Trading is a tough business and coming up with the right idea for your trading strategy is sometimes a tedious task. It looks like a mountain you cannot climb. But don’t panic we are here to help. So today we talk about the futures market and how to do proper statistical analysis when trying to find your way to the promised land. Analyzing time series can be compared to the work of a butcher. There are some nice parallels here. Like a butcher who is cutting and processing the raw meat before he sells it you need to process the numbers and do your analysis. Bit by bit you are fragmenting the time series trying to find your edge.
The concept of diversification is based on the concept that a trader can reduce his risk exposure by entering several positions at the same time. The success of a traders portfolio is therefore based on reducing risk rather than maximizing returns.
The COT Report is the single most important report issued by the CFTC revealing internal market dynamics. It’s some kind of sentiment indicator. The data collected on a weekly basis contains market positions of the largest futures traders. Let’s see how we can use the report to accurately predict market turns.
How to get the right trading mindset for success ? The first thing one must realize that this is an internal search. One must learn what is holding you back in being a successful trader. only when we have such an awareness we are able to change.
How to implement a ranking system for trend following strategies. Analyze the probabilities and trade the commodity with the odds in your favor and the highest risk-reward potential.
In today’s uncertain markets, traders who want to spot major market moves and protect themselves against large losses should consider using spread trading. Spreads are one of the most powerful market indicators. The two major ways looking at them are the price premium structure and the strengthening/weakening of the spread.
Two aspects of your trading system should be monitored one is your risk and the other one is the volatility. Effectively implement this strategy and reduce your portfolio swings. Incorporate the number of directional price changes into this equation and you can come up with even better models for position sizing.