Trading Equities through CFDs With the Cycle Trends Live Program The live Cycle Trends program is especially suited to the trading of CFDs (Contracts for Difference).The reason is that the CFD mimics almost every aspect of owning the underlying share but with two important differences. *Through leverage, you can control larger positions at a fraction of the cost of actual share ownership. Instead of having to pay the full value of the underlying contract up front, you need only deposit an initial margin usually about 10% of the contract value. *Trading long or short. This enables you to take a positive or negative view of the underlying shares price movements, and therefore to be able to profit in both rising and falling markets. It also allows for hedging action to protect long-term share holdings. Using the Cycle Trends Live program, because the share data comes into the program as the trades are made, quicker intraday signals for the buying and selling of CFDs are given and thus quicker profits are made than with End of Day programs.(cycle Trends Version 4) Profits can be realized intraday or in a day or two as is demonstrated in examples further on. Cycle Trends Live is an upgrade from the very successful End OF the Day Program. The live feed of prices to the program now gives traders, as in Forex trading, instead of using End of Day prices for the analysis, the option of using prices in time frames varying from 1 to 300 minutes. The intraday Buy and Sell signals from the analysis can be applied to the trading of CFDs, Single Stock Futures and Spread Trading As in Forex trading Cycle Analysis is the key to successful trading.every second or minute of every day, as the markets move, cycles are formed. From these cycles we can see where the peaks and lows are and what direction the market is going to take. Here is a graph of AngloGold Ashanti in a 60 minute time frame tracing the peaks and lows and trends as it traded. Higher peaks and higher lows show an uptrend, lower peaks and lower lows point to a down trend and in between there is a sideways trend.
Cycle Trends uses cycles to forecast these peaks and low points and to predict future moves The function of the cycle is to forecast the direction of the price.it does this by showing the direction it is taking in the future zone. The future zone as shown in the graphs below is the focus of the trader s attention. There are also other cycle indicators that assist in the forecast and the decision to find the entry and exit levels for the trade. In Equity trading the live data feed provided by Sharenet or esignal enable these cycle indicators to be viewed in different time periods. The data comes into the program as the trades take place in the Stock Markets Time Periods and how they are used for Trading The Cycle Trends Live program allows the trader to use different time periods for the analysis of the different markets. As you can see in this graph the trader has the option of trading with periods from 1 minute to 300 minutes. For CFD Equity and futures trading the recommended method is to use the 30 and 60 minute periods.
These time periods allow the trader to perform the three main requirements for successful trading namely Define the Trend then Decide on the Entry point for the trade Decide on the Exit point for the trade Through the use of multiple time frames the different time frames can be viewed at the same time on the screen. In Equity trading we confine ourselves initially to trading with the 60 or 30 minute time periods. The choice between using either the 60 or 30 minute time frames is judged by how the cycles fit the past movement of the price. Choosing the Data The Cycle Trends Live program gives the trader the choice of two different sets of data, either Forex or JSE. By clicking on either the choice is made. As we are demonstrating equities we click on the JSE button.
By clicking on JSE the trader is led to a menu. As seen below the menu has the following shares at the start: JSE All Shares, JSE Alsi 40, Satrix 40, Satrix Fini, Satrix Indi, Satrix Resi, African Bank Investment, Mittal Steel South Africa. The other shares then follow in alphabetical order. This order can change from time to time. You click on to the share of your choice for the analysis
Cycle Analysis and the Cycle Indicators Here is a brief description of the Cycle Indicators that are used for successful trading I am using this 60 minute graph of AngloGold Ashanti as the example ANALYSIS When you click on the chosen security, in this case AngloGold Ashanti, it defaults to 4 boxes In Box 1 we have the price line of AngloGold registering a closing price of 28100 in the 60 minute period. The red line is the Fourier trend derived from a mathematical formula of the price s movement. Both the Trendic and the TrueOBOS indicators described below are derived from this line. We have drawn a support line just below the 28100 level. Support and resistance lines are an integral part of an analysis with changes in trend very often taking place at these levels. In Box 2 we have the Cycle Graph. The program examines the cycle movements of the price in the past, pointing out those that have been repeating themselves. It s pretty straightforward and logical. The theory is that if the cycles have been repeating themselves in the past they will keep doing so and can therefore be used for forecasting the future! The function of the cycle is to forecast the direction of the price as is shown in the future zone. The future zone is the focus of the trader s attention. So the cycles project the future trend of the equity.
