Issue 64

Keep a Cool Head - Rick J. Ratchford

In all facets of business, keeping a cool head is of the utmost importance to moving ahead successfully. Having an unemotional, objective approach to the business of Futures trading is not that difficult to maintain, that is until you actually place a trade with real money. At that point, our internal psychological resolve to remain unattached emotionally starts to creak under pressure at different rates for different traders.

We as traders are not robots, mechanical facsimiles of mankind completely replete of any emotion or concern. When a trade is placed with real money on the line, it represents the potential for future finances that will indeed affect our net worth at the bottom of the ledger. Rarely is there the person that has no concern as to what their bottom line happens to be each week, month or year. Even the richest of the rich are affected by the ebb and flow of their empires, that which is depicted by their bottom line. So naturally, we all will find our emotions tugged to some degree when it comes to our money.

Trading futures generates some degree of stress. The amount of stress is directly proportional to how one thinks in terms of money, winning and losing, and what degree of reward of punishment they assign to the results of their trades. The more importance we place on the outcome of our trades, on the both the positive and negative end, the more the results will affect us.

The amount of stress we place upon ourselves by how we think can lead to taking actions in our trading that can have a detrimental affect on the outcome of our trades. By adding unnecessary pressure upon ourselves, we may find ourselves cutting our profits short and letting our losses run. This can become a vicious spiral into a financial abyss, where our failures add additional pressure leading to even worse trading decisions, and so on.

Although completely removing our emotions from this business of trading is virtually impossible due to our dependency of money for everyday business of life, it can be kept relatively in check. One effective way of doing this is to use a technical approach to analysis, creating a trading plan that is based on a set of finite rules allowing for a non-emotional approach to trading. Instead of taking a trade based on a gut feel or what we think the market will or will not do, following a set plan of action based on a technical approach that has demonstrated its reliability over a satisfactory testing period, and having the discipline to follow that plan, you help reduce your reliance on emotion and let your trades have a chance to succeed without undue stress interfering.


Trading System Alternative Plans - Bob Thompson

When trading a system – any system, one should have a plan in place that allows you to know when to stop trading that particular system when it starts to show drawdowns that make you uncomfortable. So, to begin with, you should set in place a “risk factor” whereby you will risk a certain percentage of your starting equity before contemplating your own “cease trading” order. The “risk factor” I suggest is 50% or your starting equity. When, or if, you reach that point, you stop trading that system.

The first part of your overall plan is to institute a “risk factor” of 50%, after which you determine a “trailing stop” on your total equity returns. Say you start out with $25,000 and your trading results in a profit – over time, of $12,500 = $37,500 total. At that point, you raise your “trailing stop” to your entry price – your starting equity. You have increased your starting equity by 50%. Now if your equity drops to your starting equity amount - $25,000, then you would stop trading that system. If you double your starting equity, again over time, and end up with $50,000, then you would raise your “trailing stop” to $37,500. In other words, for every 50% increase of your starting equity, you would increase your trailing stop by that same 50% amount. Then you should have an alternative plan to follow.

This takes care of your trading approach up to the point of when to stop trading that system. What do you do next if you stop? Do you continue to paper trade that system until the market turns around in your favor? Do you make improvements to the system signal parameters? Do you put the whole system in the round filing cabinet at the end of your desk? My suggestion is that while you are trading the system of your choice, you also “paper trade” at least two other systems. In this way, you are tracking the results of three trading systems, and when the one you are trading actively starts to show a downturn, or reaches your “trailing stop”, or seems to be going sideways for the previous three months, then you actually switch trading systems to the one that has shown the best results for the previous three months.

In today’s trading markets, people are only interested in “what have you done for me today?” They are not interested in how you did a year ago, or three years ago. It's “how are you performing today?” The same logic applies to trading systems. You just wouldn't start trading a system that has done poorly for the last three months, even though it showed marvelous results 2 years ago.

You should give any trading system at least three months of results before deciding to go in another direction. If, during that time, your “risk factor” or “trailing stop” has not been hit, but the results are going sideways, then you can consider switching systems. If you are satisfied with the results, then continue using that system until forced to change. If you do change trading systems, then continue to paper trade that system. You never know when it will turn around and become the favorite again.

This backup plan will entail a little more work on your part each trading day, but may result a more favorable alternative and profitable trading approach than you have considered previously.


CAPITALISM - Basil Venitis

Capitalism means complete freedom. It's the opposite of statism. Statism advocates big government, whereas capitalism advocates infinitesimal government. However, capitalism is different from anarchy. In capitalism we have the rule of laws, whereas in anarchy we have the rule of gangs. In pure capitalism, all property is private, including streets and schools. All human relationships are voluntary.

Voluntary charities take care of the destitute and unable. Voluntary contributions cover the small expenses of the infinitesimal government. There are no government regulations and controls. The best way to control is to give up controls entirely.

The invisible hand of market takes care of everything. The dollars and euros spent are the best votes cast. No country has ever tried pure capitalism. USA was very close to capitalism during its first century of independence. However, the antitrust Sherman Act of 1890 destroyed the path to pure capitalism. This stupid act tried to abolish monopolies.

But every body is monopolist as we all sell a unique product that reflects our style. There is no pure competition; there is only monopolistic competition. Nobody can duplicate my speeches and seminars; therefore, I have monopoly on Basil Venitis seminars. Everybody bares his soul on his products with his personal touch. Everybody is a brand! Inequality is a gift from God.

