Month: October 2010

By Bob Moore – The S&P 500 eMini is popular among the four eMini Futures to trade. Traders grow to appreciate the S&P 500 eMini because its trading action offers a ‘middle ground’ when compared to its stalwart brethren, Dow-30, the nascent leader, Nasdaq-100, and the hypertensive brother, Russell 2000.

Trading the S&P 500 eMini (ES) requires an understanding of Market dynamics and a sense of where the Price is heading. Keenly monitoring price action to the ES’s daily Value Area gives the trader insight into Intra-day Price Direction.

Value Area is defined as the instrument’s Price Range where 70% of yesterday’s volume was traded. The Value Area is important because it defines the current ‘Comfort Zone’ where traders are comfortable trading under a neutral bias.

By taking price movement into consideration with the Value Area, it can signal Intra-day Price Direction. The Value Area for the ES is particularly accurate in signaling Price Direction because the ES is the eMini trading instrument of ‘middle ground’.

Signals in Intra-day Price Direction are very helpful to traders in deciding quickly which trades to take during the day. A discussion of the Value Area signals follows.

80% Rule Signal. The 80% Rule is simple to understand, and quite reliable in determining market direction. When the market is above or below the Value Area, and then pierces into the Value Area for two consecutive half-hour periods, the market has an 80% chance of at least filling the Value Area.

The trader has an opportunity to place a trade once the signal is triggered and ride the price through the Value Area before deciding to exit the trade.

Above Value Area Signal. When the market opens and stays above the value area, this signals a very strong bull trend. Institutional buying is going on in the market pushing the market higher. A trader may be able to buy into the market on dips, sometimes as the Value Area Top is being tested, before it resumes its rally.

Below Value Area Signal. When the market opens and stays below the Value Area, this signals a very strong bear trend. Institutional selling is going on in the market pushing the market lower. You may be able to sell into the market rallies, such as in a testing of the Value Area Bottom, but you don’t want to trade long when the institutions are selling.

Support/Resistance Signals. The bottom and top of the Value Area are excellent support and resistance levels. For instance, if you were long above the Value Area, you would put a sell stop just below the top of the Value Area because if the market pierces into the Value Area, a strong bear trend is signaled. If you want to buy and the market is below the Value Area, you would put your buy order just above the Value Area bottom, because if the market pierces into the Value Area, a strong bull trend is signaled.

In addition, observing the other eMini’s as the ES approaches its Value Area top or bottom can be very helpful in guiding a trader’s decision. For example, when the ES is within its Value Area but hovering just below its Value Area top, if the Nasdaq’s eMini is demonstrating strength, then there is a stronger likelihood the ES will penetrate its Value Area top signaling a bullish bias and a Buy. If the Nasdaq is demonstrating weakness, then there is a stronger likelihood the ES will decline from its Value Area top signaling a bearish bias and a Sell.

In conclusion, considering S&P 500 eMini’s movement with relation to its Value Area is an excellent method of deciphering market direction. The more a trader monitors the eMini’s Price Action to its Value Area, the better ‘in-tune’ the trader will be to its dynamics.

About the Author

Bob Moore is with Taylor Trading Plus, an international data-exchange trading service using George Taylor’s Book Method, Value Area trading, Elliot Wave analysis, and Short-Term Trend analysis to identify trading entries/exits in select instruments of Futures, ForEx, Commodities, Metals and Oil, ETF’s, and Stocks. To request chart examples using Value Area to trade S&P 500 eMini, please go to ‘Contact’ tab at: http://www.taylortradingplus.com.

By Adam Hewison – A little while ago I made a video that projected some amazing levels
for gold. Given the strong upward trend in gold and the price action on
Tuesday the 5th of October, it is worthwhile looking at this video again:

This short video, will certainly give you some interesting price targets
for gold that are based on sound trading principles. I hope you enjoy the video,
and as always we would love to have your feedback on our blog.

All the best,
Adam Hewison
President of INO.com and co-founder of MarketClub

To see more of Adam’s Videos click here or sign up for Adam’s Free 10-part Professional Trading Course.

By Natalie R. – The Bank of Japan surprised the financial markets Tuesday by announcing a 35 trillion yen ($418 billion) monetary easing program as well as stating it would cut its key overnight call rate to a range of 0.0%-0.1% for the foreseeable future. It also launched a 5 trillion yen program to buy private and public sector assets.

