Guide to Ichimoku Analysis

Guide to Ichimoku Analysis in Forex Trading

First of all, the Japanese word "Ichimoku" means "one glance", "Kinko" means "balance / equilibrium and "Hyo" means "chart", in short Ichimoku Kinko means to see the equilibrium at a glance. Basically, the indicator is best used to define market trend, support and resistance and finally generate buy/sell signals.
Ichimoku Kinko Hyo consists of 5 lines and a "Kumo" or known as "cloud" as most people call it, they are:

1. Tenkan-Sen (Conversion Line) -- (Highest High + Lowest Low)/2, for the past x periods (Traditionally x=9)
2. Kijun-Sen (Base Line) -- (Highest High + Lowest Low)/2, for the past y periods (Traditionally y= 26)
3. Chikou Span (Lagging Span) -- Today's closing price plotted y periods behind
4. Senkou Span A -- (Tenkan-Sen + Kijun-Sen) / 2, plotted y periods ahead
5. Senkou Span B -- (Highest High + Lowest Low) / 2, for the past z periods, plotted y periods ahead (z = 52)

The space between the Senkou Span A and Senkou Span B is known as the Kumo or the cloud.
The Ichimoku Kinko Hyo works best on longer term timeframes and is preferably to be used on daily and weekly charts.

Applications of the indicators

To start with, the Kumo (or most people call it cloud) is getting more popular among chartists to identify support and resistance area. When price is trading above the Kumo, the prevailing trend is said to be up and the Kumo will be treated as the support area whilst if price is below the Kumo, the trend is said to be down and the cloud will become resistance area instead.
If the price is below the Kumo (cloud), the lower line (i.e. the Senkou Span A) acts as the first resistance level, and the upper line (i.e. Senkou Span B) becomes the second resistance level.
If the price is above the cloud, its upper line (i.e. the Senkou Span A) acts the first support level, and the lower line (i.e. the Senkou Span B) becomes the second support level.
One more thing is that the thickness of the Kumo (cloud) also indicates the market volatility. A thin layer of cloud implies the current volatility is low whilst a thick cloud implies increasing volatility.
The applications of the 2 lines - Tenkan-Sen and Kijun-Sen are quite similar to moving average studies, buy and sell signals are generated when short-term line (Tenkan-Sen) crossover the longer-term line (Kijun-Sen).
A buy signal is generated when the Tenkan-Sen crosses above the Kijun-Sen from below. On the other hand, a sell signal is generated when the Tenkan-Sen crosses below the Kijun-Sen from above. However, one clear advantage of using Ichimoku Kinko over the moving average crossover is that the area where the Tenkan-Sen crosses the Kijun-Sen will dictate the relative strength of that buy/sell signal.
If a buy signal (i.e. the Tenkan-Sen crosses above the Kijun-Sen from below) happens above the Kumo (or cloud), this would be considered as a very strong buy signal as the cloud is representing support / resistance area.
Similarly, if a sell signal (i.e. the Tenkan-Sen crosses below the Kijun-Sen from above) occurs below the cloud, this would be considered as a very strong sell signal. If the buy/sell signal occurs inside the Kumo (or cloud), this signal will be treated as normal.
Finally, if the buy signal happens below the cloud, it will be viewed as a weak signal whilst if the sell signal occurs above the cloud, it will be treated as a weak signal also.
The Chikou Span originally is used to indicate the relative strength of the buy/sell signals generated by Tenkan-Sen and Kijun-Sen, if the buy signal happens above the Chikou Span, it will be treated as a strong signal and vice versa. However, in our approach, we prefer and remove the Chikou Span (which leave a chart a bit more clear) and simply use the other 4 lines.

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Futures Education

SSF Relative Strength Trade

You may believe that regardless of overall market direction during the coming months, the stock of one company will gain in value relative to the stock of a different company. For example, you many think that Coke will grow faster than Pepsi. In the stock market you have many ways to take advantage of your forecast: you could buy Coke stock, you could Short Pepsi, or you could do both.
You could purchase futures contracts on Coke stock and sell futures contracts on Pepsi stock. Now instead of making money when the market goes up or down, you make money if the spread, or difference in value between the two companies, widens or narrows.
If both stocks move in the same direction and at the same rate, you will win on one contract and lose on the other. For example, let's suppose you buy a Coke SSF at $50 and sell a Pepsi SSF at $45. If both companies' stock goes up by $1, then you will make $100 on Coke and lose $100 on Pepsi, and the net effect will be breaking even. The same scenario applies to both Coke and Pepsi dropping in price, only now, you will make $100 on Pepsi and lose $100 on Coke.
There are two other possible scenarios. Coke could rise and Pepsi could stay the same or fall, or increase at a slower pace than Coke. This scenario is called a widening spread. Or, Coke could fall or stay the same, or increase at a slower pace than Pepsi. This is called a narrowing spread.
For every dollar that the spread widens, you profit $100. For each dollar the spread narrows, you lose $100. The following illustrates how this type of strategy works:

	If Price Difference Widens		If Price Difference Narrows
Opening Position	Price at Liquidation	Gain or Loss	Price at Liquidation	Gain or Loss
Buy Coke at $50	$53	$300	$53	$300
Sell Pepsi at $45	$46	-$100	$50	-$500
Net Gain or Loss		$200		-$200

As you can see from this example, you do not always have to know the direction a stock will travel; if you accurately predict how it will perform relative to another stock, you can make money using the SSF Relative Strength Trade.

SSF Short Hedge

A short hedge in single stock futures is designed to protect a long position in your stock. Since futures prices closely follow the stock prices, losses in the stock can be offset by gains in a short futures position. In this way hedging involves establishing a position in the futures market that is equal and opposite your position in the cash market, so that any loss incurred in one market will be offset by a gain in the other. The short hedge can be an excellent way to insulate your stock portfolio holdings against adverse price movements.
Let's assume you have a portfolio of stock with a large holding in IBM, 1,900 shares to be exact. IBM is reporting earnings next month and you are concerned that the news will not be good. You can protect your stock holding by selling an equivalent position in single stock futures. Since each contract controls 100 shares, you would actually sell 19 futures contract to completely protect against a potential drop in IBM share price. Should the price subsequently decline, the decrease in the value of the shares will be approximately offset by an increase in the value of the futures contracts.

Example

You own 1,000 shares of ABC, which is expected to report earnings next month. You want to hold on to your position to take advantage of the long-term upside potential but you are concerned about a short-term glitch. By selling futures contracts, you can protect yourself against the risk of a decline in its price. To accomplish this, you sell 10 100-share XYZ futures contracts priced at $50. When you think the stock has hit bottom, you buy back the futures contracts leaving the stock to appreciate as prices go back up.
The table below illustrates that the total value of your hedged stock holdings remains unaffected by either a price decline or a price increase.

Price Next Month	Value of 1000 Shares	Gain or loss on Futures	Total Value
$40	$40,000	+$10,000	$50,000
$50	$50,000	0	$50,000
$60	$60,000	-$10,000	$50,000

As the illustration clearly shows, if you hedge stock against an unfavorable price change you also give up the opportunity to benefit from a favorable price change.
Another variation of the short hedge is called the Ratio Hedge. A ratio hedge is similar in structure, but instead of hedging 100% of your stock position, you only hedge a percentage of your position. For example, if you own 1,000 shares of XYZ, you may choose to hedge 600 of the shares, leaving the remaining 400 shares to profit from a possible breakout. This popular strategy is often used to balance out risk to a more acceptable level.
You should also note that although these examples illustrate a "perfect" hedge, actual results vary one way or the other depending on the price relationship between the cash and futures markets. You will learn more about this in the arbitrage section.

SSF Long Hedge

In general, the long SSF hedge is used to lock in today's price for a future stock acquisition or distribution. This variation of hedging can be useful in a variety of possible situations. For instance, suppose you'd like to buy shares of XYZ because you expect it to appreciate, but the funds needed to acquire the stock won't become available for several months (e.g., money you expect to receive from a real estate closing or maturing investment holding). Buying a futures contract provides a way to establish a stock position at today's purchase price.
Or, as another possibility, assume you expect to acquire shares of a particular stock three months from now–perhaps from an estate distribution–but by then you are afraid the price may have declined. Selling futures contracts provides a way to lock in today's price.

