Futures Trading & Major Futures Trading Exchanges
Mar 21, 2010 currency trading
Most of the people who invest in stocks, only know about the New York Stock Exchange (NYSE) or the NASDAQ over the counter market. Futures trading is one of the ways to grow your wealth. There are many dozens of futures contracts that you can trade ranging from crude oil, gold, ethanol, heating, gasoline, silver, copper, wheat, corn, coffee, soybeans, pork bellies, cattle, interest rates, currencies and others.
If you want to trade commodities than trading commodity futures is the best way to profit from the boom in the commodity market. Richard Dennis had started with only $400 and ended up making more than $200 Million trading commodities. Now, let’s discuss the three largest futures exchanges in the world. There are many futures exchanges in the world but these three are the most popular and the most important.
Futures trading is no doubt risky but if you learn it, it can be highly profitable. As said before, Ricard Dennis and his turtles used to trade the most liquid contracts in the market. The number one is the CME ( Chicago Mercantile Exchange). The futures contracts that get traded on CME include among others stock index futures, foreign currencies, interest rates, commodities, environmental futures and others.
The commodities futures that get traded on CME include live cattle, milk, lean hogs, feeder cattle, butter, limber, pork bellies, Goldman Sachs Commodities Index and fertilizer.
Now, one of the ways to trade stock market is to trade stock indexes like the various S&P 500 like the S&P 500 Midcap, Small Cap as well as the Russell 2000 and the NASDAQ 100. CME provides you with the opportunity to trade futures contracts on these stock indexes as well as their mini versions the E-Minis.
Other important futures contracts that get traded on CME include single stock futures, futures on ETFs and futures on Japanese Nikkei 225 Index. CME group also has the GLOBEX Electronic Trading Platform that allows electronic trading of futures contract almost around the clock.
The world premier futures exchange is the Chicago Board of Trade (CBOT). The futures contracts that are available on CBOT include agricultural futures like the corn, wheat, soybeans, ethanol, rice and mini contracts on corn, soybeans and wheat.
Interest rate related futures contracts that get traded on CBOT include Treasury Bonds, FED Funds, spreads, municipal bonds, German debt and swaps. Dow Jones Industrial Average (DJIA) futures popularly known as Dow futures and its E-Mini version plus gold and silver futures and their mini versions also gets traded on CBOT.
The third most important exchange is NYMEX. Now the best place to trade crude oil, natural gas, gasoline as as well as a host of other energy futures in the NYMEX (New York Mercantile Exchange).This is infact the global hub for energy trading and offers futures contracts on unleaded gasoline, heating oil, electricity, light sweet crude, natural gas, propane and coal.
Futures contract on precious metals like gold, silver, platinum and palladium also get traded on NYMEX. Futures contracts on metals like copper and aluminum also are available on NYMEX.
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Short Selling And Short Interest Ratios Shocking Secret
Mar 15, 2010 currency trading
Everyone knows that when the stock prices goes up this is the best time to invest and make money. But can you make money when the stock prices go down. Well, you can with short selling. Many people have difficulty understanding short selling. So what is short selling. In essence, when you expect the price of a certain stock to go down, you borrow it from your brokers and sell it in the market. Later on you buy it back and return the stock to your broker. Since the stock price was lower when you bought it back as compared to when you sold it, you made a capital gain. This is in nutshell what is short selling.
Now for short selling to work, the stock price should go down otherwize, you will make a hefty loss in case the stock price starts to go up. Since, you are trading with a borrowed stock, you have to return that stock to your broker. In case the stock price goes up, you will have to buy it back at a much higher price with a loss. Now, when you go short and the market suddenly turns against you in the sense that it goes in the wrong direction, you are in trouble. You want to buy back the stock but the price is continously going up. The harder it becomes to buy back the required number of shares, the more desperate you will become and the higher the prices can go before you are able to buy back the required number of shares and return them to your broker. So in a way, short selling is tricky and must only be practiced by the experienced traders.
In case of futures or options, you don’t need to borrow the security; you simply agree to sell the contract when you go short. Why do investors take a short position? The most obvious reason is that they are expecting the price to go down further. Short selling is also used for hedging purposes.