The new monetary easing measures were taken in order to spur economic growth and to combat the unrelenting deflationary pressures. While markets were expecting some form of intervention to combat the ever rising yen, the extent of the monetary easing program caught investors by surprise.

Bank of Japan Gov. Masaaki Shirakawa stated that the decision to undertake additional monetary easing measures was based on a worse-than-expected outlook for the Japanese economy. The Japanese recovery was hurt greatly by the strong yen as the country’s economy is export driven and a strong domestic currency diminished the gains from this sector.

Unfortunately for the Bank of Japan, while it might have been the first central bank to act, as recoveries in industrial nations falter, it can be expected that several central banks will soon follow suite. The USD/JPY pair remained virtually unchanged following the surprise announcement as expectations mount the Federal Reserve will be the next to act, pumping money into the U.S. economy, negating Japan’s yen-weakening program.

The Federal Reserve has signaled last month they may announce the purchase of more Treasuries as soon as their next policy meeting on Nov. 2-3 in an effort to boost growth and reduce the unemployment rate which is hovering near 10% for the past year. Federal Reserve Bank of Chicago Governer, Charles Evans, reiterated this notion today by calling on the Fed to do more to charge up the economy, including a new program of U.S. Treasury bond purchases and possibly setting a higher inflation target.

While other Central Banks may not be looking into further quantitative easing measure, they are suspending their interest rate increases. The most notable recent example is the Reserve Bank of Australia which Monday, unexpectedly left its benchmark rate unchanged at 4.5% despite a widely expected increase to 4.75%.

It seems that the BOJ’s next move will depend on the Federal Reserve as well as other Central Banks among the G20 nations. With growth stagnating in the developed nations we may be at the beginning of what some analysts have nicknamed as a “monetary easing war.”

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Adam Hewison – I have just finished a short video on the S&P 500 that I believe is
worth watching. In this video I detail out a particular chart formation
that has proven to be very reliable in the past. If I’m right, we could
see a further move and run in the S&P500 to the upside.

All the best,
Adam Hewison
President of INO.com and co-founder of MarketClub

To see more of Adam’s Videos click here or sign up for Adam’s Free 10-part Professional Trading Course.

By Dan Eduard – Platinum has seen substantial gains in the last few weeks, as the declining US dollar has increased demand for alternative investments like precious metals. With significant fundamental news on the horizon, technical indicators are now showing that the commodity may finally be in overbought territory, meaning a downward correction is likely to take place.

We will be examining the daily chart for platinum, provided by Forexyard. The technical indicators we are using are the Stochastic Slow, Relative Strength Index and Williams Percent Range.

1. The Stochastic Slow shows a bearish cross has formed above the upper resistance line. This is typically seen as an indication that downward pressure exists, and that a correction may take place.

2. This theory is supported by the Relative Strength Index, which is currently right around 75. Anything above 70 is usually taken as a sign that the instrument is overbought, and that downward pressure is likely to take place.

3. Finally, the Williams Percent Range is currently well above the -20 level, which is widely considered to be the border between being overbought and neutral territory. Traders can take this as a clear sign that platinum prices will drop in the near future.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar found a foothold during the Asia session but was unable to recover ground lost during yesterday’s selloff. Asian equities followed their US counterparts higher, with the Nikkei-225 up +1.5% at the time of writing. The S&P500 had earlier closed up 2.1%. Gold made a new record high of $1350/oz, as investors continue to fret over the possibility of a synchronised return to quantitative easing by the world’s largest economies. EURUSD traded 1.3823-1.3859, USDJPY 83.07-83.30. A positive data release was not enough to deter thoughts of more Fed action overnight and instead kept risk-seeking intact. The non-manufacturing ISM increased more than expected to 53.2 in September and our analysts’ all-economy ISM index, which combines the manufacturing and non-manufacturing indexes, also rose in September to 53.4, a level that is historically consistent with real GDP growth of around 2.5%. The level is also consistent with the upside risks that our economists have been emphasizing to their forecast for Q3 real GDP growth (1.5% est). A Wall Street Journal interview with Chicago Fed President Evans, a 2011 FOMC voter, stoked investor expectations of more Fed action as he said the Fed needs to do much more to aid the economy. There are no major releases due from the US today. Expectations will now likely build as the Q3 earnings season gets underway tomorrow, and the payrolls report on Friday comes into view.
EUR

