Benefits of Commodity Traders Club & Real Success Method - Joe Murdock
I know its been some time since I've checked in with Commodity Traders Club. I just wanted to take this opportunity to say thank you. Not only for the "Real Success" tapes, but also for the ongoing benefits of receiving the CTCN newsletter and your website(s).
I find myself going to the website at least a couple of times a week to re-read some past articles, or just to see what's new.
Recently I found Art Simpson's "Phantom of the Pits" Tough reading, but good stuff. Just one concept racketed my success up at least twenty notches.
For years I had been taught, and believed, that you set your position, set your stop (by whatever means) get out at your profit objective or Let the Market Prove You Wrong! Man, this last bit of "wisdom" cost me both money and emotional scar tissue!
I read and applied "POPS" theory; that Its Not The Market's Job To Tell Me When I'm Wrong . . . It's Mine. I can't tell you how much money and pain this has saved me. Now I can set my position, allow the market to prove me correct, or if it doesn't, within an appropriate time, be out like a scalded cat. Am I out sooner sometimes? Yes. Will I put on a few more trades during a given time frame? Sometimes. Am I in a much better frame of mind after taking a $70 hit per contract (commissions included) rather than $200 or $250 whack in the head? YES!
I know this is very personal and probably falls under the 20% of any methodology that is not purely mechanical, but my account balance and peace of mind tells me it sure works for me. I can now enter 2 or 3 trades (if necessary) with a much better chance of catching a real move rather than sitting around in a choppy or sideways market and watching the market take bites out of my butt until my stop is hit.
Sure, it takes more agility, but that's one of the aspects of day trading that draws me to it. It keeps me alert and on my toes, and my account balance and ability to act in tact. Art's materials have been beneficial to me. I still re-read these articles every month or so.
I first ordered "Real Success" videotapes and course in April of 1999. It's taken a bit longer than I originally expected to get where I am, but with the tapes, your support and the ongoing education I receive from your website (s), I will be trading for a living within the next two or three months.
Keep the forum alive. It's the best stuff out there. Looking forward to my Real Success-2.
Real Success-2 Video Trading Course Feedback - Joe Murdock
It's Friday afternoon after the close. I just thought I'd give you some feedback after the first full week of trading with the "Real Success 2" trading methodology.
I received the tapes and immediately locked myself in the "immersion room" to see if I could digest them before Monday's opening.
To be honest, at first I was a little taken aback. After trading successfully for more than a year with the original "Real Success" method, where were my trusted swing-highs and swing-lows? What is this stuff about Keltner reversal bars? What is a Keltner extreme move? How am I going to trade 1-minute bars?
After the initial shock wore off, I realized that you had not only made the methodology in the first series more sound, but enhanced and expanded upon it with completely new material. Great job!
By Monday morning, I thought I was comfortable enough to boot up and give it try. I wasn't. I paper traded all day. I kept watching the screen, referring to the tapes, watching the screen . . . etc . . . By the end of the day I was both angry with myself for not trusting the methodology, and exhilarated by the results. I couldn't wait for Tuesday.
To save time, I'll give you just the highlights.
From Tuesday through Friday by the lunch break, I had made twenty-three trades. (More than normal) I had seven winners in a row. (Modest), one loser, (again modest) seven winners, one loser, and then six winners, one loser. Now the best, using simply the most basic tenant of the method, I was able to catch a large part of the 1125 point move to the downside that occurred about twenty minutes form the close. What a way to go into the weekend!
Do I expect to keep up this pace? Probably not. Does the "Real Success 2" methodology work. You tell me.
Honesty Dave, I did nothing but what I was taught on the tapes. Sure, feel does play a part. You go to great pains to point out that no method is 800 mechanical. However, I can only tell you of my experience. Some days its there, some days it's not. However, it sure helps to have tools you can believe in.
I have been trading my own account for about 5 years. It wasn't until I got my hands on the first "Real Success" tapes that I started to make consistent money. In my opinion, RS2 is even more powerful. I honestly don't know if you must study and apply RS-1 before you can take full advantage of this new material, maybe not. I do know that my experience has been nothing but positive.
There is a selfish part of me that hopes I can keep this new knowledge all to myself. But the larger part, the guy who was frustrated and struggling for three years would hope that anyone who is in that same boat would do themselves a big favor and start seriously studying either or both of this really terrific work.
Thanks again Dave. Im sorry I really haven't contributed much to the CTCN Newsletter, but I'm not much of a technical guy, and pretty much like to mind my own business. However, when someone has been as helpful as you have, I have to stick my head up and say Great job!
Please let me know when the next series is coming out. I'll be watching.
Displaced Moving Averages - Tom O'Brian TFNN
This is the quick explanation for the DMA's. The original source is DiNapoli, his book on Fib and D Levels (really good). This DMA system is a key part to his trading system. He uses this as a raw moving average and generates a secondary MACD from it and uses a modified stochastic, both of which he uses to define direction and trend. If you can get his book from the library, it is a treasure trove of good information and has the best short cut explanation of good/bad trading behavior I've ever heard. I have found this a great trailing stop for equities. It makes sure I'm on the right side all the time.
Displaced Moving Averages
This lets you know what the trend delineation price will be "N" number of days ahead of time. For example, the 3x3 displaced moving average is moved 3 days ahead. The chart of CMGI (on the bottom of the page) displays stock prices for a period of days. You calculate the 3x3 moving average for Monday 1/3/00 by adding the stock prices for 12/27, 12/28, 12/29, dividing by three then moving that 3 day average three days ahead from 12/29 to 1/3/00. You now have the 3x3 Displaced moving average for 1/3/00. Below are the different kinds of DMA's.
If you are using DMA's (for all examples we will use 3x3 DMA's) in a long position (buying stock) you do not want to get into a position until the closing price of the stock is above the 3x3 DMA price for that day. For example, the CMGI chart, Wednesday, 1/5/00, the closing price is 141.50 and the 3x3 DMA for that day is 136.92. If you are in a position already, you would stay in that position as long as the closing price of the stock remains above the price of the DMA for that day. If you are in a trade and the stock closing price is less than the DMA for that day, you would get out of the trade. According to DMA's, you never want to get into a trade when the stock closing price is less than the DMA for that day on a long position.
For example, the CMGI chart, Thursday, 1/6/00, the closing stock price is 125.13 and the 3x3 DMA for that day is 145.35. From January 6, CMGI continued to slide downward until it reached $50 a share. Instead, following the trade down the DMA would have told you to get out of the trade on 1/6/00. When stock closing prices are less than the DMA for that day it indicates the strength of the stocks price is weak or getting weak. You do not want to be a long position when that occurs.
For short positions the rules are opposite from long positions DMA's. In order to get into a short position trade, the closing price of the stock must be less than the price of the DMA for that day. If you are already in a short position trade, you would stay in that trade as long as the closing price of the stock remains less than the DMA's price for that day. If the closing price of the stock is greater than the DMA's price for that day, get out of the short position.
According to DMA's you never want to get into a trade when the stock closing price is greater than the DMA for that day on a short position. When the stock price is greater than the DMA's price for that day that indicates the strength of the stocks price is strong or getting stronger. You do not want to be in a short position trade when that occurs.
Two Important Rules That Need to Be Repeated. When a stocks closing price is less than the DMA for that day, it indicates the strength of the stocks price is weak or getting weak. When a stocks closing price is greater than the DMA's price for that day, that indicates the strength of the stocks price is strong or getting stronger.
DIFFERENT KINDS OF DMA's
3x3 - 3 day simple moving average displaced forward three days
7x5 - 7 day simple moving average displaced forward five days
25x5 - 25 day simple moving average displaced five days ahead
CMGI - 3x3 Displaced Moving Average on a Long Position Getting Out
Day Date Closing Price 3X3 DMA CMGI
M 12/27/00 139.06
T 12/28/00 134.03
W 12/29/00 137.91
TH 12/30/00 134.41
F 12/31/00 138.44
M 01/03/00 163.22 137.00
T 01/04/00 146.88 135.45
W 01/05/00 141.50 136.92
TH 01/06/00 125.13 145.35 Get out!
F 01/07/00 137.50 149.51
M 01/10/00 150.53
T 01/11/00 137.84
W 01/12/00 134.71
Helpful Trading Articles - Rick Ratchford
Break Free of Old Ideas
The title of this article alone is likely to raise the hairs on the back of many necks. The thought of pushing away concepts and ideas used for decades may sound ludicrous to you, but allow me to elaborate.
Old and proven ideas should never be pushed aside. Rather, the old ideas that have not proven effective for many and yet continue to be the false information that is holding traders back from progressing towards a positive goal.
Some of these ideas are that the futures and commodity markets cannot be forecasted because the patterns are random. Other old ideas are that you cannot make a success at trading unless you know the fundamentals of the market you wish to trade. And there is the heavy reliance many have for common indicators, such as the moving average, bands, oscillators and the like. Sure, they have their place in market analysis, I certainly find some of them very useful, but they fall short of the ideal. They are not all one needs to know, and yet many believe they are. That old idea has to go.
If you hold fast to these old ideas, you may be holding yourself back from reaching your full potential as a trader. False concepts and beliefs are negative ones; negative ideas and beliefs can deaden your insights and blind your way.
The world around us is bigger than we can ever imagine, with its many secrets waiting to be tapped by the individual not afraid to break the mode of adhering to old ideas and take some radical steps. W.D. Gann was recorded to be such an individual, and reading his material is only part of the psyche that made up this mans drive for perfection. He stepped outside the bounds of acceptable trading approaches and was greatly rewarded.
Many traders having a hard time gaining confidence in their own trading, and thus not achieving their personal goals in this business, often find themselves relying on others to tell them what to do.
It is one thing to be taught by someone and another to allow someone to lead you by your nose every trading minute of your life. It is one thing to read books and newsletters providing useful content and then make the final decision your own, than to simply enter and exit trades on the words of another without ever giving any thought as to what you just did.
If you are one who has very little confidence making your own trading decisions, then it is likely you are not working to break out of the mold that has so many trapped with indecision. It is time to break free and expand your horizons.
Do something different, something that may even be against your grain. Weight trainers know that at times you are going to reach a plateau and not get any bigger or stronger. The solution to this problem has always been to change your workout routine and shock your body into reacting differently. This has proven quite effective in bodybuilding. Many trying to lose weight have found they will lose for a while and then stop at some weight. The solution has been to change your diet or eating times to shock your system into getting past the plateau.
Trading is no different. Because it is heavily psychological, our thinking may reach a plateau because we keep to old ideas. Now if you are happy with where you are, then by all means you dont want to make any changes. A weight lifter may like where he is at, or maybe the person losing weight. No changes of routine needs to be done at that point. However, since we are addressing those who have no confidence in their trading and have reached a plateau in their trading skills and development, it is time to shock the system.
T. F. Ellis (1860) once said, Knowledge advances by steps, and not by leaps. Do not be overwhelmed by the amount of information available on trading. Be extremely happy it exists! Start studying subjects about trading you never thought you would have before.
Have you always stayed away from learning Cycle Analysis because of what Bob down the street told you a couple years ago, or what you read in some magazine or news group? Then break free from listening to the Bobs of the world and do it anyway.
Even if you do not become a cycle trader, you will at least have expanded your horizon and given your body an extra boost to get past that plateau. But do not stop there, keep expanding, keep shocking your mind and body. Each plateau you overcome will bring you closer to becoming a more confident trader. It will also make you a better conversationalist over coffee or wine.
Let knowledge grow from more to more, but more of reverence in us dwell; that mind and soul, according well, may make one music as before. In Memoriam A. H. H. (1850)
Exiting a profitable trade is arguably the most difficult action one can take in trading. As you note your equity increasing, the usual reaction is to do nothing. However, when you start to note your equity eroding after gains have been posted, your mind starts to zip back and forth as to whether you should exit and take what profits you have made up to that point or hold on for even more once the drop concludes (you hope).
Various approaches have been offered that usually requires a bit of sacrifice on the part of your profits. For example, there is the approach of moving ones stop-loss under every dip in equity once the redressment against your position appears to have ended and your equity is once again growing. The shortcoming to this approach is that you will always leave on the table the difference between the final top and just below the dip, you had placed your final stop-loss order. Many times this can be a sizable amount of unrealized gains.
Other approaches may use some kind of standard indicator, such as a moving average indicator. The idea here is to place your stop-loss just beyond the moving average indicator as it continues to follow the ebb and flow of the market. At any point the market dips below this moving average, you will be stopped out.
Of course, there will be many times the market will dip below the moving average line long before the move has actually exhausted, again denying you the opportunity to capture the bulk of the move. To avoid this, some may relax the moving average by using a larger sample value. However, this then forces you to have your stop-loss much further away from actual price action which upon conclusion of the trade will likely have you in the trade longer, but not with any more (and many times less) profit.
One of my favorite stop-loss approaches I call the S.T.O.P technique. This approach is similar to using trend lines to stay in a trade while momentum stays constant or increases. The concept is that when momentum starts to wan, the market will usually be topping and will drop, or it will start to consolidate before starting up again. If it drops, we are stopped out. If it consolidates, the trade continues.
The commonality of all these techniques is that we let the market decide when we should exit, and it usually will do this below the top by some margin. The best situation for any trader is to get as close to that top as possible before exiting. Profit is profit, so any trader should be happy if gains are more than two times risk. However, if you can improve your exit strategy to improve your profit-to-risk ratio, would you do it? If so, read on.
W.D. Gann wrote, After you start actual trading, when you make a trade, dont close it or take profits until you have a definite indication according to the rules that it is time to sell out or buy in or to move up the stop loss order and wait until it is caught. The way to make a success is to follow the trend always and not get out or close a trade until the trend changes.
There are several points made in his comment. One is that you should not exit a trade until you have definite indication . . . to not close out until the trend changes.
Your rules and W.D. Ganns is most likely different. His was one based on TIME and PRICE, as is mine. If it is not TIME yet for a top, why let your trade get stopped out too early?
