How To Trade The Overbought And Oversold Commodity Channel Index Like a Pro?

What is the commodity channel index indicator?

The commodity channel index is a momentum indicator developed by Donald Lambert. It reveals the moment when a new trend begins and highlights overbought and oversold conditions. It measures the current price relative to a moving average and oscillates between +100 and -100. Theoretically, the market is overbought when the CCI is above +100 and it is oversold when the CCI is below the -100 level. Please note that theory and reality are not always the same. Quite often, the commodity channel will duplicate or will accurately reflect the price's movement. Nevertheless, it is common to notice divergence between the CCI indicator and the price. This divergence comes in the form of fake divergences and valid divergences. All valid signals are validated by the price. The CCI is also a leading indicator, but one must know how to use a leading indicator in order to avoid sour disappointments.

After careful observation of this magnificent indicator, we have noticed, shocking resemblances between the commodity channel index and the humble "Bollinger bands". Bollinger bands are trading tools created by John Bollinger in 1980 to highlight the dynamism of volatility. The bands include one middle band as well as two outer bands that deviate from the middle band. Traders use standard deviation plus and minus two when plotting the "Bollinger bands". Similarly, the CCI indicator consists of one middle band (zero level) and two outer bands. The upper band is the +100 level and the lower band is the -100 level. It is obvious that the CCI indicator is seeking to play the role of the price within a Bollinger. When one substitutes the price for the CCI indicator and moves the "Bollinger bands" to the outer +100 and -100 levels, there is no doubts that the Bollinger bands and the CCI indicator become perfect substitutes for each other.

After these clarifications, we can efficiently use the commodity channel index (CCI) indicator. Please note that when the CCI period 14 is above +100, the price is usually at the upper band of the Bollinger 14, volatility two; when the CCI period 14 is below the -100 level, the price will usually be at the lower band of Bollinger 14, volatility two. When the CCI period 14 is at the middle line, the price, in most cases, is at the middle line of the "Bollinger bands" 14, volatility two. When we compare the CCI period 50 to the Bollinger (50,2) and the CCI period 20 to the Bollinger (20,2), we find that there are many overt similarities between the Bollinger bands and the commodity channel index indicator. To compare the Bollinger bands to the CCI indicator, one must use the exponential moving average settings for the Bollinger bands. These settings are crucial. Both the CCI indicator and the "Bollinger bands" must have the same period before a valid comparison can take place. Divergences do take place. For instance, when the price is still at the upper band of the Bollinger (20,2) but the corresponding CCI period 20 has pulled back near the middle line (zero), there is a high probability but not a certainty that the price may also pull back to the EMA20. If the price is still at the lower band of the Bollinger (20,2) but the CCI 20 rallies up to the middle line (zero), the price, under normal conditions, will rally up to the EMA20. One can note the same observation when using the commodity channel index (CCI) period 50 and the "Bollinger bands" (50,2). Please note that the "TSTW24" uses the Bollinger (50,2). It is important to remember that the price is the number one indicator, because we are trading the price, not the commodity channel index itself. All valid signals received or derived from the CCI indicator are validated by the price. A signal is one thing, but the entry point is the key.

Trading the overbought and oversold CCI like a pro.

No indicators, either leading or lagging, will ever completely replace the price. Never ever forget that. We are trading the price, not the indicators. One should not seek to complicate trading but to simplify it. When the commodity channel index (CCI) indicator is overbought above the +100 level, many traders will quickly place orders to sell without further verification. These are traders who trade the indicator, not the price, and they will go from one trading system to another trading system and blame their lack of success on everything except themselves. Trading the indicators instead of the price is one major cause of consistent losing trades. The CCI is often overbought right from the beginning of a new up trend or during the third "Elliott wave". While the educated traders are busy placing orders to buy, ordinary traders are selling and losing abundantly because they fail to recognize that a resistance is broken and validated as a support level, while the CCI is still overbought. Either that, or they did not recognize that a trend line has been broken and, retested and that the price has turned around. When the CCI indicator is overbought, it is alerting traders that, bullish momentum has increased and that the price is in a resistance zone (overbought), period. It does not mean that you should sell or waste your money. Traders must highlight the indicated resistance zone and follow the price. If the resistance is broken and the price finds support above the resistance zone, traders should buy even though the CCI is still overbought. Below are some simple trading rules that, one can follow.

Anytime a signal is given, acknowledge the signal.

Do not enter the trade too quickly; instead, keep your eyes wide open.

Ask the two most important questions: "Is it time" and "Is it the place to enter the trade?"

Wait for validation (the price must always confirm the signal).

Consider the risk-reward ratio, check the economic news, and enter the trade only and only after validation.

Always use stop-loss.

One should not seek to sell immediately when the CCI is overbought but to wait for either the trend line or a support level to be broken, retested and validated as a resistance level. The price must turn around and bearish momentum must increase. On the other hand, when the CCI indicator is oversold below -100, we will not buy straight away. We will wait for the trend line to be broken to the upside or a resistance level to be broken and validated as a support level. The price must turn around and bullish momentum must increase. If the commodity channel index (CCI) indicator is oversold but a support level is broken and validated as a resistance level, we must sell even though the CCI is oversold. As you can see, paying attention to the price, will aid traders in making excellent trading decisions. The commodity channel index indicator can be oversold right from the beginning of a new down trend, leading unaware traders to buy. Stubborn, aggressive traders usually lose serious amounts of money during the third "Elliott wave" in a down trend, because the CCI usually remains oversold during this bearish wave.

Using the commodity channel index indicator with the "Elliott wave" theory will allow traders to make better trading decisions. The market is considered overbought at the end of the fifth "Elliott wave" in an up trend, and the CCI is also overbought at the end of the fifth wave. On the other hand, the market is considered oversold at the end of the fifth "Elliott wave" in a down trend. At this point in time, the CCI is oversold. Traders will wait for confirmation in these "hot spot trading zones" to take part in the abc corrective waves. Fake overbought and oversold signals are given during the third "Elliott wave." However, valid overbought and oversold signals are often given at the end of the fifth "Elliott wave." Please wait for validation before entering the trade. When the CCI is oversold, bullish momentum has decreased. The oversold CCI highlight a support zone. A support zone can break and become a resistance zone. In this case, we will sell even though the CCI is still oversold. When you sell, pay attention to the nearest support level; when you buy, pay attention to the nearest resistance level. Do not buy right into a resistance level. Instead, wait for the price to cross above the resistance level, and vice versa. The overbought or oversold CCI can indicate the beginning of a new trend. Do not trade against the new trend.

On the 4th of March 2010, IBM's daily chart showed that, the commodity channel index period 14 was oversold (below -100), highlighting a support zone around 127.98. As ordinary traders were busy placing bullish bets, the price broke, retested and validated the support level as a new resistance zone. The CCI was still oversold when the bearish momentum was increasing. Naturally, the price went from 127.98 down to the 116.00 level from the 4th of March 2010 to the 6th of March 2010, a huge drop but a serious gain for educated traders. The drop was fast. Many traders who were buying the oversold CCI did lose, and those who failed to apply the five per cent money management rule also lost. Therefore, traders need to master the oversold CCI. The inverse scenario took place on the 22nd of December 2010. On that day, IBM was at 145.95, but the CCI period 14 was above +100 (overbought). The CCI period 14 was highlighting the resistance zone between 145.50 and 147.00. As always, as soon the CCI period 14 was overbought, the smart traders highlighted the identified resistance zone and waited for validation. I use the "TSTW SYS 08" in this 22nd of December case, because anything is possible here. The price can go up, down or horizontal. Do not try to guess it, and do not be too confident. On the contrary, do be calm and, wait for your turn (so to speak). While ordinary traders continued to IBM sell without further verification, the price broke and retested the resistance zone from the 6th of January 2011 to the 11th of January 2011. The price turned around on the 12th of January 2011 after retesting the resistance zone. Once again, uneducated traders lost when the price continued the movement to the upside. From the 12th of January 2011 until the 25th of January 2011, IBM was rising and the bullish momentum was rising, even though the commodity channel index indicator period 14 was in the overbought zone. Without doubt, price can rise when the CCI is overbought, and it can fall when the indicator is oversold. On the 25th of January 2011, IBM reached the 161.44 price level, which was a serious move. Many other examples are relevant, but their pattern remains the same. This strategy remains valid whether, you are trading currencies, stocks, options, futures, or any other financial instruments.

