As we do every week, we are going to review our trades over the last week and we will start our review this week with futures and stocks.
FUTURES & STOCKS
DAX
As we commented last weekend, this past week we introduced our new German futures trading technique in the Trading room. This trade is perfect for European and Asian residents because of the trading time which is at the opening of the German Dax at 2am EST (8am GMT +1). The technique is based on gaps in the opening of the Dax.
This past week, this technique gave us 2 trades which, in turn, earned us 40.5 points or 1.012.5€ ($1,316.25).
This past Friday, we didn’t place a trade as we doubted about the outcome but it turns out it would have been positive for another 30 points.
Below are the statistics of the technique from March, 2009, until July, 2010, when the technique would have registered a gain of close to 3500 points which, given that every Dax point is worth 25 euros, represents a gain of 87,500€ ($118,100) in one year and three months.
August is not the best month to execute this technique as there usually is not an opening gap for the majority of sessions. Never-the-less this past week we executed two positive trades with some very attractive benefits.
Let us remind you of the main characteristics of this technique:
This technique provides us with a trade if the Dax future opens with a gap at least 10 points larger than the previous day’s close. Normally, we set a target of the gap’s close plus 10 points with a stop equivalent to the gap size. If we hit the stop, we open a contrary position with a target of the gap plus 10 points.
Let’s review the following example:
Let’s imagine the Dax closed yesterday at 6300 points and today is opening at 6320.
The technique would call for us to trade short at 6320 points with a stop at 6340 points (20 points – the size of the gap) and a repurchasing target at 6290 points (20 + 10 points).
If we hit the target of 6290, we would gain 30 points and the trade would end for that day.
On the other hand, if we hit the stop at 6340, we will open a long position with a target of 6370 and a stop at 6320 points.
In case you aren’t sure you’ve correctly understood this example, every day we will clearly publish the signals from our trading room.
SP
With regards to the MiniSP, as of three weeks ago we have been placing Sp trades from our Trading Room in the private part of our web. The following are our results since we began to publish signals for this technique via the Trading Room. We executed 41 positive operations and only 2 negative ones for a gain of 62.25 points in three weeks which represents a monetary profit of $3,112.50 per contract.
Week | Positive | Negative | SP Points |
July 26-30 | 10 | 1 | 19 |
August 2-6 | 18 | 1 | 27.5 |
August 9-13 | 13 | 0 | 15.75 |
TOTAL | 41 | 2 | 62.25 |
Given that these gains were made in August, that this past Tuesday there was a Fed meeting, that Monday we only were able to make 0.25 points and Tuesday only 2 points, we believe these are excellent returns. And these returns should only improve when market volume rises.
LAST WAVE
We did not trade this technique this past week and we probably won’t trade it until the end of August as closes have been flat and there is no force in the market to allow large variations in the stocks we would recommend. We have been trading this technique in our Spanish web since 2005 and we have never traded it in August although, this year, we will execute an operation only if we see a clear opportunity. In other words, we won’t trade just to trade.
Therefore, we just closed ANOTHER really good week for futures and stocks: we made 1,012.5€ ($1,316.25) for the Dax and a 15.5 point gain for the Sp. For the SP over the last three weeks we have gained 62.25 points or $3,112.50 per contract.
FOREX
Now let’s review our week in Forex.
Trades this past week:
We had a good week with 5 positive operations and no negative trades for a gain of +145 Pips. This past week, the pairs had tendency which we had been hoping for. This allowed us to break the lateral market which only permitted us to enter at the same level each day.
As we continue to work on the improvements we will put to work soon, we encourage you to take a look at the futures markets. This month and only from signals from the trading room, we have made a profit of $2,000 for the MiniSP. It is one of the futures with the greatest liquidity. The guarantees necessary to operate with it are between $500 and $3,500 depending on the broker. Obviously, it is not FOREX in that the economic requirements are somewhat superior. Never-the-less, we try to be where the money is. By the way, speaking of where the money is or where it is going, this week we read two interesting articles; one bad and one good. Or so they say because they both may be horrible...
The “good” news; FOREX volume increases and returns to pre-crisis levels.
Foreign Exchange Committee Releases FX Volume Survey Results.
– The Foreign Exchange Committee today released the results of its twelfth Survey of North American Foreign Exchange Volume. For the April 2010 reporting period, key findings are featured below.