Timing is part art as it is science. Some use canned indicators to time the markets, while others determine the markets cycle pattern. Whatever you use, are you also using it to decide when to move your stop loss up? Or are you simply using one of the previously mentioned approaches that have nothing to do with the trend?
The advantages of learning a good timing model is that, once youeve determined the accuracy of the model, you can rely on it to tell you when to start preparing to exit. Using the timing model should be effective enough to warn you that a trend change is near. Obviously, if the trend is going to change shortly you should be moving your stop loss up tighter than just behind a previous dip or moving average line.
The time is close for that price area to be exceeded when price decides to change trend. It may be a good idea to start planning on moving your stop under the bottom of the last two days or something of that nature, if it is higher than the last dip or moving average value. Start edging yourself out of the trade by locking in a bit more of the profits before being stopped out.
For this to be effective, your timing model must be pretty accurate. Basic trading systems do not normally offer such accuracy. With the goal of most systems to win around 35% of the trades taken, they obviously rely on other variables to be profitable in the long run, while drawdowns can be quite large in-between.
W.D. Gann used various techniques to time his trades. He talks about cycles of various fixed lengths as well as certain day counts. He also addresses using ratios of previous moves to anticipate future moves. When a cycle is due to top, or a large anniversary date is due, many times the trend will change. If you calculate this properly, it can be the signal you need to move your stop loss out from the simple dip-to-dip, or moving average mode and closer to the top by whatever percentage you feel appropriate.
So, what does this all mean? If you really want to take advantage of most of a good trade, consider learning about cycles. Dont be satisfied with what the market will give you. The market will give you nothing unless you act and just take it. Dont ever think the market is some entity that sits back and divvies out each one his portion as it sees fit. Each trader must sharpen his own tools and take a cut out of the market in proportion to his experience and abilities. Expand your abilities and look to learn as much as you can.
When a trader asks me my recommendation for a line of study, I always point towards dynamic cycles. It may not be an easy thing to learn, and youall have to ignore the critics who think they are trying to save your trading life (but really are wasting your time) and look at concepts never considered before.
Whatever you decide to do, keep this in mind. The best time to exit a trade is when the trend is ending. If you can increase your ability to determine what a trend is and when it is ending, you will increase your share of what you used to think, the market is giving you.
Editors Comment: There are two Gann Courses offered by Waterton-Glacier, and some very informative articles about W. D. Gann.
Overcome the Barriers of Trading
Barriers are obstacles that get in our way when we are trying to reach some kind of destination or goal. We find them everywhere, in school, work, driving and even in trading. Most will try to overcome these barriers, each time hopefully learning from the experience to avoid the barrier the next time confronted by it.
At times, one may fail to do so and become frustrated. Consider the futures trader that finds himself unable to get to the next level in trading proficiency. Once frustration sets in, the trader then has removed himself from trying to learn and correct the problem to one taking his frustration out on others. If you ever find yourself being short with your family after having an unsuccessful trading episode, you then have experienced this non-productive state of mind.
A good example of this would be that of a person in a hurry to get to an appointment. In this persons haste, some speed laws may be broken. When pulled over and given a ticket (barrier), frustration likely kicks. As you carefully drive away, obeying the speeding laws better than anyone else for a short while, you no doubt have a few choice words youd like to say to that Officer that pulled you over (but hopefully you didt share them with him.)
Because you are frustrated, you have removed yourself from responsibility in your mind and are blaming the Officer for being late to your appointment when in fact he had nothing to do with it. You were the one breaking the law.
Traders who become frustrated because of some barrier, may find themselves blaming their system, or maybe it was the brokers fault, or maybe the spouse who interrupted you when you were trying to decide what to do because you were already down more than you originally planned to be and were in a moment (long moment) of indecision.
Meanwhile, the real blame never is assigned where it should and recognized for what it is a lesson. Traders normally lose for reasons they may not realize at the moment. Frustration for many is the result that will prevent a trader from becoming a winning trader.
So, what can you do about it if this happens to be you? Now that you acknowledge this about yourself, adjustments can be made.
Many times such frustration is the result of incorrectly analyzing the reasons for your inability to trade well. You may think it has something to do with your system and end up trying several with similar results.
This may cause you to abandon all approaches that youeve worked yourself into for some time and end up resorting to old approaches thinking that maybe they will work better now. This is similar to digressing, and digression will only increase your depression.
The first place to start in minimizing this problem is with your well-being. Do you spend many hours behind a desk staring at a computer monitor? Do you always feel rushed, that you dont have enough time to take care of things needing your attention? Do you stay up late and wake up early almost everyday? Do you put off exercising? Do you eat the wrong kind of foods?
Your health is the most important part of your trading plan. Without a healthy body, the mind suffers. If the mind suffers, your trading will suffer. Small barriers become bigger ones. At some point, you simply need to stop the madness and take a break.
Sit down and think about what you do everyday. Can you arrange to eat better, taking the time to do so with the family rather than bringing your food to the computer or television? Take time to take time. Schedule a part of each day to exercise, even if for just 5 minutes, as long as it is intense. Make it a habit to end your day at a decent hour each night. Getting up early int a bad thing and can be quite beneficial for getting things done when it is quiet. But going to bed late will only harm you and your ability to cope in the long run. The body needs good food, exercise and rest. If it gets these things, your mind will be in a better position to handle many of the trading barriers you will come up against, and they then can be handled in a way that you will benefit you.
Another important step you will need to take is to readjust your attitude about the barriers themselves. When they frustrate you, in your mind, you are making the barrier your enemy and thus you want to lash out and attack. Again, you end up attacking everything in sight. By looking at these barriers not as your enemy, but simply the normal roadblocks of life, each with a lesson to offer you, your mind starts to take on a more positive outlook of the situation and solutions will likely come to you sooner.
Nobody likes to lose in trading. Yet losing is a natural part of trading and must be recognized as such. The trader must realize in his mind that it is okay to lose, so why get worked up over it. Expect it to happen. As most of us were growing up we were likely told that winning was the only way and losing is unacceptable. Now you are involved in an activity where you find yourself losing here and there.
Your belief system is pulling against you, which is counter-productive. It is important that you realize that beliefs are beliefs and reality is reality. What this means is that it is how you see losing. If you have a healthy view of losing when it comes to trading, then your belief of losing becomes beneficial to you. As long as you perceive losing as a reason for anxiety, stress and frustration becomes your master.
So, keep a healthy view about losing. Do whatever you can to trade with manageable losses so that the small losses themselves will further impress upon you that they are part of the process and is not something to get wrapped up about. If you can turn your negative views into positive ones, then you will be on the road to less frustration in trading.
One of the best ways you can improve your mental outlook about trading barriers, such as trade losses, is to reduce your risk exposure. When in a trade, are you using a stop-loss at a manageable and logical price location? If you are not, do so. If you feel you cannot do some calculation or pattern recognition that tells you the stop must be farther away then you can be comfortable with, dont take the trade. It is your choice, use the power and dont put yourself into gamblers mode.
Another way to improve your state of mind is to consider the number of contracts you are trading. In other words, are you putting on more contracts than you can feel comfortable with? It is hard to pin down a main reason why some traders overtrade, thus unnecessarily increasing their stress level, thus setting themselves up for big losses, frustration and major stress. However, if we had to come up with one word to describe it, it would likely be GREED.
Take small steps towards your goal. You will have a better chance of getting to your destination if you aret prone to tripping and falling over from rushing in too hard and fast. As well, youall be able to handle adverse moves against you with less stress and a much clearer mind. Decisions will be easier to make, and when you lose a trade that is expected to happen now and then, youall likely not be looking for the nearest ear to blame.
It int always the amount of money you have in your account that determines how many contracts you should trade. Some traders have a lower threshold for losses although they have big accounts. So dont think you have to put a certain number of contracts on because you can. Cut the number down until it feels like the losses are insignificant to you. Youall then be at a comfort level to look around you with a clear mind and see the opportunities as they occur.
Make sure you are trading with money you can afford to lose. Many make the mistake of using money they need to pay car payments, mortgage and other daily bills. Stop right there! Take this test in your mind:
Youeve pulled every penny out of your trading account and are now holding it all in your hand. Now imagine that you threw the whole amount into the file. How do you feel? Are you disappointed because you could of at least have thrown a big party, or are you feeling desperate, confined, hopeless and/or pressured? If you feel the latter, then you are trading with money you should not be. You need that money and trading with it will make you on edge because you cannot afford to lose it.
No amount of good health, proper mental attitude is going to help you because you wont have the right mental attitude and your health is likely to suffer anyway from it. Make sure you have all your necessities and other obligations easily cared for by your regular income with some in savings before you commit other monies beyond this to trading. Otherwise, it will likely be a lost cause before you even have a chance to get started.
Another thing you can do is to trade markets with smaller margin requirements that dont make big expensive moves in a short period. You can trade the slower grains like Corn and Wheat, or even trade the smaller contracts such as in the Mid-American Exchange. Try making fewer trades that each have more concentrated effort in taking. You dont need to be in every trade every day.
By taking these positive steps, you can greatly reduce your frustration when it comes to trading barriers such as losses, and improve your overall outlook about every aspect of this activity. Doing this will dramatically help you become a better trader.
The Complete Picture
Even the disciplined ones of position trading will at times lapse from what is common sense, that of taking in the Complete Picture before making a move in the markets. Almost every trader expect those who day trade plan their entry using daily price charts. And although most know it is important to consider the weekly, monthly, and even yearly charts first, often this step is skipped over in place of just relying on just the daily charts alone.
Having said this, experienced traders may say, "yes, that's right. Good reminder. I'm back to it, and then stop reading this article, the inexperienced/new trader would be well advised to take note of the following.
A trend has within it smaller trends. Each of those trends have smaller trends within them, and so forth. A yearly price chart will show trends in which monthly, weekly, daily and intra day trends exist within. Imagine how mind boggling that is. If we only look at the small trend within the larger one, we miss the overall direction the market wants to go. Let me now share with you how all these trends start out, and then bring you along the road of common sense often not considered. The following discussion will deal only with a Bull Trend. Simply turn it all around for a Bear trend.
A Bull Trend is made up of Swing Bottoms that are formed higher than the previous swing bottom. It can form at times lower than the last swing bottom, but not lower than the last two swing bottoms.
All Bull Trends start with the main bottom and is followed by a bottom higher in price than the main bottom.
Now, simply visualize what I just said. Find any price chart, no matter what time frame, and locate the very beginning of a bull trend. Notice that price will rise, and then fall again, but only to make a higher bottom than the beginning of the trend. Common sense. Not a revelation.
Now, think about this for a moment please:
1. On a Monthly Chart, you notice that price made a monthly swing bottom, rose in price by a few monthly price bars, then declined again but has not moved lower than the very bottom.
2. On a Weekly Chart, you spot the weekly bottom that makes up the actual monthly. You notice it moved in an up trend off that monthly bottom, moving up and down, and now is correcting to downside with monthly move down. But prior to making a lower monthly low than the previous one, our weekly bottom is now followed by the formation of a higher weekly bottom.
If you have a weekly bottom, which is also the monthly bottom, and it rallied and now corrected to form a higher weekly bottom, what might that suggest about the weekly trend? What might that mean with the monthly trend, considering this is occurring while the monthly low is higher than the last one? The long-term trend may be changing to the upside.
But very few actually trade off a weekly chart. However, if you note the monthly starting to form the basis of a new Bull trend, and also the weekly chart, what do you think you should be concentrating on when using the daily price chart?
The day trader usually does not care. However, if the larger time frames are strong to the upside, the intra day trader would be wise to focus mainly on the long side of his trades where strength is expected to be.
For most position trades, a glance at the monthly is all that is needed. Which way is it moving? Okay, that is your weekly trend and leave it at that.
Now, on the weekly chart, keep that direction in mind unless you get the formation I mentioned earlier. If the monthly trend has been down, look for shorts until you note the weekly chart making a higher weekly swing bottom than the last one. Intermediate trend is suggesting a bullish note. Go to your daily charts and look for the same pattern. Find it, grab it, and hold on to it. It is valid for as long as a weekly swing top does not form Lower than the last one, which would suggest the intermediate trend is changing to the down side. The ride long is over.
It really helps to get the complete picture regardless of the time frame you want to trade. My daily reports include comments about the weekly as well as the daily charts for any market in question. Sometimes the monthly as well is discussed. I find that simply looking at the daily charts is leaving a lot of important information on the table. It may also leave a lot of money on the table as well. Can you really afford not to have the complete picture when trading?
Expectations vs Reality in Trading
What were your expectations when you decided to start trading? Were you looking to make a killing and live in the clouds? Were you looking to make a very comfortable living off your profits with minimal effort? Or possibly, you were just interested in supplementing your existing income with another stream of income?
After reading a years worth of comments from traders read on Internet trading forums or personal email sent to me from clients, it appears that most people come into trading with very high expectations. In time, reality starts to chisel at their original expectation and view of trading until, for many, it has been reduced to nothing more than a hope of breaking even or a quick exit altogether.
The few that remain in the trading arena after realizing their original expectation int likely to be met have likely learned what the reality of trading is and have come to accept it as reasonable. This is not to say that there is only one reality, for that would not be a correct statement. Rather, it is the reality that pertains to each of us individually that we need to come to realize, accept, and work for us.
Those who remain trading after failing to realize early expectations have come to grips with the reality of trading that pertain to them. For maybe they expected easy riches, but soon discovered that trading is hard work and takes dedication, and the payback is appreciation of capital over time. Others may realize they can make a living off the profits, but it is just enough to live on and is not stress free.
Some come to find that reality for them is that it is feast or famine. They go up and down like the markets when it comes to profitability. The reality of trading as I see it is the opportunity to outperform most mutual funds or an interest bearing account at the local bank.
