Greetings from Peter at www.TradingSmarts.com  You are receiving this Newsletter because you either subscribed to it at my site, or bought one of my many products.  It is e-mailed only to those participants who opted in voluntarily, and is not sent to unwilling partners.  Your e-mail address will never be given away to a third party under any circumstance.  We do not do any third-party advertising.  So, we will not flood you with one offer after another from outside sources.  Thank you for your business and readership!  We value you as a customer!

If you wish to unsubscribe from this Newsletter, or if you would prefer to not receive any further correspondence from us, please see the unsubscribe procedure at the end of this Newsletter.  If you have previously requested to be unsubscribed and removed from our database, but still receive e-mails from us, please try once more to let us know of your intentions.  We do not intentionally ignore your wishes.  Sometimes, things just fall through the cracks.  We try our utmost best to do good business, and appreciate any interest you have had in our products and services. 

The TradingSmarts Newsletter plumbs the profundities of the markets, and issues forth 'piranha' trading strategies.  

Please don’t click away or delete too soon, or you’ll miss my commodity trading rules, currency trading strategy, and stock market successful trading strategies coming up shortly.  Also, you will find my commodity, currency, and stock picks of the month later on in this Newsletter.

You should view this Newsletter while you are connected to the Internet, so that you can see the imbedded charts (if any) and graphics.  It may take a while for the charts to load, if you have a slow connection, so don’t panic. 

Help! I need 463,214 new subscribers by 6:32 am December 17th.  Please feel free to forward this Newsletter to three (or more) of your business associates, colleagues, family members, friends, neighbors, and relatives, and urge them to subscribe by going to www.TradingSmarts.com and accepting the offer when they click away from that page.  Thank you!  You are encouraged to do so by sending this Newsletter along in its entirety, but portions may not be reproduced or disseminated separately, as it is copyright protected.  Thank you for acknowledging this!

Peter’s Rants'n Raves: Do you remember learning in history class about the first man (his name was Roger Bannister) to run a mile in under four minutes? At the time he accomplished this feat, it was thought to be almost impossible.  What you might not remember is that, just weeks after he did it, several others did it too.

Why would this be?  In part, it was because people now believed that they could do it.  Of course, they needed the physical conditioning, but they already had that.  What they lacked, and what Roger gave them, was the belief.

When U. R. Darby's uncle struck gold in Colorado, Darby went to help. His head was filled with dreams of sure-fire riches. And he knew it would be a no-brainer.
 
But, they drilled and drilled with no results. So they sold their mining machinery to a junk dealer, and went back home in defeat. Darby's blue-sky dreams had turned to nightmares. And oh, if only he hadn't bragged so loudly about his venture.
 
Soon came a letter from the junk dealer. He'd gone and hired a mining engineer to look at the mine. The engineer had predicted that the gold vein was just three feet from where Darby had quit drilling. And it was. But not for Darby.

Napoleon Hill told Darby's story in "Think and Grow Rich." Hill revealed that more than 500 of America's most successful men had their greatest success just one step beyond the point where defeat could have overtaken them. "Before success comes in any man's life," Hill wrote, "he is sure to meet with much temporary defeat, and, perhaps, some failure. When defeat overtakes a man, the easiest and most logical thing to do is to quit."

Not only was Darby a total failure. He failed ONLY because he'd given up on the very doorstep of success and wealth.
 
Is that where you are with your trading? Don't quit like Darby just because you don't strike it rich as soon or as effortlessly as you had expected.  
 
Don't quit just three feet from the gold.

YOUR gold is there if you'll methodically persist in following the proven principles for successful trading.

I take a yeoman's approach to my business – meaning lots of hours before I commit my ideas to writing, or make a trade.  The more time you spend in preparation, the more successful you'll be with your own trading.

Quotes of the Month: "Great things are not done by impulse, but by a series
of small things brought together." --- Vincent van Gogh

"Repetition is the mother of skill." --- Anthony Robbins

"I will say this about being an optimist: even when things don't turn out well, you are certain they will get better." --- Frank Hughes

Got Some Success Stories? If you have a story to tell, please let me know, and I’ll publish it right here – in the very next issue.  Don’t be bashful.  Share and share alike.  Share your secrets with my wide audience.  We won’t live long enough to make all the mistakes imaginable in this business.  So, let’s help each other.  I don’t know all the answers.  I am sure you know some real beauts.

For those of you who missed previous issues of this Newsletter, you can read them online by going to: commodity trading rules, currency trading strategy, and stock market successful trading strategies  

If your trading is all foam and no beer, be sure to read my Newsletter on a regular basis.  And, please send me suggestions for things you want to hear about.