Services PMI improved to 54.1 and the latest data, in general, suggest that domestic demand is improving. However, both the “incoming business” and “employment” component fell, suggesting the outlook remains uncertain. Final Q2 GDP is expected to be confirmed at 1.0% q/q but with an uncertain outlook, ECB officials will need to exercise more caution as momentum potentially slows.
ECB President Trichet said that China’s declaration of its confidence with respect to Eurozone debt is appreciated. However, he also said Chinese authorities do not share Europe’s view on the need for a faster yuan appreciation. Elsewhere, Eurogroup Chairman Juncker said the yuan remains undervalued and that more FX flexibility is in the interest of China. Currency imbalances will remain a major topic in the weeks to come.
JPY

After yesterday’s policy surprise from the BoJ there were no market-moving developments during the Asia session. USDJPY remains close to its 15-year lows after initially rising on the back of yesterday’s policy decision. The yen’s intraday recovery probably has less to do with a sense that the BoJ did not ease enough, and more to do with growing expectations that the Fed will follow suit.
GBP

At 52.8 (cons. 51.0, prev. 51.3) Services PMI for September was above expectations. As such business activity has improved. However, according to our economists the outlook remains uncertain, especially as the “new orders” component fell to the lowest level in a year. As such the BoE will likely keep a cautious stance on monetary policy.

CAD

BoC Senior Deputy Governor Macklem said that the current policy rate at 1% ensures that financial conditions remain expansionary, a setting he described as appropriate. However, he indirectly raised the possibility of further accommodation, noting that the BoC’s move away from its emergency policy stance provides some flexibility if the Fed eases further. He also said the BoC becomes concerned about the CAD if it turns volatile, but would only intervene in exceptional circumstances.

TECHNICAL OUTLOOK

EURUSD targets 1.3896.
EURUSD BULLISH Momentum is positive; the pair targets 1.3896 with scope for 1.4194 next. Near-term support holds at 1.3637 ahead of 1.3381.
USDJPY BEARISH Look for a break below 82.88 for extension of bearish trend towards 79.75. Resistance remains at 83.99 ahead of 85.40.
GBPUSD BULLISH Move above 1.5999 and 1.6069 would expose 1.6276. Support at 1.5670 ahead of 1.5503.
USDCHF BEARISH Clearance of 0.9709 exposes 0.9590 and 0.9500 next. Resistance at 0.9918 breakout low.
AUDUSD BULLISH Upside potential held at 0.9751, clearance of the level would expose 0.9850. Initial support defined at 0.9542, yesterday’s low.
USDCAD BEARISH Focus is on downside; initial support lies at 1.0108 ahead of 0.9931. Resistance comes in at 1.0380.
EURCHF BULLISH Violation of 1.3467 would pave the way for a move towards 1.3651 ahead of 1.3924 key resistance. Support at 1.3265 ahead of 1.3165.
EURGBP BULLISH Next resistance above 0.8738 lies at 0.8808. Support holds at 0.8563 ahead of 0.8510.
EURJPY BULLISH Expect gains to extend towards 116.68 and 119.33 next. Near-term support comes in at 112.98 ahead of 115.53.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Dan Eduard – The EUR/NOK pair has seen some heavy volatility over the last several weeks. After dropping as low as 7.8330 in the beginning of September, the cross has steadily gone up, and is currently trading around the 8.0420 level. As will be shown through a number of technical indicators, the euro is likely to enter into a bearish trend against its Norwegian counterpart in the near future.

We will be looking at the daily chart for EUR/NOK provided by Forexyard. The technical indicators we are using are the Relative Strength Index (RSI), Williams Percent Range and Stochastic Slow.

1. As we can see, the RSI is currently slightly above the 70 level. Typically, when a currency pair goes above 70, that pair is in overbought territory, meaning a downward correction is likely to occur.

2. The Williams Percent Range is showing a similar trend. Currently, the indicator is around the -10 level. Anything above -20 is usually seen as a sign of impending bearish movement.