If you are to reap the benefits that are available by way of trading, you will need to come to grips with the reality of trading that pertains to you. Not everyone is going to make a killing in the markets on a consistent basis. You will have your good trading days and your bad ones. If you keep your expectations too high, you will likely become discouraged and lose all your money before you can achieve what would have been your reality in trading, the opportunity perhaps to make a nice return on investment instead of owning Trader town.
So my advice is this, if you have not yet realized the reality of trading that pertains to you. Do not expect to take a big chunk out of the market and live high on the hog. Instead, focus on more achievable goals such as improving your trading and making a small % dividend on your funds consistently. Once achieved, focus on the next small step beyond and so-forth. If your reality is going to be that you will one-day own Trader town, this will likely be achieved by taking one step at a time rather than expecting the whole planet up front on margin.
Big Compliment for CTCN - John Delmonte
Take this as a big compliment. You are like CTCR, you really look for the real stuff and present things factually, accurately, with lots of documentation, and then also timely. I could of sent this to you first, then to CTCR, but you are in the same league as they are, so you both got copies. See the CFTC attachment. I might also send a copy to Club 3000 since they used to be around in commodity matters.
You really have upgraded your web site big time. It looks great and reads great, too. I hope you can use this in some way so that the small guys stand half a chance against the crooks that take their hard earned money. This is one of those "I can't believe it stories" just look at what the CFTC did and wrote about "BS xx xxxxxx
Subject: BS xx xxxxxxx
CTCR is one of the most truthful, up front, accurate and fully documented commodity services in this country, which saved me, and MANY OTHERS years ago, from brokers and firms that were basically low-grade, non-professional, and actually criminal in their handling of the public consumer.
I wanted you to get this link to the Commodity Futures Trading Commission, since this "bsxxxxxxxxx" has advertised for years in Technical Analysis of Stocks & Commodities Magazine, Futures Magazine, and in numerous mailings and a website. They claimed to be full-time traders; living totally off their winning day trades of the emini or S&P.
Please print this in your publication, because it will educate the public, inform them of the scams going around, and basically try to keep the public from being financially, emotionally, and mentally harmed by the incredible lies and "tales of profit" from the types of "BS xx xxxxxxx"
As stated above they advertised heavily, using false and misleading statements for at least 4-years, and ripped off many people who had no idea there is a NFA or a CFTC.
Youall do your publication a great service and the investing public, adding credibility and truthfulness to what I consider to CTCR, which is one of the premier sources of information for the public when investing in commodity markets. If you want more information regarding any of this matter, write to me c/o Commodity Traders Club.
Editors Note: With great regret to John and all Club Members we were forced to delete the name of this Vendor, his website/business name, the CFTC Enforcement Division URL to their finding he committed fraud, etc, and Johns contact information.
We changed his name to BS xx xxxxxxx so as to not identify him. We once used a slight variation of his name and were threatened with another lawsuit by his attorney, therefore we are using a name which does not identify him.
This all results from a 1996 lawsuit he filed against us which resulted in a Federal Court Settlement which contained a provision for us never use his real name or non-de-plume.
Likewise, he was also prohibited using our name, though he has blatantly done it anyway, using our name very often, including listing it several times on his Trading Seminar and Home Study Course Website.
If we wanted to we could again sue him for violating that Court Settlement but we prefer to not once again get involved in a time consuming lawsuit, though our actual costs would be insignificant since we would again do it Pro Se.
In 1997 we obtained a One Million Dollar Judgment against him in U.S. Federal Court. However, it was later dismissed on a legal technicality by his sharp attorney and we decided not to pursue it due to the time involved.
Ask Yourself to Create a Killer Commodity Trading Plan
with Breakthrough Results! - Stephen A. Pierce, CTA
Remember the old saying "everybody wants to go to Heaven, but nobody wants to die."
Well, as it relates to trading futures and commodities; "everybody wants to win but nobody wants to die."
You see, crossing over from the occasional winner and consistent loser to the world of consistent winning and big time profits is a path of death. You MUST die to your old ways of thinking, your old ways of trading and old habits.
If the saying "you can't teach an old dog new tricks" applies to you, then my friend, you will be one cast down, sad and broke old dog . . . if you continue to trade the markets without the shift in your trading process that is a MUST for success.
There's a 97% chance that what you have been taught about how to trade the markets is flat out WRONG! . . . period.
While this article doesn't cover the mass media path of losers as compared to the narrow little know path of winners. We do want to position you for best chance of trading success.
To start, you have to begin asking questions. Not just any questions, the right questions. Not just a few questions, but a whole lot of questions. The right series of questions produce the right answers that produce the breakthroughs you need to succeed in trading the markets.
What exactly are breakthroughs? Breakthroughs are unconventionally fresh, superior, more exciting ways of doing something. Breakthroughs are the dramatic improvements in each area that makes you more powerful, profitable, efficient, effective and productive. And also more valuable and inspiring to others.
Breakthroughs make your trading produce five to ten times the results from the same effort or less. Breakthroughs transform you from a trading survivalist to a trading success.
Breakthroughs allow you to control your trading destiny with little to no confusion while producing more profits and being more productive in both your personal and trading life.
The following questions are designed to help you reinvent your trading process. To help you establish directives that will have you maximize your successes, making them more certain, better and longer lasting while consistently producing new successes.
The results from the following questions should be a sound and concise Killer Trading Plan that will allow for you to outthink, out leverage, outperform, out impact, out defend and consistently out profit all of your previous trading days.
What do we mean by: Out-think - better mental processing m Out leverage - better use of equity m Out perform - better trade selections for your portfolio m Out impact - larger gains from each trade m Out defend - avoiding the wrong markets at the right time m Out profit - larger, consistent realized profits in the bank.
The following questions are performance-maximizing questions that have consistently produced trading breakthroughs. These breakthroughs will get you the big payoff, explode your potential, consistently build your equity and sustain your new trading success.
No man or women has EVER become wealthy without having breakthroughs. Therefore, your first step to creating wealth from trading is experiencing the breakthroughs that are built with the following questions.
So, as we get ready to move forward we will do so with possibility-based mind site that looks for new, different and better ways to attain our trading goals, create solutions and address various situations that arise from fast markets.
So, lay all your cards on the table. No holding out. Everything you can conceive that could hold you back needs to be addressed now. Become transparent. Hide nothing. Every so-called problem, obstacle, limitation or boundary you say you have, needs to be addressed in a straightforward & honest fashion.
By being open, honest and realistic in answering the following questions will produce a written and concise Killer Trading Plan. You will have a complete blueprint and road map for your trading success. You will know where you've been, where you are and where you are heading. You will know specifically what to do and what not to do in trading the markets to accomplish your goals.
Remember, your completed trading plan will only be as strong as you are honest. Lie and your plan is already weak and youre certain not only to not follow it completely and without question. You are soon to lose your entire wade of equity.
Be honest and you will see the light while your bank account gets heavy and laced with the spoils of proper profitable trading.
The following questions require detailed answers. The moment you skip a question or a section - YOU LOSE! You are NOT ready for this game and as you watch your equity disappear that will be the proof.
As we begin now, be mindful. The written Trading Plan is only part if the process. You MUST stick with your written Trading Plan once it has been established.
THE KILLER PREP QUESTIONS
(if you don't know, your equity won't grow)
1. Am I mentally prepared to trade futures? How so?
2. Am I spiritually prepared to trade futures? How so?
3. Am I physically prepared to trade futures? How so?
4. Am I emotionally prepared to trade futures? How so?
5. What's the difference between a Trader and an Investor?
6. What's my type? A Trader? Or an Investor? How do I know?
7. What is my reason for trading futures?
8. What is being secure?
9. Do I want to be secure? Why?
10. What is being comfortable?
11. Do I want to be comfortable? Why?
12. What is being rich?
13. Do I want to be rich? Why?
14. What's my most important core value?
15. What matters most in my life right now?
16. Who matters most in my life right now?
17. What are my key life relationships?
18. Who is my supporting cast, my hallmark cornerstone for strength?
19. Do I live with a sense of purpose? What is it?
20. Who is God?
21. Who is God to me?
22. What does God have to do with trading the markets?
23. How do I see the futures markets?
24. What do the markets mean to me?
25. What can I bring to the markets?
26. What's a Gambler?
27. What's a Speculator?
28. What's a Trader?
29. What's a Saver?
30. What's a Giver?
31. What's a Dreamer?
32. What's a Loser?
33. What's a Winner?
34. What am I?
35. Do I realize that no one person can know it all? That includes me.
36. Am I willing to keep an open mind while trading futures?
37. Am I willing to invest the time to find out where I am financially today?
38. Am I willing to create a financial blueprint to direct my futures trading?
39. Am I planning to be rich? How do I know?
40. Am I planning to be poor? How do I know?
41. Am I even planning at all? Where's the beef?
42. Am I ready to establish and follow a simple formula for trading futures?
43. Am I ready to start with a simple plan, keep it simple and improve on it regularly?
44. Am I willing to stick with this plan and trade by it without exception?
45. Am I willing to start taking control over myself? How so?
46. Who benefits from me trading futures? How? Why?
47. How can my trading futures help others?
48. Am I willing to give a minimum of 10% of my winnings to a Church or charity?
49. Who will I give to?
50. What is my reason for trading the markets?
51. Do I understand the risk involved in trading futures? What is it?
52. What's the worse case scenario?
53. How does the worse case scenario affect my family and I?
54. Can I live with the worse case scenario?
55. Do I understand that I'm both the asset and the liability?
56. Am I prepared for whatever happens?
57. Do I understand risk and reward? What is it?
58. Do I understand fear & greed? What is it?
59. How do I deal with fear?
60. What has fear cost me in terms of dollars in trading?
61. How do I deal with greed?
62. What has greed cost me in terms of dollars in trading?
63. How do I handle winning?
64. How do I handle losing?
65. Do I understand that I can have a higher number of losing trades oppose to winning trades, yet still win more in realized profits trading futures? How is this so?
66. Am I educated about the markets? What do I know?
67. Am I experienced in trading futures? What have I done?
68. Do I have excessive cash to trade the markets? What can I lose?
69. How has my trading changed today from when I first started?
70. What kind of results do I get today from my trading?
71. Am I satisfied and content with these results?
72. What is my biggest trading problem or challenge today? (describe it in detail)
73. How have I addressed this issue? What has been the result so far?
74. What ongoing learning and developmental process efforts do I do to improve my trading skills, wisdom, knowledge and understanding? (explain in detail)
75. What is my current process for selecting, entering, managing and exiting a trade? (describe in detail)
76. Am I willing to make mistakes? A bunch of them?
77. What if I lose all of my money?
78. What's does failure mean to me?
79. How do I measure failure?
80. What's been my life's biggest failure?
81. How did that happen?
82. How did I deal with that?
83. What does success mean to me?
84. How do I measure success?
85. What's been my life's biggest success?
86. How did that happen?
87. How did I deal with that?
88. Am I trading for fun?
89. Am I trading for sport?
90. Am I trading for cash flow?
91. Am I fooling myself?
92. Am I a fool?
93. Where's my trading journal?
THE KILLER FOUNDATION QUESTIONS
94. What is my philosophy as it relates to trading the markets?
(get it together before you get it going)
95. What is my immediate term financial objective (1 day-3 months)
96. What is my short-term financial objective? (3-12 months)
97. What is my intermediate term financial objective? (1-5 years)
98. What is my long-term financial objective? (5-10 years)
99. How does winning affect my taxes?
100. How does losing affect my taxes?
101. How can I optimize both for tax benefits?
102. Do I know what a margin call is? What is it?
103. Why would I get a margin call (not following my trading plan, etc)?
104. How do I handle margin calls? (send money, duck and hide, etc)
105. Who is my broker?
106. Does my broker know who he is?
107. Do I respect my broker? How so?
108. Does my broker respect me? How so?
109. Does my broker respect my trade decisions? Where's the proof?
110. How long have they been in business?
111. Do they have any complaints on file with the NFA? (better check)
112. Am I getting full service or not? Why?
113. What am I paying per completed trade?
114. Who is the floor broker for my desk broker?
115. Who is the clearinghouse?
116. Am I trading via phone, fax or online?
117. What is my brokers phone number?
118. What is my brokers fax number?
119. What is the URL or software for online trading?
120. If I'm trading on the phone, does my broker record each trade call?
121. If I'm trading online, how reliable is the online system?
122. What kind of assistance has my broker offered to give?
123. Who is my trade advisor?
124. What software do I use? (if any)
125. At what scheduled time of each day do I go over my portfolio, look for new trades and manage open trades?
126. When do I revisit my trading plan for updates and revisions?
127. Do I have my record keeping system in place for all my trades? (if not -get one!)
128. Do I have a trading journal to write in daily? (if not - get one!)
129. What is my starting (equity) risk capital?
130. Am I willing to trade only 50% of that as margin?
131. Am I trading technicals or fundamentals?
132. What is my source (system) for getting trade entries and exits?
133. How reliable is this source (system) of trade entries and exits?
134. Does this source (system) have the winning percentage and net gains to support my goals?
135. What is the drawdown and net loss of this source (system)?
136. What markets can I trade with my 50% allocated risk capital based on the source (system) drawdown percentage and lose to win ratio?
137. How many contracts will I trade per entry?
138. What markets are an absolute NO-NO and I will not trade under no circumstances whatsoever?
139. Do I have the latest margin sheet from my broker?
140. Of those identified markets how will I diversify them in my account? (write 10 combinations)
141. How many different trades will I hold at one time for diversification?
142. What kind of diversification will I pursue? Inter-market or Intra-market?
143. What time frame while I trade? (intra-day charts or end of day charts)
144. Is scalping and day trading allowed (holding for a few minutes to until the close)
145. Is swing trading allowed (holding for 1-3 days)
146. Is position trading allowed (holding for 3 days and beyond)
147. How do I know a trades probability for success?
148. What's the formula for determining a trades probability for success?
149. How accurate is this formula?
150. What are the rules for adding on to a winning position? (when equity gains equal margin for new positions, etc)
151. How do I keep proper portfolio balance and diversification when adding to winning positions?
152. When do I let a losing position go?
153. What are the exit rules for losing positions? (stops, time, price retracements, moving averages, etc)
154. What filters do I use to control exit signals to prevent premature exits?
155. How does this filter work?
156. Do I trade options?(straddles, strangles, etc.)
157. If so, do I sell options? (overvalued options, etc.)
158. Do I buy options? (undervalued options, etc.)
159. At what point and for what reason do I trade options? (controlling risk on futures with options, longer term trades, hedging, selling during declined volatility to take advantage of cheap prices in sideways markets, etc.)