In the case of stocks, you need to monitor the rate of short selling in order to gauge investor expectation as well as the future market direction. Now, NYSE and NASDAQ report the short interest in stocks listed with them. Now this data is released on monthly basis as the brokerage firms may need a while to report how many shares have been shorted and then report that data to the exchange.
Now this number is known as the Short Interest Ratio. Short Interest Ratio is a very important number for short sellers as it can give important clues about the investor expectation to the short sellers.
Short Interest Ratio reports the number of shares of a particular stock that has been shorted, the percentage change from the previous months, the average daily volume for that stock in the same month and the number of days of trading at the average volume that it would take to cover the short positions.
An increase in the short interest ratio means that the investors are becoming nervous about the stock. Now, this number is not calculated frequently. What this means is that the trader cannot get a lot of information out of it. But still a high short interest ratio means that the stock prices will go high soon as the investors with short positions become desperate to buy it back. High Short Interest Ratios along with bullish indicators is an indication that prices are going to go up soon rather than down.
Mr. Ahmad Hassam has done masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report. Get your FREE COPIES of the HVMM Ultimate Day Trading System and the Universal Risk & Money Management Tool.
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Bullish White Long Candlestick Pattern-The Bullish White Marubozu
Mar 12, 2010 currency trading
The most bullish of the candlestick pattern is the long white candle. It represents that day when bulls have been in total control of the market throughout the trading day pushing prices higher from the opening to the closing.
As prices rise through the day, sellers do come in but not enough to stop the prices from continuing to rise. When sellers do show up during the trading day, buyers buy from them and the prices move higher.
This is an indication that the buyers are not done with their buying. The following day the bulls will still be in control and pushing the prices further higher. This is an indication of the fact that there are not enough stocks or securities in the market to satisfy the buying appetite of the investors. With high demand and low supply, the prices will continue to rise! Now, what this means is that prices have been constantly rising throughout the trading day. The closing price was equal to the high of the day or very near the high of the day.
Now, a true White Marubozu is a special variation of the long white candle with the closing price equal to the high of the day and the opening price equal to the low of the day. However, a White Marubozu may not be formed quite frequently on the chart. Most of the time, you are going to find the white long candle with a wick on either side of the candle body. These wicks will be small offcourse. What this indicates is that the closing price was close to the high of the day but not equal to it. In the same way, the opening price was close or near to the low of the day but not equal to it!
How do you know that this is indeed the white long candle? You wil find many bullish white candles on the chart. Off course, everyone will not be the white long candle. When you find that 90% of the area between the low and high of the day is covered by the candle body, you know that this is indeed a long white candle.
When a long white candle is formed, it means that the price action had been intense throughout the day. This price action was covered in a very short period of time. Now always remember, price action doesn’t move in one direction always. It retraces a little bit and then again starts moving in the previous direction. So when this retracement in price action takes place, you get the chance to trade the signal!
With long white candlesticks, the low price on the candlestick is a good support level. Support is the level where the buyers are expected to support the price of the stock or for that matter the security.
There are some variations to the bullish long white candle. Three are very important. The first is the Long White Marubozu that has no wick. It is all candlebody. This is the most bullish of the candlestick patterns. The second important variation is the Opening White Marubozu. In this case, the open price is equal to the low of the day. What this means is that the there is no wick below the candle body. The other variation is the Closing White Marubozu. In this case, the closing price is equal to the high of the day. What this means is that there is no wick on the top of the candlebody.
Mr. Ahmad Hassam has done Masters from Harvard University. Master these Candlestick Patterns with this 82 page PDF FREE Candlestick Guide! Get this 49 page Quantum Swing Trading Report plus the powerful FOREX-4 PACK Training Kit and the Profit Button Report FREE just now!
categories: forex,stocks,stock market,mutual funds,investing,trading,day trading,etfs,retirement,business,finance,money
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Interest Rate Futures Trading And The Yield Curve
Mar 11, 2010 currency trading
Interest rates play a pivotal role in all financial markets. No matter what market you trade whether it is stocks, forex, futures, options, ETFs, commodities, bonds etc, you need to keep an eye on the interest rates. A yield curve is a representation on the graph that compares the entire spectrum on interest rates available to investors.