Example

Assume that you won't have funds to buy a stock until a Certificate of Deposit (CD) matures next month, but you really like company XYZ and think the stock price will rally before you can get the money to buy the stock. To initiate a Long Hedge, you purchase 1 XYZ single stock future today for $50.
If the stock goes up to $55 when your CD matures, you will have already made $500 on the SSF and can turn around and sell the SSF and use the proceeds to purchase the stock - effectively reducing your cost basis to $50.

• If the stock goes down to $45 when your CD matures, you will lose $500 on the SSF, but you can pick up shares of stock for $45. Unfortunately, the cost basis in your stock will still be $50.
• If the stock stays right at $50, then you neither make nor lose money. You will be able to cash in the CD, buy the stock at $50 and sell the SSF for $50. Your long hedge has broken even.

SSF Portfolio Hedge

Based on market expectations, you may wish to temporarily increase the weighting of health care stocks in a portfolio while reducing the weighting of energy stocks–or vice versa. Rather than liquidate actual shares of stock, which might have adverse cost and tax considerations, it may be possible to achieve similar results by employing security futures contracts. This obviously involves some fairly complex calculations to determine which contracts and how many to purchase or sell to achieve the desired portfolio composition. This type of trading strategy needs to be monitored continuously for changes in the portfolio composition

SSF Arbitrage

An arbitrage is a unique strategy in futures. Arbitrageurs (aka Arbs) make sure that the cash price and the futures price of a stock remain relatively close. In actuality, futures prices and the underlying stock price are never exactly equal. They either sell for a slight premium or discount to the stock. The further out a future's expiration date, the greater the premium or discount will be. Arbs play an important role in price discovery, helping to ensure that a stock's cash price and futures price converge as the futures price comes closer to expiration. At expiration there should be no difference between the cash price and the futures price of the stock.
Here's how it works. Let's assume the stock is trading for $50 and the single stock future contract is trading for $51. The stock has some bad news and is heading down to $49.50, but the single stock futures are still trading at $51. The Arb will step in and quickly sell the SSF for $51 and buy the stock for $49.50. Purchasing the stock will put upward pressure on the stock, thereby pushing prices higher. Simultaneously, selling the single stock futures will put downward pressure on the futures price. The net effect will be to bring the cash price of the stock and the futures price of the futures closer together. When the futures expire, the Arb will deliver stock to cover his short position in the futures.
Due to the importance of executing an arbitrage at a precise time and condition, the Arbs generally utilize complex computer systems to help execute and manage their positions. You may hear on the news or read in stock reports that program buying or selling pushed the markets higher or lower. This is generally arbitrage buying or selling intended to bring the market back into fair value.

SSF and Equity Option Combinations

In addition to using different combinations of stock and single stock futures, you can also combine single stock futures and equity derivatives to create different risk and reward scenarios.
A common strategy among equity option traders is a trade known as the covered call. In this trade, the investor owns the underlying stock and sells equity call options against his or her stock position to generate income. It is considered a covered call because the underlying position of stock is used to satisfy an obligation to deliver stock to the buyer of the call option should the stock move higher.
Single stock futures can be used in place of the underlying stock to cover a short call position in the same way the stock covers a short call position at a fraction of the cost!
This is an example of how you could cross-margin single stock futures with equity options. Although optionsXpress does not employ cross-margin strategies, this is one application of the leverage possible in single stock futures.

Example

Suppose XYZ stock is trading for $50. The January 55 calls are selling for $2.50. Under a traditional covered call strategy you could buy 100 shares of stock for $5,000 and turn around and sell the calls for $250 in income. If the stock closes at $56, you will be called out of your stock, making a grand total of $750 on the entire trade ($250 from selling the option and $500 from the increase in the stock price).
Instead of buying the stock for $5,000, you decide to spend $1,000 on XYZ single stock futures. You turn around and sell a XYZ January $55 call and bring in $250 in premium. Now, when the stock goes up to $56, you sell the SSF for $56 and make $600. You have an obligation to deliver stock, so you go into the stock market and buy 100 shares of stock for $56, then turn around and give the stock to the option buyer for $55 - losing $100 on the transaction. Plus, you keep the $250 premium for the option. The net effect is +$600 on the SSF, -$100 on the stock and +$250 on the option, for a grand total of $750, the same as the covered call above - only you made it on a $1,000 investment. This is a 75% return on investment.
There are countless other combinations of single stock futures that we could explore, but let's keep it simple for now. As you can tell, single stock futures are quite versatile. They offer an efficient use your precious capital and they can be used to accomplish a multitude of objectives!