160. Do I trade spreads?
161. If so, what kind, for what reasons & when?
162. What about Holidays and thin trading? Do I trade or not?
163. What about long weekends do I exit or stick to exit rules?
164. Are there any exceptions to any of the above?
165. Did I write all of this in my trading journal for my trading plan?
"GET SET" KILLER QUESTIONS166. Where is my trading journal?
167. Can I see the difference between a sideways market and a trending market?
168. Which market personality do I trade? (sideways or trending?)
169. What is the rule of timing entries?
170. How do I know to enter a market?
171. What filters do I use to control entry signals to prevent bad trades?
172. How does this filter work?
173. Do I trade Elliott Waves?
174. What Waves will I trade? (impulsive waves 1, 3 and 5 only, etc)
175. How do I know what Wave it is?
176. Do I hold during corrective Waves 2 & 4?
177. If I exit at what point do I reenter?
178. If I hold at what point do I exit?
179. If I exit, why am I going to exit? What's the reason and what's the rule?
180. How do I know when to exit Wave 5?
181. What are the SPECIFIC technical and/or fundamental parameters that a market must meet prior to me entering either long or short?
182. What if the technicals are in conflict with the fundamentals? What then?
183. What if the market goes limit against my position & I still have profits? Then what?
184. What if the market goes limit against my position & I have drawdown? Then what?
185. Will I be trading using protective stops?
186. What are my protective stop rules? (risk 1% of equity per contract or more, moving average crossover, Elliott Wave violation, etc?)
187. What are my profit exit rules? (price targets, trailing stops. etc)
188. Are there any exceptions to the above?
189. Did I write all of this in my trading journal for my trading plan?
"GO" KILLER QUESTIONS
190. What do I think about this trade?
191. What do I feel about this trade?
192. Is this market trending or choppy?
193. If trending, what's the current trend, up or down?
194. Where is the current price in relation to Price Gates, Support, Resistance, 38%, 50% and 62% Retracements levels etc?
195. What's the previous significant high or low?
196. Is this a fractal trade set up?
197. What Wave is it in?
198. Is the market corrective or impulsive?
199. What's the margin on this trade?
200. Does this trade meet my trading plan rules?
201. Is this a counter trend trade?
202. What is the market volatility like?
203. Where is my fear level on a scale of 1 - 10?
204. Where is my greed level on a scale of 1 - 10?
205. Are there fundamental factors that can alter the technical picture either short or long term?
206. How does this trade diversify my portfolio?
207. What is the probability for success for this trade?
208. Is it a stop, limit or market order entry?
209. What is my entry price?
210. What's my fill price?
212. What is my profit target for this trade (if any)?
213. When do I exit this trade?
214. Where is my trading journal?
Rich Dad - Poor Dad" - A Book Review by Raymond F. Kohn
"Rich Dad - Poor Dad" by Robert T. Kiyosaki with Sharon L. Lechter is a New York Times Best Seller. Copyright 1993-2014, first printing 2000, 207 pages in paperback. Published by Warner Books - $15.95. This is not the kind of book that typically finds its way on the bookshelf of a securities trader. Most investment and trading books that I read are obscure books that have a very small audience at best. Sometimes, I get the feeling that if it weren't for "me" and the "author's mother, the author wouldn't have sold any copies at all. This is not the case with this book. It is a Best Seller and widely available.
While browsing the local bookstores, I came across this book and was captivated by the opening chapters. This was not a typical "get rich quick" book that advises you to buy whatever, for no money down, and then re-sell it for millions. This book was different. I knew I had to have this book - Read it - Have my wife read it - and, pass it along to my son and my brother. It is one of those kinds of books that have the power to change your life. Don't underestimate this one.
The "Introduction" set the tone for the entire book. To quote a key sentence:
"Today, the most dangerous advice you can give a child is Go to school, get good grades and look for a safe secure job.
The title of the book lays the intriguing foundation. The author's story begins in 1956, when he was 9 years old. One dad was his "real father, and the other dad was his boyhood friend's father (but you don't learn this right away). One father was highly educated, a PhD, graduated from Stanford, University of Chicago, and Northwestern. The other father never finished 8th grade. Both fathers worked hard, had successful careers, and both earned substantial incomes. Yet one struggled financially all his life and died leaving unpaid bills, while the other became very rich leaving 10's of millions of dollars to his family, church, and various charities.
When the author was 9 years old, both fathers were just starting out in their careers; both were struggling with money and families. Therefore, it was not apparent which one of the author's fathers was going to wind up being the "rich" one, and which one was going to be the "poor" one. The author loved and respected both of them, and carefully listened to both fathers, and their advice. Interestingly enough, his "fathers" had opposite points of view regarding most subjects, but especially when it came to money. One dad would say: "The love of money is the root to all evil, while the other would say "The lack of money is the root of all evil.
The following quotes will further contrast these two fathers. One would say:
"Study hard so you can find a good company to work for."
While the other would say: "Study hard so you can find a good company to buy." One dad would say: "The reason I'm not rich is because I have you kids."
While "The reason I must be rich is because I have you kids."
One "Our home is our largest investment and our greatest asset."
"My house is a liability, and if your house is your largest investment, you're in trouble." The author saw first hand how these different attitudes, and beliefs, affected each of his father's lives.
The author repeatedly brings home the point that while our educational system emphasizes scholastic achievement and professional skills; it fails miserably in teaching "financial skills. In fact, today's schools don't teach their students how money works at all - Schools totally avoid the subject as if it were taboo. As a result, the subject of money is typically taught at home in many "indirect" ways, which the author explores in detail.
A parent's off-hand comments to a child, such as: "We can't afford that." - "What do you think, money grows on trees." Or, "The rich are greedy and selfish. " Or, the ever present, "Study hard, get a good job with a company that offers great benefits, or join a union." And so on. I'm sure we can all think back and remember some of these tidbits of "indirect financial advice" our parents would give us. It is this process of "indirect" parental financial advice that creates today's unfortunate reality, whereby the poor remain poor for generations, the middle class continue to struggle regardless of their incomes, and why the rich get richer.
The author makes the point that being "rich" has nothing to do with how much money you have, or how much money you earn. Many "rich" folks have gone broke, sometimes more than once, yet were never "poor" (they where just temporarily without funds). And, in contrast, it is not uncommon for "poor" folks to come into money either by inheritance or lottery winnings, only to have lost it all within a year of receiving their good fortune. These "poor" folks were never "rich, (they just temporarily had funds).
Being "rich" or "poor" is a mind-set, and an attitude, which is part of a learned belief system, which was taught at home while we all were growing up. It doesn't matter if you eventually get a great job and earn a great income, if your mind-set is "poor" or "middle class, no amount of good fortune will ever help you.
The Book Is Divided Into 10 Chapters
Chapter 1 introduces you to the author's "rich dad, and his "poor dad. This first chapter was a little like a mystery novel with the author careful not to reveal the identities of each dad. It wasn't until the end of this chapter that you discover which dad was the "rich" dad, and which one was the "poor" dad. (Don't you just hate people that tell you the ending of a good who-done-it? So, I won't ruin the surprise.)
The next six chapters (2 thru 7) highlight a particular "Lesson" the author is trying to teach the reader. Chapters 8 thru 10 try to motivate you to "get started. The chapter titles give you an idea of what to expect:
Chapter 2: Lesson 1 - The Rich Don't Work for Money. Chapter 3: Lesson 2 - Why Teach Financial Literacy? Chapter 4: Lesson 3 - Mind Your Own Business. Chapter 5: Lesson 4 - The History of Taxes and the Power of Corporations. Chapter 6: Lesson 5 - The Rich Invent Money. Chapter 7: Lesson 6 - Work to Learn - Don't Work for Money. Chapter 8: Overcoming Obstacles. Chapter 9: Getting Started. Chapter 10: Still Want More? Epilogue: College Education for $7,000.
The first seven chapters are the heart of the book. Each chapter is written in a "Story Telling" fashion that is both personal, and intriguing. The author uses personal examples from his own life to illustrate the points he is trying to make. Many of these examples are both charming and funny. You actually feel as if you are growing up with the small boy who is gradually learning how to "march to the beat of a different drummer" just because he wanted to be "rich, and not "poor.
Chapter 2 is the beginning of the author's story. The author, Bob, was a 9-year-old boy when the parent of another student from his school drives up in her new Cadillac and took three "other" friends to a beach house for the weekend. Bob wanted to know why he and his friend Mike were not also invited. They were told that they weren't invited because they were "poor kids. This was the key turning point in the author's life Being "poor" has just had an impact on his life, and he didn't like it. From this point forward, Bob wanted to be "rich. So naturally, he asked his dad: "Dad, can you tell me how to get rich?"
From this point forward Bob was on a quest to "learn how to get rich, and his father was the obvious first person to ask. At 9 years old, it is easy to misunderstand what parents are saying, and his dad's response was a bit too generic for a 9 year old. Dad's reply was: "If you want to be rich, you have to learn to make money. "
This began Bob's first adventure in accumulating wealth. He formed a partnership with his childhood friend, Mike, and together these two 9 year olds would try to come up with a plan to "make money.
I have to tell you, that on several occasions I actually laughed aloud while reading this chapter. It was fun, well written, witty, and suspenseful. In addition, most importantly, it lays the foundation for the rest of the book. Its a great chapter, and the author's sense of humor is a delight.
The two boys had an idea and developed a business plan. They kept it a secret from everyone. For months they pursued their business plan by collecting used toothpaste tubes from all the neighbor's until they were ready. Once they had enough used toothpaste tubes, they set up a production line on the front driveway of their home that was guaranteed to "make them money. Bob's dad came home to find a mess of white powder all over the driveway, and the barbecue grill smoldering away below a metal pot. The boys were melting down the toothpaste tubes for the lead (this was before plastic tubes) and were casting the lead into plaster molds to form "nickels. The boys were literally, "making money. Dads explained the word counterfeiting, and suffice it to say, their business opened, and was closed down, that very first day.
Despite their disappointment over their failed business venture, an off-hand comment by a friend of Bob's dad suggested that if they wanted to learn how to become "rich, that the boys should talk to Mike's dad, saying that his father had a great head for business, and was destined to become one of the wealthiest people in the state. Both boys were stunned to hear this about Mike's dad, but had renewed hope that not all was lost. Bob asked his good friend Mike to talk to his dad to see if he'd teach them both how to make money and be "rich.
Mike's dad was a firm believer that "real life" was the best teacher, and that telling someone what to do to get rich, or teaching via lecture, was useless. Hence, the learning adventure began. Mike's dad had 150 employees, and not one of them ever asked him to teach them how money works. These two small boys were the first. Mike's dad was intrigued, and used his imagination to design a method, which would teach these young boys to actually "live through and experience" a taste of "real life. The first real-life experience included working for substandard wages in one of his retail stores a few hours a week. Both boys agreed, after several weeks Bob (the author) became so fed-up with the hard work and low wages, that he wanted to quit unless he was given a raise, and he wanted Mike's dad to keep his word and start teaching them how to become rich.
This was his first lesson, which included a taste of reality -- that life will push you around if you let it. At 9 years of age, I'm not sure Bob really understood his first lesson, but as time went by, he would slowly begin to grasp the importance of these early "reality" lessons. Despite Bob's anger and resentment at his low wages, the second part of this first lesson required Bob, and his good friend Mike, to work for "nothing. (Can you imagine the motivation that must of existed for these boys if they were willing to work for "nothing" just to learn how to be "rich.) Lesson number 1 - The Rich Don't Work for Money.
The author's writing style is witty, and realistic. You empathize with these young boys, and are captivated by the story. And, just as these boys are learning financial lessons, which will one day allow them to become rich, the reader is also learning. The belief systems of these boys, and the reader, are being challenged, and re-molded throughout the book.
As Mike's dad begins to talk with the boys, he explains what he's been trying to teach them, the reader is also learning these same lessons. Lesson Number One. "Rich people don't work for money. Money works for them."
95% of the population either work for a living, or are dependent on what others give them (welfare or social security). A small minority has "learned" how money works, and as a result, their money works for them. They are financially independent. It is this understanding of "how money works, and "letting money work for you" that distinguishes one person from being "poor, and another being "rich.
The remaining chapters provide challenging points of view, which typically contradict many of the beliefs we all grew up with. Such as: "Your home is an investment, and your most important asset. " The author, and his mentor, believe that: "A home is a liability, and if its your largest investment youre in real trouble.
"The author uses a simple diagram to explain the concept of "cash flow, and the difference between "assets" and "liabilities. His diagram is very simple, but very effective. Understanding the difference between assets and liabilities is at the heart of this book. If you happen to be one of these people who collect little bean bag toys and other collectibles, or buy a bigger home when you get a salary increase, all the while assuming these purchases have some intrinsic value to them, by the time youre done reading this book you'll understand why youre destined to remain "middle class" and in debt, at best, and "poor, at the worst.
This book will challenge your perspective on "what is an investment asset, and "what is a liability. Learn these lessons well, and you will begin down that less traveled road towards becoming "rich. The author includes a copy of the Robert Frost poem; "The Road Not Taken" saying that he uses its lesson almost daily.