You will come across three types of shapes on the yield curve. The normal curve rises to the right and the short term interests are lower than the longer term interests. A normal yield curve represents normal economic activity where investors are being rewarded more for investing in longer term securities with a premium on longer term interest rates.
Now, most of the time you will come accross the Normal Yield Curve. But sometimes, you will find the Yield Curve to be Flat. When you find the Yield Curve to be Flat, it means that all the interest rates in the economy are equal. What this indicates is that economic activity is slowing down.
An inverted yield curve develops when the longer term interest rates become lower than the short term interest rates. Now, an inverted yield curve develops when the economy goes into a recession or during times of financial crisis when the traders flock to the safety of longer term US Treasury Bonds.
Eurodollars have a highly liquid market meaning you can get in and get out without paying a large spread due to the large market in them. They also have less volatility. However, you can also trade the 10 year Treasury Notes (T Notes) and the Treasury Bonds (T Bond) that have a maturity period of higher than 10 years. However, T Notes and T Bonds have a much higher volatility as compared to Eurodollars.You can also trade options on these interest rate futures contracts. Some people trade the volatility. So, you have to know what you want before you trade these instruments! Many investors and traders trade interest rates by investing in Eurodollars. Eurodollars are short term futures contracts that have a low margin requirement meaning retail traders and investors can also trade Eurodollars.
Trading interest rate futures is no different than trading anyother futures contract. If you haven’t traded futures before, a good idea would be to first paper trade these contracts for at least two months so that you get a feel of how these futures contracts gets traded and how the market behaves! Now, when you trade these interest rate futures contracts, you need to keep an eye on the market constantly. Futures trading can be risky and in a matter of few minutes you might get wiped out in the market and get a margin call from your broker.
Mr. Ahmad Hassam has done Masters from Harvard University. Know this shocking Dow Futures secret that can make you rich. Read the story of Richard Samuels, a post office mailman with a head injury and how he made a fortune with these Neutrino Forex Signals
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A Shockingly Simple Stock Trading Momentum Indicator
Mar 11, 2010 currency trading
Trend trading is the one of the best and most profitable trading strategy used by many traders. Infact, spotting a trend at the right time and riding it till the end can make you rich. When you are trading a trend, you are intereste din knowing how fast the trend is changing or what you may call moving whether it is moving up or down. When the rate of change of a trend goes up, it means that the price action is soon going to follow suit and rise as well!
Now first what is a momentum? You must have read about the momentum in high school physics.Momentum was the velocity multiplied by the mass of the object. Velocity was the rate of change. So when we talk of momentum in trading, we are talking of the rate of change of any security prices. Now. a simple way to calculate the momentum of any security price is to divide the closing price today by the closing price ten days back and then multiply it by 100!
This gives you the momentum indicator. If the prices didn’t go anywhere momentum indicator will be 100. If the prices went up, the momentum indicator will be greater than 100 and the prices went down, the momentum indicator will be less than 100. Now, a trend is expected to continue if the momentum indicator is greater than 100.
Momentum is a leading indicator. It tells you what is likely to happen in the future not what happened in the past. Momentum trading is done with some attention to the fundamentals. When key business fundamentals like the sales or profits are accelerating at the same time the security price is going up, momentum is likely to continue.
As said before, instead of investing in a security or a stock you can do momentum investing. When you are doing ordinary investing, you are waiting for its price to appreciate to give you a capital gain. This price appreciation might take from a few months to even years tying down your capital in that investing. However, in momentum investing, you search for stocks that have rising prices that are expected to continue for sometime. So you buy high and sell even higher within a few weeks making a decent profit. You can use that profit to do more investing.