Shameless brag time!  Time to toot my own horn!  Let the record speak for itself.  In my last Newsletter – for October – I recommended natural gas as one of my picks in the commodities section.  The week my Newsletter went out, natural gas had the biggest weekly gain in seven months on speculation that colder-than-normal weather in the U.S. the following week would boost demand.

In the same Newsletter, I recommended gold as a short - contrary to the advice given by Bob Hoye at Institutional Advisors.  The day after my Newsletter came out in October, the price of gold nose-dived as the U.S. dollar rebounded.  Gold for December had the biggest one-day drop in six years.  The optimistic employment report from the U.S. government had raised hopes of a strengthening economy.

Up to early October, gold had been on the rise, thanks in part to the struggling greenback.  Gold is bought and sold in U.S. dollars, so weakness in the currency encourages investors overseas to buy gold.  The reverse holds true with a stronger dollar, which drives them away.

Want to know where gold is going now?  Just follow this link: commodity trading rules

Again, in my October Newsletter, I recommended shorting cotton.  It has since dropped from 86.00 to 70.09.

In my August Newsletter, which came out August 9, I indicated that corn, soybeans, and soybean oil were all set to make a move, and that copper and silver were looking vulnerable.  Tuesday, three days later, corn futures in Chicago had their biggest gain in four years.  Soybeans and soybean oil also rose.

Further, copper prices had their biggest drop in more than four months. 

In my May Newsletter, I said the following about Kansas Wheat: "According to my interpretation of recent COT data and research as of April 26, 2003, Kansas (KCBT) Wheat is shaping up as a good buy. The commercial traders are extremely long with their positions, whereas the big and small specs. are equally short. This type of extreme divergence in sentiment is usually a classic set-up for an upward move."

Well, in my June Newsletter, I reported on the progress of Kansas Wheat: "You may recall in my last newsletter (May) that I recommended Kansas Wheat. Take a look for yourself. It headed north as soon as I pressed enter."  As a matter of fact folks, immediately following the release of my May Newsletter Kansas Wheat shot up  from the 300'0 level to 340'0 in six days!  Spectacular!

On September 2, I recommended the euro. as a position trade.  It netted US$8,000 per lot by the end of that month for anybody who cared to listen.

In my September Newsletter, I made a call on market direction: "Up until April/04, with a correction along the way, and then new market lows after April/04. This seems to be supported by Elliott Wave Theory."  So far so good, although the market could continue to be robust right through to November.  But, we'll keep tabs on it month-by-month.

My stock picks have done alright too, due in part to a buoyant market.

If you don't believe what I am telling you here, you can audit my results by reviewing all of my picks in the back issues of my Newsletter at: commodity trading rules  You'll notice that I didn't just cherry-pick my winners.

So, please take my  picks of the month seriously.  Ka-Ching! 

If you want to hone your trading skills in commodities, currencies, stocks, or markets in general, get the scoop at: commodity trading rules, currency trading strategy, and stock market successful trading strategies  

Trading is definitely where it’s at folks.  It is estimated that Goldman Sachs, Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. have made twice as much money this year from trading as they have from their other activities.

Tops form more slowly than bottoms.  Buy fast/sell or go short slowly.  In up-trending markets, oversold readings last only for brief periods of time, and overbought situations are more dominant.  Conversely, in down-trending markets, overbought readings are of short duration, and oversold conditions are more frequent. 

Overbought/oversold indicators tell you when a market is overbought or oversold, and are best used with trading-range markets.  Markets can remain overbought or oversold for quite some time; so, it is wise to keep an eye on other indicators for evidence of a shift in price direction. 

The identification of bottoms and tops is facilitated by observing price action.  Where price declines and closes down for the day in relation to the previous day, this provides further evidence of a possible bottom – in addition to other clues that may be obvious.  Correspondingly, if price advances and closes up on the day compared to the previous session, this is possible confirmation of a top.

Thanks to Thomas N. Bulkowski, we’re now going to look at an Adam & Adam double bottom (AADB).  “Look for a downward price trend leading to a twin-bottom pattern. The twin-bottom lows should look like they are at or near the same price, say within 4% of each other.  The rise between the two bottoms should be 10% or more.  Time separation between the two lows should be at least three weeks.  Finally, look for two downward price spikes, not rounded turns.  In short, the bottom should look like a sharp, V-shaped double bottom. If there is any doubt, skip it and look for the next pattern.”  And, of course, look for prices to climb above confirmation.

There is also the “W” or “1-2-3” bottom, explained in the “Commodity Trading Rules” section of the May, 2003 edition of this Newsletter.  You can explore that further by going to: commodity trading rules

So, when is market sentiment truly worth watching in relation to bottoms and tops?  According to David Penn, the best time to begin tracking sentiment is when a market appears to be reaching an extreme point – a high or low that seems out of sync with market fundamentals or price action (i.e., a new high during a negative divergence in a key indicator like MACD).