I must warn you that "This Is NOT A Get Rich Quick Book. This book teaches you how money works in today's world. It is a book about altering your belief system so you can become "rich. The author never tells you "what assets" to invest in. That is up to you based on your personality, desire, and interests.
The book offers fair warning to the reader that the people around you will discourage your efforts offering dire warnings of financial loss and disaster. These well meaning people will try to dissuade you from going your own way, which is contrary to the "conventional wisdom, the "crowd, and your friend's best advice. You need the will and personal strength of character to "go where no man has gone before. (Excuse the parody, I couldn't resist).
On a personal note, I can remember back when I started investing in the markets in hopes of becoming a full time trader/investor. There were many around me who thought I was crazy. The most common comment was: "What makes you think you can do it, when so many others, who are smarter than you, have failed?" Or, "Youre going to lose your shirt, don't do it." The only one who supported this effort was my wife. Our determination and faith has paid off. Today, my wife and I are financially independent. Our investments "work for us. I no longer "work for money - money works for me." We have successfully made the transition from a typical "debt ridden middle class" lifestyle, to being "rich. Trust me - Rich is better.
The whole idea behind the book is to change your attitudes about assets and liabilities. And once understanding what an asset is -- Learning to acquire and accumulate "assets, and making those assets work for you. Eventually, those assets reach a level that they throw off sufficient income to permit you to join the ranks of the "financially independent. Then, you too will be "rich.
"Rich Dad - Poor Dad" was designed to change your belief system and teach you how money works. In addition, the author covers a wide range of specific topics which include taxes, corporations, real estate, how to select advisors, and the all-important difference between "assets" and "liabilities. A couple of key points, which I took, note of include:
It is far better to have a diverse education with a good understanding of a wide variety of topics, rather than being highly specialized and focused. He believes that a person whose career training is highly specialized is vulnerable to changes in technology or employment circumstances. He gives the example of a commercial airline pilot who earns a very high salary, but discovers that he can no longer fly anymore. His career is over, where does he go next? There is no "job" out there that will pay what he earned as a pilot. He's in trouble.
The author recognizes that there are some people who will just refuse to learn "how money works" -- Its a subject that just doesn't interest them at all. For these folks, there is only one solution that he gives. "Start Investing Early" in mutual funds, or other passive investment vehicles, etc. The magic of compound interest and "Lots of Years" will eventually solve your financial problems, as you get older. However, for this method to work, you have to start "really early, if youre over 30, it may already be too late. Hence the importance of educating your children as early as possible.
The author also highlights that classic phrase "Pay yourself first. However, his attitudes are so extreme, that even I had a hard time with this one. He went so far as to postpone paying bills until he was forced to, and this even included postponing payments on IRS bills too, to the point of getting threatening letters. All done for the sake of "paying yourself first, even if you had to not pay your creditors on time. I strongly disagree with this seemingly irresponsible attitude towards your own bills. I can understand the single-minded focus on accumulating wealth, but at the same time, I consider such a disrespectful attitude towards your creditors as a reflection of poor character. It is my belief that you can manage your financial lifestyle in such a manner as to do both. Responsibly pay your bills on time, (even if that means making only partial payments), and paying yourself regularly. I would suggest you exercise some personal judgment on this one.
The author also sings the praises of the "corporate form of doing business. The personal corporation provides several advantages. First, it provides a degree of personal lawsuit protection. Your assets are held within the corporate structure, and not held personally, therefore if you are sued, you literally own nothing yourself, but control everything, (which is held in the corporate structure).
You should be aware that this may provide protection from "frivolous" lawsuits; however, it may not provide any protection at all, especially if negligence or criminal behavior is involved. In the legal profession, this is referred to as "piercing the corporate veil. Get good legal and tax advice before you do anything, and "never assume anything.
The second, and more important reason for establishing a corporate structure is for tax reasons. The corporation generates pre-tax income, you have the ability to "write off' as many legitimate business expenses as you can think of ranging from cars, trips, operating supplies, health insurance premiums, pension plans, etc. The list goes on forever. And all of these expenses are paid with "pre-tax dollars"; taxes are paid on "whats left over after all expenses are paid. Ideally, you should have very little left over when youre done. Hence, you have generated a high level of income, and effectively paid no or very little in taxes.
Income, which is generated by an individual, is taxed first, and then what is left over, is used to pay personal expenses. (Note: The inherent limitations, combined with IRS scrutiny, associated with itemized deductions preclude this area of the tax law to be used effectively to reduce income on a pre-tax basis. Itemized deductions are better than nothing, but are a far cry from what is available to you via a structured business entity.)
The single largest expense any of us will ever have is taxes. It behooves us to learn the tax laws, or seek out tax advice, to reduce our tax liability as much as legally possible. The corporate form is one way to do that.
However, a cautionary note is necessary. If you are a professional trader, there are additional factors, which come into play, which further complicate the issue of being a corporation. Please refer to my other book reviews of Ted Tesser's book "Traders Tax Survival Guide. Once again, don't do anything, don't assume anything, and get good legal and accounting advice. Securities Traders are unique under the tax laws and don't fit any standardized models.
The author's primary vehicle for generating passive income is real estate. Such an investment vehicle is ideal for inclusion within the corporate structure. Other investments may not be as ideally suited.
The author makes reference to an adult board game he has invented called "Cashflow 101 " - $195.00. Its loosely based on Monopoly, but with a very different objective, and purpose. This game is a "Teaching Tool" which tries to reflect the "real life" financial choices each of us must make. Thus, teaching those who play the game the various lessons that are needed to become "rich. If you fail to learn those lessons, you stay within the inner circle known as the "Rat Race, however, if you learn its lessons, you can move to the outer circle and leave the Rat Race behind. A children's version is also available called "Cashflow for Kids" - $79.00. These board games are highly specialized teaching tools hence the high cost.
This book provides the foundation for "how money works" that every young person and adult needs to understand. This is not just another financial self-help book. Don't let this book slip past you. Its a real winner. Read it yourself, and pass it along to your kids.
DayTrading for Beginner - Virginia Knapp
I received your introductory Gann course and the newsletters. Thank you. Looks like I have my work cut out for me for a while. The newsletters look like they will help a lot with the nuts and bolts of determining good data providers and brokers. I have sure been through the mill on this.
I am currently with Field Financial and find them adequate. Their staff is knowledgeable and nice and the price is right for a beginner. My major problem lately, is that the web keeps dumping me when the market gets fast. I get scared to enter a position for fear I will be trading blind or only get the position and not the stop entered before the system dumps. I do not know if the problem is my ISP (Metricom) or the website servers. Anyway, I find the Gann material fascinating.
If you feel my comments will help others, I am happy to share them. I have found the people at Field to be helpful and nice. My fills have been fast. They have increased their server capacity.
My major problem is the Internet right now. Whenever there is a market change or surge in orders, quote.com and Field Financial both go down. I get afraid to enter orders because of trading blind. I also worry that I will get an order in but not be able to enter the stop. I really like the independence of the net and really don't want to have to talk to a broker and wait to be called for a fill. The e-mini S&P that I am learning to daytrade is just too fast. Thanks for your good service!
Joe Ross and System Vendors -- Wayne Antonellis
A critical reason why I took Joe Ross's class was based on his alleged 30 years experience. This was the principal reason. My thinking was that if a trader can survive 30 years he must be very good at it.
His class included nothing that wasnt in his books which are mainly market setup and entry techniques. At the time I took his class in 1994, I was new and inexperienced. Of course, I lost money before Ross's class and after because he teaches an incomplete trading method.
I was always frustrated trying to learn the missing element in what he taught. His style of trading changed with every new book and as always was missing items 2 & 3 below.
The irony for me is that I write software for a living (23 years), have a Masters Degree in Computer Information Systems from Boston University and spent over $5,000 to get information from someone that has no respect for people or education and helped put me deeper in the hole.
If Joe Ross wants to come even close to redemption with me he can start by paying me back the money I spent on his books, class and travel expenses.
Editors Comments -- By the way, you are right regarding trade exit rules. There is NO WAY any trading approach can possibly succeed without the following 3 elements: (1) Entry Rules. (2) Stop-Loss Rules if wrong. (3) Exit (Profit Target) Rules if right.
I repeat, it's totally impossible to be profitable if one of these is missing. I recall some years ago there was a trading method heavily advertised named AIQ. It was advertised as a trading system but was NOT truly a trading system as it was not fully mechanical and had no stop loss rules at all.
Many other trading methods also commonly omit either #2 or #3 above, yet claim an amazing track record as far as winning percentage goes. It's impossible for that to be so.
Even if a Stop and Target Rule is used, with a very slight change to a Stop or Target level it usually will make a significant difference in the P&L and be the difference between a winning and losing system. With no Stops or Targets the trading results would be unpredictable and basically be random.
We normally only provide this type of information and our recent articles to club members. In fact, we are sending a special Traders Ezine to our list members in a few weeks with an amazing series of emails between Joe Ross and this Club. Joe even claims in one of the emails someone in the past impersonated Joe and his wife.
It claimed fabulous success and a high percentage of wins. When I called them asking how they could claim this when there were no stop loss rules at all, they became very hostile and nasty and refused to even discuss it.
I have taken Joe Ross's "Trade the Truth" seminar for $3,000. I have heard some negative talk concerning his past and the possibility that he has misstated his trading experience and success. I too became suspicious when his description of his past varied extensively.
One item he never covers in his seminars or books is Exits. It seems the trading business is dangerous because you never know whom you can trust.
Is it possible that you can send me the articles in your latest publication concerning this matter? I found your website by an Internet search and was surprised about Joe Ross and the possibility he may be some what of a fraud.
When someone lies about their track record, it's wrong no matter how anybody wants to explain it.
I know we live in an era where anything goes and everything is explainable from the president of the US lying to the American public down to someone that claims to be trading for 30+ years when it is more likely under 10 or none at all.
That's the way it is. My attitude is lie if you must but don't lie to me at my expense. I ended up telling Joe to take the $3,000 and stick it up his ass. I also told him I don't want anything to do with him. He obviously needs the money more than I do.
Therefore, you do what you want. I really don't care whether you print the stuff or you don't, whether Joe keeps being Joe or whatever. One thing that has been made clear is the people that really know how to trade don't give seminars or write books. Good traders trade they don't have time for bullshit.
Editors Comment: I understand your frustration and being upset at Joe Ross and agree with what you have said on some issues. I am in no way defending Joe Ross here but speaking in general terms regarding all trading system product and service providers.
Many vendors are not successful traders for various reasons. Most commodity traders lose money and it's frequently not the fault of the trading system they use! It's sometimes due to poor money-management, lack of discipline, lack of concentration, lack of nerve, not using stops, overriding their stops, not using target prices, not getting out of a profitable trade when they should, errors, mistakes, being under capitalized, etc., and other factors.
Many vendors lose due to the reasons above. Many vendors know over 90% lose so they personally do not trade their systems at all or as much as necessary to establish a track record. Also, some vendors are much better at teaching others than trading themselves. A surprising number of vendors and traders do not have the personality needed to trade.
Some vendors never built-up the excess risk capital needed for an account. Some vendors have risk capital or may even be wealthy but don't want to risk their money as they know it's a high-risk game! They know they can simply teach others or sell systems and make steady money with no risk.
There is nothing wrong with that. Why do College Professors teach others Mathematics, Biology, Astronomy, Politics, Physics, Programming, etc., instead of working in their professional field themselves! Why is it if a trading system developer teaches others how to trade a system it's viewed suspiciously by some, but everyone respects teachers who basically do the same thing, teaching rather than using their skills themselves or working in their profession?
I think there should be some regulation that prevents people from making false claims. I write software for a living. I have been doing this since 1977. I would be happy to display my resume including all credentials. If I were to provide you a service for money and lied about my resume, word would get around and I would not be in business too long.
Joe Ross and others that trade information for money should provide whatever the public wants to see that proves they are successful at what they claim to be. If they can't do that then obviously there is something wrong. Maybe they are all winning traders, but maybe they are not. In Joe Ross's case where he claims to be a winning trader for x amount of years. Prove it or go work for Burger King. Over there, he can have it his way. Come on Joe you're from Missouri, isn't that the "Show Me State.
I thought you might be interested in this exchange. I sent Joe Ross an email requesting the truth or tuition reimbursement. Directly below is his response.
Joe Ross - My, my such indignation. And to think I've been busting my butt trying to put together a seminar so you could attend again.
Wayne you can have every bit of your $3,000 back as soon as you return to me the time I spent giving the seminar and the material I taught you there.
After all, even Wal-Mart won't give you your money back until you return the merchandise.
As for your figures, you have it all wrong. It's not 30 years, it's 42. However, the burden of proof is on you, the accuser. You prove that I havent been trading for 42 years and I'll prove I've been trading for 30. Fair enough? JR
He is asking ME to prove HIS trading background and asking me to give him something I can't, which is time. If he was a winning trader, you can bet his P&L statement would be his biggest advertisement. He's another Ken Robert's wannabe intent on making money by telling others how it's done when they have never been able to do it themselves.
It's time these clowns start backing up what they say or leave people alone and work an honest days work.
Editors Comments: Of course they should not lie about their track record, or years trading! That's a given. All I am saying is there are many reasons (as I outlined earlier) why a vendor does not trade his own system, though the system may be a good one.
Also, you said, "One thing that has been made clear is the people that really know how to trade don't give seminars or write books. Good traders trade they don't have time for bullshit."
Also, a vendor can make more money, more consistently and with no risk by training others rather than doing it himself.
This is why Carleton Sheets (for example) sells courses on buying real estate with no money down. He can make a lot more money with less work and little if any risk, compared to buying properties himself. Same with many other experts in various fields. It's usually much better to teach others for a fee than doing it yourself for a living. This is true in many diverse areas, including trading and investing.
Why do you think a Professor works as a teacher rather than actually working in his area of expertise? He can work only 12 to 16-hrs a week and earn perhaps $60,000 to $80,000 or more a year. That compares to working 40-hours at a company in his field and likely making less money (per hour) and probably having less job security than offered by a University.