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Futures Education

Single Stock Futures

Single stock futures (SSF's) combine the elements of two popular and useful financial investments–futures contracts and stock equity. The "commodity" or underlying product of single stock futures is, obviously, stock, or in other words, equity ownership of publically traded corporations.
You may be asking why there is a futures market for stock when there is already a healthy viable stock market? First, single stock futures offer flexibility to your portfolio by offering different strategies of managing the risks of a volatile stock market. Second, single stock futures offer exciting new ways to profit from expected price movements in an underlying company's stock. Third, single stock futures combine the advantages of the futures market with the popularity of the stock market; in other words, you take the advantages of the futures market (leverage, market hours, taxation, etc.) and combine it with the usefulness of the stock market.

Single stock futures for speculation

Let's suppose you were expecting the price of a stock to increase during a particular period of time. Instead of buying stock, you could buy a single stock futures contract. If you hold a stock position, your profit (or loss) will depend on whether the price increases (or decreases). The same is true with single stock futures, you will make money if the stock goes up and you will lose money if the stock goes down.
Conversely, let's suppose you expect the price of a stock to drop over the next couple of months. You could short the stock, or borrow stock and sell it at the current high point, and then buy it back when the market drops. Or, you could sell a single stock futures contract and offset your position by buying a single stock futures contract later after the price of the stock has dropped. When it comes to single stock futures, it is not necessary to own or borrow shares of the underlying stock in order to sell futures contracts.

Single stock futures for hedging

The foregoing examples involve speculative uses of futures contracts. But futures can also be used for the purpose of managing or limiting price risks. Let's suppose you have a large holding of Google stock which is highly susceptible to price volatility. Instead of watching your account value go up and down every quarter, you could lock in a sell price today to protect your portfolio against future price risks. We will talk about this in greater detail later in the module.

The benefits of futures in the stock market

The great thing about single stock futures is that they take all the general benefits of futures (refer to module 1) and apply them to the stock market. In other words, you get the leverage, ease of diversification, 24-hour markets, and tax benefits of the futures applied to corporate stock.

A word on risk

Before you run out and start investing in single stock futures, however, you need to know that trading single stock futures for any purpose, speculative or hedging, is not appropriate for anyone who does not understand the associated risks.
When you trade single stock futures (SSF's) you assume a level of risk greater than that of trading stock. Buying or selling futures contracts can result in losses that may substantially exceed your original investment. Although the nature and extent of risks vary, all futures trading involves risks.
The only funds that should ever be used to speculate in stock futures, or any type of highly speculative investment, are funds that represent risk capital–i.e., funds you can afford to lose without adversely affecting your financial health.You should not risk any funds that you cannot afford to lose. Retirement savings, medical and other emergency funds, funds set aside for purposes such as education or home ownership, proceeds from student loans or mortgages, or funds required to meet living expenses, should not be used to trade futures.
There are other reasons futures trading may or may not be appropriate, such as your temperament, or ability to manage your investment. Due to the leverage and volatility of futures trading generally, investing in single stock futures requires more attention and is less forgiving than trading individual stocks. Only you can determine whether this style of investing is worthwhile to you. Before you begin, make sure that you have sufficient capital, time and energy to be successful investing in single stock futures.

Differences between stocks and stock futures

While the possible uses of single stock futures are numerous and varied, you should understand that it is not the same as owning shares of the stock. Buyers of futures contracts have no ownership interests; they have no voting rights and receive no dividends. Moreover, on a stated date during the contract month, futures contracts expire; they cannot be held indefinitely in the hope of an eventual price recovery.
Single stock futures should be viewed as short-term trading instruments-whether for speculation or for risk management.
Single stock futures should not be confused with any another type of stock contract i.e. the popular stock option or stock derivative. In some circumstances, futures and options may offer alternative strategies for achieving similar goals. However, they differ in their risk and reward characteristics. Experienced investors can combine futures contracts with option contracts to create customized financial instruments with unique risk and reward characteristics. However, the two instruments are used for different purposes and are structured differently.