Because sentiment is most clearly read – and most passionately felt – during market extremes, market sentiment is a particularly valuable tool for those market players looking to take contrarian positions vis-à-vis the market.  While it is true that market sentiment can also be helpful in keeping a trader on the right side of the market, it is the contrarian character of sentiment analysis that is often the most telling use of this market information.

Seasoned traders spend an inordinate amount of time proving tops ’n bottoms.  If you would like a free report on the process they go through to nail them bang on, all you have to do is ask: prbain@tradingsmarts.com

Get the drill on trading at: commodity trading rules, currency trading strategy, and stock market successful trading strategies

Patience is probably the single most important attribute of experienced, successful traders.  Beginners are NEVER patient.  They want to ‘do something NOW.’  This is a carry-over from their proactivity in their business and personal lives. In trading, riches often come to those who ‘don’t press enter’ until the time is absolutely right.  Trading is not a race.  It IS about making MONEY, and ENJOYING the process along the way.  Trading is NOT about action and excitement.

To make money in the markets, you should always think in terms of "short term" versus "long term."  You will sit on some positions for a few weeks – or even a month or two.  However, the bulk of your profits on a monthly basis will come from short-term trades.  These may last anywhere from five minutes to two-to-three weeks.  Remember here that you are trading – not investing.  There’s a big difference.  And, the more volatile a market is, the shorter the time frame you can trade it on. 
 
Losses are an inevitable part of this business.  You are not going to make it unless you first come to grips with having losing trades.  The sooner you are out of a losing position, the more quickly you can go on to make winning trades and make back the money you lost.  Remaining in a losing position just keeps you from making money.  As far as account draw-downs are concerned, look at where you stand at the end of each month, each quarter, and each year.  Just make sure you keep making higher highs. 

Price is the number one indicator.  When swing trading, all you should really care about is – where were the previous swing highs and lows, and what was yesterday's high and low?  Are the swings greater to the upside, or to the downside?  Is the market making new highs or lows?  The only technical indicator you really need is price.  Of course, I use four other indicators to complement price, and you can read all about them at: stock market successful trading strategies

  
Bear in mind that a technical indicator, such as those that are basically a derivative of price anyway, just tells you what you already know from looking at a chart – the exception being divergence – where indicators can play a big part.  The key here is to learn how to read a basic chart – like you would sheet music.  Then learn how to read two or three time frames in conjunction with each other.

For example, don’t make a trade off a daily chart without first knowing the technical structure of the weekly.  And, don’t make a trade off a 15-minute time frame in the Forex – without first knowing the technical structure of the hourly chart.  I think you get the point.  In other words, is the market just breaking out of a chart formation?  Or, has it already had multiple swings up, and now makes a lower high?

Stick with the basics.  Where are support and resistance levels, and what is the trend?  I talk a lot about support and resistance in my book, which you can get a copy of at: stock market successful trading strategies  It comes with my proprietary program that automatically calculates buy/sell points for you.

Learn to process these components on two-to-three different time frames.   
 
Don’t try to predict how far a market will go to the upside or the downside.  It will ALWAYS go further then you think it will.   

And lastly, In terms of technical analysis, you won’t find much difference between trading currencies, futures, or stocks.  Stocks are more difficult to short than futures, because you need to borrow stock and wait for an up-tick (except in Canada).  Such is not the case when you are shorting currencies or futures.  With stocks, you need to take into account the influence of general market direction.  If you buy a stock and you are on the wrong side of market direction, you are probably going to lose money.  So, you have to correctly forecast the direction of the stock and the direction of the market at the same time.

To conclude, optimum performance in trading can only truly be achieved when 'all of you' is in it, and you're doing the right things really well.  Just going through the motions in trading is so mediocre, and won't cut it.  Don't just tolerate it ... get far enough into it, so that you don't fall out of it!

You will achieve results with your trading in direct proportion to the effectiveness of the effort you put into it, not just the effort alone.  Do not confuse activity with results.

Credits: Linda Raschke (courtesy Optionetics)

Have a great day after you digest this one, courtesy the International Herald Tribune, Sarasota, Florida: The Methuselah of investment mavens, John Templeton, 92, says we should all get out of U. S. stocks, the U. S. dollar, and 'excess' residential real estate.

Templeton sees the dollar falling 40% against other major currencies. This, in turn, will lead the nation's major creditors – notably Japan and China – to dump their U. S. bonds. Interest rates will rise, and a long period of stagflation will ensue.

Templeton was still sharp in 1999 at age 88. While the financial industry hacks were urging everybody buy, buy, buy more tech stocks, Templeton was warning that the bubble would soon burst. And, so it did.