The price is the most important and number one indicator. It must confirm both the overbought and the oversold commodity channel index signals. The overbought or oversold CCI signals are neither signals to sell systematically nor signals to buy without further verification. The ability to "filter out fake signals" and to understand both the language of the price and the language of the overbought and oversold commodity channel index will allow traders to enjoy their trades rather than endure their trades. We hope that, you find this article useful and that you will put it into practice in order, to avoid losing money. Do not guess the price; instead, follow it. Like pro Trade, or learn to " trade like a pro ."

1929 Stock Market Crash

Some economists regard the 1929 stock market crash as major contributing factor to the great depression. The speculative boom of the 1920's caused the crash because of the build up of the economic bubble. The bubble was formed because in the 1920s, as the stock prices were increasing, many people invested in the market. As the prices kept increasing they continued to invest hoping the prices would go up forever. Most people borrowed money to invest in the market.

This continued till about 1929. Then the market started trading down. Most people panicked and this resulted in heavy selling of stocks. By the year 1933, the stock prices were down 80% from the highs in 1929.

This led to people feeling poor. This led to decrease in the demand for various products in the market. Companies that tried to raise money in the market failed miserably. This led to shortage of money for manufacturing products or providing services. Companies started firing their employees because they wanted to scale down production. As you can guess, this led to the great depression. This period lasted about 4-5 years till 1934. All this was caused due to lack in confidence. This was preceded by confidence in the stock market. This turn of confidence was caused by a small negative sentiment in the market.

The speculative boom of the 1920's was one of the factors that contributed towards the great depression. The speculative boom was caused due to the heavy investing in the market. The heavy investing was taking place due to most people trading on margin. Some traders were trading on 90% margin. The banks were also invested in the stock market. When the stock prices went down, people lost faith in the entire financial system and this lead to banks failing by the hundreds. This could have been avoided if there were proper regulatory procedures for the banks and the stock market in place. There should have been a limit on the margin you can use to trade. There should have been some restrictions on the banks from investing the depositors' money in the stock market.

Needless to say, the regulators learnt a lot from this cash. It required some time before the trust in the financial system came back. The federal government then set up the federal deposit insurance corporation. Due to the presence of FDIC the banks could run out of money to pay back but still escape as the government reimbursed the depositors. The regulatory rules and procedures in place now are stricter and prevent the economy from crashing like it did in 1929.

You as an investor or a trader can learn a lot from this crash. In the late 1920's people began to invest without doing any research about the stocks they were buying. In those times, the trader who was in the floor had more information than the common people trading. This led to lack of information among investors. Now, due to internet and disclosure policies, the common investor can have all the information about a company before investing in it. Good research will give you confidence about your investment and you will not panic when your stock price goes down or the general market conditions are bad.

A Forex System That Actually Works – The Forex VIP Program

95% of forex traders lose their money. Blah Blah blah. I'm sure you've heard that one before. There are many, many systems available online today. A few work, most do not. From my experience & research, the Forex VIP Program is the best value and the real deal for teaching you to trade in the forex market. It does this with flexibility to time while being affordable and easy to learn. You get mentoring that help you get significant results.

This system is pretty flexible as far as time is concerned. It is made to trade in one of two sessions: midnight to noon and noon to midnight. Also the midterm system gives you more freedom as you do not have to stay in front of the monitor 4-5 hours a day. This combination allows anyone to benefit, once it is mastered, regardless on the time schedule.

Many systems charge you well over $ 1000. This system and mentoring for 3 months is just $ 197. I think thats pretty reasonable to obtain knowledge that will help you make a whole hell of a lot more. Over 3 months that you would be using a demo account to train, thats only like $ 2 a day. I spend more than that a day in snacks.

This system is pretty easy to learn. Now you need to have some technical analysis knowledge to understand. It takes about a week of studying before you get a grasp of it. Also, you become part of a special yahoo group in which you get even more information. You can review past questions that students before you had and benefit from the answers.

One of the most beneficial aspects of the system is the mentoring. Whenever you have a question about the system or the trading period, you can email and ask trader Jon Levine. Jon developed the system and trades it daily. He shows you through pics that capture the charts along with notes on how it should have been traded. He normally responds within 24 hours.

The results of this system can be great. Slow and surely is the way. Your goal is to make 20 pips a day or 100 pips a week. If you can accomplish this, after about 8 months you will be making around $ 10,000 a week. Pretty sweet, huh? Now netting 20 pips day is not easy, however with practice you can realistically get there.

But let's see what other Forex VIP Program members have to say, according to a forex review site:

"… At the moment, I am averaging around 40-50 pips a day on a demo account. Now I do not want you to think thats how much a person can except to gain a day from the system. This is exceptional result. And it takes a deeper understanding of Jon course to achieve this result. but it show you the potential that Jon course has. on a good day I could take in a hundred pips "- HR, Brunei

"Jon's training requires some study, the material he provides is really professional and quiet easy to understand. Daily availability for any kind of questions is another great plus for Jon. His system is really getting to the point without any diversion. As a matter of fact, just studying the training material has shed a lot of light into my trading mistakes. To my opinion, this course is MORE than worth the money, and I just can recommend it. "- Guenter Becking, Germany

"This course is unlike anything else that most traders have taken before. It is taught by a trader that trades what he teaches. Jon has trading system that is best day trading system that is publicly available. Consistency is what every trader strives for. Jon's systems are the most consistently systems that I have ever seen. One can easily and consistently take 20 to 50 pips out of the market on a daily basis. Jon teaches a system with a set of rules. In his daily e-mails he stresses following the rules of the system until these rules become second nature. The setup that the system is basis upon occurs several times per session, and with the money management system that teaches, you manage the trade while keeping your losses small. I would highly recommend Jon's mentoring program. he will answer any of your questions. Just imagine, you can ask a pro trader any question about haw he trades! That alone is worth the cost of the course. "- D.Melton, USA

There you have it. The Forex VIP Program is an excellent choice for novice, immediate, and expert traders. I encourage you to give this program a try in order to really succeed in the forex market. I am personally using it on a demo account and can see some real potential in building an income stream from this system and my learning.

Philippine Oil Deregulation – A Policy Research Analysis


The Policy As An Output

Embodied in the Republic Act No. 8479, otherwise known as the "Downstream Oil Industry Deregulation Act of 1998," is the policy of the state that deregulates the oil industry to "foster a truly competitive market which can better achieve the social policy objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products "(Congress 1998).

With deregulation, government allows market competition. That means government does not interfere with the pricing, exportation, and importation of oil products, even the establishment of retail outlets, storage depots, ocean-receiving facilities, and refineries.

It has been a decade ago since lawmakers made a proposition that deregulation would secure the Philippines from the vulnerability of oil price shocks due to its heavily dependent on imported oil. But it is now increasingly apparent that many are calling to scrap the law as six out of ten Filipinos favor the repeal of RA 8479 (Somosierra 2008).

The Policy As A Process

When President Fidel Ramos started his administration in 1992, the country had already started feeling the effects of power supply deficiencies, with major areas already experiencing power interruptions. The power crisis caused a slowdown in the national economy for nearly three years and prodded the government to initiate major reforms in order to rehabilitate the energy sector (Viray 1998, p.461-90). In response to a power supply crisis, Ramos revived the plans to liberalize the oil industry that were cut short during the Aquino administration due to Gulf crisis.

The government's efforts to enact an oil deregulation law were also intensified in 1995 when the Oil Price Stabilization Fund (OPSF) started to threaten the fiscal stability of the economy. Deregulation was thus seen as the solution to the recurring deficit.