Remember the Dot Com Bubble that burst and hurt many people a decade back. Lot of people were doing momentum investing without doing fundamental research on the stocks that they were investing in. So you need to do some fundamental research as well to ascertain that the rise in prices of a stock are sustainable over the long haul or not. So when you are doing momentum investing, you are looking for a security or a stock that has a potential to move big. How long this big move might take to materialize? Well, the expectation is for the big move to happen in a few weeks to a few months. Just like in ordinary physics, when a ball is set in motion, it will continue moving unless stopped. This is what the Newton’s First Law says. You can expect a security price to keep on rising as long as something drastic doesn’t happen to stop that rise. So what can be that something drastic? It can be a sudden breaking news about the misdoings of the management that have not been known to the public before. I am just giving you one example. There can be more. So before you do your momentum investing, it is always better to do some fundamental research on the company.
Now just like price momentum that we have been talking about above, we can calculate the earnings momentum. Earning momentum is the province of the investors. The investor looks at the quarterly earnings of the company to see if it is going up at a faster pace say from a steady pace of 10% a year to 12% or 15% and so on. If the earnings growth rate is going up what this means is that the underlying price is also going to accelerate.
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Dragonfly & Gravestone Doji Candlestick Patterns- A Rare But Highly Profitable Patterns!
Mar 10, 2010 Uncategorized
A Doji Candlestick Pattern is very easy to spot but it forms rarely when the opening and the closing prices of a security or a currency pair are the same. So there is no stick on the Doji Candlestick Pattern. It is all wicks with no candle body. In essence, a Doji Pattern looks like a cross. There are a few variation to this important pattern. Read this article to know more how profitable this pattern can be.
For a Doji to be created, a trading day must begin and end with the same price. A whole lot of trading takes place during the day but when it is all said and done, the security price is right back where it had started in the morning.
It is a signal that the battle between the bulls and the bears had been a draw during the trading day when a Doji is formed with the opening and the closing prices equal. Soon, either the bulls or the bears are going to previal. In other words, a trend reversal is about to take place.
A Dragonfly Doji pattern is unique in the sense that the opening, closing and the high prices are all the same or equal. A Dragonfly Doji is formed when the stocks opens, trades down during first part of the day. During some part of the day, the price starts to climb again and eventually closing on the high which is the same as the open.
When a Dragonfly Doji is formed, bears initially decide to rule the market. But at some point the bulls step in and decide to buy again. When the bulls step in, they start pushing the price up. As the bulls dominate the trading day, the security price ends up right where it had started.
Dragonfly Doji is considered to be a bullish candlestick pattern. The low on this pattern can be taken as the support level because this was the level at which the bears entered the market and started buying.
When a Bearish Gravestone Doji Pattern is formed, it is a signal that a prolonged downtrend is about to start in the market. The second important variation to the Doji is the Bearish Gravestone Doji. This pattern is formed when the open and close of the day is equal to the low of the day. This is something opposite to the Dragonfly Doji where the open, the close and the high were equal.
When Doji Pattern does form, get ready for a trend change! As said before, this pattern is rare but very easy to spot on the chart.
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Profitable Candlestick Patterns -Bullish Necklines, Bearish Meeting Lines & bearish Piercing Line
Mar 9, 2010 Uncategorized
Trend is your friend. But how do you know it is really your friend. Trend can only be your friend if you know that the trend is going to continue or it is about to reverse ahead. Otherwize, trend trading is going to give you a loss. Candlestick patterns can help you anticipate whether a trend is going to continue or reverse ahead. There are many candlestick patterns. Bullish Necklines is one of them. It is a two stick trend confirmation pattern that tells that the trend is expected to continue. There are two type of Neckline Patterns, the In Neck and the Out Neck. When you spot the Bullish Neckline in an uptrend, it is a signal that the trend is expected to continue for sometime.
The candle formed on the setup day should be a long bullish candle that shows a lot of buying. On the signal day a bearish candle either long or short is formed with its closing price very near the close of the setup day.
If the closing price on the second day is very near the closing price on the first day, the neckline candlestick pattern formed is known as the on neck pattern. If the closing price on the setup day is a little lower than the closing price on the second day, it is known as in neck pattern.
You might be thinking that this is not much of a difference. Well, this is true but nevertheless, you should be aware of this slight difference between the In Neck and the On Neck Patterns. Both these patterns are telling the same thing that the uptrend is going to continue in the near future. So even if you are not able to differentiate between the In Neck and the On Neck, don’t worry much. You must at least be able to identify that a Neckline Pattern has been formed.