And who, save perhaps John Templeton, is old enough to recall what happened to housing in the 1930s? In 1933, during the fourth year of the Great Depression, the U.S. was in the midst of a housing crisis, with housing starts at a measly 10% of where they were at in 1925. Almost half of all mortgage debt was in default. During the 1930s, housing prices collapsed nationwide by roughly 80%.

In the meantime, while you are digesting the above news, why not try currency trading on-line at the Forex? Why not? Sure, give it a whirl. This is something you can do at home. Perfect for the millions of people who have lost their jobs since the "jobless" recovery began. Be sure to read the next section below.

You will find the whole shebang on trading in my book by clicking here: stock market successful trading strategies

“Got some marketing pizzazz in you?” – If you have a flair for marketing, and would like to help me grow my business, drop me a line: prbain@tradingsmarts.com  I am always looking for people who love the Forex, and would like to earn some extra cash on the side by running a SOHO business in their spare time, that has exciting revenue potential.  But, I'll warn you.  You must be “as hungry as a pit bull on a pork chop” to do this!  No couch potatoes please.  We will even help you set up your own Web site.     

This section is all about my own personal currency trading strategy as it relates to the Forex market.

With the Forex, there is no such thing as a specialist firm acting as a market maker – as is the case in the stock world.  Being an OTC all-electronic model, there are NO execution costs, and gaps between bids and offers have declined.  And, get this … there are absolutely NO commissions.  That’s not a typo.

"I have been very happy to see what you mean when you say Forex is pure TA. It's true! ... and being a "purely technical" trader, I feel like a little kid in a candy store [ha, that remark reminds me of a testimonial you posted!]. My index trading friends do not even want to hear about Forex ... they think I'm crazy to want to trade with 100:1 leverage. I just say ... well, stops do work regardless of the vehicle you're trading ... so to me the leverage is great! They are also used to so much market manipulation that they don't even know what pure TA is anymore ... nor can they conceive that all mkts. are not like the spx! Oh well, to each her/his own! (Victoria Keeling)

Risky you say?  Not if you use my system, and use tight stops.  Also, please keep in mind – worst case scenario – there is an automatic margin call if the client/trader's equity falls below 10%; so, there is no way you can lose all of your money, and no reason why you would need to add funds to your account in the unlikely event something goes wrong.

Trading Tip: One of my customers wrote in to say he believes there is a definite correlation between the direction of the Dow and the FX.  He observes that if the Dow is down, the FX is up – and vice versa.  

You can familiarize yourself with FX Solutions’ Global Trading System by simply practicing trading on their revolutionary platform.  You can obtain real time Forex quotes and charts, use their unique multi-level stop loss and profit function, and much, much, more.  In addition, your demo account is a perfect tool to practice your trading strategies.   You can open such an account by clicking here: currency trading strategy fxsol

In addition to the Global Trading System, they also offer professional G.T.S. charts with FX Solutions' rates at zero cost to their clients. With G.T.S. Forex charting package, you can utilize five different types of charts, including Analytical (Line, Bar, Candlestick), Point and Figure, Kagi, Renko, and Three Line Break – with nearly 3 dozen customizable formula studies.  Their G.T.S. charts are fully Windows-based, and designed to minimize computer resource usage and error input, and to ensure maximum security.

It only gets better at FX Solutions. To show FX Solutions’ commitment to improving their charts, they are adding automated trailing stops, the ability to save charts with pre-drawn pivot lines and trendlines, and scaling on the right side of each chart so that you get to choose what it should look like.

In addition, a new version of their Global Trade Station software should be out by the end of December.  It should have a number of new improvements including simple programmability, that will enable features like alarms, etc.  Thanks to Richard E. for this.  It can only get better from here folks.

At FX Solutions, they are constantly looking for ways to make your trading experience more pleasurable – and hopefully more profitable.  If you would like to obtain more information about their Forex products, please visit them on the internet at currency trading strategy fxsol or simply give them a call at + 1 201 345 2210.  Please ask for Thomas, and say I sent you.  When you open your account there, please mention my name (Peter R. Bain) in your application.  Thank you in advance.

At FX Solutions, if you are self-trading a standard account where each lot has a value of 100,000 base currency, you can trade up to 100 lots at a time equaling 10,000,000.00 without any fill/execution problems.  To quote Stefan Fudge, “You will never have a need to trade more than one currency (euro) with that kind of liquidity!  One hundred lots at once is big-time trading.”

Warren Buffett is crying wolf again: The Sage of Omaha said he never bought foreign currency – until now. Trolling the headlines, a recent BBC report tells us that Warren Buffett is worried about the dollar. The U.S. government deficit has "greatly worsened," he said, "to the point that our country's 'net worth,' so to speak, is now being transferred abroad at an alarming rate." The budget deficit this year is nearly twice the previous record.