Average daily volume in total over-the-counter foreign exchange instruments (including spot transactions, outright forwards, foreign exchange swaps, and options) totaled $754 billion in April 2010, up 11.8 percent from the $675 billion reported in October 2009 and just below the record $762 billion reached in October 2008.
Following the sharp decline in turnover evidenced in the April 2009 survey, average daily volume has resumed its historic upward trend, with rising volume across all instrument types and execution methods as well as most counterparty types and currency pairs.
Average daily volume in spot foreign exchange transactions rose relative to the prior survey, but remained below the record reached in October 2008. Average daily volumes in both outright forwards and foreign exchange swaps, however, registered new highs of $104 billion and $203 billion, respectively, in April 2010.
Since the survey’s inception in 2004, the average trade size declined steadily from $4.3 million to roughly $1.8 million in October 2008. It has remained near this level in all subsequent surveys.
After the dive in October, nothing was the same; not for FX, not for any other market and not for the “real” economy. This was the good news (it is really not good and later we’ll explain why). And now, the bad news. Many of you read us from the USA or Asia where there are many new regulations such as leverage reduction, hedge prohibition (long and short for the same pair), etc.
The bad news; Obama wants to prohibit the FX Spot.
Obama Threatens Forex; Says Goodbye to OTC Gold Trading
James identified four key points which may severely affect OTC forex in the US
- Elimination of OTC Forex: Effective 90 days from its inception, the Dodd-Frank Act bans most retail OTC forex transactions. Section 742(c) of the Act states as follows: “…A person [which includes companies] shall not offer to, or enter into with, a person that is not an eligible contract participant, any agreement, contract, or transaction in foreign currency except pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe…”
- Elimination of OTC Metals: As for OTC precious metals such as gold or silver, Section 742(a) of the Act prohibits any person [which again includes companies] from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis. This provision intends to expand the narrow so called “Zelener fix” in the Farm Bill previously ratified by congress in 2008. The Farm Bill empowered the CFTC to pursue anti-fraud actions involving rolling spot transactions and/or other leveraged forex transactions without the need to prove that they are futures contracts. The Dodd-Frank Act now expands this authority to include virtually all retail cash commodity market products that involve leverage or margin – in other words OTC precious metals.
- Small Pool Exemption Eliminated: Pursuant to Section 403 of Act, the “private adviser” exemption, namely Section 203(b)(3) of the Investment Advisers Act of 1940 (“Advisers Act”), will be eliminated within one year of the Act’s effective date (July 21, 2011). Historically, many unregistered U.S. fund managers had relied on this exemption to avoid registration where they: (1) had fewer than 15 clients in the past 12 months; (2) do not hold themselves out generally to the public as investment advisers; and (3) do not act as investment advisers to a registered investment company or business development company.
- Accredited Investor Qualifications: Section 413(a) of the Act alters the financial qualifications of who can be considered an accredited investor, and thus a qualified as eligible participant (“QEP”). Specifically, the revised accredited investor standard includes only the following types of individuals: 1) A natural person whose individual net worth, or joint net worth with spouse, is at least $1,000,000, excluding the value of such investor’s primary residence; 2) A natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 in each of those years and a reasonable expectation of reaching the same income level in the current year; or 3) A director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, executive officer, or general partner of a general partner of that issuer.
Talking to Bart Mallon from Mallon P.C. it seems that there is actually little new in this bill and that the CFTC will need to complete its own rules within the next 2.5 months or so. These rules include the infamous leverage and guaranteed IB requirements however Bart feels that the final rules will not be as bad as some may think.
Whatever the case is I advise US forex traders once again to shift their accounts to more sane regulatory locations, as even Obama himself may ‘have a tooth against’ retail forex. I wonder which broker hunted his stops.
You can find more information and opinions at http://forexmagnates.com/obamas or http://www.fxstreet.com/education/markets-regulation/obama-forex-otc-gold-trading/2010-08-05.html.
Let’s return now to the question of volumes and analyze if it is good or bad news. If we keep in mind that these volumes have increased due to desperate bank interventions - USD/JPY AT HISTORIC LOW, EUR/USD PUSHED TO 1.30, NATIONAL SWISS BANK INTERVENED AND LOSING 14 MILLON FRANKS (APPROX. 13 MILLON DOLLARS) - is the recovery of volume really "good news"? Whose money is increasing these volumes? It is definitely not coming fro the majority of investors or speculators like us.
Does this mean that we are doing well and the economic recovery has started? You be the judge. But this money is coming into Fx only to avoid the unavoidable… The US
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