Same is true with a trading system developer. He can "work" few hours (compared to being chained to his PC Screen all day and studying his charts all night), yet get steady year-around income, with less risk, no drawdowns, no trading related stress, and also avoid all the reasons I gave earlier why most traders end up losing their money.
The same is true with trading system product and services providers. It's far better in many ways to sell your services to others than utilize it yourself to make a living, though most all vendors will never admit this to be so. Instead, they make up odd excuses for their lack of a trading history and track record, rather than tell the truth about it.
OPTIONS & SPREADS: Sonatas at Twilight & the
Horse Parlor Stock Exchange - Greg Donio
"When I found the skull in the woods, wrote Jack Handey, "the first thing I did was call the police, but then I got curious about it. I picked it up and started wondering who this person was and why he had deer horns."
So, he looked at the skull and insisted on seeing Homo erectus instead of roebuck, despite the evidence of the antlers. Was he any sillier than those who see hard-sell TV commercials for foreign currency futures and envision fabulous profits? Who disregard the evidence of sharp horns punching holes in one's bank account?
Penny stocks and IPOs, dot com offerings and electronic chat room recommendations, futures and options on items from rough rice to interest rates, S & P "spiders" crawling all over the financial channel commercial -- few hopefuls look at these skulls and visualize skeletons of bankruptcy. Certainly, hope is essential for speculative traders but too frequently, it camouflages bloody antlers.
Those come-ons in your mail do not help any. You know, the ones with buffalo-sized announcements of huge gains, the ones that make speculation sound like an easy-pickings gold mine with nuggets as big as your fist. The ones with the "warning of risk" that the law-requires squeezed into the tiny type above the printer's name, a hair's breadth from the bottom of the page.
Yet, hope can have a solid, business-wise foundation. Veins of gold and silver are not imaginary and the individual sourdough can be the smiler in the assayer's office. Inescapably, it requires knowledge of topography and methodology, ways and means. Many venture forth with just hope and hype, expecting all nuggets and no rattlesnake. Fledglings perish and years of experience veterans have little to show for it.
A solid, business-wise foundation can underlie both the hope and the "how to go about it." If everybody's "blueprint for wealth" reached the brick & stone stage, the street outside your window would be jammed with chauffeured Lincoln's. Yet, some blueprints do work at the concrete-pouring stage, including for the individual trader who is not marshaling millions in a corporate treasury:
Using stock options, my blueprint is the Horizontal Calendar Spread. My "office" is my desk at home or my pockets; my "business phone" is often the street corner touch-tone. The amount of my own capital that I float is typically less than $1,500 per venture plus -- and here is a crucial ingredient -- several thousands of dollars of other people's money. I would stay the hell away from options but for that latter item.
Why? Because my carved-in-stone One Commandment remains the W. D. Gann Maxim: "Handle speculation as a business, not as a gamble." Spread strategy uses substantial quantities of other people's capital and therefore in my estimation stands as the most business-like form of speculative trading. Like banking and bookmaking, it requires seed money or an outlay but is mechanically geared to gather profitable spill-over from other folk's bankrolls.
Also, like banking and bookmaking, it often gains while those who put up most of the cash lose. Spreading is not risk-free but can powerfully reduce the risk in futures and options, two forms of trading notorious for producing the results of a "one medal per 10 coffins" type of battle. With spread strategy, usually the coffin train carries away others' lost dollars. That is why I would not touch stock options unless that strategy armed me.
I received a thought-provoking letters from a gentleman, a dentist in Illinois. He wrote that he would like to leave the dental profession and become a successful full-time trader. My reply was, "I have good vibrations about you. Yet, you and I may be working at cross-purposes. You want to leave the dental profession and I want to make trading more like the dental supplies business, i.e., more a business and less a crap-shoot."
Alas, the Gann Maxim/One Commandment everywhere gets mangled in actual practice. "Handle speculation like a business" is like saying, "Drink only in moderation." Everybody claims to be doing so but millions of people clearly are not. That dentist can probably handle trades in a scientific, business-like manner, but so many others - you would urge them to "handle it intelligently" but does any living being claim not to?
Recently I became involved in a brief debate-in-print, which turned to the subject of investments when I did not expect it to. A piece in the Wall Street Journal waxed eloquent over horse-gambling in a bygone era. I wrote a response, which the Journal published 6-1-2000
At the Track, It Ain't All Guys and Dolls
Ray Kerrison (Tastes Page, Weekend Journal, 5/19) sentimentalizes the old-time horse-players with the cigar in one hand, pencil and Racing Form in the other. Straight from the pages of Damon Runyon and Ring Lardner.
Not everybody is so nostalgic. I am not completely anti-gambling, since I had my first investment success with Atlantic City casino stocks & parachuted out before they plummeted.
Yet I stopped believing that "wisdom comes with age" as an eight-year-old kid, the son of innkeepers in 1950s pre-casino Atlantic City. I saw too many gray-haired racetrack suckers. Too many fellows in sports shorts told my Old Italian grandmother, "Sorry, Katie. I got no money for another night's rent. Lucky Penny ran too slow."
In South Philadelphia's Little Italy they had a saying: The reason you never see any horse manure on the racetrack is that all the horses' asses are at the betting windows." Greg Donio - New York. That prompted a rebuttal from a West Coast man "eminent in the field." On 6-9-2000, the Wall Street Journal -- printed the following:
No Hot Horse Harrys
In response to Greg Donio's June 1 piece about seeing "too many gray-haired racetrack suckers," I invite Mr. Donio to a day at the races in the year 2000. He would find that the horses asses are where they belong, on the racetrack, and that the people at the betting windows are in possession of a large amount of horse sense.
Nowadays, the sports shirts and loss of rent money he recalls from his youth are the stereotypical exception, and not the rule; 21st century horseplayers today are not the hunch players of yesteryear, but rather studious investors who apply high-tech concepts to gauge each horse's capabilities.
If that sounds similar to choosing a stock on the basis of its fundamentals, that's because it is. The modern-day racetrack, racebook or Internet wagering outlet has evolved into a fast-paced and exciting financial market unto itself. I know. I have 25,000 nationwide subscribers who will attest to it. -- TOM QUIGLEY Publisher - The HorsePlayer Magazine- Beverly Hills, Calif.
Isn't it nice to know that horse-players are "'studious' investors" and that betting the nags is like "choosing a stock on the basis of its fundamentals? Is the pad & pencil roulette-player also applying "high-tech concepts to gauge" patterns in the spin of the wheel? Like the racebook (horse parlor), is the- worn-out poker table and the back-alley crap game on concrete "a fast-paced and exciting financial market unto itself?
So, you see the problem. Everybody-but-everybody claims to be the "studious investor" with the "scientific approach." Every Internet gambler and card-playing patsy with a rabbit's foot thinks himself "the mogul" who "handles it like a business." This extends heavily to the fast-swing buyers and sellers of stocks, futures and options.
The fellow with the sure-thing horoscope guide, the trader in the throes of speculation fever whose hunches keep missing, the dabbler who expects to massacre the big boys and don't keep me waiting and don't expect me to strain my brain, the thrower of good money after bad, etc, etc. Every one of them a "brilliant tycoon" by his own estimation!
To me, "handling it like a business" meant (1) learning the details and (2) achieving realistic profits, not overnight wealth. It is the "gambling degenerate" of the casino or the racetrack who expects $500 to become $5,000 before the twilight beer flows. He is the last to realize that if that big a gain were that easy, every desperate wagerer like himself would enjoy valet service and maid service. As for learning the details, few avid gamblers know anything worth knowing even about gambling.
So for futures, options and other speculations, too often the years of experience have resulted in depleted checkbooks and no knowledge worth following. Gee, he must have learned a lot from all that trading activity. Yeh, follow his advice and you'll borrow money for groceries just as tasty. He would not ask the restaurant supplies dealer or the barbering supplies dealer for advice because their profits are not 1,000% in a day. Yet, if he imitated them at least a bit his pockets would be less empty.
Not all-bad trading advice comes from rag-pickers and obscurities. Articles appearing in Futures Magazine caused me to send the editors a critique, which they did not publish. Here are excerpts of what I wrote:
In your June, article "The Best Reads for Traders," using the word "read" as a noun ("a good read") smacks of saloon slang, which may be appropriate since much of the advice is near the cuspidor level. Among the "best" according to your article are a whopping four books by or about the "legendary" Jesse Livermore.
Jesse Livermore made and lost four speculative fortunes. In 1940, he wrote the book How to Trade in Stocks and in 1941, the wiped-out man put a gun to his own head. Advice-wise, he stands as the classic example of a baldy selling hair-grower. Yet, he keeps appearing on the very latest lists of "best reads" and "top 20."
In the same issue, "Ratio Retracements" by Cornelius Luca drew heavily upon W. D. Gann and his calculations with Fibonacci numbers. The great W. D. was "legended" to have made 50-million dollars as a speculator - but nobody can substantiate this with paper documents. Still his lessons sell for hefty amounts.
As mentioned, they did not publish it. So, what was published in the issue most recent at the time of this writing? Page-35 in the August 2000 edition of Futures Magazine, a full-page ad: "At Last You can Discover - The Secret Trading Method That Made, W. D Gann Both Famous and Rich.
I found W. D. Gann worthwhile for his "trend-following" writings regarding stock price movements, ideas that he apparently borrowed from Charles Dow. Of course, his "Handle speculation as a business " axiom is my Gospel, Hindu mantra and ethic wedding song. Yet, my skeptic's nerve was and is struck by the Gann Square of Nine, his Square of 144, the Biblical numerology and his other esoteric. It is unclear whether anybody has consistently made money trading with his methodologies but more than a few people have made dollars upon dollars selling them.
When you hunt for gold in rattlesnake country, you need a thorough knowledge of diamond-backs, sidewinders and two-legged snakes that "salt" the mines or sell apocryphal maps. The business section of the New York Post for August 10, 2000 contained the heading, "Report Shows the Dot-Carnage Is Spreading." It began, "The Internet fire sale is official. Forty-one Internet companies have gone belly-up this year --- and 83 others have withdrawn their initial public offerings, according to a report by webmergers.com."
The New York Post for July 17, 2000: "NASD Charges All-Tech, Stock USA with Trade Violations."
Dateline Washington -- Day-trading firms All Tech Direct. Inc. and Stock USA Inc. were charged by regulators with supervisory failures, including All-Tech's widespread use of allegedly misleading advertising.
. . . statements cited were that "day trading gives one unlimited earnings potential" and that "most of my customers have enjoyed successes virtually unheard of in the trading community."
. . . The NASD contended that All-Tech lacks supporting data and customer records to back these claims, and does not have written procedures for determining the accuracy of advertising statements.
. . . All-Tech also was charged with failing to properly supervise employees who arranged $131 million in loans between customers when their account balances fell below minimum thresholds.
Loans between customers circumvented the margin-loan limits. Buying stocks on margin could double the gain but could also double the loss if the share-price movement went the wrong way. Loans between customers in addition to margin-buying amounted to "deeper in the hole" loans, which often furthered the losses. This is a controversy atop the already-existing "tomahawk takes your scalp" day-trading controversy.
Yet, if you believe the advertising, the employees were remiss in their duty in not helping customers hire yacht crews with their immense winnings. Salted gold mines yesterday, misleading ads today. Has much really changed? Apart from the fact that the hunch-playing horse gamblers of long ago have been replaced by "studious investors" at the betting windows, has much changed?
Now as in the past, even the grandmotherly side of investing more than rarely gets hit with hailstones, some as big as baseballs. New York Post, August 12, 2000: "Malone, Amos Lose Billions on AT&T." The AT&T shares in the portfolio of entertainment mogul John Malone were worth $2 billion this past Christmas but are now worth just $I billion. The $26.3 million worth of the same stock held by former cable TV bigwig Amos Hostetter has fallen to $13.3 million. Everybody knows that, now as in olden times, you cannot lose with blue chips! Blue chips are as safe as a picnic and yield abundance like brimming picnic baskets. Yeh, right.
The Wall Street Journal for August 7, 2000: "SEC Acts at Cyber speed to Halt Suspect Trades." Paragraph One: "On March 9, the Securities and Exchange Commission's Los Angeles office received a telephone tip that the skyrocketing stock price of a little Internet company called eConnect Inc. was being fueled by false press releases.
Things have changed so much since rumors over ale tankards affected the price of shares that were sold in taverns. So much is different since false messages went by carrier pigeon to Lloyd's of London. The bell at Lloyd's rang once for good news and twice for bad news. Some say all has changed.
Yeh, birds fly, not on the World Wide Web and not one brass bell rang at the Los Angeles office of the SEC. Bookie joints are now "fast-paced and exciting financial markets unto themselves." Yet, in risk trading now as in past centuries, a helluva lotta people get sneaky and a helluva lotta people get shafted.
Fake telegrams criss-crossing the nation used to juggle stock and commodity pries in 1900. Now Internet message boards and chat rooms make similar use of electric current. As a speculative trader, you have an obligation to know what schemers do and how, what strongbox can resist what bandit, what hand physical or electronic may pick what pocket.
Ponzi schemes and hard-sell schemes keep showing up in new disguises, sometimes on a computer or TV or sometimes on old-fashioned paper, ready to bankrupt more innocents. Can you pierce the disguise? A trader hunts gold in a land of danger and, whether he rescues a grandmother or protects himself, he must know all the hazards like he knows his own scrotum. He must be a mental encyclopedia of what to avoid and what can go wrong.
Now that you have looked at a few snakes not to be stepped on, let us address the technique of gold mining and nugget-hunting. Handling it like a business usually means having something to sell, whether ores and diamonds, apples from a cart or an architectural design, services as a tree surgeon or song-writer, or paper securities. Options are the focus of this article because something is true of them that is not true of stocks, bonds or CDs: With spreading, owning options permits you to create and sell more options.