"Our country [the U.S.] has been behaving like an extraordinarily rich family that possesses an immense farm," Buffett warned in an interview with Fortune magazine. "In order to consume 4% more than we produce – that's the trade deficit – we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own." Continuing his analogy, Buffett goes on to explain that, as foreign ownership of the "farm" grows, income flows out of America in the form of dividends and interest payments.

The U.S. trade deficit with China was a record $11.7 billion in August, according to U.S. government figures cited by Bloomberg. The trade gap with China, which widened to $77 billion in the first 8 months of this year, was a record $103 billion last year. "We have entered the world of negative compounding," laments Warren. "Goodbye pleasure, hello pain."

"I am crying wolf again," Buffett continues, "and this time, I'm backing it with Berkshire Hathaway money. Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency. Since then Berkshire has made significant investments in – and today holds – several currencies." 

"Both as an American and as an investor, I actually hope these commitments prove to be a mistake. Any profits Berkshire might make from currency trading would pale against the losses the company and our shareholders, in other aspects of their lives, would incur from a plunging dollar."

"But as head of Berkshire Hathaway, I am in charge of investing its money in ways that make sense. And my reason for finally putting my money where my mouth has been so long is that our trade deficit has greatly worsened, to the point that our country's 'net worth,' so to speak, is now being transferred abroad at an alarming rate."

Jimmy Rogers, who is more than a decade away from 80, but who has seen more of the world than most 100-year olds, also advises unloading greenbacks. "If I could tell you all just one thing today, it would be to sell the dollar."

"Artificially low interest rates and rapid credit creation policies set by Alan Greenspan and the Federal Reserve caused the bubble in U.S. stocks of the late '90s.  Now, policies being pursued at the Fed are making the bubble worse.  They are changing it from a stock market bubble to a consumption and housing bubble."

"And when those bubbles burst, it's going to be worse than the stock market bubble, because there are a lot more people that are involved in consumption and housing.  When all these people find out that house prices don't go up forever, with very high credit card debt, there are going to be a lot of angry people."

The BoJ is running out of money.  According to Derek Halpenny, a currency

economist at Bank of Tokyo-Mitsubishi, the BoJ has only Y8,500bn of its diminutive currency left in its foreign exchange fund.  By today's exchange rate of 107, that means the BoJ can continue to support the dollar ... for just 79 more days.

Since August, in an attempt to keep its exports competitive, the Bank of Japan has swapped yen for dollars at the rate of $1 billion per day.  One day two weeks ago, the BoJ bought $9 billion in the currency markets, pushing the greenback up from 3-year lows against the Yen.

And ... get this ...  The first six months to September 30 was the BoJ's first loss in 32 years.  Wow!  The loss was attributed partly to losses on its large holdings of foreign government – mainly U.S. Treasury – bonds.  The BoJ has been intervening heavily in the foreign exchange markets to stem the appreciation of the yen.  It has been the biggest foreign buyer of U.S. Treasury and quasi-sovereign agency bonds.  It has ploughed the bulk of the dollars gained through currency interventions into U.S. government debt, whose performance has been weak, and whose value has been eroded as the dollar has fallen.

Dollar Woes:

The US dollar rose over 40% between 1995 and 2002.  Yet, at the same time, America's trade deficit was getting completely out of hand.  Today, it stands at $423 billion – over $1 billion a day pouring out of the country.

The federal budget, meanwhile, has gone from surplus to deficit in record time. That's more than twice the fiscal deficit under the Reagan administration.  And the Reagan deficit was very bad news for the dollar, as it fell by half between 1985 and 1995.

The dollar has already dropped 20% against the euro in the last year.  Look for it to fall further n the next 24 months.

Currencies in Favor:

The euro has made a strong comeback against the dollar, soaring more than 20% in the last 12 months.  And, since Europe has far lower fiscal and trade deficits than the U.S., the prospects for the euro through 2004 are excellent.  Yet, longer term, there are currencies that offer even greater appreciation potential against the U.S. dollar.

These countries have stable, developed economies that are in far better shape than the U.S.  And they have massive amounts of commodities that are quickly rising in value.

Currency Diversification: For decades, the U.S. dollar has been losing value in relation to stronger currencies. For instance, in 1970, a U.S. dollar would purchase approximately 4.5 Swiss francs. In September 2003, the dollar purchased only 1.4 Swiss francs. While U.S. investors can purchase foreign currencies through a few U.S. banks, offshore banks generally offer higher yields, lower fees and lower minimums.

The dollar's slow-motion collapse continued Friday, November 28, as the greenback fell half a percent to a new record low against the euro. The beleaguered U.S. currency briefly touched $1.20 per euro during the shortened New York trading session, before ending the day at $1.198. That's the dollar's lowest level against the euro, since the currency debuted almost five years ago.

Since January of 2002, the dollar has lost 25% of its value against the euro.

