-owned organization that offered a centralized location for cash trading a variety of goods, as well as trading of forward contracts. Members served as brokers who facilitated trading in return for commissions.
As trading of forward contracts increased, the Board decided that standardizing those contracts would streamline the trading and delivery processes. Instead of individualized contracts, which took a great deal of time to negotiate and fulfill, people interested in the forward trading of corn at the Board, for example, were asked to trade contracts that were identical in terms of quantity, quality, delivery month and terms, all as established by the exchange. The only thing left for traders to negotiate was price and the number of contracts.
These standardized forwards were essentially the first modern futures contracts. They were unlike other forwards in that they could only be traded at the exchange that created them, and only at certain designated times. They were also different from other forwards in that the bids, offers and negotiated prices of the trades were made public by the exchange. This practice established futures exchanges as venues for "price discovery" in U.S. markets.
In contrast to customized contracts, standardized futures contracts were easy to trade since all trades were simply re-negotiations of price, and they usually changed hands many times before expiration. People who wanted to make a profit based on a fortuitous price change, or alternatively, who wished to cut mounting losses as quickly as possible, could "offset" a futures contract before expiration by engaging in an opposite trade: buying a contract which they had previously sold (or "gone short"), or selling a contract which they had previously bought (or "gone long").
The usefulness of futures trading became apparent, and a number of other futures exchanges were established throughout the country in the decades that followed. The Chicago Butter and Egg Board was founded in 1898 and evolved into the Chicago Mercantile Exchange (CME) in 1919. Futures exchanges also opened in Milwaukee, New York, St. Louis, Kansas City, Minneapolis, San Francisco, Memphis, New Orleans and elsewhere. Chicago, however, became the most influential and predominant location for futures trading in the U.S.
In recent years, the commodities exchanges have experienced tremendous change by way of mergers and acquisitions. Most notably, the Chicago Mercantile Exchange has redefined itself as the Chicago Mercantile Exchange Group - a conglomeration of the Chicago Mercantile Exchange, the Chicago Board of Trade, and the New York Mercantile Exchange. Otherwise know as the "Merc," the Chicago Mercantile Exchange Group also controls the world's largest electronic futures exchange: Globex.
In addition to the Merc, there are many other commodity exchanges both domestically and around the globe. The industry is in a state of significant growth, and change is announced almost daily. As of this writing here are some other exchanges you may come across:

Kansas City Board of Trade

A commodity futures and options exchange that specializes in hard red winter wheat - the principal ingredient of bread.

Chicago Climate Exchange

A relative newcomer to the futures industry, the Chicago Climate Exchange is North America's only voluntary, legally binding greenhouse gas (GHG) reduction and trading system for emission sources and offset projects.

Intercontinental Exchange

An electronic based marketplace which trades futures and over-the-counter (OTC) energy and commodity contracts as well as derivative financial products. While the company's original focus was energy products, recent acquisitions have expanded its activity into the "soft" commodities, foreign exchange and equity index futures.

One Chicago

A subsidiary of the Chicago Mercantile Exchange, One Chicago is the home of single stock futures (SSF's), which are futures contracts with the underlying asset being stock.
Futures trading is also growing around the world with many notable exchanges including Canada's Montreal Exchange, Britain's London Metal Exchange, Eurex, and many more.

How futures are traded on exchanges

Trading at the futures exchange is conducted in two ways: an open outcry format and the electronic trading platform.

Open Outcry

The open outcry method consists of floor traders standing in a trading pit to call out orders, prices, and quantities of a particular commodity. Traders on the floor of the exchange wear different color jackets to indicate their position and affiliation. In addition, complex hand signals (called Arb) are used. These hand signals were first used in the 1970s. The pits are areas of the floor that are lowered to facilitate communication, sort of like a miniature amphitheater. The pits can be raised and lowered depending on trading volume. To an onlooker, the open outcry system can look chaotic and confusing, but in reality the system is a tried and true method of accurate and efficient trading.

Electronic Trading

Approximately 70 percent of total futures volume is conducted via electronic trading platforms. Fully electronic trading systems allow market participants to trade from booths at the exchange or while sitting in a home or office thousands of miles away.

Who are the players in the futures market?

You've already learned of two players in the futures industry: the regulators and the exchanges. Now we want to introduce the rest of the players in this industry and give you an idea of why they are there and what they hope to accomplish.
Generally speaking, the two primary players in the futures market are hedgers and speculators.