Now, let’s talk about a trend reversal candlestick pattern; The Bearish Meeting Line. On the first day or what you call the setup day, you will find a long bullish candle.What this means is that heavy buying took place throughout the day. On the second day or what you call the signal day, you will find a gap opening. This is a Bearish Meeting Line Trend Reversal Pattern. What is means is that the trend is about to reverse itself soon! This gap entices the sellers to start selling that continues throughout the day. This will result in a long bearish candle on the second or what you call the signal day. This long bearish candle should have a close very near the open of the low of the day as well as the close should be very near to the close on the first or what you call the setup day.
Another trend reversal pattern is the Bearish Piercing Ling Pattern. This candlestick pattern is formed when on the first or the setup day, a bullish long candle is formed meaning that the bulls have been in control of the market throughout the day. The second day or what you call the signal day, there will be a bearish candle formed. This bearish candle should have an opening higher than the first day’s high. This means that on the second day or what you call the signal day, the sellers started selling pushing the price action down past the opening price to the midpoint of the first day candle.
This pattern usually occurs in the last stages of an uptrend and when it happens, it means that the trend is about to reverse itself. When this Bearish Piercing Line Candlestick Pattern is formed, it means that the price action has lost it’s momentum.
Mr. Ahmad Hassam has done Masters from Harvard University. Master these Candlestick Patterns with this 82 page PDF FREE Candlestick Guide!Get this 49 page Quantum Swing Trading Report FREE!
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Before Short Selling-Know These Shocking Facts
Mar 9, 2010 Uncategorized
Short Selling Stocks is one of the favorite day or swing trading strategy. Many traders short stocks. Now many stock brokers make it very easy for the investors and traders to short stocks. Now a days, most of the trading is being done online. When you sell a stock, a message will ask you whether you are selling stocks that you own or you are selling short. With one click, you tell the broker that you are short selling. The broker than goes about and arranges the shares for you to short sell. These shares are a loan to your account.
In some cases,a stock gets so much shorted that there are no more shares of that stock left for you or your broker to borrow anymore. Now, you cannot always short a stock instantly. Most of the investors work on rumors. In that case, you simple will have to cross your fingers and see how the other short sellers do on that stock while you search for another stock to short!
Now, day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts. Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down!
You have to be careful about the uptick rule as stock exchanges have rules in place to help maintain an upward bias in the stock market. What this means is that you can only short a stock when the last trade was a move up. In other words, you can’t short a stock that is moving down.
If you are wrong in your short selling decision, your loss can be catastrophic.How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.
There is something known as Short Squeeze. A short squeeze happens when the stock of the company that you have shorted has some good news that drives the stock prices high. Now if this happens, many short sellers might lose money and even get margin calls. When they get desperate to buy back the stock, its prices go even higher hurting them more.
Now many companies, brokers and investors hate short sellers and try tactics to bust them. Sometimes, they will issue good news or spread rumors of good news to create a squeeze. Other times, they can ask the stock holders collectively to tell their brokers not to loan out their shares. What this means is that short sellers have to buy back the shares and return them to the brokerage firm and close their short positions even if it does not make any sense.
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Candlestick Trading Patterns- The Hanging Man, the Hammer and the Spinning Top!
Mar 7, 2010 Uncategorized
There are many candlstick patterns that you can master. Candlestick patterns can be highly profitable trading signals. However, some patterns appear frequently and can be easily spotted. Hanging Man and the Hammer are the two among them. Both are different. Hanging Man is bearish while the Hammer is bullish.
The first question. How do you identify whether this is a Hanging Man or a Hammer? If this type of pattern appears at the top of an uptrend with the long wick at the bottom, it is a Hanging Man. And if it appears at the bottom of an downtrend it is a Hammer. Hammer and the Hanging Man both have a very small candle body accompanied by a long wick either on the bottom.
Now suppose, you find the Hammer or the Hanging Man. What you need is to look for the confirmation the next day! Now, in most of the cases, you will also find a small wick on the top of the candle body.
