Final Trading Using Trade Station - Essay Example

? Final Trading Report Using TradeStation Total Number of Words: 5,000 Executive Summary Trading stocks, options, foreign exchange, and futures is totally different from gambling in the sense that the movement of its price levels can be predicted through the use of both fundamental and technical analysis. This report focused on discussing the use of simulation trading through the use of TradeStation trading platform. In relation to the actual simulation trade placed on trade equities/options (i.e. $INDU and DOW), foreign exchange (FOREX) (i.e. USD/JPY and USD/CHF), and futures (i.e. SU14), this report provided a clear rationale on why the trader chose to “buy” or “sell” and/or “put” or “call” in each of the completed trade. In most cases, the use of fundamental analysis alone is not sufficient in terms of enabling the trader to accurately determine where the price level of each trade will be heading. Therefore, each trade decision was made based on both technical and fundamental analysis. Table of Contents Executive Summary ........................................................................................................... 2 Table of Contents ............................................................................................................... 3 1. Introduction ............................................................................................................. 5 2. Trading Logs ........................................................................................................... 5 2.1 Trade Equities/Options ............................................................................. 5 2.1.1 September 4, 2013 ...................................................................... 6 2.1.2 September 5, 2013 ...................................................................... 6 2.1.3 September 10, 2013 ...................................................................... 8 2.2 Foreign Exchange (FOREX) Trading ...................................................... 8 2.2.1 September 4, 2013 .................................................................... 8 2.2.2 September 5, 2013 ..................................................................... 10 2.2.3 September 10, 2013 ..................................................................... 12 2.3 Futures ..................................................................................................... 12 2.3.1 September 5, 2013 .................................................................... 13 2.3.2 September 6, 2013 .................................................................... 13 3 Reflection on Financial and Economic Theory ...................................................... 13 4 Reflection on the Use of Technology .................................................................... 17 5 Conclusion and Recommendations ........................................................................ 18 References ........................................................................................................................... 20 - 23 Appendix I – Entire Day Logs – 9/4/2013........................................................................... 24 Appendix II – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/4/2013........................................................... 25 Appendix III – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/4/2013 ......................................................... 30 Appendix IV – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/5/2013 .......................................................... 32 Appendix V – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/5/2013 .................................................................................... 37 Appendix VI – Order Confirmation, Trend of the Candlesticks, and Order Status of DOW – 9/5/2013 ........................................................................................... 43 Appendix VII – Order Confirmation, Trend of the Candlesticks, and Order Status of A131019C50 – 9/5/2013 ................................................................................ 49 Appendix VIII – Order Confirmation, Trend of the Candlesticks, and Order Status of SU14 – 9/6/2013 ........................................................................................... 51 Appendix IX – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/10/2013 ......................................................... 56 Appendix X –Trend of the Candlesticks and Order Status of DOW – 9/10/2013 ........................................................................................... 60 Appendix XI – Bar and Line Chart ........................................................................................ 63 1. Introduction Over the years, millions of people around the world are gradually becoming dependent on trading as their main source of income. Despite the huge profits that trading can offer to each individual, trading equities, foreign exchange, options, and futures also entails risks of losing money. As an amateur trader, it is necessary to practice trading through the use of a simulator. Due to lack of hands on experience, part of the first week’s trading plan is to familiarize myself with the use of the TradeStation platform. Thereby, limiting the daily trades to one (1) contract only. The second week’s goal of this trading plan is to make at least 1 out of 5 profitable trades. As soon as I manage to earn profit consistently on a daily basis, the number of profitable trades is expected to increase from one (1) to two (2) for each day trade. The main purpose of this study is to expose oneself and be familiarized with the use of the TradeStation platform. As part of being exposed to the use of online trading platform, this report aims to enhance my knowledge and skills particularly with regards to the application of technical and fundamental theories when analyzing each trade. 2. Trading Logs 2.1 Trade Equities/Options Trading equities is the act of buying and selling some shares of stocks of public companies from one of the major stock exchanges such as the Bombay Stock Exchange (^BSESN) in India, Dow Jones Industrial Average (^DJI) and New York Stock Exchange (^NYSE) in the United States, Frankfurt Stock Exchange (^GDAXI) in Germany, Hang Seng Index (^HSI) in Hong Kong, Nikkei 225 Index (^N225) or Tokyo Stock Exchange (TSE) in Japan, the London Stock Exchange (^FTSE) in Great Britain, and/or Toronto Stock Exchange (TSX) in Canada (Poitras, 2012, p. 5; Ehrhardt and Brigham, 2011, pp. 713 – 714; Brigham and Daves, 2010, p. 967). On the other hand, option trading is all about trading complex securities such as bonds, mutual funds, and stocks. Although trading options can give higher return on the part of the trader, option trading entails higher risks for losses as compared to trading stocks. 2.1.1 September 4, 2013 Using account name SIM753723M, the trader decided to trade $INDU stock market sometime during the first week of trading. Due to lack of experience, this particular account was losing some money. To learn more about the main reason that has triggered the significant decrease in the stock price of $INDU, the trader decided to do some research on this matter. Based on Dow Jones Industrial Average, $INDU closed at 14,946.46 last August 26, 2013 was down to 14,798.66 as of September 3, 2013 (1:44 PM CT) (Farrell, 2013; Morning Star, 2013). In fact, $INDU was reported to have been declining by 4.5% last August 2013 due to the on-going tension over Syria (fxstreet.com, 2013; Kerr, 2013; McGee, 2013). To counteract the losses from the $INDU trades, the trader decided to sell equities under NDAQ. However, several orders were rejected due to “invalid stop price”, “failure to route orders”, and “cut-off time”. (See Appendix I – Entire Day Logs on page 24) 2.1.2 September 5, 2013 Related to trading options, “put option” means that the owner has the right to sell stocks, securities, and bonds within a specific time frame whereas “call option” means that the owner has the right to buy shares (Fontanills, Gentile and Cawood, 2001, p. 142). To learn more about option trading, the trader decided to trade on Dow Chemical Company (DOW) on the 5th of September 2013. DOW has been doing quite well the entire day. Since the long-term trend shows a bullish pattern, the trader decided to buy 1,000 shares of stocks with limit price and stock price at 39.00. However, this particular order expired even before the trader was able to record the profit/loss for the day. If this particular order did not expire, the trader will be more on the losing side because the candlestick trend shows a bearish pattern right after this particular trade was made. In fact, the market prices of DOW went down to as low as 37.76 during the same day. (See Appendix VI – Order Confirmation, Trend of the Candlesticks, and Order Status of DOW – 9/5/2013 on pages 43 to 48) At the market price of 37.80, another trade order was placed on buying position for 10,000 shares of stocks for DOW with limit price and stop limit at 37.88 (See order number 291069461). With a realized loss of 62.00, this particular trade order was filled after an hour and 38 minutes. One of the possible reasons behind the realized loss for this particular order is due to the fact that the trader allowed only 0.08 pips difference between the market price and the stop price. Usually, online trading companies such as the TradeStation earns a portion from each trader’s trade. This particular realized loss could have been prevented if the trader chose a limit price and stop price of at least 10 pips higher (buying) or lower (selling) than the market price. The highest trading price for DOW was 38.60. In case the limit price and stop price was set at around 38.53 level, there was a higher chance wherein the trader could have earned a profit of 6,450.00 (unrealized profit) (See Appendix – VI – Order Confirmation, Trend of the Candlesticks, and Order Status of DOW – 9/5/2013 on pages 43 to 48) On the same day, the trader decided to go for a “buy to open” option for 1,000 A131019C50 with limit price and stop price at 0.65. However, the first trading attempt was rejected for the reason that the stop price should be above the market price. After increasing the limit price and stop price from 0.64 to 0.74, the option trade was finally accepted. The share prices of A131019C50 were slow to move. This explains why traders who invest on a single stock usually investing on a long-term periods. (See Appendix VII – Order Confirmation, Trend of the Candlesticks, and Order Status of A131019C50 – 9/5/2013 on pages 49 to 50) 2.1.3 September 10, 2013 Last September 5, 2013, the trader placed a buying position on trade order number 291069461 for 10,000 shares of stocks of DOW set with limit price and stop limit at 37.88. Since the market price of DOW increased from 37.80 last September 5, 2013 up to 39.77 in September 10, 2013, the trader had an unrealized profit of $18,820.00. In case the trader placed a long-term trade on this particular order, the trader could have earned a total profit of $18,820.00. At the time the trader decided to close the trading order, the trader managed to earn a realized profit of $18,238.00. (See Appendix X –Trend of the Candlesticks and Order Status of DOW – 9/10/2013 on pages 60 to 62) 2.2 Foreign Exchange (FOREX) Trading Foreign Exchange (FOREX) is all about the trading of currencies (Exchanges Journal, 2013a). Unlike in trade equities, the players in FOREX market are the international banks, the central banks, people who speculate the currencies, companies, governments, institutional investors, and financial institutions among others (Siddaiah, 2010, p. 5; Rosensreich, 2005, p. 157). In most cases, foreign currencies are being traded in pairs such as: USD/CAD, EUR/USD, USD/CHF, GBP/USD, AUD/USD, and USD/JPY among others (Rosensreich, 2005, p. 157). 2.2.1 September 4, 2013 A colleague who works in a FOREX company had once mentioned that the movement in trading USD/JPY is much faster than the other currencies. On the 4th of September 2013, using account name SIM753725X, the trader decided to place a buying order for USD/JPY with a limit price of 99.150 and a stop price at 99.000. This particular trading log was rejected because the stop price the trader encoded was more than the market price (See Order number 290901622). Using a 5 minutes interval, the chart was compressed between September 3 and 4, 2013. The graph shows that since September 3, 2013 (11:00 a.m.), the candlestick trend reflects a “bearish” or downward candlestick pattern. Therefore, the trader decided to change the next order from “buying” to “selling” position which was finally accepted in the simulated trading platform (See Order number 290901622). Contrary to what the trader expected to happen, the first order for the day was filled after an hour and 14 minutes with unrealized loss of ?950.00. Eventually, the unrealized loss went up to as much as ?2,200.00 (US$22.09) at around 16:55 of the same day for the reason that a stop limit was placed at 99.620 (a figure that was set too close to the upper limit) of the second trade. Instead of gaining more profit from this particular order, the trader ended up experiencing a much higher unrealized losses. To test whether or not the movement in trading USD/JPY is much faster than the other currencies, the trader placed another order buying 10,000 USD/CHF at 0.92990 limit during the same day. The reason why the trader decided to purchase USD/CHF is because of the “bullish” or upward candlestick trend. Although order number 290915051 was gaining profit (USD/CHF), the order status of particular online trading order “expired” at around 15:00. This made the trader unable to record the realized/unrealized profit/loss. (See Appendix I – Entire Day Logs on page 24; Appendix II – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/4/2013 on pages 25 to 29; See Appendix III – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/4/2013 on pages 30 to 31) 2.2.2 September 5, 2013 On the 4th of September 2013, Kerr (2013) reported that USD/JPY is in the middle of a resistance between 99.45/65 area and its failure to “overcome 99.95 by the end of this week means that consolidation in USD/JPY will persist” a little longer. On the other hand, Rodriguez (2013) reported that there will be a “large USD/JPY breakout” pretty soon. Basically, the term “breakout” means that there will be an increased volatility or a sudden change in the price movement. The problem with breakouts in FOREX trading is that the volatility of the prices “has no directional bias” (Ponsi, 2007, p. 13-3). It means that it can be very difficult to predict where the next movement will be (i.e. bearish or bullish pattern). Also reported back in September 4, 2013, Lewis (2013) forecasted that there is a higher chance wherein the USD/JPY would hit “as high as 101.50 in the short term, and quite possibly much higher over a longer-term”. In most cases, indecision can make the currencies move within a well-defined pattern. When this happens, there is a higher risk wherein the traders will not be able to earn short-term profit. Even though Kerr (2013) reported that there is a chance wherein the USD/JPY could remain within the identified levels of support or resistance, the candlestick patterns at the time the simulated trade was made was bullish. Furthermore, the BOJ reported that USD/JPY is expected to have a resistance at 100.00 as of September 4, 2013 (fxstreet.com, 2013). For this reason, at 99.685 level, the trader decided to buy 10,000 USD/JPY. At first, the limit price and stop price was set below the current market price at 99.40. Therefore, the first trading attempt was rejected. Immediately, the second attempt to buy 10,000 USD/JPY was set with a limit price and stop price at 99.95 which was eventually accepted. As a common practice, traders should penetrate the FOREX market “either at the price ceiling or the floor price” (Garner, 2012, p. 177). Doing so will enable the trader to maximize their profit potential. Today’s trade was made at the price of 99.685. Because of the cut-off time, this particular day trade order expired (See order number 291019920). In case this particular trade did not expire, the buying decision for 10,000 USD/JPY at 99.40 seems to be highly profitable because the market price of this particular currency pair went up as high as 100.167 during the same day. To benefit from the market forecast made by Lewis (2013), another trade order was made on USD/JPY with limit price and stop price at 100.100 (See order number 291065612). After 5 hours and 17 minutes, the market price of USD/JPY increased from 99.769 to 100.134. Because of the differences between the limit price and stop price at 100.100 as compared to the highest price hit at 100.134, there was an unrealized loss of ?1,160.00 on this particular trading order. An hour before the trading cut-off, the market price of USD/JPY closed at 100.119 level. This made the unrealized profit/loss amounted to ?200.00. (See Appendix IV – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/5/2013 on pages 32 to 36) Another trade was placed on USD/CHF during the same day (See order number 291070844). Based on technical analysis, the market price of USD/CHF suddenly went down from the 0.93837 level down to 0.9373. To take advantage of the market volatility, another trade order was placed on 10,000 USD/CHF with limit price and stop price at 0.93700. This particular trade was expected to earn profits because the candlestick pattern has shown a bearish pattern. Few minutes after the trade, the market price of USD/CHF went down and close to as low as 0.93621 which is the lowest in the entire day trade. (See Appendix V – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/5/2013 on pages 37 to 42) In general, the trade market speculators can significantly affect the movements of the market prices of currency pairs. This explains why the market prices of USD/CHF suddenly rose from 0.92621 which is the lowest point of the day up to 0.94540. At the market price of 0.93871, the trader decided to reverse the trading position from selling to buying (See order number 291073164). This particular order was filled around 8:19 pm. At the end of the day trade, the trader had a realized loss amounting to CHF39.70 or US$42.15. (See Appendix V – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/5/2013 on pages 37 to 42) 2.2.3 September 10, 2013 The candlestick chart of USDJPY shows a bullish pattern since 2:04 p.m. today. The price level of USDJPY has increased from 99.65 (2:04 p.m.) up to 100.316 (8:05 p.m.). For this reason, the trader decided to take a buying position with limit price and stop price set at 105.00 for USDJPY today (See order number 291503676). In the middle of the day, the trader managed to earn a profit of ?3,110.00. At the time the trader closed the trading order, the trader managed to earn a realized profit of ?2,720.00. (See Appendix IX – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/10/2013 on pages 56 to 59) 2.3 Futures Futures are actually contracts based on indexes that are composed of stocks (Duarte, 2008, p. 39). A good example of futures is the S&P 500 which is composed of a total of 500 commonly traded stocks, the Nasdaq-100 index, Russell 1000 and 2000 indexes, S&P MidCap 400, Dow Jones Industrial Average, and the Single-Stock Futures (Lind-Waldock, 2005, pp. 119 – 121). In most cases, traders trade in either futures or options as a way to hedge or protect their security in their portfolio (Duarte, 2008). 2.3.1 September 5, 2013 The first attempt to trade futures was made on the 5th of September 2013. However, the trader being an amateur failed to locate futures indexes even before the cut-off in trading time. 2.3.2 September 6, 2013 On the 6th of September, a selling position was made on SU14 with the limit price and stop price set at 1190. The market price of SU14 shares fell from 1256 5/8 down to 1234 3/8 and 1214 2/8 prior to the time the trade order was made. It means that the rationale for choosing the selling position is because of the bearish pattern as shown in the chart. After the 4th attempt, the trade order was finally accepted. Among the reasons why the initial three (3) place orders were rejected was because of the use of “unsupported futures symbol” and placing order more than the available purchasing power of $200,000.00. Due to the limitations in the available fund, only 10 shares of SU14 were purposely made on order number 29115672. (See Appendix VIII – Order Confirmation, Trend of the Candlesticks, and Order Status of SU14 – 9/6/2013 on pages 51 to 55) 3. Reflection on Financial and Economic Theory Trading is totally different from gambling. For instance, when trading foreign exchange, movements in the currencies are usually triggered by a wide-range of external pressures which are commonly related to political and economic factors like the interest rates, movements in prices, international trade, and deflation (Exchanges Journal, 2013b). It means that the on-going fluctuations in the FOREX market or stock market do not happen without any reason. Therefore, one can say that the risk behind losing in FOREX trading or the stock market trading is somehow predictable and highly controllable. The same is true when trading stocks, options, and futures. Usually, negative external pressures caused by political conflict or instability, security threats, and/or the presence of natural calamities can adversely affect the short-term movements of stocks, options, and futures. For this reason, traders are expected to pay close attention to any political, economic, and environmental changes that will take place in a country or between two or more countries. When trading trade equities, foreign exchange, binary options, or futures, it is important for traders to avoid trading with the use of gut feel. To increase the chances of winning a trade, the trader should be knowledgeable when it comes to combining the use of fundamental and technical theories at all times. It means that the trader should be aware of the economic, environmental, security, and political factors that can significantly affect the movements of prices in trades of stocks, options, foreign exchange, and futures. As mentioned earlier, situations wherein the security of a nation is at risk of a civil war or a terrorist attack can adversely affect trade. In the case of FOREX, the currency of the affected country is more likely to depreciate. In the case of the stock market, the stock prices of companies situated in the affected country is more likely to depreciate. A good example is the on-going civil war in Syria. Because of civil war in Syria, the stock market prices or equities quoted by Dow Jones Industrial Average ($INDU) has been declining enormously since August 2013 (fxstreet.com, 2013; Kerr, 2013; McGee, 2013). Despite the adverse effects of the on-going civil war in Syria on the US stock market and currencies, the trader decided to take a buying position for USD/JPY simply because the Japanese Yen was reported to show signs of struggling over the US dollar (Vecchio, 2013). It means that the Japanese Yen itself has been badly affected by the on-going tension in Syria. In line with this, a news report which was written by Fisher (2013) mentioned that one of the main reasons behind the weakening of the Japanese Yen is because of the significant decline in the total sales of the Japanese retail sector. (See Appendix IV – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/5/2013 on pages 32 to 36) On the 27th of August 2013, Vecchio (2013) publicly announced that the US equity was badly affected by the international military conflict in Syria and that most investors. For this reason, the trader initially took the selling position for USD/CHF. However, the real-time candlestick chart shows otherwise. Because of the bullish trend in the candlestick, the trader immediately shifted the position from selling to buying of USD/CHF. In case the trader did not placed a limit price and stop price close to the prevailing price (at 0.94100 level), the trader could have earned a total of 5,300.00 profit at the end of the day trade. This particular trading experience clearly shows that the use of the fundamental information is not enough to determine whether or not the stock market or the FOREX trading market would go up or go down. Therefore, traders should not rely totally on what the news reports say about certain issues. In most cases, it is the technical analysis part that can provide the traders with a more accurate feel as to where the movement of prices is heading. Therefore, contradiction between the fundamental analsysis and technical analysis somehow explains why there are cases wherein the traders ended up trading multiple accounts on a specific stock, option, or currency pairs. (See Appendix IV – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/5/2013 on pages 32 to 36; Appendix V – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/5/2013 on pages 37 to 42) Based on economic theory, the basic law of supply and demand can explain the movements of prices in stocks and foreign exchange markets. Specifically the presence of a civil war can adversely affect the stock market prices due to the fact that a war can disrupt the supply chain of products and services. As a result of war, the operational and financial risks of the affected companies increases (Li, Chen and Wang, 2011, p. 49). Each time a company is experiencing an operational and financial risks, the public investors’ confidence level on the affected companies tend to decrease. As a result, traders are most likely to pull out their stock investments on affected public companies. The presence of war can also indirectly affect the stocks and foreign currencies of other countries worldwide. For instance, given that the supply of goods and services is less than the actual market demand, the market prices of goods and services tend to increase rapidly (Lipsey and Harbury, 1993, p. 77). It means that only few people will be able to purchase the goods and services. This explains why the market prices of oil commodities has suddenly increased due to the on-going war in Syria (Chandwani, 2013; Hindustan Times, 2013; Lopez, 2013). Because of the war in Syria, the market prices of oil per barrel increased from US$94 in 2012 up to US$125 in September 2013 (U.S. Energy Information Administration, 2013). Each time the market prices of oil increases, a lot of globally affected companies also need to increase the selling price of their products and services. As a universal economic rule, demand for goods and services tend to decrease in case the market prices of goods and services is high (Siddiqui, 2005, p. 50). Therefore, the total value, sales and profitability of the affected companies are also likely to decrease. This affects the public companies’ ability to attract more investors to purchase their stocks (Kotler, Kartajaya, and Young, 2004, p. 193). In the study of finance, portfolio management is referring to the proper management of risks in investment portofio (Snopek, 2012). Basically, this particular financial concept is very much applicable in trading. In most cases, a well-experienced trader would come up with a trading portfolio in order to hedge the market. As a trading practice, hedging is all about offsetting potential loses. Even though the trader loses some money in trade A, doing better in trade B would mean that the trader could lessen his net loss at the end of the day trade. It means that the probability wherein the trader would loss in a trade can be minimize. In most cases, hedging portfolio is “consist of one or more long positions and one or more short positions in various correlated instuments” (Harris, 2003, p. 348). By placing one or more short and long positions in trades, the trader will have a higher chance of being able to earn profit at the end of the entire trading period. 4. Reflection on the Use of Technology I am not very familiar with the use of the TradeStation web trading platform. When I first opened the simulated trading link, I questioned myself endlessly on how to place new trade orders under my simulated trading account. To learn and get myself familiarized on how to use the TradeStation platform, I ended up spending a few hours reading more about the web trading overview and layout (TradeStation, 2013a). The TradeStation platform turned out to be quite easy to use. After reviewing the chart view displays and make a few research works with regards to the fundamental aspects that could logically explain the movements of the candlestick patterns, it is necessary to click on the “place trade” button which is found on the simulated trading page. Before selected the “order info” fields, the trader should first decide on the “asset class” (i.e. equities, options, futures, and forex). Depending on the chosen “asset class”, the trader should fill-up the “order info fields”, the “current market prices”, and the “order action” (TradeStation, 2013b). TradeStation allows the traders to make use of real-time charts, quotes, place trade, orders, balances, and position. Basically, the “quotes” panel reflects the real-time movement of prices of selected stocks/options, currency pairs, and futures indexes. The “orders” panel reflects the order status made each day. For the easy management of trade orders, the traders are given the option to view “all orders, open/queued, filled, and cancelled/rejected”. Traders are also given the option to view only orders under a specific account (i.e. SIM753723M, SIM753724F, and SIM753725X). The “balances” panel reflect real-time cash balance, purchasing power, realized and unrealized profit/loss, etc. For technical analysis purposes, the charts can be viewed as open high low close (OHLC), Area, Line, or Candlesticks. I prefer to use the Candlestick chart it allows the trader to easily view and analyze the movements of prices. In line with this, the red candle stick indicates that the prices closed at a low level whereas the green candle stick indicates that the prices closed at a high level. Likewise, the use of candlestick chart reflects more information about the current trades as compared to other charts such as the OHLC, Area, or Line. TradeStation’s Indicator Manager is a feature that is totally new to me. To learn more about the use of the Indicator Manager, I decided to test the feature through trial and error. During the first trial, indicators such as Average True Range and Money Flow, Volume – Calls, and Volume – Puts were applied in the chart of DOW. As a result, the candlestick chart represents the money flow whereas the line charts represent Volume – Calls, Average True Range, and Volume – Puts. (See Appendix XI – Bar and Line Chart on page 63) The chart is available in 1, 2, 3, 5, 10, 30, and 60 minutes, daily, weekly, and monthly intervals. The only thing this feature does is to create charts within the specified intervals. In most cases, 1, 2, 3, and 5 minutes interval is used when placing a short-term trade. Long-term trades require the trader to make use of the weekly and monthly intervals. By increasing the historical trend of the chart, the trader can have a much closer of what is going on in the market. 5. Conclusion and Recommendations In reality, each trade is different from other trades. Therefore, there will be cases whereby the trade could either win or loss. To minimize the risks of losing in trade, stop losses should be utilized prior to the submission of online trading. Using a stop loss entry, the trader can prevent trading losses even before the fundamental or technical signs could show that there is a higher chance wherein the trader would lose in a day trade. Another way of minimizing trading losses is to spend more time reading the news and analyzing the short-term and long-term trends of the candlestick chart before placing a new trade order. It is given that the presence of a civil war could negatively affect the stock market and/or the foreign exchange. Therefore, increasing one’s knowledge with regards to the political, financial, economic, and/or environmental events or situation that are currently taking place in different countries worldwide will assist the trader in terms of determining whether or not to buy or sell shares of stocks and currencies. Sudden market volatility is necessary to make the trader earn profit from trading. In case the trader has already placed a trading order even before the market volatility took place, the trader should be able to create a trading portfolio in order to cut down the losses on the previous trade as the trader earns more profit in the succeeding trades. Through hedging, the trader will be able to cut down the short-term and long-term risks of realized losses. When using this particular online trading platform, traders should be aware that the speed of the internet can significantly affect the ability of the traders to take advantage of the movements of the on-going trades. During peak hours, it is more difficult to place an order immediately even before the 1 minute candlestick pattern changes. For this reason, the use of a high-speed internet connection is highly recommended to allow the traders to maximize their profit potential when doing an online trading. References Adaikalam, R. (2013, September 9). 09/09/2013 – Dow Jones, S&P500 & NASDAQ accumulate. 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Appendix I – Entire Day Logs – 9/4/2013 Appendix II – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY Appendix III – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF – 9/4/2013 Appendix IV – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/5/2013 Appendix V – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/CHF –9/5/2013 Appendix VI – Order Confirmation, Trend of the Candlesticks, and Order Status of DOW –9/5/2013 Appendix VII – Order Confirmation, Trend of the Candlesticks, and Order Status of A131019C50 – 9/5/2013 Appendix VIII – Order Confirmation, Trend of the Candlesticks, and Order Status of SU14 – 9/6/2013 Appendix IX – Order Confirmation, Trend of the Candlesticks, and Order Status of USD/JPY – 9/10/2013 Appendix X –Trend of the Candlesticks and Order Status of DOW – 9/10/2013 Appendix XI – Bar and Line Chart Read More