By Elliott Wave International

Every trader or active investor at times wishes they could pick the brain of a pro that has “pulled the trigger” on real-money trades before.

EWI Director of Analysis Wayne Stough is one of these pros. For several years, several times per month, he’s been alerting his Flash service subscribers to opportunities in futures markets.

And now, there is a new addition to the Flash service line-up: ETF Opportunity Flash. We caught up with Wayne in his office and asked him a few questions:

Q: What method do you use when looking for high-probability trade set-ups?

Wayne Stough: My main approach is The Elliott Wave Principle. I look for clean, precise wave counts — usually ones that other analysts can confirm, so there is a general consensus on market direction. Once the market meets my other criteria for a high-confidence trade, I send out a Flash recommendation to my subscribers.

Q: How do you define a “high-confidence” trade?

WS: That’s a good question, because no market forecast is ever guaranteed, whether you use Elliott or some other forecasting method. Having said that, there are definitely moments when probabilities (or odds, if you will) strongly suggest a particular move. For example — and this is just basic Elliott — the Wave Principle says that markets move in a series of five waves in the direction of the larger trend (labeled on a chart 1, 2, 3, 4, 5) and three waves against the trend (labeled A, B, C). Also, there are certain proportions between these waves that markets often adhere to. So whether I’m counting a 1, 2, 3, 4, 5 pattern in a rally or a decline (i.e., in a bull or bear market), I focus on where the fifth wave should end, according to Elliott wave guidelines.

Once I’ve identified that price termination point, it becomes a matter of waiting for the market to get there. Fifth waves come at the end of the pattern and are usually weaker than third waves. So once I see certain technical indicators diverging (e.g. the RSI), my confidence grows: We are near the end of the pattern, and prices are about to reverse. That’s just one example of a high-confidence situation. But I do suggest a protective stop with every new Flash alert, in case the forecast doesn’t come true.

Q: Are you aiming for a particular percentage gain?

WS: Absolutely. When I send a Flash alert, I’m typically looking for a 3-to-1 ratio, at a minimum.

Q: Does that always work out?

WS: No. I monitor the recommendation for warning signals that let me know when a different scenario is unfolding in the charts. In those cases, I send out another Flash alert suggesting to lower or raise the stop-loss level, or exit the recommendation entirely.

Q: They say you love the S&P Mini as a trading vehicle. Why?

WS: I’d put it differently. I have traded the S&P for a long time, I understand that market’s nuances, and I like the leverage and volatility. But while the S&P comes naturally to me, I’ve also made many Flash recommendations on other markets, like gold and currencies. So, a better way would be to say that I love any market that gives me the desired risk-reward ratio. Now I’m also “looking for love” among various ETFs.

Special Introductory Offer: Get ETF Opportunity Flash now and have 2nd month FREE. Details.

Q: If traders expect a bear market, should they still consider Flash Services?

WS: Absolutely. I think we’re at the cusp of something very big in the stock market. And this is the time to act. Just keep in mind that speculating in severe bear markets (or during extreme volatility) carries additional risks. So be sure you do your research and know how your financial instruments behave under these conditions. And anyone who chooses to trade in this environment must only risk the money they absolutely can afford to lose.

Q: Who do you think should consider subscribing to EWI’s Flash Services — including the newest addition, the ETF Flash?

WS: Anyone who has some risk capital but not enough time or experience to find their own opportunities. Anyone who understands and accepts the fact that when you bet your money, there will be winners and losers. (Sometimes more of one than the other.) Anyone who knows better than to risk all their capital on a single recommendation; the old “all eggs in one basket” situation. I think in terms of quarters: I want all my subscribers smiling at the end of a quarter.

EWI ETF Opportunity Flash service now brings you potential high-probability opportunities in exchange-traded funds (ETFs). Don’t miss this special offer.

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In this new short video, I show you what I’m looking at and how we showcased this market last week when we did our last webinar. This webinar is set to be rebroadcast on Friday, September 24th at 5pm EST/9pm GMT.

This market is still looking good and looking strong. Pay very close to it this Friday because if it closes well, it should bode well for the following week.

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The video runs a little over two minutes and gets right to the meat and potatoes of this market.

This particular ETF is leveraged and trades almost 2,000,000 shares a day, so it is nice and liquid. What makes the Euro ETF so interesting, is that it plays such a big part on the financial world stage.

Watch the video here: How to play the inverse, leveraged Euro ETF

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Exchange-Traded Funds Linked to Individual Commodities Futures
Futures are very popular with investors, which can be considered the home of commodities-linked exchange trade funds. The way this works is that this type of fund will buy futures with leverage, but they will only offer a small part of the cost of the contract. Then the remaining balance will go to treasuries, who will in turn generate income from the interest that is accumulated. When an investor begins to inquire about the return he or she will get on their investment, the answer can be increasingly complicated. This is because it is based on many different contingencies that begin with roll yield, collateral interest income, and ends with any changes in spot price.

Exchange-Traded Funds Taxes
This can be a very tricky subject when it comes to exchange-trade funds. Essentially, the IRS requires investors to sell their exchange-traded funds by December 31 of each year. It is important to remember that if the fund is up then taxes will be owed. This is because there is no deferment when it comes to gains on commodity futures. It is vital to remember that all gains are taxed at a rate of 60 percent for long-term gains and 40 percent for short term; this is true not matter the holding time period. There is also a tax on the interest. Capital gains also cannot be deferred and they are taxed to a maximum of 23 percent.

Exchange-Traded Funds Linked to Commodities Indexes
There are only two broad-based commodity indexes; ishares GSCI Commodity Index and Trust DB Commodity Index Tracking Fund. When researching these funds, an investor will find that they use futures, including collateral and yield interest loans, which charge the same expenses. There are some differences between the two funds. The first difference is that DB Commodity Index Tracking Fund only tracks six commodities while ishares GSCI Commodity Index Trust will track a more simplified index of 24 components.

The roll strategies between the two indexes are another difference. DBC will look at 13 months for the highest yield, instead of rolling the expiring differences to the next month available. iShares, on the other hand, uses a five year contract, known as CERF kind of futures contract. The advantage to this is that CERF contracts will reduce trading costs.

While both funds will require taxes to be paid on their interest income, the GSCI Commodity Index fund are benefited with special long-term contracts where the annual tax can be dodged. It is important to mention that there is some controversy on this subject, however, the IRS has not issued their final ruling on its capabilities.

Exchange-Trade Funds Linked to Commodity Equities
Commodity-focused equities are considered a good investment for those who are looking for corporate upside or leverage. This type of fund is also high in oil exposure. It is important to remember that there is a high risk of corporate malfeasance, even though the fees are low with this type of investment.

For more advice on cd rates, please visit our site.

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