Correlation and Lag Trades

Gold and Crude Oil in normal day to day movements are not overly correlated. They do not move tick for tick or take a lead from one another as strongly as the 10yr note and the 30yr bond. However during times of volatility, that correlation can increase and they do start following each other. Additionally, it’s not uncommon to see one market lag behind the other when volatility picks up. Here is a good example…

Trading Gaps with Projected Values

The good thing about correlated markets that open and close at different times is the potential for gap trades. The opening gap will occur when one market makes a decent move while the other is closed. Once that second market opens, you’ll most likely see a gap in the direction that the first market has moved. This article will show you how to project an open and therefore determine if a trading opportunity exists.

Watch the Sky for a Corn Trade

I came across this chart in my travels. It’s quite an interesting one. It shows the relationship between the time a corn crop is planted and the subsequent yield. Contrary to popular thought, it shows early planting (i.e. early April) has little effect on yield, but late planting (i.e. May or after) has a dramatically negative impact.   Chart source: …

Stops Right There

There are a few ways to approach stop orders – and placing them manually. Each have their positive and negatives. Let’s say you’re the market is trading 45/46 (45bid and 46offered). You have your buy stop at 50. Method 1: Hit the offer As soon as the market goes higher and 50 is the best offer, trade out at market. …

The Rolling of the SPI

You may be seeing some large numbers go through Time & Sales this week in SPI. These are positions rolling from March to June expiry. Typically this happens in the week or so leading up to the front month expiry. What you are probably seeing is large numbers going through Time & Sales, but not actually trading. This is 100% …

Market Immunity

Both SPI and bonds hardly moved after it was announced PM Gillard would keep her job today. The last leadership challenge was a positive for the market, although we did then have a leadership change. Still ‘political certainty’ is generally as positive for the market. All in all, it shows how the market can grow immune to things after it …

Rate Cut Probabilities

When discussing upcoming rate cuts, you’ll often hear news services talk of the ‘probability’ of a cut or what the market has factored in. For the Australian market, here is how to calculate the probability. The cash rate futures trades on the SFE settle at the end of the month at a price that equals the average cash rate for …

What are the trading rules you live by?

Here is the answer to the question from Paul Tudor Jones in Market Wizards. Don’t ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don’t have control. For example, I don’t risk significant amounts of money in front of key reports, since that …

One Way to Fix Randomly Wrong Trades

Guy, I am having a tough week. This weird cycle I have since many weeks ago keeps happening and I need to break it. Somehow, I will be up early in the day, then mistakes start happening. I have noticed that nothing is different about my psychology, and my thinking (NO revenge trading etc), but just randomly wrong. What can I do?