If you want to know where the dollar is going from here, please follow this link: currency trading strategy

If you believe there is further weakness in the U.S. dollar, you can take advantage of such bearishness by following this link: currency trading strategy 

The Top Four Currencies YTD Versus the Dollar: The top four currencies year-to-date versus the dollar," writes Chuck Butler in the Daily Pfennig, a daily e-letter he authors for the Everbank World Currency unit, "are, in order, the Aussie, South Africa (up 28%), Canada and New Zealand."

You can invest directly in these currencies safely and easily through Everbank's FDIC-insured World Currency CDs.  Call Chuck Butler directly at 800.926.4922, or follow the link below: http://www.everbank.com/main.aspaffid=eb&idpage=pro_wc&referID=11570

FX Solutions is now accepting electronic payment using PayPal service. It is the fastest and easiest way of funding your currency trading account at FX Solutions. For more information about PayPal service, please click here.

Benefits of Using Electronic Payment

·         PayPal accepts major credit cards and e-checks.

·         Supports payments in U.S. Dollars, Pounds Sterling, Euros, Canadian Dollars, and Yen.

·         Payments received and cleared through PayPal are immediately added to clients' accounts.

Regarding the new NFA margin requirements Effective December 1, 2003: It means that now your equity must always be greater than your used margin while in a trade.  Thanks to George C. Smith for this interpretation.

Holiday Promotion Details:

New Accounts
Open a new account for $3000 or more, receive the $250 bonus.

OR

Existing Accounts
Add $3000 to an existing account, and receive the $250 bonus.

For those in the U.S. with investor status (not full-time traders): The IRS taxes profits from the Forex at 60/40 (60% long term capital gains, and 40% short term capital gains), which averages to a high rate of 22%.  Capital losses are limited to $3,000 per year.  Again, thanks to George C. Smith for this.

For information on FX Solutions' mini accounts, free news service, Advanced Margin Watch, Pending Orders Report, and how to derive the OHLC from FX Solutions, please go to the October/03 copy of this Newsletter by clicking here: currency trading strategy 

For a discussion on combining chart pattern recognition with pivot point analysis, please go to: currency trading strategy 

Bonds and the U.S. dollar are probably the two best shorts in the U.S. financial markets today.  Both assets have struggled mightily throughout 2003.  

Hot Commodities

Feeling lucky?  Huge returns only come from brave actions.

According to my interpretation of the latest commitments of traders data, the following commodities futures represent good trading opportunities to the long side: natural gas and sugar.

Unleaded gas is a good short candidate.

Traders, trading these commodities at absurd prices, are practically giving their money away. Why not take it? You will be doing God's own work ... helping to teach valuable moral lessons to those who need them.  You might also be paid well in the process.

Please adhere to the 11 commodity trading rules outlined in the May/03 edition of this Newsletter.  You can read it by going to: commodity trading rules

Caution

Be sure to observe the rules around trading active contract months – i.e., open interest and volume.  FutureSource.com is a good “source” of such information.  That was all explained in my May issue of this Newsletter.  You can go there by clicking here: commodity trading rules 0503   

MACD is a good indicator to help you trade commodities.  You can read all about it at: commodity trading rules

My book was originally inspired by commodities futures, and the profit potential they stood for.  You too can get your very own copy at: commodity trading rules

Hot Currencies

The four major pairs (EUR/USD, USD/JPY, GBP/USD, USD/CHF) are always hot – each and every day of the week.  That never changes from session to session.  That’s the nice thing about trading currencies on the Forex.  You only have to worry about four entities, rather than 7,800 stocks, or 72 commodities.  Of course, you can get the latest at: currency trading strategy

Hot Stocks and Real Gems

With the market doing quite nicely, traders are piling in.  But, not SO fast.

In their rush to "do something," many of them are simply trading the WRONG stocks.

SO, trade only the very best marquee stocks, and play it safe … with this pared-down list of 12 cult hotties I have ferreted out for you, after wading through all the gobbledygook.  This is not just some ragtag collection.  No “dead man walking” stocks here: 

Ford (F/NYSE)

GM (GM/NYSE)

ADI (ADI/NYSE): Makes chips for cell phones and various electronics.

EMC (EMC/NYSE)

Heinz (HNZ/NYSE)

Lucent (LU/NYSE): Telecommunications equipment maker

Tiffany (TIF/NYSE): Upscale jewelry store

Brinks (BCO/NYSE)

Cooper (COO/NYSE): Manufactures high-margin specialty contact lenses

Radioshack (RSH/NYSE): Retails consumer electronics products.

Newmont Mining (NEM/NYSE): The world’s biggest gold miner.

Corinthian Colleges (COCO/NASDAQ): One of the largest providers of post-secondary education for profit in the U.S.