The trader is also looking for the peaks and lows traced by the cycle and where they are in relation to the moment he is examining the graph. In the case of AngloGold the cycle is pointing upwards in the future zone forecasting a slight rise in its price. Also note how the peaks and lows of the cycles co-incide with the peaks and lows of the price. In Box 3 we have the TrueOBOS indicator. The OBOS in TrueOBOS stands for Over Bought, Over Sold. This indicator is considered by many to be the most important part of the Cycle Trends programme. TrueOBOS is derived from the Fourier trend line that you see on the price graph. The currency becomes oversold when TrueOBOS reaches the thick green line. It becomes overbought at the thick red line. In the graph TrueOBOS is at the oversold level indicating that AngloGold at 28100 is oversold and confirming that the price could rise as is forecast by the direction of the cycle in the future zone in Box 2. Box 4 contains the Trendic Indicator. Trendic is the indicator that we have developed specifically for Cycle Trends. Trendic is there to trigger a buy or sell when a decision has been made that a cycle low or peak has been reached. You shouldn t buy or sell until you get this signal! Trendic signals a Buy signal when it moves through the zero level into the positive area and a sell signal when it moves into negative In this analysis Trendic is still in the negative zone and would have to move into the positive zone through the zero level to trigger a buy signal for the mining company. Conclusion The fact that AngloGold is near support, is oversold and has a positive cycle direction tells the trader that an opportunity is close at hand to go long on AngloGold or its CFD. However the Trendic indicator would have to turn positive to trigger the actual buying level. Here is an actual trading example of AngloGold Ashanti on July 13, 2011 at 9AM (when the market opened)
Analysis In Box 1 the AngloGold price has moved up to reach a line of resistance at 29200. Very often a change in trend will take place at resistance and support levels. Here the resistance line has just been penetrated. This penetration can serve as a buy signal if supported by the cycle indicators. In Box 2 the Array cycles give the projected trend. The projected trend is seen in the future zone on the right hand side of the graph. The cycle is pointing in a positive direction in the future zone. Box 3 has the overbought oversold indicator TrueOBOS. It is just above the zero (0) level. To go long the indicator should be above zero level if the price is penetrating resistance. Box 4 has Trendic 36 and we have added a further Trendic indicator (55) to the graph. The function of the Trendic indicator is to show the immediate trend. The indicator has two zones, either positive or negative on either side of the zero line. In the graph both Trendics are in the positive zone indicating that the immediate trend of AngloGold is positive. Both Trendics must be pointing in the same direction before a trade is made. Trading decision Based on the facts that AngloGold has penetrated resistance, has a positive cycle projection, supported by positive Trendics the decision is taken to go long at 29200
At 2pm on the next day (14/7/2011) this was the result as seen in the graph below AngloGold had moved from the 29200 price on 13/7/2011 at 9am to 30700 at 2 pm on 14 /7/2011. The decision was taken to take a profit from the long trade. The reasons are given in the analysis below the chart. Analysis A profit was taken for the following reasons. In CFD and futures trading the aim is to take a profit at a target. The overbought oversold indicator TrueOBOS, support and resistance Trend lines and cycle peaks and lows serve best as target profit levels. The signals of the Trendic indicator are discounted. In this example TrueOBOS is at the overbought line and the cycle is peaking.this is sufficient evidence to sell the CFD and take a profit of 15 Rands in less than a day. If one bought a 1000 AngloGold CFDs at 29200 and paid in the 10% margin of 29,200 Rands the profit would be 15000 Rands, less commission and a day s interest. (at least a 45% profit in less than a day) Using CFDs to go Short Here is an example of going short on the Gold Mining share AngloGold on July 19, 2011 at a price of 31245 at 4pm. Again a 60 minute period graph is used for the analysis.
ANALYSIS In Box 1 AngloGold has come down from a top to penetrate a support line at the price of 31245.Breaking through a support line is a potential sell signal if supported by the cycle indicators. In this example the penetration is being supported by the cycle in Box 2 trending downwards in the future zone, Trendics 36 and 55 being in a negative mode and TrueOBOS coming down from the overbought line. Based on this the decision was to short AngloGold at the price of 31245 at 4pm on 19/7/2011 Result The graph below taken the day after the short sale on July 20,2011 at 3pm shows how a good profit was made when the short of AngloGold was covered at 30180. The reason for the decision to buy back AngloGold, based on the indicators, was as follows. The price in Box 1, at 30180, had come up against a line of support. At the same time the cycle in Box 2 had reached a Cycle low. TrueOBOS in Box 3 was at the oversold line and Trendic 55 had turned positive in Box5. The signals were clear cut to cover the short at 30180 giving a profit of 10.65 Rands. Going short on 1000 AngloGold CFDs would have cost 30,180 Rands, 10% of 301,180 Rands. 1000 AngloGold CFDs would therefore have given a profit of 10650 Rands less commissions (more than 30%) in one day. Of course if the trader had gone short on more than 1000 AngloGold CFDs the profit would have been substantially bigger.
The Cycle Trends Live program and course consists of the following The Theory and Techniques of using Cycle Analysis for Equities and Forex. Cycle Indicators and methods for trading Equity futures Cycle Indicators and methods for Trading Forex Standard technical Indicators such as MACD, Stochastics, Moving Averages and Trend Lines etc for trading Forex and Equities The use of a live Sharenet data feed in trading Note the program comes with CD recordings giving instructions on how to use the program and the Sharenet Live feed for successful trading. Traders who are interested in purchasing the program should e-mail Dr.Bacher at isbacher@netactive.co.za
Cycle Trends Software Pty Ltd Dr.I.Bacher Box 41606 Craighall, 2024 Cell 082 9900 780 E-mail isbacher@netactive.co.za www.cycletrends.co.za