The problem of the OPSF deficit was in part related to the highly political nature of oil prices, which encouraged government to defer price increases as much as possible in order to avoid public protest even at the expense of incurring a fiscal deficit. However, government mismanagement of the fund also included using it for non-oil purposes such as financing other government projects or the public sector deficit when it was in surplus (Pilapil 1996, p.12).

At the height of a strong lobbying effort for deregulation by oil companies and despite the loud opposition of militant groups, the industry was eventually deregulated in 1996 with the enactment of RA 8180 (the Downstream Oil Industry Deregulation Act of 1996) in Congress.

However, Supreme Court declared in 1997 the unconstitutionality of RA 8180. The Court decision stemmed from three provisions in the law that were deemed to inhibit free competition and therefore, violated the anti-trust mandate of the 1987 Constitution (Supreme Court 1997). But administration Congressmen quickly re-filed the oil deregulation bill leading to the new oil deregulation law. RA 8479 was then enacted to pave the way for the full deregulation of the oil industry. Since then, government has no longer control over the industry. What it can do is only monitoring.

Applicable Models

The policy model that best describes the policy process is Vig and Kraft 1984 model where policy stages / phases are characterized by five elements: 1) agenda setting, 2) policy formulation, 3) policy adoption, 4) policy implementation, and 5) policy monitoring.

On the other hand, the model that best describes the policy approach is Mixed Scanning because the Ramos administration resorted to rational planning process and incrementalized on liberalization plan of the Aquino government.


The Policy Environment

Identified policy environment includes the regime characteristics of Ramos Administration, socio-economic structure in 1990's, and the prevailing international financial influence on the country's economy and politics.

The Policy Stakeholders

Identified as stakeholders in this policy are the Filipino people, the President, Legislators, Supreme Court, DOE, DOJ, DTI, NEDA, the oil companies, NGO / advocacy groups, and media.

The Interrelationships Between Policy Environment And Stakeholders

Despite a strong opposition coming directly from ordinary people, transport groups, and NGOs, the oil deregulation policy was still pushed through. It was formulated and instituted under the regime of President Ramos who, in his flagship program called the Philippines 2000, envisioned to make the country globally competitive by pursuing the thrusts of deregulation, market liberalization, and privatization. The media then exposed the fact that the biggest factor that influenced the formulation of the policy was the perceived eventual bankruptcy of the Oil Price Stabilization Fund, which had been originally established by President Ferdinand Marcos for the purpose of minimizing frequent price changes brought about by exchange adjustments and / or an increase in world market prices of crude oil and imported petroleum products.

Influenced by the International Monetary Fund, Ramos administration argued that there was a need to deregulate the industry because under a regulated environment, prices are not allowed to rise and fall with market levels. This means that when prices went up, government had to shell out money to subsidize the difference between the old and the new price.

According to the National Economic Development Authority (NEDA), had the government opted not to deregulate, OPSF obligation would have ballooned to at least P8.3 billion in 1998. The P8.3 billion is equivalent to the construction of more than 4,500 kilometers of provincial roads, 51,000 deep wells of potable water, 25,000 school houses, or free rice for 20% of the poorest Filipinos (Bernales 1998)

The Supreme Court in 1998 ruled in favor of the constitutionality of the Downstream Oil Industry Deregulation Act of 1998. Since then, it has been the policy of the subsequent administrations to deregulate the industry. DOE, DTI, DENR, DOST are agencies mandated to serve as the monitoring-arm of the government.

Is The Policy Working?

The answer is obviously "No." IBON Foundation reported that the Oil Deregulation Law has further strengthened the monopoly of the big oil companies as automatic oil price hikes are allowed. Consequently, other oil companies took advantage of the policy, hiking pump prices of all petroleum products by around 535% since the Oil Deregulation Law was first implemented in April 1996 (Bicol Today 2007). The policy is also unable to solve or, at least, mitigate the effects of global oil crisis.


A. Repeating The Process

a.1 Problem Definition / Structuring

It has been recognized that the problem with oil is far from over as deregulation policy fails to meet its goal to foster a truly competitive market and reasonable oil prices. The current president herself, Gloria Macapagal Arroyo, acknowledges the fact that the oil crisis is threatening to erode the very fiber of the Philippine society.

Unlike in 1998, the crisis today seems to be more irreparable as the United States is facing what many economists describe as the worst economic crisis in its history, triggering unstoppable skyrocketing of oil prices and prices of foodstuffs around the world. As already stated, the oil crisis is a global one and has to be addressed not only at the national level, but at the international level as well.

But why is the oil crisis a global crisis? Is it really beyond the government control?

The Philippines, like many other nations, buys the oil at the spot market. By "spot" is meant, that one buys the oil at a market only 24 to 48 hours before one takes physical (spot) delivery, as opposed to buying it 12 or more months in advance. In effect, the spot market inserted a financial middleman into the oil patch income stream.

Today, the oil price is largely set in the two futures markets: London-based International Petroleum Exchange (IPE) and the New York Mercantile Exchange (NYMEX). Here, traders or investors buy or sell certain commodities like oil at a certain date in the future, at a specified price. Basically, traders invest in the futures market by buying futures contracts called "paper oil" or simply paper claim against oil. The very purpose of buying oil is not to wait for the actual delivery of the physical oil in the future, but to sell the paper oil to another trader at a higher price. That's how investors engage in widespread speculation; and it is becoming a viscous cycle. Almost all countries, including the Philippines, buy the oil at the spot market where the price is already at its peak.

In a year 2000 study, Executive Intelligence Review (EIR) showed that for every 570 "paper barrels of oil" -that is futures contracts covering 570 barrels-traded each year, there was only one underlying physical barrel of oil. The 570 paper oil contracts pull the price of the underlying barrel of oil, manipulating the oil price. If the speculators bet long-that the price will rise-the mountain of bets pulls up the underlying price (Valdes 2005).

This only disproves the popular assumption that oil price hike has something to do with the "law of supply and demand." In fact, as much as 60% of today's crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price (Engdahl 2008).

In its recent statement, IBON Foundation cited a study conducted by the US Senate Permanent Subcommittee on Investigations, which revealed that 30 percent or more of the prevailing crude oil cost is driven only by speculation. IBON further cited that speculation adds about $ 35 to a barrel of crude oil (Martinez 2008).

a.2 Developing Alternative

In the face of the alarming oil price hike that threatens the survival of ordinary Filipino people, a number of stakeholders call for alternative solutions: 1) amendment of the Oil Deregulation Law, 2) scrap / repeal the law, 3) removal of 12% vat on oil, 4) seek alternative sources of energy, and 5) engage in country-to-country oil agreement.

a.3 Options Analysis

1. Amendment of the Deregulation Law

As the public continues to hurt from surging oil prices, many policy makers call to re-examine the Downstream Oil Industry Deregulation Act of 1998. One of whom, is Ilocos Sur Rep. Eric Singson who has sought several amendments in the said law to ensure transparency in the pricing of oil products and encourage greater competition in the retail industry, which has been under the influence of giant oil companies. He cited the need to amend Sections 14 and 15 of RA 8479 to strengthen the powers of the Department of Energy (DOE) so it can effectively carry out its mandate to inform and protect the public from illicit practices in the oil industry and to provide more financial assistance for the establishment and operation of gasoline stations, which will encourage investment and fair competition (Malacanang 2005).

2. Scrap / Repeal the Oil Deregulation Law

To many, amending the law is not enough to rectify the skyrocketing prices of oil and oil-based products; they demand for the repeal, instead. A lawmaker from the Lower House, Cagayan de Oro City Rep. Rufus Rodriguez filed House Bill 4262 aiming to repeal Republic Act No. 8479, arguing that instead of fostering a competitive market, the law has only strengthened the oil cartel in the country and brought the oil prices up. The bill also seeks to re-establish the Oil Price Stabilization Fund. He articulated that dominant oil companies still dictate the price because even new oil industry players get their supply from the giants (Sisante 2008).

