Activist investing continues to gain advocates — and capital; according to Hedge Fund Research...
Five Top Trading Tips for Active Traders (Part 1)
08/11/2008 12:00 am EST
This is a five part segment designed to give traders and investors an insight on how to determine what markets are best to be in and in what time frames that are best suited for buying or selling.
The tips we will cover this week include my five top categories:
- Seasonal and Cyclical Market Tendencies
- Position Accounting Confirmation Techniques (COT report)
- Technical Tools-Lagging (Moving Averages, Stochastics & MACD)
- Technical Tools-Leading (Fibonacci, Pivot Points & Seasonal Price Averages)
- Trade Management (entries, add-ons, stops and profit targets).
It does not matter if you are a futures trader, or a stock trader, or if you are a day, swing or position trader, the material presented here is designed to help introduce you to how to make more informed investment decisions based on a past market action and factual information rather than market opinions.
The chart below (1) is the front month contract on gold futures with a line chart based on the close of Gold Mining stock ASA Ltd. (ASA). Notice that the stock does have a tight correlation in price movement to the underlying futures market. The middle section is a ten year price average showing the seasonal tendency of gold's move and the bottom section is the historic seasonal price tendency of gold since 1975. We want to compare the typical price move from recent history to a longer-term history to see if gold's recent history still reacts similar to its overall historic seasonal price move and as you can see it certainly does. If you pay attention to the two points of interest labeled point "A" you will see that gold typically bottoms in August -September and then typically trades higher through late January into early February. This seasonal phenomenon was magnified last year by a long term secular commodity bull market. It is important to note that we are currently entering a seasonal strong price period as indicated by point "B". Traders want to use this information to know what side of the market may generate better returns. If we are in a seasonally strong period then traders want to look to buy dips. In the next few sessions we will go over many different techniques that professionals use to help uncover buy signals and which technical tools work best to uncover support and resistance value areas for entry and exits strategies.
More tomorrow in part 2.
By John Person of www.NationalFutures.com
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