Imagine if owning diamonds enabled you to create and sell more of those gems. Imagine if owning paper money enabled you to print and spend more dollars without going to prison. Imagine if owning common stock gave you the power to issue and sell additional shares. In other words, suppose you could have your cake and sell it too, then materialize and sell more a little later, and sell more still later without touching the original, then finally sell the original cake at your leisure. Would you call that a great business, a great bakery to own?
The business is not risk-free but a jewelry store or a food store that could do that would have a wonderful advantage. It would also be a fine risk-reducer in a high-hazard financial realm. A phrase heavily used earlier in this piece was "other people's money." It is the selling end of the enterprise that pulls that in. Shops do that, of course, but they must pay wholesalers. Being able to materialize jewels, cakes or options out of the mist would sure cut out most of the overhead, but it is only with the latter item that this can be done.
Let us look at the stock options page of the Wall Street Journal for August 4, 2000. Verio stock shares trade at 52-3/8. (Nasdaq symbol VRIO. This stock is mentioned here only as an example, not a recommendation.) A Horizontal Calendar Spreader looks only at "out of the money" options, which would include Verio call options with strike-prices above 52-3/8. Among calls with a strike-price of 55, those expiring in August (third Friday of that month) traded at 2¼ on August 4, those expiring in September traded at 3-5/8 on that same day, those in November at 4 and February at 4¼.
I routinely buy and sell options in groups of 10. Let us say that you bought 10 call options with a strike-price of 55 and the February expiration. Trading at 4¼ means one sells for $425 and 10 for $4,250. Owning one such option means that if the price of Verio stock rises to, say, 60 or 70 or higher, you are entitled to buy 100 shares at the strike-price of 55 between now and the third Friday in February. In actual practice, however, you would not need to buy the stock because, if the price of the underlying shares were to rise markedly, the resale value of the call options would swell to much more than $425 for one or $4,250 for 10.
Most options are never exercised, i.e. their share-buying call power never utilized or share-selling power never utilized if they are puts instead of calls. Options that increase markedly in value are resold at a profit without being exercised and, sadly, most puts and calls do not increase in value and are a loss to their holders.
Over 90 percent of all "out of the money" options expire worthless. As with futures, most who trade in them do not intend to exercise and, also as with futures, the scalped cavalry rate pushes 90 percent, i.e., graves on boot hill.
So how can options be termed a "business" with smoke signals like that? Remembers those 10 February's you bought on August 4th? They give you the right to create and sell 10 August's and, after they expire, 10 September's and, after they expire, 10 October's etc. Let us portray that in dollars.
Assume you paid $4,250 plus brokerage commissions to purchase the 10 Februarys. Instantly this allows you to create and sell either 10 Augusts for $2,250 or 10 Septembers for $3,625.
As mentioned, you can sell 10 Augusts and then sell 10 Septembers after the Augusts expire. Remember, however, that all options lose value with the passing of time. By late August, "time decay" will burn one amount or another off the Septembers' $3,625.
A pronounced drop in the value of the underlying stock could shrink part or most of the $4,250 off Februarys. Also, they will lose value with the passing of time but, at this point in time, more slowly than the Aug or Sept Options.
The fact that spreading is in essence a risk-reducer means, in this example, you should choose the Sept instead of the Aug for the first sale. The larger the proportion of Other People's Money in the mixture, the lower the risk. If you invest $4,250 in Februarys and sell Septembers for $3,625, you are actually risking only the difference or the "spread" between those two figures, plus brokerage commissions.
At this time, October options in that particular stock do not exist yet but will in the weeks ahead. The spread strategist holding the Februarys may sell Octobers after the Septembers expire, then Novembers after the Octobers expire. However, the "unknown factor" that must be allowed for is the price fluctuation of the underlying shares. A declining stock price could shrink every thing, which is why the trader should include as much of other people's money in the mixture as possible. A rise in the shares above the strike-price requires an early pull-out since a spreader is a seller of "out of the money" options and should not stand pat with unexpired "in the moneys." I tolerate "in the moneys" over night at most and often for less than a full trading day.
At the time of this writing, February is six months away and the "sold" options in the example much nearer. In other instances where the buy side and the sell side of the spread are just one month apart, my formula stated in previous articles remains ironclad: A sell side of 3 points or higher and a gap or spread between the buy and the sell of less than 1½ points. For example, selling out-of-the-money Octobers at 3¼ and buying Novembers with the same underlying stock and the same strike-price for 4-5/8. The 3¼ sell fits the "3 or more" criteria and the 1-3/8 spread or difference is less than a point and a half.
In spreads with which the buy end and the sell end are several months apart, I am a little more flexible but still insist on mostly other people's money entering the total via the sell end (mostly, that is, compared to the price you pay on the buy end) and by "mostly" I do not mean "only slightly more." In the Verios call option example just given, the Augusts at 2¼ points barely qualify as mostly, a thin sliver over half of the Februarys at 4¼. The Septembers at 3-5/8 constitute a far better "mostly."
I write as an active trader, not as a pure theoretician or a swimming instructor who never gets wet or a huckster of alleged "winning strategies" who keeps his own money off the speculative battlefield. Always some readers are shocked when an active trader who writes admits to having had a losing trade. Some think there exists an unwritten law that writer/speculators tell of their gains but never their losses. Not so.
My plunge struck dry rock recently instead of oil and the disappointment, though small-scale, is instructive. When Legato Systems shares were around the 20 mark this past April, I tried an experiment with fractional options. The strike-price of 50 was far above the stock price. I bought 10 Legato call options with a strike-price of 50 and an expiration date of June for half a point and sold 10 May 50s for a quarter of a point. The $250 from the sale of the Mays paid for half of the $500 that buying the Junes cost me. I paid the difference of $250 plus brokerage commissions. This Horizontal Calendar Spread was Horizontal because both sets of options had the same strike-price of 50 and Calendar because of the different months, May and June.
It was a total loss albeit a small total. The experiment taught me to be sure the value of the options on the sell side was multiple points, not a fraction of one point. It also taught me to keep my experiments small. Multiple points on the sell end of the spread mean more of that crucial ingredient -- other folks' cash. Make it a helluva lot more than a quarter of a point. On August 4 Compaq Computer stock sold for 28?. Among its out-of-the-money call options, Augusts with a strike-price of 30 traded at a half of a point, Septembers 30s at 1-5/16, October 30s at 2-1/16 and January 30s at 3½. Januarys may make a good buy but for the sell end of a spread, have an autumnal heart and do not look earlier than October. Harvest Sam's, Bill's and Edna's cash.
After the October expires, the trader owning the January can sell November and then December. However, he need not wait until the third Friday of October. The value of October will shrink substantially in late September. At around that time the trader could buy back the Octobers at a shriveled price and sell the meaty Novembers. If he waits longer than that, the Novembers shrink. Compaq call options are mentioned here as an example rather than put options because the underlying shares are gradual trending upward.
It is advisable that an option spreader also be a stock trend-follower. A call option spread belongs above rising shares and a put option spread below declining ones. The fact that a stock can turn around and keep going is why spread strategies are not risk-free and why other people should provide as large a portion of the capital as possible. Also, spreading means selling puts or calls to hopeful people, about 90 percent of whom will end up disappointed and with depleted checkbooks.
Merriam-Webster defines "wildcatter" as 1: one that drills wells in the hope of finding oil in territory not known to be an oil field; 2: one that promotes unsafe and unreliable enterprises; especially one that sells stocks in enterprises of this kind. In a sense, therefore an option spreader sell shares in wildcat mines. He makes money off the "studious investors at the betting windows, people who look at a skull, and see a man with deer's horns. He profits from "get rich quick" patsys who turn to options instead of to phony Star of India gems and perpetual motion machines and "valuable real estate" where vultures roost undisturbed.
He gains off of dabblers and triflers who expect to make vast fortunes in less time and with less mental effort than they devote to selecting a suit of clothes. A day-trader or a penny stock venture fails at puts & calls before or after failing at something else. In the previous issue of CTCN, C. J. Casebeer asked annoyedly "'How many traders are spread traders?" My answer: There have always been more horse-players than bookmakers but who consistently takes home the profits? Now for some diversion.
A woman CTCN subscriber wrote to me, "I enjoyed your excerpts from Edith Wharton's novel The Age of Innocence in an issue last year, the one where a turn in the stock market sweetened the atmosphere in the opera boxes and the dress circle. Have you read John Galsworthy's books about pre-atomic age English gentry?"
I find Galsworthy's writing rather uneven and not much of it elegantly quotable. Nevertheless, The Forsyte Saga contains the section "Indian Summer of a Forsyte" with some fine crystal decanters of prose. The elder aristocrat Jolyon invites a young woman music-lover to dine with him in his mansion. The butler is in attendance in the dining room but no other company and the fare includes hock, a type of Rhine wine. John Galsworthy wrote (condensed):
The light was just failing when they went back into the music room. "Play me some Chopin," Jolyon asked.
. . . Irene sat down at the piano under the electric lamp festooned with pearl-grey, and old Jolyon, in an arm-chair whence he could see her, crossed his legs and drew slowly at his cigar. Then she began . . . He fell slowly into a trance. She was there, and the hock within him, and the scent of tobacco; but there, too, was a world of sunshine lingering into moonlight, and pools with storks upon them, and bluish trees above, glowing with blurs of wine-red roses, and fields of lavender where milk-white cows were grazing, and a woman all shadowy, with dark eyes and a white neck, smiled, holding out her arms; and through air which was like music a star dropped, and was caught on a cow's horn. He opened his eyes.
He felt miraculously sad and happy, as one does, standing under a lime tree in full honey flower. Go on -- more Chopin!" She began to play again. This time the resemblance between her and "Chopin" struck him. The swaying he had noticed in her walk was in her playing too, and the Nocturne she had chosen, and the soft darkness of her eyes, the light on her hair, as of moonlight from a golden moon. Seductive, yes; but nothing of Delilah in her or in that music. A long blue spiral from his cigar ascended and dispersed.
In his syndicated column of August 5, William F. Buckley, Jr. complained and lamented that in the drives to uphold the various ethnic heritages, the white English-speaking ethnic tradition was being shunted aside. No doubt, the John Galsworthy novels give him comfort during a dark night of the soul. Buckley wrote this after the wrap-up of the Republican National Convention on TV and its "rainbow coalition" appearing on stage. Blacks, Latinos, Asians and women came forth one after another in an effort to portray the GOOP as "the party of inclusion" and "not just the white man's party."
Bill Buckley must have seen that convention on TV. Again and again, the cameras panned to the delegates in the galleries and showed acres upon acres of white male faces wearing 10-gallon-hats. Certainly there is an Anglo-Saxon cultural heritage and a white Protestant English-speaking ethnic tradition. But really, Mr. Buckley, how much could those Wasp delegates in cowboy hats have told us about English Restoration drama or the music of Benjamin Britten?
A recent book receiving much attention is How I Accidentally Joined the Vast Right-Wing Conspiracy (and Found Inner Peace) by Harry Stein. It purports to list several "tell-tale signs" for determining if you are "turning to the Right." For example, you hear someone talking about traditional morality but you do not assume he is a religious fanatic. You are actually relieved that your daughter plays with dolls and your son plays with guns. It annoys you that Black History Month seems to run from February through July. I can think of signs" he fails to mention.
Pardon me for being the proud paisan, but people with an ultra low saturation point for Black History never seem to have a high one for Italian music from the candlelight era or paintings from the Dutch & Flemish Golden Age or classical Greek drama. So face it, it is a "tell-tale sign" of Right-Wingedness if you call yourself a "traditionalist" like God gave you the word but your "cherished past" contains more singing cowboys than Florentine artists.
It is another "tell-tale sign" of Right- Wingedness if you yank the trigger on the censorial side of the "Culture Wars," blaming movies and rock songs and video games for anti-social behavior, youth crime and bad sex. Anybody who has been to the grand opera knows that Puccini's Tosca did not provoke seduction and stabbing, torture on a rack or high-leap suicide. Anybody who has been to the art museum knows that nude Salome carrying the severed head of the Baptist on a silver platter did not compel schoolgirls to strip naked and chop off heads. But this means little to "good old days" conservatives who dread anything stronger than Doris Day movies and Moonlight Bay songs.
Harry Stein's book is only mildly negative toward ethnic diversity but that is becoming a Cardinal Sin to the one-culture New Right. In the conservative and Buckleyite flagship magazine, the National Review of April 3, 2000, John O'Sullivan's "Advice for "George W. Bush" piece called ethnic diversity "a bastard ideal" and Sullivan complained, "Under diversity, different ethnic groups fail to melt into one another to produce an American ethnicity. Each group retains its own culture." Bad, says he. That is one gripe that George W. Bush will never quote while stumping for the ethnic, immigrant, and minority "swing votes."
If you take the notions of "tradition" and "heritage" farther back in time than Shirley Temple and Tin Pan Alley, you arrive at ethnic and cultural pluralism -- French salon paintings or music by Massenet, Spanish architecture of the Alhambra, the Dresden art treasures. In contrast, the one-culture Right hugs a "golden yesteryear" that is pretty recent. Try finding a Venetian artwork or a Rachmaninoff rhapsody in the Wall Street Journal writings of Judge Robert Bork or critic/author Michael Medved when they cheer lead for return of 1930s movie censorship, or other conservative writers when they crucify rock songs in favor of "Pennies from Heaven."
The Wall Street Journal carries brilliant articles on fine art and classical music. However, all its "Culture Wars" pieces seem to be written by people who avoid the art museum and the opera house like hillbillies avoid a bathhouse. Surely, the diamond stickpin mogul of the carriage-trade era who skimmed the cream of culture must have heirs of the spirit. Today the Wall Street suits and the country club Republicans who know some artistic heritage or should know it never seem to get a voice in the Journal. Are they silent when they should not be? Are you, dear reader?