Militant groups and other non-government organizations have staged rallies and strikes all over the country in opposition of the deregulation policy. Kilusang Mayo Uno (KMU), one of the country's prominent labor groups, contested that cartelization still exists amidst deregulation. In its recent statement, KMU articulated that with recent Dubai oil prices pegged at $ 97 per barrel (as of 3rd week of September), local price of diesel is at P49 / liter; while when Dubai crude was at $ 97 / liter on Nov. 6, 2007, diesel in the Philippines was sold only at P37.95 / liter, or P11.05 / liter lower than the present rates (GMANews.TV 2008).

3. Removal of 12% VAT on oil

Senator Mar Roxas said that government must heed calls to remove the 12% value-added tax (VAT) on oil and oil products as prices continue to go up despite the lowering of oil prices in the world market. Roxas had filed Senate Bill No. 1962. However, in her eighth State of the Nation Address (SONA), President Arroyo, stated that it will be the poor who will suffer the most from the removal of VAT on oil and electricity as this will mean the loss of P80 billion in programs being funded by her tax reform (Arroyo 2008).

4. Alternative sources of energy.

While many have engaged themselves in the long-running debate about amendment vs. repeal of the law, a number of stakeholders argue that Philippine government must, instead, focus on alternative sources of energy to rectify the heavy dependence on imported oil. Senator Juan Miguel Zubiri, now considered "Father of the Philippine Biofuels Bill," has hyped biofuel as the miracle product which can lower oil prices. But more and more scientists are worried that focusing on biofuels could jeopardize food production.

The Philippine LaRouche Society, an increasingly emerging think tank organization in the country, says that biofuel advocacy is a losing proposition as it competes with food production for human consumption. The organization calls, instead, for the revival of the Bataan Nuclear Power Plant (BNPP) as soon as possible to provide the population with a cheap, reliable, and continuous source of power to subsequently free the people from dependence on oil. The organization further articulates that since that will require huge financial requirements, the Philippine government must, therefore, declare a moratorium on foreign debt payments-since much of which are onerous and merely product of "bankers arithmetic" (Billington 2005).

5. Country-to-country oil agreement

The Philippine LaRouche Society has long been proposing to the government to initiate immediate steps to establish bilateral contract agreements with oil-producing countries of not less than 12 months' government scheduled deliveries at reasonable, fixed prices. Government can also enter into commodity-swap agreements with oil-producing countries.

As a member of the United Nations and other intergovernmental associations like APEC and WTO, the Philippine government should join the growing worldwide call for a fair and honest oil trading by de-listing oil as a commodity traded in the futures market.

a.4 Deciding the Best and Most Feasible Option

It must be known to all the Filipino people that oil deregulation, as a policy, has failed to foster a truly competitive market towards fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products. Proposed solution # 2 (scrap / repeal the Oil Deregulation Law) is therefore a better option. But repealing the Deregulation Law is not the ultimate answer to the rise in oil prices. Even if the law is repealed, the Philippines will still be subjected to the same factors-a rise in oil prices in the global market.

Proposed solution # 5 (country-to-country oil agreement) can address the issue of the oil crisis at the international level. How about the efforts to solve the crisis at the national level?

The Philippine government must revive the Bataan Nuclear Power Plant to provide the population with a cheap, reliable, and continuous source of power to subsequently free the people from dependence on oil. As proposed, government must direct enough funds, instead for debt servicing, towards the revival and upgrade of BNPP. Removal of the entire E-VAT, not only on oil, must also be taken into consideration to ease the pain of the Filipino people. By moratorium, government does not have to extract a pound of flesh out of every Filipino to have the means to fund its programs.

B. Why seemingly "better" options are not adopted? The Peculiarities of the Philippine Policy System

From the standpoint of the present administration, amending RA 8479 seems to be difficult to adopt because re-regulating the oil industry would mean subsidizing oil prices-something like OPSF. To many, this does not work in an era of rising crude prices because it would entail government resources. This is where debt moratorium comes in as an effective fiscal strategy. But moratorium, to many skeptics, is unwise because they fear the blackmail or retaliation of the multinational creditors. Our leaders must learn how then President Nestor Kirchner of Argentina defied the predatory financial institutions, averring that "There's life after the IMF."

On the other hand, many leaders deem country-to-country oil agreement impossible to implement as the giant oil companies have still strong influence on the policy-making process in the country. On the part of the oil companies, it will be a huge loss if government will assert its power to have a bilateral agreement with any of the oil-producing country. Also, many leaders consider the Philippines as a small nation with no voice in the international assembly. But it is a matter of having "big balls," to put it in a figurative language. After all, they are the leaders and are mandated by the Constitution to protect and promote the general welfare.

Another peculiarity of the Philippine policy system is the negative perception towards nuclear energy. BNPP has been stigmatized as being environmentally dangerous and as being associated with "corruption." The fact of the matter is, the technology has already evolved and been modernized. The Philippine government spent $ 2.3 billion to build BNPP without generating a kilowatt of electricity. It is high time to revisit the old strategy to finally free the country from dependence on imported oil.

It is worth mentioning that the International Atomic Energy Agency inspected the power plant in Bataan early this year and reported that this could be rehabilitated, in full compliance with high international safety environment standards, in at least five years at a cost of $ 800 million (Burgonio 2008). The Philippine LaRouche Society emphasizes the importance of declaring debt moratorium as a fiscal strategy to start the rehabilitation. The organization argues that the Philippines is servicing the debt over US $ 10 billion per year, which is more than enough to start the full operation of BNPP (PLS 2008).


With the recognition that oil crisis is a global oil crisis, affecting the lives of all inhabitants of our planet, it is incumbent, therefore, upon the leadership of the Philippines to immediately take the following steps:

A) To immediately repeal the oil deregulation law, for the government to assert its sovereign power to have control over the oil industry and economy as a whole.

B) To propose at any international summit or assembly that oil, being a commodity, critical to the continuation of human life, be de-listed as a commodity traded in the futures market, thereby escaping the clutches of unscrupulous people and speculative financial institutions.

C) To initiate immediate steps to establish bilateral contract agreements with petroleum-producing countries of not less than 12 months' government scheduled deliveries at reasonable, fixed prices.

D) To design a comprehensive energy development program, such as nuclear power plant being the most cost-efficient source of energy to date, for the purpose of freeing our country from complete dependence on imported energy sources. To this end, moratorium on foreign debt must be taken into account as a paramount fiscal strategy.

The crisis, which we now face as a nation, requires understanding of the problems through diligent study and concomitant courage to do what is right for the benefit of the present and future Filipino generations.

Hong Kong Clothing Industry


Textile quotas were eliminated among WTO members at the first day of 2005 in accordance with the Agreement on Textiles and Clothing (ATC). However, resistance to quota removal spread in the US and EU. Subsequently, China reached agreements with the EU and the US in June and November 2005 respectively. The China-US agreement, effective from January 2006, governs the exports of a total of 21 groups involving 34 categories of Chinese textiles and clothing products to the US during 2006-2008. The China-EU agreement, effective from June 2005, covers 10 categories of Chinese textiles and clothing exports to the EU during 2005-2007.

On the other hand, the mainland and Hong Kong agreed in October 2005 to further liberalise the mainland market for Hong Kong companies under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III). Along with other products of Hong Kong origin, the mainland agreed to give all products of Hong Kong origin, including clothing items, tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin , will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met.

Hong Kong clothing companies are reputable for ODM and OEM production. They are able to deliver quality clothing articles in short lead time, as foreign importers and retailers request clothing suppliers to tighten up supply chain management to ensure the ordered merchandise reaching the store floor at the right time. Increasingly, Hong Kong clothing companies, the established ones in particular, have shown enthusiasm for brand promotion.

Hong Kong's total exports of clothing rose year-on-year by 9% in the first 11 months of 2005. While Hong Kong's re-exports of clothing rose by 20%, domestic exports fell by 14%. In the first 11 months of 2005, Hong Kong's clothing exports to the US and EU rose by 11% and 18% respectively. While Hong Kong's clothing exports to Japan levelled off, those to the Chinese mainland declined by 11%.

Industry Features

The clothing industry is a major manufacturing sector of Hong Kong. Its gross output is one of the highest among all manufacturing sectors, amounting to HK $ 35.9 billion in 2003. It is the largest manufacturing employer in Hong Kong, with 1,673 establishments hiring 28,752 workers as of June 2005. It is also the leading earner in terms of domestic exports, taking up 40% of the total in the first 11 months of 2005.

Hong Kong's geographic boundary has never constrained the development of the forward-looking clothing industry. The majority of clothing manufacturers have set up offshore production facilities in an attempt to reduce operation costs. Relocation of production facilities offshore has however resulted in a steady decline in the number of clothing manufacturers in Hong Kong.

Hong Kong is not only a leading production centre but also a hub for clothing sourcing globally. Companies doing garment trade in Hong Kong are experienced in fabrics procurement, sales and marketing, quality control, logistic arrangements, clothing designs and international and national rules and regulations. The professionalism that they command and the combined services offered are not easily matched elsewhere. With a total of 15,190 establishments hiring 95,889 workers, they form the largest group involved in import-export trade in Hong Kong.

Performance of Hong Kong's Exports of Clothing

Hong Kong's total exports of clothing rose year-on-year by 9% in the first 11 months of 2005. While Hong Kong's re-exports of clothing rose by 20%, domestic exports fell by 14%. The contrasting performance of Hong Kong's re-exports and domestic exports was basically ascribed to the increasing relocation of garment manufacturing to the Chinese mainland, resulting from the removal of quotas under WTO's Agreement on Textiles and Clothing (ATC). But the declining trend of domestic exports has been reversed somewhat in recent months, due to the re-imposition of quantitative restraints on mainland-made textiles and clothing by the US and EU.

Retail sales in the US held firm in the first 11 months of 2005, rising by nearly 6% from the same period in the previous year. In the first 11 months of 2005, Hong Kong's clothing exports to the US rose year-on-year by 11%.

In the first 11 months of 2005, Hong Kong's total clothing exports to the EU surged year-on-year by 18%. Clothing exports to major EU markets like France, Germany and Italy recorded growth rates in excess of 20%.

On the other hand, Hong Kong's clothing exports to Japan levelled off in the first 11 months of 2005 partly due to the trend of direct shipment. On the back of the rising income however, Japanese consumers tend to resume their spending spree on premium clothing items. Meanwhile, Hong Kong's clothing exports to the Chinese mainland dropped by 11% in the first 11 months of 2005, compared with the same period last year.

Product-wise, Hong Kong's exports of woven wear rose by 12% in the first 11 months of 2005. While woven wear for women / girls grew by 13%, those for men / boys recorded a growth of 8% from the same period in the previous year. Knitted wear grew by 2%, with women / girls and men / boys rising by 1% and 6% respectively. While clothing accessories declined by 3%, other apparel articles, for their part, increased by 13%.

Sales Channels

Hong Kong's clothing manufacturers have forged strong relationships with their customers. They are able to understand and cater for the preferences of very broad customer bases. Exporters also have good knowledge of international and national rules and regulations governing clothing exports, such as rules of origin, quota restrictions, tariff rates and documentation requirements. Cut, make and trim (CMT) arrangements are common although many Hong Kong manufacturers have moved to higher value-added activities such as design and brand development, quality control, logistics and material sourcing.

A few well-established local manufacturers have entered into the retailing business, either locally or in overseas markets. Many of them have retail networks in major cities around the world including Beijing, London, New York, San Francisco, Shanghai, Singapore, Sydney, Taipei and Tokyo. Some well-known manufacturing retailers include Baleno, Bossini, Crocodile, Episode, Esprit, G-2000, Giordano, JEANSWEST, Moiselle and U-2.

As a global sourcing hub in Asia, Hong Kong attracts a number of international trading houses and major retailers. Buyers sourcing from Hong Kong include American and European department stores (eg Macy's, JCPenney, Federated, Karstadt Quelle, C & A), discount stores (eg, Sears, Target and Carrefour), specialty chains (eg, The Gap, The Limited) and mail order houses (eg Otto and Great Universal Stores). Many international premium designer labels – such as Calvin Klein, Donna Karen, Ralph Lauren, Tommy Hilfiger and Yves Saint Laurent – source clothes in Hong Kong through their buying offices or other intermediaries.

Hong Kong's fashion designers have been gaining worldwide reputation for their professional expertise, sensitivity to current trends and ability to blend commercialism with innovation. Medium to high-priced fashion clothing bearing Hong Kong designer labels is being sold / have been sold in renowned department
stores overseas such as Bloomingdale's, C & A, Harrod's, Isetan, Macy's, Marui, Mitsukoshi, Nieman Marcus and Seibu.

Trade fairs and exhibitions remain common places for buyers and suppliers of clothing to congregate. To establish connections and explore market opportunities, Hong Kong manufacturers and traders have involved themselves actively in international shows led by the Hong Kong Trade Development Council (TDC), including the ones in Beijing, Chengdu, Dalian, Dubai, Dusseldorf, Hong Kong, Moscow , Mumbai, Paris and Tokyo. 'Hong Kong Fashion Week' is organised twice a year and attracts international suppliers and buyers to participate in the exhibition. Organised by TDC, 'World Boutique, Hong Kong' is the first independent event in Hong Kong dedicated to promoting designers' collection and brands from around the world.

Industry Trends

Changes in retail landscape: In the US and EU, large-scale retailers are undergoing drastic restructuring and consolidation, in particular, the growing prominence of hypermarkets such as Wal-Mart. To strengthen competitiveness, Sears and Kmart have merged to form the third largest retail group in the US.

Growing importance of private labels: Private labels, in essence, have become an increasingly effective marketing tool among garment retailers. In order to differentiate as well as upgrade the image of their products, major retailers have started to put a stronger emphasis on their own labels. According to Cotton Incorporated, private labels accounted for 45% of total US apparel sales in 2003, up from 39% in 2001. In some adult apparel categories, such as skirts, private labels accounted for as high as 76% of the total sales. It is also estimated that 45% of products sold in the EU are sold under private labels. Renowned retailers such as H & M, Marks & Spencer, Orsay, Palmers, Pimkie, Springfield and Kookai have owned their private labels. As consumers desire to have private labels on everyday garments like jeans, accessories and T-shirts, the doors are also open to the supply of these clothing items to private label owners.

Growing interest in China's domestic market: The rapid expansion of mainland's economy has attracted great interest of Hong Kong clothing companies to explore its clothing market. A TDC survey on mainland's garment shoppers indicates that Hong Kong brands are ranked number one by the respondents in the mid-range segment. While international brands are most preferred in the high-end segment, mainland brands dominate the low-end. In addition, the same survey finds out that in the eyes of mainland consumers, Hong Kong companies are very strong in casual wear, as they are generally of good design and quality. In essence, many mainland consumers have developed a stronger awareness of Hong Kong brands through tour to and shopping in Hong Kong. Therefore, Hong Kong's casual wear has successfully projected a positive image to mainland consumers.


On 18 October 2005, the mainland and Hong Kong agreed to further liberalise the mainland market for Hong Kong companies under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III). Along with other products of Hong Kong origin, the mainland agreed to give all products of Hong Kong origin, including clothing items, tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin , will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. But non-Hong Kong made clothing products will remain subject to tariff rates of 10-25% when entering the mainland.

The promulgated rules of origin for clothing items to benefit from CEPA's tariff preference are basically similar to the existing rules governing Hong Kong's exports of these products. Generally speaking, the principal manufacturing process of cut-and-sewn garment is sewing of parts into garments. If linking and / or stitching is / are required, such process / processes must also be done in Hong Kong. For piece-knitted garment, if it is manufactured from yarn, the principal process is knitting of yarn into knit-to-shape panel.

If the piece-knitted garment is manufactured from knit-to-shape-panels, the principal process is linking of knit-to-shape panels into garment. If stitching is required, it must also be done in Hong Kong.

Trade Measures Affecting Exports of Clothing

According to the ATC, textile quotas were eliminated among WTO members at the first day of 2005. However, resistance to quota removal spread in the US and EU. Particularly in the US, China-specific safeguards on 10 categories of clothing items from China were invoked. Against this background, China reached agreements with the EU and the US in June and November 2005 respectively.