Some people are born rich, some beautiful, some smart, and some stupid. Variety, diversity, and differentiation bring life. If all humans were equal, they would all be dead.

Nothing moves with equality. There has to be some gradient for movement. Capitalism is the most efficient system to take advantage of inequality. Unfortunately, in most countries now, we have mixed economy. The state of this system is a war of pressure groups and pull peddlers. The government tries to relieve all the pressure by overspending, printing extra money, devaluing the currency, worsening the business cycle, creating hobgoblins and wars, and fooling the people. It's a real mess, a mad house.

Mixing statism with capitalism is like mixing poison with food; you end up with poison. Manipulation of money supply by the government brings recessions and depressions. This manipulation brought the infamous stock market crash of 1929 and the great depression of 1932.


Time-Traveler Busted For Insider Trading - Chad Kultgen

Federal investigators have arrested an enigmatic Wall Street wiz on insider-trading charges, and incredibly, he claims to be a time-traveler from the year 2256!

Sources at the Security and Exchange Commission confirm that 44-year-old Andrew Carlssin offered the bizarre explanation for his uncanny success in the stock market after being led off in handcuffs on January 28.

We don't believe this guy's story, he's either a lunatic or a pathological liar, says an SEC insider.

But the fact is, with an initial investment of only $800, in two weeks time he had a portfolio valued at over $350 million. Every trade he made capitalized on unexpected business developments, which simply can't be pure luck.

The only way he could pull it off is with illegal inside information. He's going to sit in a jail cell on Rikers Island until he agrees to give up his sources.

The past year of nose-diving stock prices has left most investors crying in their beer. So when Carlssin made a flurry of 126 high-risk trades and came out the winner every time, it raised the eyebrows of Wall Street watchdogs.

If a company's stock rose due to a merger or technological breakthrough that was supposed to be secret, Mr. Carlssin somehow knew about it in advance," says the SEC source close to the hush-hush, ongoing investigation.

When investigators hauled Carlssin in for questioning, they got more than they bargained for: A mind-boggling four-hour confession.

Carlssin declared that he had traveled back in time from over 200 years in the future, when it is common knowledge that our era experienced one of the worst stock plunges in history. Yet anyone armed with knowledge of the handful of stocks destined to go through the roof could make a fortune.

It was just too tempting to resist, Carlssin allegedly said in his videotaped confession. I had planned to make it look natural, you know, lose a little here and there so it doesn't look too perfect. But I just got caught in the moment.

In a bid for leniency, Carlssin has reportedly offered to divulge "historical facts" such as the whereabouts of Osama Bin Laden and a cure for AIDS.

All he wants is to be allowed to return to the future in his "time craft." However, he refuses to reveal the location of the machine or discuss how it works, supposedly out of fear the technology could "fall into the wrong hands.

Officials are quite confident the "time-traveler's" claims are bogus. Yet the SEC source admits, no one can find any record of any Andrew Carlssin existing anywhere before December 2002.

Weekly World News will continue to follow this story as it unfolds. Keep watching for further developments.

Reprinted Courtesy of © Yahoo and Weekly World News.

Editor’s Comment: If true this is amazing as it seems only a time traveler could have 126 consecutive winning trades!


From Amin - Trading in India: Trading in stock market in India is very much the same as trading at NYSE or Nasdaq and more or less is governed by similar or one could say, copied rules and regulations of such internationally reputed stock exchanges.

I have been trading for last three years at our National Stock Exchange from my home desk, devoting one opening hour to the trading on my personal computer through a stockbroker. Each evening I spend 2 to 3 hours browsing through charts and other stock information of the day. I continue with my regular day job which is not affected in any way.

At the end of three years of trading in stocks, I have learned not to lose my undershirt. I think I am successful in the sense that I am still surviving and trading in the market daily having preserved 2/3rds of my capital amount even now and still hoping to know to handle the market correctly someday. In our markets, thousands join everyday and equal numbers leave everyday with their hard earned money handed over to professionals and market makers.

Indian market hardly follow any rules of the game and least respect trading techniques such as: Stochastic, MACD, Moving Averages, Divergences, Momentum, Gap trading, RSI or other techniques of great masters in the game. One needs to develop a technique of trading, which must simply be indigenous, new and applicable to only Indian market as Indian market is the only market of its kind which will not subject itself to internationally accepted trading techniques even if modified to Indian stocks.

Over the years, I have developed a simple yet workable mechanism of trading in the first one hour of the opening session of the market and leaving thereafter for my day job. I am not yet satisfied with the success rate but I am disciplining myself to achieve a success rate that is repeatable. I shall share that at a future date.

Editor's Reply: Yes, trading local markets seems to be the same as U.S markets as far as trading systems and techniques go. Also, a system based on sound trading principles should do well in most any freely traded market, traded from or in any nation.

From Mark: Hi, Anyone out there day -trading spot currencies with success? I like the idea, but read the brokerages rip people off due to it not being regulated. Any news on this?

Editor's Reply: The spot currency and Forex markets seem to be getting more popular, especially with the sharp decline in the CME Currency Futures Markets over the years. I am not sure about the regulatory issues or lack thereof. Perhaps a member may know.


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