5 Pro Trading Secrets That You Need To Know
Many traders depend too much on charts and technical analysis. It is true in the short term technical analysis is the best tool a trader can use. It is purely based on price action. Now professional traders often anticipate the market fundamentals and factor these fundamentals even before they occur.
People use more heating oil in the winter. In the same way, agricultural commodities have seasonality in them that you need to know as a trader. Now, if you think that going long on the December Heating Oil Futures Contract is a good think to do than you must be quite naive. Professional traders and investors are already aware of the seasonality in the heating oil or for that matter the contract that they trade. So they have already catered the price of this seasonality in their contracts. If you are trading heating oil or for that matter agricultural commodities than you might know that heating oil demand climbs in the fall and the winter. This is obvious.
Another thing that you need to always keep in mind is the date and time of release of Economic Reports. So, if you are trading on Friday, you need tos top trading before 8:30 AM EST as the market usually gets too volatile around this time. There are traders who specialize in trading the NFP Report. But if you are not specifically trading NFP Report, you need to stay away from the market around this time. You can’t do anything about the breaking news. It is always a surprise. But as far as the Economic Reports are concerned, they have a fixed schedule. These reports are released at a fixed time and date of the week or the month. NFP is report is always released on Friday at 8:30 AM EST.
As a trader, you need to keep yourself abreast of the developments in the world that are going to have an effect on the market that you trade. Read the Wall Street Journal, The Financial Times or the Bloomberg regularly. This way, you know what fundamentals are driving the market that you trade. There are some markets like the agricultural commodities and others that might not get extensive coverage. In that case, you need to subscribe to a specific newsletter that you think is good and can keep you informed about what is happening in these markets.
Always remember that markets are interrelated and often influence each other. What starts in one market may eventually spread to other markets. Remember the subprime mortgage crisis that started in 2006-07 and eventually spread to the stock market as well as other markets bringing down many big financial behemoths.
Rising crude oil prices can increase inflation in the economy forcing the central banks to raise interest rates. Similarly, strong US Dollar can mean cheap foreign goods. So never think in terms of only one market. Always think in terms of multiple markets. Crudeoil, US Dollar and gold can significantly impact other markets.
As a trader, you need to develop the practice of keeping a trading journal and developing your own checklist. In this trading journal, you should enter each trade. Try to analyse the market before entering that trade. After closing the trade, there should be a post analysis. In your checklist, always use multiple timeframe analysis. A trend might appear different on different timeframes. So you should check that the trend on the daily chart is in confirmity with the long term trend on the weekly as well as monthly charts.
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Posted: March 24th, 2010 under Business.
Tags: Business, day trading, etfs, Finance, forex, investing, money, mutual funds, retirement, stocks, trading