The China-US agreement, effective from January 2006, governs the exports of a total of 21 groups involving 34 categories of Chinese textiles and clothing products to the US during 2006-2008. It allows an annual growth of 10-15% in 2006, 12.5-16% in 2007 and 15-17% in 2008. The China-EU agreement, effective from June 2005, provides for an annual growth of 8-12.5% ​​in 10 categories of Chinese textiles and clothing exports to the EU during 2005-2007. In addition, both EU and US agreed to exercise restraint in invoking China-specific safeguard against Chinese textiles and clothing that are not covered in the agreements.

Product Trends

Formal Dressing: While casual wear accounts for the bulk of clothing sales, a general trend towards stricter corporate dress codes has led to a rising demand for formal dressing, particularly suits. According to a survey by Cotton Incorporated in late 2004 / early 2005, 38.5% of respondents believe that people dressed too casually at work. This is a 6.5 percentage point increase over the same year-ago.

Teenager: One of the major driving forces of clothing market appears to be the teenagers in the coming years. The number of teenagers in the US expects to increase from 31.6 million in 2001 to 34.1 million in 2010. A recent survey by Teenage Research Unlimited found that teens are saving money by value shopping. While JCPenney is their favourite department store, Target and Wal-mart are their favourite hypermarkets. In addition, Old Navy is their choices among specialty apparel stores.

Silver Market: Ageing population becomes a common phenomenon in many developed countries in Europe as well as Japan and the US. Elderly people constitute a major market segment called 'silver market'. Supported by savings, social security benefits and pensions, many elderly people have rather strong spending power. It is estimated that the age group of 65 year and above accounted for about 21% of Japan's consumption expenditure in 2000. A survey conducted by the Japanese government also shows that people who are 60 years old and above possess almost three times the financial assets of those in the 40-50 age group. In the US, those aged at or above 65 amounted to 18.1 million in 2001, and the number is expected to swell to 26 million in 2015.

Plus-size Market: The plus-size market has been an area of ​​growth for many years, and the trend is expected to continue in the coming future. It is estimated that 65 million women in the US wear size 14 or above. This group represents one-half of the US female population. It is reported that some renowned brands have already responded to the trend by offering merchandise of larger size; these companies include Liz Claiborne, Ralph Lauren and Tommy Hilfiger.

Easy-care Clothes: Clothes made of stain-resistant and wrinkle-free fabrics are well received in the market. It is estimated that about a quarter of apparel is now made of easy-care fabrics, and its popularity is expected to continue in the next few years. While major apparel brands like Dockers and Liz Claiborne have already marketed extensively easy-care clothes, major hypermarkets, like Wal-Mart, also offer more merchandise of such quality.

Source: Hong Kong Trade Development Council

Candlestick Charting – What Does Solid Candlestick Mean?

Candlesticks have grown in popularity considerably over the last decade and a bit and originally a guy by the name of Steve Nison introduced them to the western world. Whilst the scope of candlestick charting is extremely wide and varied we are going to concentrate on what does a solid candlestick mean when looking at the charts.

The first thing you'll note about candlesticks is that you can have open and solid candle and you usually have different colour candlesticks too, namely red and green.

An Open Candlestick

An open candlestick simply means that the closing price for the day closed higher than where it opened at, resulting in a rise in the share price between the open and the close.

A Solid candlestick

A solid candlestick means that the closing price for the day closed lower than where it opened at, resulting in a fall in the share price between the open and close.

A red candlestick

A red candlestick usually refers to a down day relative to the previous trading day. For example the previous day's close was $ 25 and today it closes at $ 24 resulting in a red candle.

A greed candlestick

A green candlestick usually refers to a positive day relative to the previous trading day. For example the stock you are trading might have closed yesterday at $ 30 and today it closed at $ 31 resulting in a green candle.

An open red candlestick

An open red candlestick may be new to most people as their charting program may not have the functionality or depth to show these candles. An open red candlestick simply means the closing price today is lower than the close of yesterday but the closing price today is higher than the opening of the day.

A solid green candlestick

A solid green candlestick shows us that the closing price today is higher than the closing price of yesterday but the closing price today is lower than the opening price of the day. So as you can see, candlesticks can paint a very impressive and graphical picture and once you get used to them you'll be able to see some advanced patterns to profit from.

Proprietary Trading Firms – Interview Questions and Preparation Tips

A common question from prospective proprietary traders preparing to make an impression at their interview for a trading vacancy is "What interview questions will I be asked?", "How will the interview process be conducted?" and "How best can I prepare for my interview?".

Every proprietary trading firm will have its own unique recruitment process, and these will often be modified frequently as firms adapt and update their techniques. It is therefore impossible to give anything more than general guidance as to the interview process and what may be involved. However, the following article may help in giving pointers as to what you may be asked, and how you can best prepare yourself for interviewing.


Research the company and your interviewer (if known), find out what their markets are (stocks, options, futures or multi-asset) and how they trade (market maker, spreads, pairs, algorithmic, flow trading, etc). Check the job description carefully. Search the internet for prior discussions or comments on forums about the firm or position.

If you do not prepare carefully and thoroughly for the interview, why should the interviewer assume you will prepare properly for each trading day?

Make sure you know the products and exchanges such as fixed income or STIRS, Eurex and LIFFE. Read up on relevant tick sizes, value of contracts, rollover dates, volatility of contracts and product specifications.

Group interview

Some companies do this, some do not, but be prepared for the first round of interviewing to be done as a group. This is an easy way for a proprietary trading company to get a largish number of their most interesting applicants into their office en-mass, and to narrow down which of these applicants they are interested in speaking to one on one.

In a typical group interview, a recruiter (or two) will introduce the company and their opportunity. They will run through a short presentation, and then they will ask the candidates, one-by-one to stand up and move to the front of the room to make an introduction. You should talk about yourself, why you want to do trading and why with their company, etc. You should tailor your introduction to address what you think the company is looking for based on the job description and your earlier research.

The group interview will possibly include some sort of reflex or cognitive testing; you may be required to do some of this on a PC. Quite likely they will also include some basic numeracy test too – these will not normally be exceptionally difficult tests, but a time limit will be imposed.

The whole process is usually crafted to help the prop firm recruiters identify and single out which of the grouped candidates display the characteristics the firm considers desirable. For example, trading requires confidence and composure, as well as effective communication with trainers and other traders especially if you go on to work in a team. The aptitude or maths tests will demonstrate whether you can retain your focus and accuracy whilst under pressure and in a competing environment against the other candidates.

Individual Interviews – Question types

Interview questions fall into category types, such as open or closed questions or behavioural questions, designed to elicit or provoke specific responses from inteviewees. It is useful if you understand the types of questions you may be asked, so that you can mentally prepare for how you can handle your responses in these question scenarios.

Behavioural questions – predicts future behaviour based on your past experiences
You should have ready examples of how your prior experiences have allowed you to develop specific skills required for the job, and explain the benefit to the firm.
STAR: Situation, Tasks, Action, Result

Open questions – "Tell us about …….."

Keep in mind the skills likely to be required as a trader, and tailor your response around the job description, selection criteria and your strengths.

Closed questions – Used when the interviewer wants information of a specific factual or technical nature, these sort of questions can often be answered with a "yes" or "no"

They interviewer will be seeking clarification and elaboration of past experiences or will require you to demonstrate your knowledge in some subject area.

Hypothetical questions – "What would you do …" "How would you handle …"

These questions are designed to assess your mental agility, the ability to think on your feet.

Leading questions – The answer seems obvious …

"As a trainee trader you will require good communication abilities – do you have good skills in this area?" Do not give a simple yes or no answer. Always give examples to support your response.

Combination or sequential questions – two or more questions phrased together, on the same topic

Do not be afraid to ask for the question to be repeated if you can not recall parts of the full question during your response.

Use the 'STAR' method for answering interview questions

S: Situation – describe the scenario
T: Task or problem – what problem did you face?
A: Action – what action or decision did you take?
R: Result – what was the result or outcome of your action?