Trading Techniques

No Hail Mary passes or fancy knee-jerk gizmos here … just stuff that rocks – but, even Muhammad Ali lost a few fights.  Say “Hasta La Vista” to bad trades.  Hit the “sweet spot” of trading successes with these trading tips, and don’t forget that almighty tight …

Don’t be condemned to repeat past mistakes.  Everyone knows how to buy, but few people know how to sell.  When you are trading momentum stocks, where you are dealing with hairy-fairy fundamentals, that’s perfectly okay, so long as you have an exit strategy in mind – worked out on paper before you press enter.  Don’t just gloss over the following information.  Please study it in detail.

For stocks: Please refer to section 7 of the July/03 newsletter: stock market successful trading strategies 0703

If you would like a “free” copy of my special report on trading stocks the way the Big Dogs do, just drop me a line: prbain@tradingsmarts.com

For information on shorting stocks, please follow this link: stock market successful trading strategies

For currencies: Please see the Forex Section in the August/03 Newsletter: currency trading strategy 0803 and please be sure to read the entire newsletter for April/03: currency trading strategy 0403

For information on FX Solutions’ hedging, momentum, and statistical charting, as reported in the last Newsletter – for October – please go to that Newsletter by clicking here:  currency trading strategy 1003  

Thanks to Mike Clements for this: Your stop can be blown through if price moves 50 pips in one second, as it did Friday morning (October 3, 2003), after the favorable announcement about the U.S. job situation.  CBFX, for example, will give you the first available price, but it might be 30 pips past your stop.  However, according to CBFX, ninety per cent of the time a stop gets filled at the price you specified.  Just something to think about – and reason enough to keep an ear open for newsworthy news events – like job reports that have a direct bearing on where the economy is going – and the U.S. dollar. 

For commodities: Please go to the May/03 Newsletter: commodity trading rules 0503  Also, please visit the June/03 edition: commodity trading rules 0603  And, the September/03 issue: commodity trading rules 0903

For information on when to cut and run in a commodities trade, the meaning and use of the 200-day moving average, the purpose of trendlines, the Relative Strength Index indicator, and the “4-9-18 Formula,” please refer to the last edition of this Newsletter by going to: commodity trading rules, currency trading strategy, and stock market successful trading strategies 1003

For more information on the role commitments of traders data plays in trading commodities, please follow this link: commodity trading rules 

This just in - for conservative traders: “Trade markets that are just beginning to establish a solid trend. The risk for high volatility (and bigger losses) is lower when a trend is in its early stages, as opposed to when a trend is mature, and higher volatility is more likely. Also, the lack of high volatility at higher price levels favors the bulls and does not warn of any topping process.” Thanks to Jim Wyckoff for this.

Just some of the many trading gems you will find at: commodity trading rules, currency trading strategy, and stock market successful trading strategies

The level of volatility can be determined by looking at a chart of the VIX (the volatility index from the Chicago Board Options Exchange).  Please refer to the VIX commentary at: stock market successful trading strategies

According to Tom Gentile, when the overall market volatility is high, you should consider strategies involving time spreads, in which you would profit from a trade in the shortest amount of time decay possible (as in butterfly, calendar, and credit spreads).  Implied volatility is a component of time value in an option.  When it is high, the time values of options increase.  When it is low, there's very little time value to consider.  In such a case, you would probably want to consider purchasing options either as calls and puts, or as debit spreads, straddles, and strangles.

Here is a sample list of various options strategies you could employ to match the degree of volatility.  As you learn new strategies and master them, you could add them to the matrix.

Open interest is defined as the number of open contracts of a given option series.  An open contract is one that is not closed, exercised, or expired.  One unit of open interest entails two parties: a buyer (long) and a seller (short).  Open interest increases when a buyer opens a long position, and a seller opens a short position – at the same time.  Open interest decreases when a buyer sells/closes a long position, and a seller closes/covers a short position – at the same time.

Options normally expire on the third Friday of the month.  A number of options series expire on this day, including futures, index, and stock options.  Options trading is most active during this period.  Accordingly, option expiration affects market movements.

 
Certain months of the year tend to have higher open interest because longer-term options are available.  These months include January, April, July, and especially October, which is when multi-year options expire.  Price movements near the expiration of these months tend to be more volatile.

Thanks to John Boere for this.

My book addresses commodities, currencies, market indexes, stocks – and, of course, options too.  It’s all waiting for you with just one mouse click at: commodity trading rules, currency trading strategy, and stock market successful trading strategies  

Good News for a Change: The U.S. economy is accelerating at a fair clip. On October 30, the Bureau of Economic Analysis reported that the economy grew at a staggering 8.2% annual pace for the 3rd quarter – its strongest growth in almost 20 years, far outstripping annualized growth of about 0.9% in Germany.  It's the fastest pace for the economy since the first quarter of 1984, raising the possibility that the Federal Reserve may have to raise interest rates as early as the first half of next year. 