3. Finally, the Stochastic Slow has formed a bearish cross right above the upper support line. Taking this into account, along with other indicators already mentioned, traders can be fairly certain that the pair will experience downward pressure soon.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

Today’s non-farm data from Automatic Data Processing Inc. (ADP) should give traders a glance into a sizeable portion of Friday’s Non-Farm Payrolls release, since it will be measuring the private sector of the US economy. Expectations are for a rise in employment of approximately 23,000 jobs. If the actual results are in line with forecasts, the USD could pare some of its recent losses. If not, expect the greenback to continue dropping against its rivals.

Economic News

USD – USD Could Receive Respite from ADP Data Today

After a minor uptick against a few of its rivals, the US dollar appears to have continued its strong downturn against every major currency counterpart. For instance, the EUR/USD, after descending to as low as 1.3624 in early trading yesterday, currently trades just under the 1.3850 price level, marking an 8-month high for the pair. The USD/JPY also persists in testing its 15-year low mark of 83.00 despite efforts from the Bank of Japan (BOJ) to intervene in the forex market and weaken the yen.

Market participants have yet to lower their expectations for a Federal Reserve intervention of the forex market in the shape of quantitative easing. The greenback has been testing long-term low points against many of its currency rivals, and a large portion of data, whether positive or negative, seems to have the identical effect of weakening the buck.

This has done much to bolster the notion of a Fed intervention, but the actual planning for further quantitative easing may first require Friday’ non-farm data, which could explain the delay.

Today’s non-farm data from Automatic Data Processing Inc. (ADP) should give traders a glance into a sizeable portion of Friday’s release, since it will be measuring the private sector of the US economy. Expectations are for a rise in employment of approximately 23,000 jobs. If the actual results are in line with forecasts, the USD could pare some of its recent losses. If not, expect the greenback to continue dropping against its rivals.

EUR – EUR Climbs to 8-Month High vs. USD; 7-Month High vs. CAD

Despite the euro’s fundamental weakness over the past year, the past few days have seen strongly resurgent growth for the 16-nation single currency. The EUR/USD has recently touched an 8-month high mark just under 1.3850; the EUR/JPY and EUR/GBP are both at 5-month highs, and still climbing; and the EUR/CAD ascended to a 7-month high to currently trade at 1.4060.

Boosts to JPY and USD liquidity, combined with monetary policies from both countries, has helped increase the flow of investment towards riskier assets, such as stocks and higher yielding currencies. The euro has been a primary beneficiary of this investment migration regardless of many of its fundamental weaknesses.

The euro zone continues to show weakness in its banking sector and sovereign debt coverage, but its appeal to investors looking to escape the conventional safe-havens and enter new markets has helped drive its currency to recent heights. If today’s German Factory Orders report comes out as expected with 0.9% growth, the EUR will likely remain bullish against most of its counterparts.

JPY – BOJ Lowers Interest Rates; USD/JPY Still Falling

The surprising move by the Bank of Japan (BOJ) yesterday to lower interest rates from their record low of 0.10% has done little to support the JPY. In fact, the island currency persists in rising against a number of its primary counterparts. The USD/JPY is testing the BOJ’s intervention price level of 83.00, while the GBP/JPY also remains in a downtrend with a current price of 132.33.

Expectations for the moment seem to suggest that further BOJ intervention is on the way, but the market awaits Friday’s Non-Farm Payroll (NFP) data from the United States. Central banks may therefore be hesitant to make any serious moves on monetary policy until the market absorbs the reaction from this week’s interest rates and employment data from the world’s largest economies. It seems fair to suggest that most of these major currencies will not move too sharply in the next few days until Friday’s NFP release.

Crude Oil – Oil Prices Climb above $82 a Barrel

The price of crude oil has climbed back to the high mark of two months ago with a current market value around $82.60 a barrel. The price broke the significant barrier of $80 a barrel as the USD plummeted on increased risk taking. Currency interventions in Japan and the threat of further quantitative easing by the Federal Reserve, have both pushed traders into riskier assets and out of those two traditional safe havens.

The resulting sell-off in US dollars has pushed the price of commodities like crude oil and gold to recent highs. However, it’s not only the descending USD that has crude prices higher. A number of reports have shown that the industrial and manufacturing sectors of some of the larger economies have begun to pick up steam and add fundamental support to oil prices. This growth may also be having an impact on recent risk taking in the market since investors are perhaps feeling more confident about investment growth in those regions experiencing an expansion.