Common interview questions

Following are a list of some of the most commonly asked proprietary trading interview questions, and an indication of what the firm might be looking for in a response.

Tell me about yourself

The single most commonly asked question in all interviews, though it often catches the unprepared off guard. You need to have a short statement prepared in your mind. Be careful that what you say does not sound overly rehearsed. Limit your reply to trading-related or professional information unless instructed otherwise. Talk about things you have done and jobs you have held that are related to, or could contribute in some way to your suitability for the trading position you are interviewing for. Start with the things farthest back and work up to the present.

Why do you want to be a trader ?

Explain how long has it been your desire and describe the steps you have taken to achieve your goal. If you have traded already this is a great opportunity to demonstrate real-world proof of your interest in trading by producing your account statements and PnL metrics. The firm will be for the desire to make money, and useful skills that you have already got from other areas. You should also demonstrate an understanding of the requirements of the job, and have longer term goals. They are not looking for people who are want a "glamorous" job, who have no appreciation for the hard work involved, or for people going into trading because they were unable to get into their chosen field; ie, an Investment Bank.

Do you consider yourself a risk taker?

You should answer this honestly, and be prepared to back your answer up with behavioural examples. If YES, give an example of a risk you took; Why do you consider that to be a risk? Do you enjoy taking risks? If NO, explain why; be prepared to describe what you consider to be a risk, and how you react to others who do take risks. The firm will likely be looking for people who know the difference between a calculated risk and recklessness, who consider the risk before hand and who enjoy the challenge of calculated risk taking. They will not be looking for people who enjoy risk taking purely for the adrenalin rush, or who can not distinguish between risk taking and foolishness.

What do you know about this organization?

This question is one reason to do some research on the organization before the interview. Explain in short what you know about the firm, where they have been and where they are going. What are the current issues and who are the major players in the firm, what their markets and exchanges are and how they trade. Do not be afraid to phone in to reception beforehand and speak to someone when doing your research to try to get enough information.

Why do you want to work / trade with this company?

This may take some preparatory thought and again should be based on the prior research you have done on the prop group. Sincerity is quite important here and will easily be sensed. Relate your response to your long-term career goals – which should of course be linked to the trading opportunity you have applied for.

What have you done to improve your knowledge or skills in the last year?

Try to include self-improvement activities that relate to the specific opportunity. A wide variety of activities can be mentioned as positive personal improvement, and could include sports or performance activities. Have some good ones you think the firm would value ready to mention. Talk about what and how did you learn, how long did it take, are you still learning or perfecting? The prop firm will be looking for people who can explain why they wanted to learn, who understand that learning takes time. They will of course want people who put in considerable effort to learn something new and who realise that there will always be something new to learn.

They will not looking for people who show no perseverance, or who think a two day typing course is a good example.

Why should we hire you to trade for us?

Point out how your personal strengths and assets meet what the company needs. Ultimately, the company is looking for someone who will make money for them, so you should structure your reply in such a way that this result is your mutual objective and explain how you intend to accomplish that for them. Do not mention any other candidates to make negative comparisons.

Do you consider yourself successful?

You should always answer yes to this sort of question, and in short explain why. A good answer should include some personal goals that you have set, and explain which ones that you have met some and how you are on track to achieve the others.

What is your greatest strength?

Numerous answers are good, just stay positive. A few good examples: Your understanding of technical analysis, your analytical or problem-solving skills, Your ability to stay focused and work under pressure, your positive attitude, your persistence.

What has been your biggest disappointment?

Try to keep your response to a professional scenario. Endeavour to refer to something that was beyond your control. Show acceptance of the situation and no negative feelings. Explain why you think this happened, what steps have you taken to overcome this. How successful have these steps been, and most importantly, what have you learnt or taken from the situation that has led to personal improvement. The company are likely to be looking for people who can accept their part in a failure and who take some form of action to try to overcome failure or at least learn from it. They want people who accept that they will have failures, particularly in trading since losing trades are part of any traders activity.

They will not looking for people who think they are perfect, who do not accept their part or attempt to blame others, or people who get hung up about failure.

Describe a situation that required an unusual amount of hard work under pressure.

You could say that you thrive or enjoy certain types of pressure or that you perform at your best when in a stressful situation. Give an example that relates to a trading environment. Talk about whether the hard work in your example was justified, and you tried to relieve the stress, and if it was all worth it in the end. The firm would be looking for people who understand that success takes sustained hard work, and who can cope with and relieve stress. They will not be looking for people who think that success comes easily or who get bogged down by stress.

Are you willing to put the interests of the company before your own?

This is a direct loyalty and commitment question. Do not worry about any ethical and philosophical implications. Just answer yes.

How do you expect to counteract your lack of experience?

Firstly, if you have relevant trading or market experience the interviewer is not aware of yet, bring it up here: Then, point out (if correct) that you are a fast learner and will work hard.

Do you have any questions for me?

Always have questions prepared, even if you think you already know a lot about the opportunity or company from your prior research, as this will show that you are interested. Prepare your questions in such a way where you will be an asset to the organization are beneficial. "How soon will I be able to begin trading?" "What is the earliest I can get onto the trading floor each day?" "What types of strategies will I be able learn?" are examples.

Technical or Product related questions

Technical questions are something you should expect of almost every proprietary trading interview. While the area of ​​speciality, market type and level of difficulty of these questions vary widely from firm to firm, you will undoubtedly be asked technical questions in at least one round of your interviewing.

Again, careful research about the firms activities and markets, and the trading role you have applied for may give you valuable pointers about areas of speciality that you should brush up on beforehand. Accurate and detailed responses will be what will most likely impress your interviewer and help improve your chances to land the job. In this the most competitive industry, it is important for you to gain any edge over other candidates that you can. If you put in the time to prepare, this can help give you that edge.

Some example Product related Interview Questions

Graph the price-yield relationship of bonds.

What is convexity?

What is an inverted yield curve?

The following are prices of four different bonds: 25, 23, 22, 24. Assuming that you can sell or buy these bonds at no cost, if you know that tomorrow, three of them will go to 0 and one of them, 100, how would you arbitrage?

How would you explain credit spread?

If the yen / dollar exchange rate is 100 yen / $ today and the one year forward rate is 105 yen / $, what does this imply?

What is the yen / dollar exchange rate today? Where do you think it will be in one year and why?

If an exporting company wants to pay no more than 110 yen to a dollar and no less than 90 yen to a dollar in 3 months, how would you use option instruments to hedge their position?

Would a price of a call option go up or down when the maturity of the option is longer?

Brain teasers & Problem Solving

It would pointless for us to include a huge library of possible interview problems or brain teasers in this article, you have Google available if you really want to find examples, but we suggest you research the Monty Hall probability puzzle, as variants of this paradox are fairly commonly asked in interviews

Interviewees should understand that some puzzles may not have an obvious solution, or pose some sort of paradox that has no right answer. The right answer in these situations is simply to demonstrate your reasoning as you work it out, and show that you will not panic.

Monty Hall style question:

You are on a game show, behind one of the doors is $ 1000. Behind the other 2 is nothing. You pick a door. The host, opens one of the other doors revealing that it's empty. He now gives you a chance to switch to the remaining closed door, or keep your original choice. Would you switch? What would you pay to switch?

Or another on similar lines …

I have two envelopes. One contains twice the amount of the other . I give you one of the envelopes. Should you switch?

Maths, Aptitude, Psychometric and Personality Profiling tests

Last of all, but not least – be prepared for some kind of mathematical tests at some stage during your interview process, particularly if the proprietary trading firm you are interviewing with is involved in market making, calendar spreads trading or options trading.

Although most trading platforms perform important calculations on ratios and implied prices automatically for you, the firm will expect you to have good math skills in any case, as they will want to be sure you understand what and how you are trading as they train you in their strategy.

A maths test is a reasonable measure of mental agility and you should expect, at the very least, a test involving numeracy, subtraction, multiplication and / or division of large numbers and fractions. If the firm you are testing with is quantitative or involved in options market making, expect the math testing to be difficult. The test will be timed to add of time pressure and stress into the equation.