This update is continued at: stock market successful trading strategies  Please read the entire article, as Buffett, Soros and Templeton spill their guts on where the market is going from here.

The latest market stats. – as at December 1/03:
 

Put/Call Ratio: .54 (For an explanation of the Put/Call Ratio, please click here: stock market successful trading strategies)

$VIX Volatility Index (a.k.a. the Wall Street's market fear gauge): 16.43 (For an explanation of the VIX Indicator, please click here: stock market successful trading strategies)

$TICK: 427 - The New York Stock Exchange (NYSE) this indicator, which measures up-ticks verses down-ticks on the NYSE.  This statistic summarizes the number of stocks that are increasing in price, versus those that are decreasing in price.  Readings above 1,400 are rare.  A spike in TICK to that level and beyond is a sign of aggressive buying, and helps to explain a rally that helps push stocks from negative to positive territory. 

NYSE/DOW Crash Index:  4 (invested)

NASDAQ 100/S&P 500 Crash Index:  6 & -2 respectively (invested) – In distribution mode (A buy occurs when an index goes to a +6 from a sell, or a crash alert status.  A sell occurs when an index goes to a -6, and a crash alert occurs when an index hits -10.)

NYSE Advancing/Declining Issues:  21983.00 (lower than September’s reading, which was the highest of June, July and August)

COT (Commitments of Traders) – Commercial traders net positions

DJIA – Neutral

NASDAQ 100 Stock Index – Funds very short; commercials not so

S&P 500 Stock Index –  Funds very short; comm./specs. neutral

Want to know why the market keeps going up and up at times for no apparent reason?  Please follow this link to find out: stock market successful trading strategies

Top performance. Many of the best-performing investments in the world are not in the U.S. Take Man-AHL Diversified PLC, for instance, an offshore fund domiciled in Ireland that's gained an average of +21.5% per annum since 1996 – right through the worst bear market since the 1930s! And, it's not the only top-performing offshore investment. Indeed, every one of the 500 non-U.S. managed mutual funds tracked by Business Week's quarterly Offshore Funds Scorecard finished the quarter ending June 30 with positive returns. And more than 96% of them turned in double-digit gains.  

If there is any part of this Newsletter than you cannot see because of the e-mail program you are using, please view it online at: commodity trading rules, currency trading strategy, and stock market successful trading strategies

Or, please send me an e-mail, and I’ll send you a PDF version of the Newsletter: prbain@tradingsmarts.com  It could be that you are not online while viewing the Newsletter, as we pull the charts and graphics down from our site – to save having to send them out with each e-mail copy of the Newsletter.  

If you don’t already have a copy of my internationally-acclaimed book “How to Trade Like a Pro in One Hour” and associated software, you can get your very own copies for the price of dinner and a bad movie!  Get the whole enchilada at: commodity trading rules, currency trading strategy, and stock market successful trading strategies

The book and program are for traders who trade any market, not just the Forex.

Please feel free to send your inquiries, be they comments, feedback, questions or suggestions, to me at: prbain@tradingsmarts.com

If you have any ideas or suggestions for future articles, they would be most welcome.  I especially invite any trading tips, strategies or techniques you may have that you wish to bring forward, and share with others.  If I include them in future editions of this Newsletter, you will most certainly get proper credit and recognition.  You will also receive a free bonus from me for your time and trouble.    

Happy trades to you, and here’s to your health, happiness and good relationships!

Thank you for reading this Newsletter!  Go forth and multiply your income!

Sincerely,

Peter R. Bain
www.TradingSmarts.com

PS: I would be more than glad to put on a seminar in your area, if you could pull together a large enough audience to make it worth my while.

PPS: If you wish to unsubscribe from this newsletter, please send an e-mail to webmaster@tradingsmarts.com (Brad Du Preez, MCSE) 

Merry Christmas and Happy New Year!

Disclaimer:  I do not promote or make any promises about short-term predictions or daring speculations.

There is a risk to investing and trading, so please use money you have set aside for that purpose, and guard it with your life by using good money management practices and principles, and good trading technique.  Please don’t invest or trade money you can ill afford to lose. 

I am not responsible for your decisions, and subsequent actions, based on the information contained in this Newsletter. 

Please note: The Securities Commission in the jurisdiction where I live and work precludes me from giving you trading advice or recommendations when it comes to any form of security.  So, I present my picks for educational and informational purposes only, and do not personally benefit from their inclusion in this Newsletter, or for any other reason.  Nor am I imputing my views to you.  Please proceed at your own risk, should you decide to act upon any of the tradables mentioned in this Newsletter.

E-mail: prbain@tradingsmarts.com
Web site address: www.TradingSmarts.com

Copyright© 2003 by Peter R. Bain/All Rights Reserved