If you think that you have spotted a Hanging Man appear on the top of an uptrend, wait for the next day’s opening price. If the opening day is lower than the last day’s close, you have spotted a true Hanging Man.
Similarly suppose, you think that you have correctly spotted the Hammer in a downtrend. A Hammer should have a very small candle body with a long wick at the bottom. You should confirm this with the opening price on the next day. If the opening price is higher than the closing price the previous day, you have a true Hammer. If the opening price is not higher than the closing price the last day, it is not a true Hammer!
Whenever, you trade candlestick patterns, first spot them correctly than wait for the confirmation on the following day. The best chart for these candlestick patterns is the daily chart. Once, you get the confirmation, trade these patterns. They can be highly profitable. But in case, you don’t get the confirmation the next day with the price action, simply ignore the pattern as not true.
Spinning Top is a signal that the battle between the bulls and the bears ended in a draw. It will start next day again with ony side giving in. What this means is that an explosive move in the price action can take place the following day. Spinning Top is just like the Hanging Man and the Hammer.
How to identify a SPINNING TOP? This pattern appears very frequently in the daily charts and can be highly profitable if spotted correctly. A Spinning Top has a very small candle body in the middle with two equal wicks on the top and the bottom.
Mr. Ahmad Hassam has done Masters from Harvard University. Master Candlestick Charting with this 82 page PDF FREE Candlestick Guide! Get this 49 page Quantum Swing Trading Report FREE.
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Trading Futures Like The Turtles
Mar 3, 2010 currency trading
There are many types of financial instruments that traders and investors trade. Futures is one of them just like stocks and bonds. A stock gives you ownership of one part of a company. If you own 10,000 stocks of a company, you own 10,000 parts of that company. On the other hand a bond is an IOU that governments and companies issue to finance their operations.
A futures contract is a legally binding contract between two parties with a set of conditions for the delivery of the underlying asset such as a commodity or a financial instrument at some specific date in the near future.
Futures market is the backbone of the whole sale and retail commodity market ranging from oil, wheat, corn, heating oil, meat, cattle, soybeans and other foodstuff. So you can well imagine the importance of the futures market. Futures market serves the purpose of hedging and speculation.
Futures contracts are by design meant to limit the amount of time and risk exposure experienced by hedgers and speculators. What this means is that all futures contracts are time bound and at some point in the future they expire.
Now you can easily trade these contracts by opening an account with a FCM brokerage and deposit an amount to start trading these contracts on margin. The minimum amount with most of the brokers is something like $5,000 but it can less too! Brokers allow leverage upto 10:1 when you trade on margin. Compare this to the leverage of 2:1 allowed by stock brokers. In the last decades, electronic trading has become highly popular among the traders. This includes futures as well.
In US, open outcry trading still takes place during the official hours at the different futures exchanges. However, most of these futures contracts also get traded electronically. GLOBEX allows electronic trading of most of these futures contracts 23 hours each day. Electronic trading provides a more level playing field, more price transparency and lower transaction costs.
CME, NYMEX and CBOT are the three most important Futures Exchanges. GLOBEX allows you to trade most of the contracts that get traded on these exchanges. The popular contracts that get traded on GLOBEX are the E-minis like the S&P 500, NASDAQ 100 and Dow. You can also trade E-mini gold futures as well as crude oil futures on GLOBEX.
GLOBEX trading overnight tends to be thin and more volatile than during the official trading hours that are from 8:30 AM EST to 4:15 PM EST. If you trade financial news on Bloomberg or CNBC before the stock market opens officially, you will find quotes on S&P 500 futures and other taken from GLOBEX.
These GLOBEX quotes are real time and if you have taken a position with sell stop or a buy order, early next morning, you might find your position executed with a new position or out of the position altogether. Futures can be highly profitable if you know how to do it!
Mr. Ahmad Hassam has done Masters from Harvard University.Get this 49 page Quantum Swing Trading Report Plus the Profit Button Report that applies no matter what you trade FREE! Know this shocking Dow Futures Secret that can make you rich!
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