Hedger

The futures markets exist to facilitate the management of risk and are thus used extensively by hedgers - individuals or businesses who have exposure to the price of an agricultural commodity, currency, or interest rate, for instance, and take futures positions designed to mitigate those risks. This requires the hedger to take a futures position opposite to that of his or her position in the actual commodity or financial instrument. For example, a soybean farmer is at risk should the price of the commodity fall before he harvests and sells his crop. A short position in the futures market will return a profit when the price of soybeans declines, and the hedger's profit on the short futures position compensates for the loss on the physical commodity.

Speculator

Speculators are attracted to futures trading simply because they see the opportunity to profit from price swings in commodities and financial instruments. Speculators take advantage of the fact that the futures markets offer them access to price movements; the ability to offset their obligations prior to delivery; high leverage (low margin requirements); low transaction costs; and ease of assuming short as well as long positions. In pursuit of trading profits, speculators willingly assume the risk that hedgers wish to transfer. In this process, speculators provide the liquidity that assures low transaction costs and reliable price discovery, market characteristics which in turn make futures markets attractive to hedgers.
Besides these two broad classifications of players in the futures market, traders can also be categorized in a number of other ways. There are full-time professional traders and part-time traders; traders who trade on the trading floor or behind a computer screen. Each of these market participants plays an important role in making the markets efficient places to conduct business.

Public Traders

The vast majority of speculators are individuals trading off the floor with private funds. This diverse group is generally referred to as "retail" business. With the growing movement from trading on the floor to the computer screen, the retail customer is becoming a more important force in futures trading.

"Local" Traders

Perhaps the most visible and colorful speculator is the professional floor trader, or local, trading for his own account on the floor of an exchange. Locals are usually more interested in the market activity in the trading pit as opposed to the activity in the underlying market fundamentals. With the popularity of electronic trading sweeping the industry, a trader who operates in a fashion similar to a floor local has emerged-the "electronic local." The electronic local trades using the same method as the local except they do so through the Internet rather than in the trading pits of Chicago.

Proprietary Traders

Another major category of trader is the proprietary trader, who works off the floor for a professional trading firm. These "upstairs" traders are employees of large investment firms, commercial banks and trading houses typically located in major financial centers. This group has a number of different trading objectives. Some engage in speculative trading activity, profiting when the market moves in their direction. Such proprietary traders are compensated according to the profits they generate. Other proprietary traders manage risk, hedging or spreading between different markets-both cash and futures-in order to insulate their business from the risk of price fluctuation or exploiting differences and momentary inefficiencies in market-to-market pricing.

Market Makers

Market makers give liquidity to the market, constantly providing both a bid (expression to buy) and an offer (expression to sell). Increasingly important in electronic markets, market makers ensure that traders of all kinds can buy and sell whenever they want. Market makers often profit from the "spread," or the small difference between the bid and offer (or ask) prices.
You can see the futures market is made up of many different players working with different motivations for the common good of the market place. Each player has his or her own motivation and executes business in a strategy that best fits those individual objectives.

What are the Strategies?

With the many different players in this market, you may think that learning futures is going to be an insurmountable task. In reality, futures are very simple to understand. That's not to say it's easy to make money trading them, but futures are very straightforward. Speculators and hedgers alike trade two primary strategies - long or short. If you've ever traded options, you will understand that there may be variations to these strategies, but the root of any investment strategy in futures is to be long the market when prices are rising or to be short the market when prices are falling. You are either a buyer or a seller. It really is that simple.
This may seem obvious, but prices don't always go up. Sometimes they fall. With futures, it's just as easy to sell, or take a short position in a commodity as it is to buy, or take a long position. Unlike many cash-based investments, there are no special forms to fill out, no "uptick rule" and no higher financial requirements to meet when you take a short position. The requirements to sell short are exactly the same as to buy long. Either strategy is treated equally, and can be executed with equal ease.

How are prices determined?

Futures trading is based on the principle of forward pricing. While this may sound complicated, it really isn't. The concept has been around for hundreds of years. Let's explain it with an example:

Suppose you have a wheat farmer and a baker. For many years, the baker has bought the farmer's wheat and made delicious bread for the townsfolk. Their transaction always happens in September and they always set the price to the current market price of wheat (i.e. they don't bicker over price!).