Is ethnic diversity "a bastard ideal.? Better not let anybody take a magnifying glass the pedigree papers of the one-culture Right Wing. If their claim to "time-honored tradition" looks doubtful on the page, it looks even worse in the opera house.
The 1953 movie Roman Holiday won an Academy Award for Audrey Hepburn and was shot on location. Inside Italian palaces and mansions, however, elaborate camera angles were used to prevent nude statues and paintings from appearing on screen. You should make it a point, dear reader, to view some sensual artworks by Correggio and Boucher. Make sure they do not cause art patrons to collapse into quivering blobs of lust. Then --- no joke --- please write a letter to the Wall Street Journal stating that there are two sides to the "Culture Wars" and that not everybody thinks the Golden Age of Film Censorship (Bork's phrase) was the zenith of civilization.
Music by Debussy on your CD player can feel enriching when you look over trading-related papers in the evening. See if its effect on you is anything like that of Chopin on Galsworthy's aristocrat at twilight. Do not assume that somebody else is the tycoon who knows artistic heritage. An awful lot of "somebody elses" are not. You be the one.
Also, do not assume that somebody else is handling speculative trading in a business-like manner. You be the one. Otherwise, the short list of those who do gets shorter.
You Can Lose Money Because your Data
Connection Can Get Lost - E-Signal
We are currently experiencing a circuit failure on both our primary and backup circuits through ONE of our ISPs. If you are unable to connect to the Fill Receiver when you open your Order Entry software, you are probably on the circuit where we are experiencing problems. Our new circuit has dual connections to the Internet that provide a seamless backup. To make the switch, you will need to contact Tech Support by going to: http://www.lfgfutures.com/status/status.htm and creating a help ticket.
Using this process will enable our technicians to maximize their time used to actually make switches. In the meantime, we are continuing to work on repairing the circuit.
Futures Truth Top 10 Results
Take a look at some of the results for this issue!
Top Ten Systems for Past 12 Months*
1. Anticipation II - 188.2%
2. R-Mesa - 148.1%
3. ONIX - 140.5%
4. R-Breaker - 138.5%
5. VOLPAT -136.2%
6. Sidewinder - 132.0%
7. Trender - 130.8%
8. R-Levels - 95.0%
9. Anticipation - 86.7%
10. Capcon 1 - 80.2%
Editors Comment: Please Futures Truth; explain why when traders buy these trading systems they rarely (if ever) experience these types of profits.
Also, what about high drawdowns and the ability of a trader to have enough money to withstand large drawdowns! We have been asking you to explain these issues for many years and have never received an explanation.
Comments on the Webtrading Gann Commodities Course Raymundo Rosa
Just finished reading your Gann Techniques Trading Course, which I ordered, and have a question on the Squaring Tool. I use charts that are squared, however, they are too small to properly handle the Squaring Tool enclosed with your course. Could I transfer the angles to a smaller triangle tool without affecting there validly? Would appreciate your advise on this and want to thank you in advance for the same. By the way, found the Course very interesting and enjoyed your no nonsense (approach).
Bad Fills & Slippage Comments - Ted P.
If you want to print this, please leave off enough of my name and the brokers so it wont be traceable, at least until I can do something about this in a legal sense, if possible.
Im sure NFA and CFTC will be interested, but before I go there, Im going to give these creatures a chance to rectify. Here is further information, from printouts from last Wednesday; I printed this without realizing what exactly was happening, so at least I have this record. Youll note that there are many trades here:
From your course, I developed a method of scalping small market moves that seems to work very well for small profits, provided the commission and fees are within reason. Most of the time this will gain a point or two; this broker has $3.98 flat per turn commission, so a point yields a few pennies over $42. Also, this being my first day of actual trading, I expected losses, so I wasnt too concerned about the final numbers, until October 27.
1st round turn:
long 1, fill 2 ¼ above market, position -$112.50 short 1, fill 4 above market, position +$200
short 1, fill 3 ¼ below market, position +$162.50 long 1, fill 2 above market, position -$100
short 1, fill ¾ below market, position -$37.50
long 1, fill ¾ above market, position +$37.50
short 1, fill 3 ½ above market, position +$175
long 1, fill 1 ¾ above market, position +$87.50
long 1, fill 1 ½ below market, position +$125
short 1, fill 4 ¾ above market, position -$237.50
short 1, fill 10 above market, position -$500
long 1, fill 4 ¾ below market, position +$237.50
long 1, fill 5 ¾ below market, position +$287.50
short 1, fill 7 ¾ above market, position -$387.50
short 1, fill 6 ¼ above market, position -$312.50
long 1, fill 9 below market, position +$450
long 1, fill 13 below market, position +$650
short 1, fill 6 ¼ above market, position -$512.50
Now, as I did these trades, I made mental notes of where I was, and assuming my memory is correct, all but one should have been a winning trade. The numbers above indicate the market position when I entered the market at that time. Some of the fills were so slow that the sequence got reversed, and two positions were open at one time (this being the first day, I was very excited, naturally, about the whole thing, and stopped checking on the fills after a short time. Wont make that mistake ever again! Damn, it was fun!
The whole point of this is that none of those fills should have been more than a point or so away from market, since all were market orders. As you can see, one during the 9th round turn got 13 points away from the market, which is amazing! And there is NO excuse for this; I dont think that even in incredibly volatile markets there would be slippage like this on an electronic platform. I might also add that the market orders were coming within a few seconds: it was fills that were slow. But, as the previous note mentioned, that last fill was 5¼ above market on a buy.
Id appreciate, as I said, not using my name or the brokers until I talk with both of them (Field is an IB for First American Discount). I cant believe one or the other wouldnt do something about this, and in a hurry! As stated before, Field was having computer problems last week (they went offline Thursday around 8:30 AM PDT, and I got off at that time. Giving them the benefit of the doubt, if this was the problem, Im sure theyll do something about it. If not, as stated, I will lodge a complaint with NFA.
Once again, after having done the RS2 and using the software, I must say that this course is super. If I cant make good money from this, Id be very surprised. And, while Im sure there are many traders out there that will look cross-eyed at scalping, remember one thing: There are scalpers on the floors and in the pits, and floor seats are very expensive. If a scalper can make enough to purchase a seat, then by golly, money can be made doing it electronically; perhaps not as much, but it can be done. RS2 is a perfect way to start.
Editors Comments: An amazing story, and incredible fills and slippage. Im not familiar with Orion. Perhaps you should try my Broker. The one I used in the Tapes. They are very good and most fills take on average approximately 4 to 8 seconds. Also, I really would like to publish this for the benefit of others. You can fill in the complete story or any actual numbers later. Would it be OK to reprint it? We can leave out the Brokers name if you wish or perhaps abbreviate your name if you want to.
Dave, Regarding our phone conversation at about 12:45 PM PDT, I tried to get my records from Field; turns out the website is down and displays a message that the computer is undergoing maintenance and will be back online at 7 am CT Monday. So, I wont be able to get records until then.
I dont really want to make statements Im uncertain can be upheld by the transaction records. I will state that today, October 27, I received a fill that required several minutes and was at 138500 while the market was at 137975. Of the fills today, five of six drove against the market. In other words, the buys were above market and the sells were below market. The only trade I was in doubt over was the last, with the fill being so slow. The first two should have netted at least 6 points ($300).
Ill also say that on October 25, some of the fills were so slow that when I went long, the sell was filled before the buy; when short, the buy was filled before the sell. Even with this, the first day net was $212.50 before fees. Ill elucidate on this when I have the complete records, and Ill send the records along with the writings (with the account numbers removed, of course). When I do that, Id appreciate not using my name or email address, since it is possible that would hinder any recovery action I may lodge against that brokerage.
A final thought on this whole thing: Having taken your course, traded with real-time feed (no money) for seven days with much more time studying the day end charts, I felt I could go into the market and stand a decent chance of making a good showing. I may have said how I did the live fake trading, but if not, Ill mention it. I watched the indicators (which I found to be quite accurate for trading) and when a set of indicators aligned according to RS2, I placed a graphic arrow, blue up for buy and red down for sell, and recorded the current market value as in the live feed from the Tradestation ticker. From this I was able to determine approximately the P&L on each trade, excluding slippage. First day was the worst (I got really screwed up), but still showed a day net of $475. Each other day was better, save Wednesday, which was an extremely volatile market, and I showed $2487.50 net. While there were losses in the trading, each days net was positive. Ive recommended RS2 to several of my associates as a method for at a minimum making some money from the markets. I think Real Success (2nd Edition Trading Course) and the associated RS2 Software is probably one of the best investments Ive made.
Re the Broker, however: I was beginning to have doubts about myself and my capacity to do this type of trading, until I saw the last two fills this morning. Those convinced me quickly that ANY method of investing would fail when 5 of 6 fills are adverse to the extent these were. The buy was an instant $262.50 loss, and didnt get the fill on the sell, since I was already in shock (I do know that it too was adverse, because the minus signs got bigger on the fill). I was also very careful this morning, considering how badly it went yesterday.
I will also attribute yesterdays loss ($150) to the slow and/or adverse fills. Some of the days trades were already losers when the fills came, and I had to immediately offset (which allowed more time for the market to move against me). Itll be very interesting when I have a broker that is as fast as what I saw on the tapes (I believe Ill be using Orion Futures Group: if you have any comments on them, Id appreciate knowing; I intend to begin those proceedings October 30, transferring the account and so on. They use a thing called IOXM and they claim times similar to what I saw on the videotapes).
MISC REQUESTS, COMMENTS & NOTES
Does anyone have an interest in Moon Tides? I'm seeking more info on (S-Ptrading.com) Ron Prince - (he may not use his own system) any positive comments or anyone to investigate further seems to have some merit. Like chaos trade. May E-mail me direct if they choose firstname.lastname@example.org -- Bill South
A question with regard to trading Japanese or Singapore Indexes in particular. I would like to know if there is anyone who reads this letter who has any experience. They are intriguing to me, because I see them as a good trading vehicle because of the hours I work.
Am also curious about the mechanics (good online brokers, etc.) Do these indexes trade the same as those we are familiar with? Are there other opportunities someone like myself would be interested in knowing about? Bruce Fox email@example.com
Greg Donio, your recent letter in Futures Magazine neglects one very important reason to read books by failures -- Success teaches only that we must be doing something or other right, but failure can teach us, specifically, what we did wrong. One learns more from failure than success. Richard B. Hoppe, Ph.D.
Editors Note: Announcing a New Special Reward for our clients effective Jan 2001, for making one or more contributions - submissions per year, you will receive a FREE CTCN 1-Yr Subscription/Membership at your next renewal time. Previously we only gave a 50% credit.
Editors Note: As you may know, our free E-Mini S&P and Free E-Mini Nasdaq Charts have been non-working for some time now. Unfortunately, there is a bug in the Code, we have so far been unable to fix. However, we expect to get this resolved by early January.
Editors Note: If you have delayed acquiring our trading products, including Real Success Video Course, Gann Trading Courses and CTCN Membership, right NOW would be a perfect time to do so for a last minute tax deduction on your Tax Return.
Thanks to everyone who has contributed knowledge to this issue of Commodity Traders Club News. Without you, this trading club and newsletter would not be possible.
As a New Special Offer and Reward for making one or more contributions / submissions per year, you will receive a FREE CTCN Subscription/ Membership at renewal time. Submissions can be any length, long or short, typed, handwritten, e-mailed or submitted on a disk. Formal or Informal is fine; we do not expect or necessarily want professionally written content.
Please participate by sharing your knowledge with other traders. Please make a contribution about your experiences, both good and bad with trading systems, trading services, trading advisors, commodity and stock market data vendors, and all other trading related products.
Thanks to everyone who has contributed knowledge to this issue of Commodity Traders Club News. Without you it would not be possible. P.S. - Remember, as a special reward for making just one contribution/submission per year, you'll receive an automatic 50% price reduction on your renewal. Submissions can be any length, long or short; typed, handwritten or submitted on a disk. Formal or informal. Please participate by sharing your information and knowledge with other traders. Please make a contribution about your experiences, both good & bad with systems, services, advisors, data vendors, and other trading related product.
The reproduction, copying or publication of any part of this work beyond that permitted by Section 107 or 108 of the United States Copyright Act, and also World-Wide International Treaty Provisions, is unlawful. ALL RIGHTS RESERVED. Written permission from the Publisher/Editor is required for reproduction in any form (with proper credit to CTCN, including our address and phone number being required), and may be withdrawn at any time. Commodity Traders Club News (CTCN) is a 'Clearing House' or 'Information Exchange' for members only. We do not verify, (and we have not) verified the accuracy of the mathematics or numbers published herein, or accuracy of comments and remarks made by the authors. All information and remarks in the contributions are the opinions of the author or contributor, not the Editor or CTCN. You should be aware that P&L reports and advertisements are frequently based on hypothetical (not real-time/actual) trades. Article headlines or Sub-Headlines sometimes may be changed or written solely by the Editor, using verbiage the Editor believes highlights important points being made by the contributor. CTCN Membership, which includes our bi-monthly CTCN newsletter is "Your Guide To Profitable Trading and How To Save Money Along The Way." It's regularly priced at $100 (US) for 1-year. . . and includes free postage within USA & Canada (add $20 for Overseas Air Mail). Publisher: Webtrading.com, D.B.A. Our E-mail address is: firstname.lastname@example.org Our Website address is www.webtrading.com Editor is Dave Green. The opinions and recommendations are those of our writers and not those of Webtrading.com, CTCN, or its editor. (Note: There is high risk of loss in futures trading and past results may be difficult to achieve in the future and also may be based on hypothetical trading, with benefit of hindsight, and not actual trades) Note: We operate open member forums and consequently reserve the right to publish e-mail and other communications received. Therefore, please indicate "confidential" or "not-for-publication" on any e-mail or other correspondence sent us which you want kept private. Please contact us if we publish your comments and you object. Thank you.