More rigorous testing could include psychometric profiling. If you have never done a psychometric test, you should perform an internet search on the phrase and try some of the free tests that show up in your search. Although it is possible to improve your scores in these sort of tests by being familiar with what is involved, unfortunately, it is impossible to know exactly what the firm conducting the test is trying to profile you for. Just relax, and answer the questions honestly and as consistently as you can.

Knowing the Best Day of the Week to Sell Stocks and Why

Ok, so everyone knows that it is pretty much impossible to predict what the stock market will do. If that were the case, there would be a lot of millionaires who made their wealth from the stock market … wait there ARE a lot of millionaires that made their wealth from the stock market. Ok, if MORE people could predict what the stock market was going to do, there would be a lot MORE millionaires who made their wealth from the stock market and definitely a few more billionaires to join the likes of Warren Buffet.

Now, once again no one can predict the future. However, there are a few tools that investors can use to put the odds in their favor. Nothing is guaranteed, but when the odds of something happening are in your favor you can be sure that you will have a much greater chance of succeeding. One of the tools I want to get into is knowing when to sell stocks. I also want to drill deeper and talk about specific days in general that are good for selling.

Let's think of an example, based on recent events you know that stock markets tend to have massive drops if something really bad happens in the world. A good example that everyone is probably familiar with would be the 9/11 attacks on the World Trade Center in New York. The market dropped so much that trading was halted. The following day, the market dropped even more! However the following day after that major event , the market tried to rally (bounce back) a bit. That would have been a good day to sell.

The Monday after stock options (usually the third Friday of every month for most stocks) expire is a good day to sell stocks. In the third week of every month, stock options and stocks experience high levels of volatility and this is usually to the down side. What I mean by this is that stock prices tend to drop somewhat significantly during the third week of every month.

If stock prices experience big down days, the day following that down day will usually be a rally as the short sellers will try to cover their positions and as other investors will see stocks as oversold. Stocks NEVER go straight down and never go straight up. There are always down days and up days in between a stock's move to higher highs or lower lows.

The First trading day after a holiday. Trading is usually light leading up to a weekend or leading up to a holiday as most brokers take vacations. Trading then tends to pick up once the brokers and big time traders come back from vacation.

The days when there is great news about a company such as earnings or a great new product. Positive earnings reports on a stock make great days for selling a stock. This kind of news usually sends a stock price higher, and these are perfect days for selling.

The conclusion is that you should learn to identify events that would cause a stock to go up in price. Lastly, as a rule of thumb NEVER buy on an UP day, always look to take profits on up days.

The Best CFD Trading Books Available – Find the Top 3 Books to Learn About a Contract For Difference

I'm going to take a look at the best CFD trading books available on the market today so you can be an informed CFD trader instead of taking pot shots in your CFD trading.

I have read all the CFD trading books on the market and have listed what I believe are the top 3 available. Here they are in no particular order …

1. Real Traders 2 by Eva Diaz

2. SuperCharge Your Trading with CFDs by Jeff Cartridge

3. Making Money from CFD Trading by Cat Davey

Let's have a look at each of the books in a little more detail.

1. Real Traders 2 by Eva Diaz

How would you like to learn the tips and tricks that enabled Australia's most successful CFD trader (Dave Limburg) to make a staggering $ 110,000 or 441.79% in 9 weeks? Real Traders 2 by Eva Diaz takes us on a journey to uncover exactly how Dave Limburg managed to make those incredible returns with realatively small drawdowns.

Back in 2007 CMC Markets ran a trading competition which involved over 440 budding CFD traders for a winner take all $ 100,000 cash first prize. Unbelievable I know but Dave Limburg managed to pocket the $ 100,000 and during the 9 weeks that the competition was run he actually made $ 110,000 in his own account.

In Real Traders 2, Eva Diaz actually interviews 7 of the top 10 placegetters and uncovers the day by day strategies these gun traders employed to hit the top 10 in a nationwide trading competition. You'll find a mixture of fundamental, technical, discretionary and mechanical trading systems employed to catapult each of them to the top including a husband and wife duo. Just for the record the wife came 2nd and the husband came 7th!

2. SuperCharge your Trading with CFDs by Jeff Cartridge

Jeff Cartridge has been educating traders for over a decade and has been actively involved in trading for longer than that. Further to this, Jeff started trading CFDs when they first launched in Australia back in 2002.

In his CFD book, Jeff runs through the most common uses for CFDs and outlines the key CFD trading strategies both himself and others employ. The types of strategies that Jeff goes into include: Day trading, short term trading, medium term investing, pairs trading, dividend plays, hedging, index stripping / tilting and seasonal patterns.

For those that want a well rounded, educational CFD book that uses everyday language that all new comers can understand, then this is the CFD book for you.

3. Making Money from CFD Trading by Cat Davey.

Whilst this is not considered your typical CFD instructional book, it rates very highly in my opinion for one reason. This is live trading at its best and Cat Davey takes us through the emotional roller coaster that full time trading offers as she turns her $ 13,000 stake into $ 30,000 in 3 months.

The key highlights in this book are the day by day round up of how Cat Davey makes her better than average returns plus she explains clearly the technical analysis methods she used to get there.

If you like the idea of ​​learning from a real CFD trader and you understand how valuable it is to have a 3 month trading journal of a successful trader then grab this fantastic CFD book. You'll be glad you did.

5 Tips to Avoid Front Running by High Frequency Traders HFTs

The new Flash Boys book has captured the imagination of everyone who invests or trades in the stock market. The fear that the market is "rigged" is everywhere. The CEO of IEX is of course hoping his new exchange will benefit from all the news media hype and panic.

However, most investors and retail traders do not need to worry. If your investments for your long term portfolio are with a large to giant mutual fund or pension fund, then these funds are using Dark Pools which are off the exchange transaction the HFTs can not see and front run.

If you are a retail trader, remember that most of the orders placed with online brokers for retail traders are filled from that online broker inventory. So your orders never make it to the exchanges. If you are using an Electronic Communication Network ECN, most of those orders are not sent to the exchanges either.

Here are 5 Tips to Avoid Front Running by HFTs:

  1. Study your stock charts using volume large lot accumulation / distribution indicators. These are uptick / downtick based indicators that track the larger lot meaning 50,000 – 500,000 shares, against the smaller lots which are usually 100 shares to as high as 5000 shares. Entering with the giant buying keeps you out of the HFT order flow, because the Dark Pool orders are hidden from HFTs.
  2. Remember that any order 10,000 shares and above is considered a "Large Lot" order and these tend to be sent more often to exchanges if inventories for your online broker are too low.
  3. If you are a day trader, you must accept that HFT activity is going to interfere with your trading. There is just no way of getting around it intraday. HFTs trade 1000-3000 times per second, YOU can only trade on the minute scale by law and by circumstance. Most retail traders could not afford a million dollar HFT trading setup of hardware and software.
  4. Do not use "At Market Orders." An At Market order tells your broker to fill the order at the market price. This can set up an opportunity for slippage and wider spreads which will give you a higher cost entry. In addition, At Market Orders send a message to the online broker and market in general that you are not an educated, experienced investor or trader. At Market Orders are rarely used by experts and professionals. There are only rare specific purposes for such orders.
  5. Do not use a simple "Limit Order." Limit orders are the most common reason why retail traders, especially day and swing traders have constant losses. Professionals stopped using Limit Orders years ago and have switched to more complex, multi-tiered controlled bracketed orders. You need to learn these new types of orders if you plan to swing or day trade so that you can avoid getting swept into an HFT downdraft or huge gap.

Huge HFT activity is usually a one day event in a stock based on news, arbitrage from another market or instrument, hedging, retail cluster orders caused by retail traders all using the same trading systems, strategies, MACD or Stochastic indicators, and some technical set ups. One of the huge advantages you as a retail trader using technical analysis and stock charts is that you can see the activity of the HFT, Dark Pool, Smaller Fund, Corporate Buybacks, and many more patterns that tell you who is controlling price and thus how price will behave thereafter.

One final tip is that HFTs rarely shift the trend, so do not start selling short right after a huge HFT down day.