Think Financial Markets - Excellence In Trading Financial Markets

Think Financial Markets - Excellence In Trading Financial Markets

Market Sentiment

It is essential that we have a general feeling of which direction our market may trade on any given day.

To achieve this it is necessary to be aware of how global markets have performed on the previous day as well as during the night.

We measure this sentiment by allocating points to certain global indicies to measure their strength or weakness.

We look firstly to The Dow Jones Index. This index is one of the world’s most influential and as such rates very highly in determining the daily sentiment.

We allocate between 2 pts plus or minus if the overnight movement is less than 50pts or 4pts if over 50pts

The next most important indicator is the SPI200 which is the futures contract covering the Australian markets top 200 stocks and trades almost 24hours per day.

We also allocate between 2 and 4 pts as per the Dow.

Then we add both the Nasdaq and the S&P 500 indicies from the U.S they are allocated points as follows

Nasdaq above /below 30 ,plus or minus 2pts or less than 30, 1pt

S&P 500 above /below 15, plus or minus 2pts or less than 15, 1pt

Next we add the FTSE 100 results from England and the NIKKEI 250 from Japan which are allocated 1pt for a plus or minus result.

The maximum points on our table are 14 and variations of this will gauge bullish or bearish sentiment.

Other very important overnight markets to be taken into consideration when trading the Australian market are firstly the strength or weakness in the Aussie dollar versus the US dollar and we rarely have a good day if the commodity markets have been sold down during the night.


Sunday, January 20, 2008

Continued from Market Pulse 19/01/08 Front Page

If I have said it once, I've said it 100 times, if you can't trade shares successfully for profit, then you have no business trading leveraged instruments such as CFDs, options and warrants.
The recent market falls have highlighted that the majority of the public trade one side of the market, the upside. The majority use these leveraged instruments to do so, failing to fully understand or use the protection benefits these CFDs, options and warrants often give.
Also over the past few weeks you would have seen there is just as much money made trading the downside, than there is trading the upside. According to newspaper reports $136 billion has been lost on the Australian All Ords index in two weeks. Knowing this money just dosen't evaporate, some have made $136 billion in two weeks trading the downside.
When was the last time you purchased a put option/warrant to protect a stock position? When was the last time you used a CFD to short sell a stock? (sell at a high price with the intent to buy back at a lower price).
If you are having trouble understanding what I am on about your probably not alone, but if you use these CFDs, options or warrants to trade the upward side of the market, and are having trouble understanding what I am on about, my guess is you are in a spot of bother with the recent market events.
If you would like to discuss this further, leave a comment by clicking on the word "comments" (in green) at the bottom of this post or send me an email at thinkfinancial@amnet.net.au
Regards
Anthony
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