Friday, February 1, 2008

Trading Methodology

1 Feb 2008

Having done your mock trading, the next step is to do the actual trading. There are many futures trading tools which are available in the market. Some of these trading tools can be learnt from books or by attending short courses conducted by investment companies or organisations.There are also some on-self softwares or applications which can be purchased and be installed in computer.Any way, from my experience, these apllications are no gurantee that you will be making "huge profits in a day of trading" as promised by some of the software producers. Some are good to be true. The use of human brain's capacity in analysing the strategies of entering and existing of the market is more prominent.The dependence solely on the softwares and follow it religiously may end you in the depleting of the deposits in your account.

The use of technical analysis is common among the futures traders. Unlike the stocks, there are two schools of thought when it comes to stocks trading ; fundamental analysis and technical analysis. In futures, fundamental analysis is almost non-existing. Technical analysis is a methodology to study and forecast the price movement of the commodities through the use of charts. The technical analyst make decision either to enter or exit the market by looking at the charts.This is done by appraising the trends of the past and present.Besides, there are also other methodologies in determining the future prices of the commodities such as; Moving Average, Japanese Candle Stick, Fibonacci Retracement Ratios, Oscilltors and Elliot Waves.

My experience in futures market especially the CPO futures, indicates that there is no specific technical analysis that can be used to ensure maximum profits. The combination of one or more technical analysis is more promising. As for me, I am using Japanese Candle Sticks ( with improvisation), trendlines and my own devised strategy. In normal circumtances, you can only devise your own trading plan after fully understood and after being in the market for quite sometime.

My forecasting of the CPO prices will be elaborated further in the coming issues. One point to ponder, whatever trading plan that you use, it will not gurantee that you will be making profits on every entrance of the market. There are times when your entrance is not profitable. In a month if you have 10 positions entered and at least 6 of them generate profits, then your are on the right to success!

Further readings ;

No comments: