FuturesTechs Blog

We often get asked “How can I use your product?”

FuturesTechs provides support and resistance levels to professional traders across a range of different Futures markets. They use our levels as the basis of their day trading.

Unfortunately I often come across traders using them in different ways, so it’s tough to give a definitive answer to that question. We are all different, and do things in different ways, and the individual’s interpretation of the levels we produce is no exception.

Let me make something clear right now. A lot of what we do here at FuturesTechs is basic common sense. We are almost “reporting” the technical news.

Take today’s FTSE Futures price action as an example. In our report this morning we talked about how important resistance at 4220 was, and we made this a bold level to make sure our readers got the message!

It was a VERY obvious level, being Friday’s high: Quite simple, unless you decided to ignore the simple and obvious.

It gave us the high this morning, not once but twice.

The low between these two highs was 4174, so we got a sell signal (Double Top) on the short term (eg 10 minute) charts once this gave way. We had 4163 posted as our first support, so on the way back down (if you hadn’t sold at the bold resistance at 4220) there were two more opportunities to sell; once we broke 4174, or even safer once we sold off through 4163.

Where to get out? We had a bold “area” of support at S5 in today’s report, between 4051.5 and 4064.5. The lunchtime low was 4066.5, where we suddenly started posting reversal candlestick on our trusty 10 minute chart - time to cash in.

Hopefully this gives some insight into how one can use technical levels to help decide where you put on trades, and where you get out.

Ideally you should aim to create trades with a basic set of criteria.

• Trade in the direction of the overall trend.

In other words In a downtrend sell ahead of an important resistance with a tight stop if it breaks.

Buy ahead of a key support level in a rising market.

• Targets should be acheivable, especially considering the current market conditions. It is Martin Luther King Day in the US today, so large swings of volatility are unlikely.

• Targets should also not be “blocked” by large resistance or support levels. For example if you decide to buy a Stock at £1.03 with a stop at 99p then you want to have a target of at least £1.11, to give a 2:1 reward to risk ratio: You are planning to make twice as much as you’re willing to lose - the way it should always be.

But if £1.10 is an old high on several occasions it is hopeful at best to ask the market to trade £1.11, so you have set a target that’s going to be tough to achieve.

Whenever you’re looking for trades to put on you want to try and skew things so that it’s going to be tough to get stopped out, but much easier to head to your target.

This doesn’t mean you’re not ever going to get stopped out, it just means you’re stacking the odds in your favour. This is what Technical Analysis does, and what we hope to help YOU to do when you use our service for YOUR trading decisions.

And one last thing while we’re talking about stops. RESPECT YOUR STOP. It is very easy to move a stop further away if a market’s getting near to triggering your loss. If you have set a stop, then LEAVE IT WHERE IT IS!

So far 2009 has been a tough year to call. Volatility has dropped, but we haven’t gained any firm directional traction yet in most anything. Although it goes against our usual mode of operation to give longer term calls we are still happy with our overall view for Equity markets for 2009; that we will make a new low in the early part of this year, but end the year quite a bit higher than where we are now…

Technical Analysis is an essential tool if you are going to trade using CFDs or Spread Betting.

The vast majority of professional day traders use technical analysis in some way shape or form during their trading day. They are aware what the important technical levels are for the markets that they trade. some do this work themselves, some rely upon services like FuturesTechs, knowing that we’ve got an 8 year track record of providing this information to the bulk of the UK Pro trading community.

Many newbies to trading struggle with how to “structure” a trade. Hopefully we’ll shed some light on this with today’s blog post.

It’s all about the levels, and that’s what we do here at FuturesTechs each day: We look at the levels that the market may be looking at, where things may change, where the buyers may return after a sell-off, where the sellers may wake up if the market starts to rise. These are commonly known as support and resistance.

Support is the name given to downside levels; prices below here the buyers may have returned previously, or where they may return today. If we fail to hold support levels the bears are obviously dominating; not giving the buyers the chance to defend these key price levels.

Resistance is the name given to price levels above the market where there may be some”action”. Either we’re going to get to these levels and fall over, or the market should see a strong reaction if we break above them.

These levels are quite often something as simple as old highs and lows, however old they are. We have found markets reacting to levels from over 20 years ago. The market has a long memory, and with charts readily available to all and sundry there’s no excuse not to be armed with the important lines in the sand as you head into each trading day.

The best traders in the world react to a bunch of different things to put on their trades: They wait patiently for a piece of news to come out, or for a technical level to break or hold, or for the market to do a certain thing that they’ve been expecting. They wait patiently. Lots of money can be lost doing trades for the sake of it. Boredom or the need to be involved is a dangerous emotion that a trader has to deal with.

There is little point in trading in between technical levels. The levels are created because they are the prices where things changed previously. They are the “action areas”. Why mess around trying to put trades on in “no mans land”? If you want to buy the market, chose a support level and put your buy order at or above there.

If you need somewhere to put a stop order you can again use a technical level.

Here’s an example: We were bearish of the Eurostoxx 50 Futures today despite Friday’s gains. We had a bold resistance level at 2704. Our bold levels are the important ones. So if we’re bearish and the market rallies to a bold resistance we would suggest selling before the level with a stop above it. The high this morning was 2698….

If you had sold at 2690 with a stop ay 2710 (or our next resistance level at 2728, if you want to give it a bit more “breathing space”) you would have got short and never been far offside.

On the same report we have bold supports at 2640 (the overnight gap) then right down at 2467 and 2418.

So this is the bit that isn’t “harry hindsdight”, just in case you want to jump on the idea that I’m writing this after the event: I will look to cover the short trade at 2470, but if we hold 2640 today I would just get out and cover the trade for either a small profit or at worse nothing. I think we need to break 2640 today to give this trade credibility. In other words we are using another bold level (this time a support) to add weight to our trade. If we don’t break below 2640 then maybe the bears aren’t ready to push us lower just now.

IT’S ALL ABOUT THE LEVELS.

So If you’re just starting out trading, whether it be with a Spread bet account, or CFD’s, or DMA (Direct market access) I would urge you to make technical analysis part of your daily process, AND TO TRADE THE LEVELS.

Be Careful!