Technical News

EUR/USD

The price of this pair appears to have just entered the over-bought territory on the weekly chart’s RSI, suggesting long-term downward pressure may begin to build over the next few days. The daily chart’s RSI has the price descending down within the over-bought region as well, highlighting this growing momentum in downward pressure. The overall trend remains up for this pair, but it appears as if counterbalancing force is beginning to be applied and traders may wish to place their stop orders a bit closer as a result.

GBP/USD

The indicators on this pair’s MACD are unanimously forming bearish crosses on the daily and weekly periods. With the price floating in the over-bought region on the daily chart’s RSI, these indicators together suggest that a downward move may be imminent. Going short with tight stops could be a wise move today.

USD/JPY

The long-term downtrend on this pair appears to be continuing, with the price approaching its recent low mark of 83.00. Technical indicators seem to suggest an upward correction could be building. The price floats in the over-sold region of the daily and weekly RSI, there is a fresh bullish cross on the daily Stochastic (slow) and there appears to be an imminent bullish cross on the weekly MACD. Going long on this pair appears to be worth considering throughout the remainder of this week.

USD/CHF

This downward movement of this pair for the past few months has pushed almost every indicator into the over-sold region. Bullish crosses have either formed, or are forming in the Stochastic (slow) and MACD of the daily and weekly charts. The price also appears to have turned into an upward direction from within the over-sold region of the daily and weekly RSI. An upward correction may be pending, but traders should enter long positions with caution due to the long-term downtrend of this pair.

The Wild Card

AUD/USD

This pair’s upward movement has pushed the price to its highest resistance level since July 2008. By reaching this significant psychological barrier it has caused almost every technical indicator to show an impending correction. The daily and weekly MACD both show impending bearish crosses, as does the weekly Stochastic (slow). The price also floats in the over-bought region of the weekly RSI, which suggests impending downward movement. Forex traders can take advantage of this information by calling the reversal on this pair and going short to ride the wave for significant profit.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Sara Nunnally, Editor, Smart Investing Daily, Taipanpublishinggroup.com

My co-editor Jared Levy and I were sitting in the audience at this year’s 2010 Global Opportunities Summit in Las Vegas when gold hit a new record… Futures prices topped $1,300 an ounce, and Jared turned to me and said, “Now’s the time to take some profits off the table.”

Friday saw gold for December delivery hit $1,319.70, another record, and traded as high as $1,322 at one point during the day.

So what does this mean? Are gold prices too high? Will we see a correction?

Or will gold continue its climb, and possibly hit $1,500 an ounce by the end of the year, as one analyst writes?

I like gold, nearly at any price, for one specific reason: It always makes sense to allocate some portion of your investment portfolio to this precious metal, and hold it as a hedge against both currency and stock market fluctuations.

But traders might see a different picture.

Is the Gold Market Overheating?

Traders might look at how gold prices have climbed 12% in the past 60 days, shooting nearly straight up from late July. Take a look at this Kitco chart:

In the four months prior to this huge bounce, gold prices showed a lot more back and forth, ending the four months with a gain of only 5%.

This move is massive, and now we have to determine if the gold market is overheated. And for that, we have to look at exactly what’s driving this market higher, and if those factors are still in place to make this a long-term move.

The main factor behind this move is the strength of the U.S. dollar. Take a look at this U.S. Dollar Index December futures chart that compares the dollar to a basket of currencies:

View Larger Chart

This six-month chart from Barchart.com shows the dollar in a massive decline since early June. It’s this drop that’s propelling gold prices higher.

The Federal Reserve has been talking about more quantitative easing, which spells more trouble for the dollar. If the Fed cuts rates, gold prices could indeed hit $1,500 before the end of the year. This is a big, big decision that’s waiting on some key economic figures coming in the next week or so.

The Fed has clearly stated that it’s ready to “take further action” if the U.S. economy fails to show any strength. The next meeting is in November.

(Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the stock market for you with our easy-to-understand investment articles.)

Inflation and Gold Prices

In the long term, it’s clear that the Federal Reserve’s monetary policy will lead to spikes in gold prices that we haven’t seen since perhaps the 1970 s when we lost the Gold Standard. Gold prices climbed from $37.87 in January 1971 to $183.85 in December 1984… an incredible climb of 385% in four years.

