Has a new 6-month cycle already started?

Welcome back in my website.

Even if the situation in the main stock indices is somehow confused, I think that a new 6-month cycle is already started from the last bottom of few days ago.

In fact, if I look at both the VIX index and the TMF etf, I see a rounding top.

It corresponds to a new 3-month cycle that started at the beginning of March for these two instruments.

It is impressive that the value of the VIX index has just broken down its previous bottom. This is a bullish signal for the stock market.

The Nikkei index tells the same story as regards its previous top that was broken up.

Sometimes, a new 6-month cycle starts without a previous drawdown. The strength is so great that a great pullback do not takes place before a new trend starts.

It is something rare but it may happen.

I want to have a short report today, because I want to perform a good stock picking.

Therefore, I am busy in these days. I have just explained to my customers what are the stocks that I prefer in my members-only area.

Instead, I will send one free buy signal to my followers in the next few days. I decided to do this every quarter of each year.

Here are my forecast that you should compare with the graphics of the instruments mentioned above.

 

S&P 500 stock index forecast updated on 10th of April 2015S&P 500 stock index forecast updated on 10th of April 2015

 

Nasdaq stock index forecast updated on 10th of April 2015

 

Sensex stock index forecast updated on 10th of April 2015

 

Italian stock index forecast updated on 7th of April 2015

 

I think that it is all for this week. Stay focused in buying some stocks now.

 

The problem with binary options

 

Welcome back in my website.

I want to tell a story to you today. A story about options.

Some weeks ago, a friend of mine said to me that he wanted to learn trading.

He started to look for good instruments to trade in the short term. He considered stocks, currencies, futures etc.

Obviously, he also considered binary options as an opportunity.

Frankly, I had never considered them as an instrument and so I began to study something about them.

They are very appealing because a lot of marketing has been used to launch them. Therefore, are they an effective bargain?

I immediately found out their problem.

What is the problem of binary options? The problem is that the house always wins.

 

Let me make an example.

Suppose that I want to buy 100 $ of a stock. If things go wrong, I will exit with a stop loss of 5% for instance.

If things go right, I will gain a 20% of return (because it is undervalued for instance).

Let me suppose that the probability of this trade is 50%.

What is the edge of this trade?

50% * 20% + 50% * -5% = 7.5%

This means that if I perform such a trade 100 times for instance, my average gain will be 7.5%.

This implies that I will be successful on the long run, because my edge is positive.

This is a good trading system because the report between gains and losses is 4 to 1.

 

What does happen with binary options? What is my edge?

Let us look at the following two images. The first one is an example of a binary option on the cross €/usd and the second one is the meaning of winning or losing on average in this game.

I have found these two examples in a booklet that a broker online offers.

 

binary options problem

 

binary options 2

 

What is the edge of this example that can be used as a general example?

I have to forecast something in the future that I do not know. Therefore, my probabilities to be right are 50%.

If I win, I will win a 75% on my investment and if I lose, I will lose all my money invested.

My edge becomes now:

50%*75 $ + 50% * – 100 $ = -12.5 $

This means that my edge is always negative. It is negative in one trade and in the long rung as well.

This is not trading: this is gambling. It is another thing.

On the basis of this negative edge, new online broker firms have been established in the last 4 years.

When I told these little examples to my friend, he turned to another financial instrument to start his new career as a trader. I am very curious to understand what his final choice will be.

 

What are the teachings of this story?

  1. If something financial is heavily marketed, there is a reason. It may be good or it may be bad and it is up to you to discover it;
  2. Great option traders have made their money by selling options and not by buying options. They have created them from nothing and they have sold them for money. Binary options are not different;
  3. Simple does not mean unsophisticated. I mean that you should consider always simple financial instruments to trade and not complex ones. If they are simple, your control over them increases;
  4. Have always a positive edge. Come on boys and girls…. Trading is a game where you and I fight against great funds. They want that we buy when they are selling their positions and they want that we sell when they want to buy. This is a continuous counter position between them and us. Therefore, there is one way to have a great return on our portfolio: when you lose, you have to loose few dollars and when you gain, you have to gain many dollars. This is your positive edge. It is fundamental to have one edge;
  5. Look not only for a trading system that fits your personality, but look for a financial instrument to trade that you are in confidence with.

 

This is the end of this story.

After putting aside these teachings, I insert my weekly forecasts of the main indices. There is no great novelty respect the previous week. Indices are near the top of this six-month cycle and a distribution has just started. I am waiting for a buy signal of some inverse etfs. There is no signal yet because the distribution phase has not been completed yet. When it is completed, a new trend will start.

 

S&P 500 stock index forecast updated on 3th of April 2015

 

Nasdaq stock index forecast updated on 3th of April 2015

 

Sensex stock index forecast updated on 3th of April 2015

 

Italian stock index forecast updated on 3th of April 2015

 

I think that this is all for this week.

Do not forget to share this post with your friends in social media. They will be happy. You can find all the buttons here below.

Kind regards,

Fredrick

 

The power of new money

Welcome back in my website

The stock market was particularly bad last week. A 30-day cycle finished and a new 30-day cycle has just started probably.

As the FED continues to print money, the stock market keeps on growing.

Look at the chart below… its title may be “the power of new money”.

