LS Trader Weekly Update – Monday 30th May 2011

The week ahead is a shortened trading week due to the Bank Holiday in the UK and the Memorial Day Holiday in the US. The coming week promises to be an interesting one as there are a couple of key levels to be tested that could lead to a reaction one way or the other. The dollar has resumed long term weakness and this has been to the benefit of commodities.

Stocks

Typically the 2 days following Memorial Day are quite bullish for stocks. The S&P 500 is heading for fourth test of downward sloping trendline from the highs on the 2nd May. Sloping trendlines are not as reliable as horizontal ones but this is an interesting short-term pattern. If The S&P 500 can break above the trendline then it may continue higher towards the May 2nd highs. Conversely, another failure to break the trendline may lead to aggressive selling. Currently the market is forming lower highs and lower lows, which is a bear market set up but a break above the trendline will break that.

We are however now entering into a seasonally weak period for stocks. June brings an end to the best 8 months of the year for the Nasdaq.

The weakest of the indexes is still the Nikkei and this index remains the most likely to break down first. Last week saw a decline into the support zone between 9335 and 9400 but the lower end of support has so far held firm.

Commodities

The long term trendline that has been supporting Gold of late continues to hold and still applies to the August contract, which we rolled into last week. Gold also pushed through short term resistance at $1526.80 that we wrote about last week and may now continue towards recent all time highs.

Crude continues to hold support around $95 and closed above the $100 level on the August contract after a gain of 0.68% for the week. The long lower shadows on the bottom of several of the daily candles are still in evidence and are also present on the weekly candles. This continues to show that the lower are being rejected and that buyers are returning to the markets at the lower levels just above $95. The long term trend remains up.

Currencies

The recent rally for the dollar appears to have fizzled out, at least for now and the past week saw the dollar index decline.

initially continued higher, moving above 7600 for a second time but once again being unable to stay above that level. If the index can regain and close above 7600 the next target will be resistance from the shooting star pattern formed on 1st April.

We wrote last week that the Swiss Franc and the New Zealand dollar had been holding up better than the other currencies as this continued to be the case over that past week. The Franc continued its recent long-term uptrend against the dollar hit new all time highs on Friday while the New Zealand dollar also continued its recent bullrun and cleared the highs of the year at 8100.

Interest rate futures

The Interest rate futures sector continues to be bullish with yields falling to new lows for the year and prices hitting new highs. The long-term trend remains up across the sector.

Kind Regards

Robert Stewart

Do Spread Betting Strategies Really Minimise Losses

Spread betting is a risky type of financial investing and one in which great losses may occur. However, utilising proven spread betting strategies can help minimise losses. There are many spread betting strategies which really can help investors earn more profits than potentially suffer losses.

Spread betting strategies are many and vary with the financial instrument being traded. One strategy which is possible on almost all trades is the execution of a stop loss. A stop loss outlines a total loss a trader is willing to lose on a particular trade and when that loss has been reached, the trade automatically closes.

A guaranteed stop loss is another of many spread betting strategies which helps minimise losses and works in the same way as a stop loss. The major difference is the stop loss takes some time to close out the bet and therefore a small amount of additional capital may be lost. There is no waiting time with the guaranteed stop loss and so the loss limit is guaranteed.

Other spread betting strategies include outlining the trades planned for each day and adhering to this plan. Spread betting strategies can prove beneficial to minimising one’s losses which can help all traders but especially novice traders.

Financial Spread Betting Is Not Executed on the Stock Market

Many UK residents have discovered the world of spread betting and it has made many citizens significant profits. Financial spread betting is a type of spread betting which focuses on the financial instruments found on the stock exchanges. These financial instruments include bonds, stocks, commodities, indices, and forex markets. Although these instruments are involved in spread betting, financial spread betting doesn’t really take part on the stock exchange.

Spread betting firms offer spreads on individual markets, and financial spread betting involves a bet being placed on this spread. No purchase of an instrument ever takes place and it is normally on the stock exchange where one would execute these purchases. Instead in financial spread betting, a trader will contact the spread betting company and place a wager on the spread. The trader will determine which direction the price of the financial instrument will move and make an appropriate buy or sell bet.

All aspects of financial spread betting are handled through the spread betting firm because no instruments are really being purchased. The spread betting firm takes the money wagered, collects losses as necessary, and deposits any profits. Therefore, in financial spread betting a trader is dealing only with the spread betting firm.

Fixed Odds Betting is a Popular Type of Financial Betting

There are three different types of financial betting for investors to participate in and the most popular of which is fixed odds betting. Fixed odds betting is the wagering of a financial instrument against odds created by a bookmaker or on a betting exchange.

In this type of financial betting, the odds are presented normally in fractional odds with the first number representing how much one could win in relation to the second number, the stake size. A fractional odd of 4/1 means a trader stands to make £400 for a wager of £100. Traders who make wagers on fixed odds are awarded the winnings plus their initial stake.

Fixed odds financial betting can be found regularly in betting on sporting events. The bookmaker presents odds on a variety of sporting events which traders then place wagers. Financial betting such as this type has been around for years even before the Internet was invented. Fixed odds is such a popular type of financial betting because of its history among sporting fans.

Financial betting is a type of gambling event which is regulated by the gaming commission and therefore many traders participate in fixed odds investing.

How are Profits Calculated in Spread Betting?

Spread betting can make people large profits with only a small amount of capital wagered. That is because profits in spread betting are calculated by the point movement of the spread times the stake size. The more correct a trader is the more profits. Likewise, the more incorrect one is the greater capital lost.

In spread betting a bet is made on a spread of numbers. A trader may buy or sell the spread for a stake size of one’s choice. A trader places a spread betting buy bet on the spread 23-25 for a stake size of £2. The closing market price ends up being 35, a ten point difference, and is multiplied by the wager and the total profits are £20.

These spread betting profits could have been greater if the trader had staked £5 per point which would have resulted in £50. Another way the profits could have been greater was if the point movement had been more than 10 points. A 20 point movement would have resulted £40 in profits.

Calculating profits in spread betting is will give an approximate value if the bet is in the trader’s favour; however one can never predict the accuracy of the bet.

How is Currency Forex Trading Different from Other Markets?

Currency forex trading is very different from other markets and was mostly traded by financial institutions until technology provided an outlet for the general public to participate in this market. Most markets are traded on a major stock exchange, such as the London Stock Exchange, but currency forex trading does not have a regulated exchange. Continue reading “How is Currency Forex Trading Different from Other Markets?”