In 1971, inflation stood at 4.3%; 1972, the figure fell to 3.3%. Then in 1973, inflation popped to 6.2%, and in 1974, inflation soared to 11%.

This shows you that when inflation hits, as it surely must with the Fed keeping rates at near zero and printing money like mad, it hits hard and fast. The dollar drops and gold skyrockets. We see the same thing in the late 1970s and early 1980s with inflation at 11.3%, 13.5%, and 10.4% in 1979, 1980, and 1981 respectively.

Gold prices went from $227.27 in January 1979 to $410.09 in December 1981, topping $675 an ounce in January 1980.

What to Do in the Meantime

But in 2009, inflation was -0.4%, and 2010’s inflation is estimated to be 1.4%… That’s hardly scary compared to what happened three decades ago.

What are we supposed to do in the meantime? Heck, what are we supposed to do in the next four months?

Craig Ross, vice president of ApexFutures.com in Chicago, told Kitco that gold would likely hit $1,325 an ounce this week, and that $1,350 wasn’t out of the question. George Gero, senior vice president and financial consultant RBC Capital Markets Global Futures, told The Street a similar story, saying that gold’s next resistance point was at $1,325.

Over the next few months, we could see continued demand from institutions, investors and regular folks who buy gold jewelry (though these higher prices do dampen jewelry demand, the fourth quarter is still a strong quarter overall).

Investment demand has really picked up, though. According to Gold.org, demand for gold jumped 36% in the second quarter compared to the same time last year.

And that’s with gold prices at $1,200 an ounce!

Demand and price trends say the best time of year to buy gold is in the summer, but you might not want to wait that long.

If the Fed decides not to ease rates, we could see a slight pop in dollar strength, which could give you a momentary pullback in early November. That gives traders four weeks of possible price climbs and a potential exit point.

“Short term” buy-and-hold investors might buy and re-assess come the end of March 2011, while maintaining a prudent trailing stop.

Long-term investors, or folks that will buy now and hold gold in their portfolios indefinitely, will ignore the Fed’s decision in February, and possibly average down in summer, should gold prices move against them.

Gold ETFs like the SPDR Gold Trust (GLD:NYSE) or the iShares Gold Trust (IAU:NYSE) are easy and accessible for both long-term investors and traders, as both have options. Of course, buying coins and bullion is also an option. Beware of gold mining companies, however, as costs can sometimes trip these stocks up even as gold prices climb.

If you’re playing gold itself, or hedging your portfolio, the purer the play the better.

Don’t forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

About the Author

Sara is Co-Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country.

As Senior Research Director, global correspondent and co-editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.

By Taro Hideyoshi – Over time, experts have identified the most common biases that usually affect behavior of traders. Curtis M. Faith, who had been the most successful of Turtles, also mentioned about this in his book “Way of the Turtle“.

According to the book, people always distort perception of reality when it comes to trading. Scientists call these distortions as cognitive biases. Curtis listed some of cognitive biases that affect trading. I think it is interesting to discuss some of them that have occurred mostly among traders.

Getting know your biases is the first step to avoid them. Here are some of cognitive biases that I think many traders has experienced.

1. Loss aversion

This bias is to have a strong preference for avoiding losses over acquiring gains.

For example, traders usually feel the pain for losing of $100 more intense than they missed a trade that would have made them $100.

2. Disposition effect

It is the tendency for traders to lock in gains and ride losses.

Instead of letting profits run, many traders decide to take out their small amounts of profits. It is because of their fear to give back the profits, but when it comes to losing trades they always keep the positions until they lose large amounts of their capitals.

Traders who exhibit this tendency will face large losses and become very difficult to make up from winning trade.

3. Outcome Bias

This is the tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made. This bias causes traders to put too much emphasis on what occurred rather than on the quality of the decision.

In trading, even a correct approach can result in losses, and then they may evaluate the approach negatively because of the negative outcome.

4. Recency bias

The recency bias is placing greater weight on recent performance relative to previous performance. A trade that was made yesterday weights more than trades from last weeks.

This bias affects the trading if the outcome series of recent trades were lost, it will cause most traders to doubt their method and decision-making process.

5. Bandwagon effect

This effect is the tendency to believe things because many others believe them.

The example for this effect is the bull market. When market is going up for sometimes, it pursues many traders to believe that market and buy more. Hence the market will go further up, seemingly, unstoppable.

About the Author

Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.

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