 

FED M1

 

Due to this fact, my forecast have been modified a little bit, automatically.

The stock market wants to go up again with less strength. I will try to find out good stocks to buy now. However, this is a distribution phase and buying now is very risky. I will perform a very good stock picking session tomorrow to understand if there is some low risk buy stocks worth considering.

Here are my forecasts.

 

S&P 500 stock index forecast updated on 27th of March 2015

 

Nasdaq stock index forecast updated on 27th of March 2015

 

Sensex stock index forecast updated on 27th of March 2015

 

Italian stock index forecast updated on 27th of March 2015

 

They show the willing of the stock market to go up, but with no real conviction. Remember that this is the last 30-day cycle before the end of this important 6-month cycle. So, let us pay attention because everything can happen now.

As you can see, the forecasts of Indian and Italian markets show one scenario and the forecasts of the NASDAQ and the S&P 500 show another scenario. Which of them is correct? I do not know. The stock market will tell us the truth.

However, there is an ugly bar of sell volume in the S&P 500 future. Futures are managed by great funds and they know perfectly what they are doing…

Nevertheless, I do not like it at all. It does not correspond to a bottom. Therefore, I do no consider it a pure buy signal. Something great is about to happen.

 

S&P 500 full future updated on 27th of March 2015

 

That is all for the moment. I will keep under control the stock market and I will inform you.

Do not forget to share this post with your friends in social media. They will be happy. You can find all the buttons here below.

Kind regards,

Fredrick

 

  • Fredrick

    Fredrick

    This is MY PERSONAL and OBJECTIVE point of view about American and Indian stock markets.

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  • STRONG AMERICAN STOCKS – FREE FINANCIAL ADVICE 2014 (FEW DAYS DELAYED)

    Ticker % Gain/loss Current price Buy price Buy date Sell price Sell date
    MNST 8.00 138.28 98.6 22/10/14 106 15/12/14
    ANAC -1.00 56.12 34.5 02/12/14 34 15/12/14
    EQR -1.00 79.73 78.5 15/01/15 77.59 02/02/15
    CEMP 30.00 40.92 28.75 19/02/15 37.5 24/03/15

  • STRONG AMERICAN STOCKS – PAID FINANCIAL ADVICE 2014 (1 MONTH DELAYED)

    Ticker% Gain/lossCurrent priceBuy priceBuy dateSell priceSell date
    AKRX5.0048.9842.720/01/1544.9611/03/15
    IBKR10.0034.283023/01/153326/03/15
    NVAX-6.999.558.0806/02/157.5326/03/15
    FTNT1.0034.5832.7812/02/1533.2011/03/15
    IMKTA-2.0049.524806/03/1547.226/03/15
    DUG-6.9954.355811/03/1554.1420/03/15
    MTSI038.863718/03/153726/03/15
  • MOST UNDERVALUED AMERICAN STOCKS – PAID FINANCIAL ADVICE 2014 (1 MONTH DELAY)

    Ticker % Gain/loss Current price Buy price Buy date Sell price Sell date
    ADT 2.0 36.26 32.85 27/05/14 33.479999999999997 09/07/14

  • STRONG INDIAN STOCKS – FREE FINANCIAL ADVICE 2014 (FEW DAYS DELAYED)

    Ticker % Gain/loss Current price Buy price Buy date Sell price Sell date
    PCJEWELLER.BO -3.00 265.45 248 30/10/14 240 25/11/14
    SKSMICRO.BO -4.00 447.65 469.45 19/01/15 450 27/01/15
    HCLTECH.BO 0 2035.95 2030 19/02/15

  • STRONG INDIAN STOCKS – PAID FINANCIAL ADVICE 2014 (1 MONTH DELAYED)

    Ticker % Gain/loss Current price Buy price Buy date Sell price Sell date
    KPIT.BO -2.00 185.9 215 20/01/15 210 02/02/15
    GDL.BO 5.00 413.6 372 19/01/15 390 05/02/15
    BHARATFORG.BO 18.99 1295.34 1015 19/01/15 1208 26/03/15
    MARICO.BO 2.00 371.6 361 23/01/15 370 16/03/15

  • Undervalued stocks are used to appear two times a year. It is great to buy them!

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  • Federico, l have to say that it's very unusual to come across someone that is as open and honest as you are.
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    Dear Fredrick you are a very serious and reliable person.
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    I just happened upon your site in the last few days and am satisfied with your attempt to communicate. I will continue to follow until I see a noticeable lack of "something" like sound advice, logical remarks and well put sentences. Should I notice what I feel are these and other short comings, I will attempt to email you at this address and share my concerns. I know you want to be a success at this and I support your endeavors. Be patient. Asking us for input today, that's a good idea.

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    Hello Fredrick,
    I happened to bump into your blog and i must tell you that i'm glad i have. I'm an aspiring trader whom wants to develop a trading method like you have since i dont have the time to daytrade....
    I would appreaciated it if you can give me further explanation and i was also wondering if your willing to take me as your apprentice to teach a good strategy like the one you've acquired. I have experience position trading but i need a good foundation like you have. ...
    Thanks in advanced,

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    Hello Fredrick, some time has passed and I wanted to write to you to thank you warmly for your weekly counseling about markets.
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    Bye and thanks again.

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