The single stock futures contract

Contracts for single stock futures are structurally similar to other future commodities except when it comes to the contract specifications. The following specifications are standard and consistent to all single stock futures:

• Contract Size: 100 Shares of Common Stock.
• Tick Size (min. fluctuation): $0.01
• Value Multiplier: $1.00
• Initial and Maintenance Margin: 20% of the Cash Value
• Contract Expiration: Quarterly (Mar, Jun, Sept, Dec)

How much would it cost you to purchase a single stock future contract for Caterpillar, Inc. (CAT) if it is trading at $37?

First calculate the contract value:

• Contract size * Stock Price = Contract Value
• 100 Share of Stock * $37 = $3700
  

  Second, calculate the Initial Margin or how much you will need to deposit purchase one contract:

• Contract Value * Initial Margin Requirement = Initial Deposit
• $3700 * 20% = $750

Now, let's assume Caterpillar goes up to $38.00. How much did you make?

First calculate the number of ticks:

• Increase in Stock Price / Tick Size = Total Ticks Gain
• $1.00 / .01 = 100 Ticks

Next, calculate your profit:

• Total Ticks Gain * Value Multiplier = Profit
• 100 * $1 = $100.00 profit.

Now let's assume Caterpillar goes down to $36. How much did you lose?

Again, calculate the number of ticks lost:

• Decrease in Stock Price / Tick Size = Total Ticks Lost
• $1.00 / .01 = 100 Ticks

Next, calculate your loss:

• Total Ticks Lost * Value Multiplier = Loss
• 100 * $1 = $100 loss

Now that you understand the details of purchasing a single stock future, let's compare it to purchasing the stock.
The following chart compares purchasing Caterpillar stock versus purchasing Caterpillar single stock futures if the stock goes up $1.00:

	Caterpillar Stock	Caterpillar SSF
Total Investment	$3700	$750
Total profit if stock goes up to $38.00	$100	$100
Return on Investmnt (ROI)	2.7%	13.3%

The following chart compares purchasing Caterpillar stock versus purchasing Caterpillar single stock futures if the stock stays the same:

	Caterpillar Stock	Caterpillar SSF
Total Investment	$3700	$750
Total profit if stock stays at $37.00	0	0
Return on Investmnt (ROI)	0%	0%

The following chart compares purchasing Caterpillar stock versus purchasing Caterpillar single stock futures if the stock goes down $1.00:

	Caterpillar Stock	Caterpillar SSF
Total Investment	$3700	$750
Total profit if stock drops to $36.00	-$100	-$100
Return on Investmnt (ROI)	-2.3%	-13.3%

Trading in futures can be a double-edged sword. When the market is moving in your direction, the increase in ROI can be significant. However, when it is moving against you, it can be painful.

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Cup And Handle Pattern

Bumi Citra  Permai Tbk (BCIP)

The pattern is very clear that forms the cup and handle, also penetration resistance has occurred, and the price was heading for the first price target of 355-360 is achieved in the near future, then the price will go to the next target is 425-430. In trading yesterday 340 prices close higher

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Futures Education

It's a function of time

You can define the concept of trend only in relation to a particular time frame. When you determine the trend, it must be, for example, the two-week trend or the six-month trend or the hourly trend. So an important part of a trading plan is deciding what time frame to use for making these decisions.
For purposes of this course, trends are classified in three major time frames: primary, intermediate and short-term.

Primary Trends

Primary Trends last from nine months to many years. Primary trends are usually based on the fundamentals of the commodity and economy. Intermarket analysis is the study of the flow of money from one financial industry to another. The primary trend is largely determined by the fundamentals that cause money to flow from one industry to another, from one commodity to another.

Intermediate Trends

Intermediate Trends last from six weeks to nine months. Intermediate trends are considered market corrections, where the market responds to problems of over-supply or over-demand. An event that might precipitate a change in the intermediate trend could be an earnings announcement, or a management change. Here is an example of the intermediate term trend.

Short-Term Trends

Short-Term Trends last from two to four weeks. Short-term trends are usually based on random news events, such as an analyst upgrade or short-term shocks to supply. This is an example of the short-term trend.
It is important to note that longer-term trends are made up of shorter-term trends. The primary trend is formed by a series of intermediate term trends. The intermediate term trend is formed by a series of short-term trends. One of the first steps in trend analysis is to identify which trend you are looking at and how it relates to trends of other time frames.
The chart below shows the relationship between primary, intermediate and short-term trends.