This example describes a typical cash transaction involving no forward pricing. It would be the equivalent of you going to the grocery store and purchasing milk. Milk prices are different every time you go to the grocery store. When you purchase the milk you pay the current price. In the futures world, the going rate is called the cash or spot price.
Despite years of great business, when spring rolls around, both the baker and the farmer suffer a little stress. Both their incomes depend on where the price of wheat is come fall. Sometimes wheat is high, which is good for the farmer and sometimes it's low, which is good for the baker.
One spring they meet to see if they can work out an agreement that will help ease the stress and reduce some of the guesswork in their businesses. After talking for a few hours, they agree that it would be in their best interest to set a price now that would make it possible for both to make a profit this year.
In this example, the two parties have made an agreement, which in the futures market is called a forward contract, because of the fact that the agreement will be fulfilled in the future. It is from these types of forward contracts that the futures market was born.
The two strike an agreement for a future delivery of wheat at a specific price of $3.00 and for a specific delivery date of September 15th.
The terms are important elements of any futures contract. The two elements of this contract include price and time. In the financial world these are called the strike price or contract value and the expiration date. In this example, the terms are customized to the needs of the baker and the farmer. In the futures market the terms are fixed or standardized. You will learn more standardization in terms and contracts in Module 2.
Another valuable lesson we learn from this example is the motivations of the different players. In this case both parties in the contract are hedgers. The baker is a manufacturer or user (a term you have learned previously) and created a long hedge (he buys the wheat). Manufacturers use the futures market to lock in prices at favorable - low - rates. The farmer is a producer or dealer and created a short hedge (he sells the wheat). Producers also use the futures market to lock in favorable selling prices.
Still unsure about exactly how this contract is going to work, the baker calls up a friend of his in Chicago who is an expert in price forecasting analysis. With a little bit of anxiety over the whole deal, the baker explains what he has done in arranging a forward contract with his friend, the farmer. The analyst tells the baker that he did a great thing in working out this type of arrangement, and that if the baker wanted he would be willing to buy the contract for the wheat from him right now for $3.50 a bushel - and the baker could essentially walk away from the transaction and pocket $0.50 right now.
We have now introduced another party to the contract - the speculator! The speculator has an entirely different motive than the hedger. The analyst is an expert in forecasting future price levels. In this scenario, the speculator believes the prices will continue to increase over the summer and will be more than $3.50 before the contract expires.
The baker first hedged away his risk by entering the contract with the farmer. Now the value of the contract has grown in the futures, or secondary market. Notice that the cash market and the futures market are offering two different prices: the cash market is trading at $3.00 and the futures market is trading at $3.50. The futures are trading at a premium to cash.
One final thing we should understand is that by selling the contract to the speculator, the baker closed his position. In futures, you don't always have to take delivery of the underlying commodity to "get out" of your obligations. You simply turn around and perform an offsetting transaction that brings you back to a no obligation position. In this case the baker bought the contract from the farmer at $3.00 and then closed his position by selling the contract to the speculator for $3.50 making $0.50 on the deal.
A few weeks later, the price of wheat dropped significantly. The farmer, who was also concerned about taking care of his friend the baker, worried what if my wheat doesn't grow, how will I provide wheat to baker? He decides to call up a friend of his in Chicago who brokers wheat. He explains the deal to the broker. The broker congratulates him on an excellent deal and says that if he locked in prices right now, he could sell him a fall wheat contract for $2.50 a bushel plus a $500 finders fee. Eager to lock in enough wheat to give the baker, the farmer buys the contract.
A different type of speculator, the broker or dealer plays an important role in the futures industry by creating a market for the underlying commodity. The broker or dealer is essentially a matchmaker bringing together people who want to buy with people who want to sell. Brokers and dealers usually specialize in a particular commodity and derive their living by charging a commission or transaction fee on every transaction.
We should learn another lesson from this example. Just like the baker, the farmer closed his original contract by purchasing another contract. Remember the farmer essentially "sold" his contract to the baker - creating a short hedge. The farmer has an obligation to deliver wheat - wheat that has not grown yet. The farmer closed his short position to deliver wheat by purchasing a contract to receive wheat. In this example, the farmer makes money because he sold the rights to his wheat to the baker for $3.00 and bought the rights to other farmers' wheat for $2.50 making a profit of $0.50 minus the dealer's commission.
One afternoon the farmer and the baker met at the local cafe. The baker explained what he had done with his contract and with an approving laugh the farmer explained what he had done with his contract. Patting each other on the back the farmer put away his tractor and the baker turned off the oven and they enjoyed a nice afternoon at the golf course.
Both the farmer and the baker were able to deflect risk off to third parties and in the process lock in profits that would make their businesses run smoother.
As it turned out, it was an exceptionally stormy spring and the wheat crop was damaged. As a result of the decreased supply of wheat, the cash price for wheat shot up to $4.00 a bushel.
So, what happened to the broker, the speculator and the other farmer?
The broker already made his money. Being compensated for every transaction, the broker in this example ended up making $500. The broker makes money on the number of transactions that run through the brokerage. It really doesn't matter to the broker whether prices go up or down. He is buying and selling inventory all the way up the price scale and all the way down - making $500 a pop!
The speculator in this circumstance made out fine as well! For a while the speculator suffered some heat as the cash market dropped to $2.50 a bushel. But thanks to his trading plan, knowledge and expertise in forecasting price and with the discipline of a Gregorian Monk, the speculator ended up making money in the end.
The tragedy of this story was the other farmer - who really didn't fare so poorly either. It ends up that at the end of the year it cost him $2.00 a bushel to produce the wheat. Since he sold the wheat contracts for $2.50 he ended up making $0.50 on each bushel he sold. Where the tragedy occurs is in the "should of, would of, could of" dreams that keep haunting him at night. But then again, everybody (the baker, the dealer, the first farmer, the speculator) has those dreams and there's always next year!
A couple of points we need to make sure we understand:

Cash Prices and Supply and Demand

Cash prices respond to the present supply and demand for the actual commodity. If there is a shortage of the underlying commodity, its price will be bid up. If there is a surplus of the commodity, the cash price will fall.

Cash prices and Futures Prices

Futures prices respond to changes in the cash price. The futures price most affected by a change in the cash price is that of the nearest expiration date. Other futures prices will include a small premium to the cash price.

Futures Prices and Traders' Expectations

Futures prices are also valued by traders' expectations. The mere threat of drought, crop damage, labor strike, hurricane, etc. can send futures prices up long before the actual event materializes.

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Analysis PT Tambang BatuBara Bukit Asam(PTBA)

Technical analysis of shares of PT Bukit Asam coal mine

Cup and Handle

This formation was first discovered by William O'Neil, a famous figure in the investment world, this pattern forms as a cup that has handles. Cup and Handle is a Bullish Continuation Patterns, a pattern that only a bullish signal (which will continue the uptrend started). Formation on Daily charts This generally occurs within a period of six weeks to eight months, and certainly will be longer when using the Weekly charts.  

 

How to Process A Cup Formation And Handle The Founding Ideal?

Uptrend that started this pattern starting from Point A to Point B that after a decline in prices, accompanied by trendline penetration. Prices continue to gradually depressed as the basis of the cup. Then gradually the price moves up and tried to resistance level at the previous peak (ie: peak B), thus forming a cup or like the letter U. Although not always the case, in general the lips the cup on the left and right have high levels of (almost) the same.
Price movements when attempting to re-stress resistance level due to selling pressure in the area (C), will cause the corrected price down or slightly sideways consolidation, forming the handle to the right of the cup. In this consolidation phase formation that occurs potentially similar to the pattern Flags or Pennants. The smaller the correction that occurred in the value of the stock price at the formation stage of the handle formation, the signal indicating an increasingly bullish.  

If the price movement in its formative stages when the handle instead of sideways, but declined, the decline should not exceed the limit "mid-altitude cup". In general, the formation of the handle is formed within one week to four weeks.
As a validation of Cup and Handle pattern, the closing price must be able to penetrate into the line of resistance. Then the target can be determined based on the projection "height cup" to the breakout point from the line of resistance. Mnegenai issues pullback after permeation resistance to this pattern, according to statistics reached a high enough rate, that is 70 percen. 

 

The ideal volume of the Cup and Handle

 Volume thinning should accompany the decline in price from point B to the bottom of the cup. On average, the thinnest volume occurs when price movements are based on the cup, then increased when accompanied munuju rally point C, then thinning again as consolidation or correction in its formative stage handle. Breakout should be accompanied by a surge in volume, and if there pullback must be accompanied by a thin volume, and then increases when prices began to rally back.  

 

Summary:

In Figure above cup and handle pattern is formed in the shares of PT Tambang Coal Bukit Asam (PTBA), dimanan uptrend that started from point A to point B.
The price gradually dropped form the bottom of the cup (Support) and the price back up to point C (resistance), then re-corrected price from point C or less half a cup body, called the Handle, until this analysis is to make the price resistance level, Breakout occurs we expect in the next few days at a price of 18,850 (Bullish Break), and the projected target price will reach levels of 20250-20300, while for entry into or purchase in the short run when prices broke through the 18,100 resistance, we would buy at the price of 18,150 -18,300. While for Cut losses at the level of support at the 17,650 price, so we'll go out when the price is below the support price which is at 17600-17550. 

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