It's a function of Volatility

Another consideration is the volatility of the markets you trade. There are about forty futures markets with sufficient liquidity to allow prudent speculation. However, it is important to select a good universe of markets that are appropriate for your account size, risk level and trading style.
It is also important that the commodities you choose to follow are diversified. There are always a number of big market moves every year, but no one knows in advance where they will be. If you trade a diversified portfolio, there is a greater chance that you will catch some of the truly big moves that make for successful trading.
Another consideration in choosing a market to trade is its historical propensity to have more big trending moves. Since the trend is your edge in trading, you can maximize your edge by selecting the most "trendy" markets. The following are some of the best trending markets in various trading sectors.
The currencies are the best trending sector. The currencies to trade are the Swiss Franc, the German Mark, the Japanese Yen and the British Pound.
Interest rate futures are also good trending markets. T-Bonds represent long-term interest rates and Eurodollars are for short-term interest rates.

• In the energy complex, Crude Oil, Heating Oil and Natural Gas are good trading vehicles.
• In the food sector, Coffee, Orange Juice and Sugar are recommended.
• In metals, you can trade Gold, Silver and Copper.
• In agriculturals, Corn, Oats, Soybeans and Cotton are the best.

Volatility and Risk

Another important aspect of trading futures is your ability to manage risk. In fact, this may actually be the most important aspect of trading futures because it is by managing risk that you limit losses and preserve your capital.
The most important element of managing risk is keeping losses small, which is already part of your trading plan. Never give in to fear or hope when it comes to keeping losses small. Preventing large individual losses is one of the easiest things a trader can do to maximize his chance of long-term success.
Some markets are more volatile and more risky than others. Some markets are comparatively tame. If you have a small account, don't trade big-money, wild-swinging contracts like the S&P 500 stock index. Instead you may want to trade the "mini" contracts to keep risk in proportion to your capital. Many traders feel like they have to trade the big contract to make big money, when in a sense, the smaller contracts are actually preferable due to the liquidity and better risk management opportunities. Successful traders emphasize risk control over achieving big profits.
The biggest risks to commodity traders come from surprise events that move the markets too quickly to exit at their pre-determined give-up point. While you can never eliminate these risks entirely, you can guard against them by advance planning. Pay attention to the risk of surprise events such as crop reports, freezes, floods, currency interventions and wars. Most of the time there is some manifestation of the potential. Don't overtrade in markets where these kinds of events are possible.
Trade in correct proportion to your capital. Have realistic expectations. Don't overtrade your account. One of the most pernicious roadblocks to success is greed. Commodity trading is attractive precisely because it is possible to make big money in a short period of time. Paradoxically, the more you try to fulfill that expectation, the less likely you are to achieve anything.

What's your style?

Time, trend and volatility meet to help you define your trading style.
Do you want to be a long-term trader, also called a position trader? They hold positions for weeks or months. Do you want to be a short-term trader who holds positions only for a few days? There are even very short-term traders called day traders. They watch the markets throughout the day and always enter and exit their positions on the same day.
Each of the types of traders uses a different strategy to achieve his goals. Here are a few of the different styles of trading used in the futures market.

Scalpers

A scalper trades in and out of the market many times during the day, hoping to make a small profit on a heavy volume of trades. Scalpers attempt to buy at the bid price and sell at the ask price, offsetting their trades within seconds of making the original trade. Scalpers rarely hold a position overnight and often don't trade or make predictions on the future direction of the market. Locals and market makers often employ a scalping strategy, which is the most common source of market liquidity.

Day Traders

A day trader is similar to a scalper in that he or she also typically does not hold positions overnight and is an active trader during the trading day. A day trader makes fewer trades than a scalper, generally holds his positions for a longer period of time than a scalper, and trades based on a prediction on the future direction of the market.

Short-term or Swing Traders

A short-term or swing trader will hold his or her position for just a few hours up to a few days. The swing trader tries to predict and catch the short-term trends of the market.

Position Traders

A position trader might make one trading decision and then hold that position for days, weeks or months. Position traders are less concerned with minor fluctuations and are more focused on long-term trends and market forces.
Many traders have difficulty holding a position trade long enough to make it profitable. They find it psychologically easier to keep the timeframe short. While it may be easier to hold your position over the short run, many successful traders will say the best results come from longer-term trading.

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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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