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Step-By-Step Advise on How to Correctly Select a Broker
Choosing the right broker is a critical aspect of trading. While it is easy to obtain recommendations for a broker, the actual selection process itself is often overlooked. What is a great broker to someone else, might not be a great broker for you. For this very reason, I have avoided giving out my own broker recommendation (plus, I don't want to detract from the selection procedure itself).
The following is a checklist of the process that I go through when looking for a new broker (any additions are welcome!). Many of these steps will be universally applicable, others will relate only to my personal needs. So, pick and choose the ones that apply to your situations
1. First and foremost, clearly define what your needs are. Are you a novice or experienced trader? Are you a day trader or position trader? Do you trade in both Chicago and New York? The answers to these questions will determine the 'category' of firms you will want to look at.
2. Based upon your needs, obtain a list of 4-6 different brokerage firms. You can get such a list from recommendations or advertisements (or even by glossing through Futures Magazine annual 'SourceBook 'for firms that may be suitable).
For the purposes of illustration, as a day trader (only) in the Chicago markets who is interested only in fast execution and fill quality, my initial needs are: Broker must be located in Chicago. That's where the business is, so that's where I want my firm; firm is a clearing member itself on both the CBOT and CME. I prefer not to have to go through a 'middleman' Introducing Broker (IB) and pay a middleman's commissions. However, not many clearing firms deal directly with smaller individual retail accounts, so you have to do your homework to find the ones that do; I prefer NOT to use one of the large well-known/heavily advertised discount firms (personal bias/opinion - based on prior experience).
Once you've got your list of 4-6 possibilities together, call the NFA at 1-800-621-3570. Ask them to mail you a written copy of all disciplinary actions taken against a firm (do this for all 4-6 firms). If your considering an IB then be sure to obtain the disciplinary information for both the IB and the clearing firm that it uses.
Note - Some firms with a poor disciplinary history may have changed their name and registered with the NFA under a new name to try to 'hide' their history. So ask the NFA how long each firm has been registered under their name. If not long, then ask the firm for their previous name, and get the NFA to check under that name!
Going a step further - you could even ask the potential brokerage firm for the name of the floor broker/s that it uses in the pit/s that you trade, and have the NFA check up on them too!
4. Once you get your NFA reports, you may choose to automatically rule out a few firms with poor disciplinary records. There are two things that I look for in these reports. Firstly, any major 'problem' like a huge fine/fraud/big lawsuit etc. Secondly, I look for an excessive number of reparation complaints against that firm, relative to other firms. I'm not overly concerned about occasional minor rule infringement.
5. With your surviving 'possibilities' - contact them! Be sure to let them know that you are speaking to a few different firms, and that you won't be making a decision until after you have spoken to everyone. Not only is this a good idea, it's also a useful negotiating tactic. Make the firms compete for your business!
6. Ask each one, any probing questions that you can think of e.g.:
If dealing with an individual person (e.g. full-service broker), how experienced is he/she? Will he/she help you with order placement if you need help etc? If dealing with a discount order desk, where is it located? (preferably on the exchange floor) How many phone calls before your order reaches the pit? How fast is their turnaround time in the markets you trade? (especially important in New York markets).
You don't want a broker that is slow to report your fills. Does the clearing firm use salaried pit brokers, or independent pit brokers (in the markets you trade)? Preferably you want independent pit brokers, because they will likely have a greater vested interest in giving out good fills, as opposed to a salaried employee, who is merely doing a 'job'.
It is also easier for a firm to switch from one independent pit broker to another, than to get rid of a salaried employee. Is the clearing firm financially sound? Is it a member of all the exchanges that you trade on? (If not, find out the other clearing firms, and check their disciplinary records).
7. Negotiate the best commission rate you can, based on your account size/trading activity and experience. Make sure that you negotiate all fees (except the $0.16 NFA fee) into the commission rate that is quoted to you, otherwise they'll show up as 'extras' on your statements! Tell them about a better competitive offer (if you have one)! Don't commit to anyone until you've sized up all the offers.
8. Then, based on all criteria (not just commission rate) pick a firm that you feel will best suit your needs and personality. Don't necessarily go with the lowest commission rate. Go with the best 'all-round' offer. If commission rate is in the middle of all your offers (and other intangibles look to be the best) then you've probably made a good choice. You don't want to be penny-wise and pound foolish!
Finally, my personal belief (contrary to the opinions of some), is that even if you are a novice you are better off going with a quality discount firm (as opposed to full-service) in order to reduce your trading overhead.
If a (full-service) broker's 'advice' was so wonderful then he wouldn't be a broker, he'd be a trader. If you are a novice who needs help in learning how to place orders, and wants a thorough understanding of the order process itself, then order Joe Ross' course "How to Place Trading Orders." You'll likely learn more about order placement from this course than you will from your full-service broker, and save yourself lots of money in the process.
Does Futures Truth Use of Systems Result in Copyright
Violations & Should They Get Income From Them? - Kent Calhoun
John Hill is a valuable asset to the futures industry, and my respect for him has matured over 15 years. Our friendship is greater than my viewpoints of this issue. Others have refused to address this complex legal issue.
I am not a lawyer, but have studied law. When I was informed last year of the suit against Futures Truth (FT), I told John Fisher the case would be dismissed due to a lack of jurisdiction. It was dismissed on that basis. Now let's examine the Hill-Greenwald controversy, etc.
The US Justice Department successfully prosecuted Japanese computer manufacturers for stealing IBM "trade secrets," and IBM was awarded a substantial financial settlement. The Justice Department stated to effect "architecture of computer software and computer hardware component designs belong to IBM," just as lyrics and music of a copyrighted song belongs to its author.
Feist Publications, Inc. v. Rural Telephone Service Company, Inc., 1991, reaffirmed the original constitutional historic interpretation of copyright law which "copyright rewards originality, not effort." Feist had a telephone directory that overlapped Rural Telephone's directory listings, which the court ruled could not be covered by copyright law. This ruling reinforced Harper & Row v. Nation Enterprises (1985) that no one can claim authorship in facts or other non-original material.
"Originality," is the operant word concerning copyrights. The second legal aspect to consider is that rights are legally recognized negotiable entities and may be legally viewed the same as personal property. Any attorneys out there please respond.
If a person buys a stolen TV at a garage sale and it is later discovered in the purchaser's home, the purchaser is arrested and taken to jail despite producing a bill of purchase. This is criminal law applied to receipt of stolen property, and is often a felony if the object's value was over $50.
FT knows most system purchasers must sign a nondisclosure document prohibiting purchasers from selling, copying, and transferring any of the system's information to others in any medium. "Original design," is protected by United States federal copyright infringement law. Violators may be sentenced to five years imprisonment and a $250,000 fine per offense.
When Futures Truth receives an unsolicited trading system, does copyright infringement take place when FT reviews the trading system? Is FT in receipt of stolen property, since property and copyrights may be legally treated the same?
Should FT be held financially accountable for deriving income from the developer's system, when they do not have the developer's permission to review the system or have paid the developer for his system? These are legitimate legal questions that could have expensive answers. Why expose FT to these potential lawsuits?
Does Futures Truth Benefit from Others & Have A
Conflict of Interest - Kent Calhoun
Does the original design of a trading system belong to the developer? I believe it should. At what point is the new system design original? I do not know. Many systems use my 1981 opening breakout system for their entry. This system places buy and sell stops equidistant from a price reference point, like an open or close. Are these developers in violation of my original copy-righted material. I do not think so, but legally they could be.
A system purchaser, who sends system materials to Futures Truth (FT), is guilty of violating a non-disclosure document, a civil matter, and copyright Infringement, a criminal matter. FT would be required in deposition or court to reveal person's name who sent then the system. FT benefits by learning how the most successful trading systems are designed, access to trade good systems, and financially profits from the system's design without paying vendors. Is a law broken?
Again, the Justice Department has already stated the "original design'' of software, computer chips, and hardware is protected by existing copyright law. FT knows systems of "original design" are copyright protected, and is more knowledgeable than purchasers of stolen goods at a garage sale.
Futures Truth sells research reports of a system's performance, sells FT's newsletters tracking the system's performance, FT discusses the system's design in video tapes, and presents system design information at their seminars. All these things financially benefit FT and help sell their products.
FT was started to drive one well-known system marketer out of business. The vendor allegedly sold trading systems belonging to a system creator's widow, who received no compensation from the vendor of others' systems. FT now uses vendor's systems to produce their income without purchasing them or compensating the vendor. FT does not sell the system's rules, that's the only vendor's difference between them and the well-known system marketer.
A conflict of interest exists when FT rates their systems, and FT admitting this fact does not condone it. Independent testing reported in another newsletter last year showed FT's Universal 44% less profitable than reported by FT. The error was ascribed to bad data used to produce results; FT was not responsible for their misrepresentation of their system's results.
Without FT, where is an honest vendor to turn to have his system results verified? I have spent over $13,500 to this end with FT, because I want to produce the best trading materials available. FT's testing has helped me improve the trading results of my systems, and this helped increase their sales.
Should FT stop publicly rating their own systems, and using vendors' systems without paying for them? Absolutely! Both practices detract from FT's credibility and reputation for honesty, invite further costly litigation, and undermine FT's efforts to being needed vendor accountability to our industry.
Info on TBSP/Pocket Quote Pro/PrimeLine/ Reply to Russell Sands & An Opinion Curve-Fitting is Desirable! - Paul E. Diehl
I appreciate the answer to my question on TBSP Right Time Stock Program (RTSP) from George Moldenhauer. His experience is the same as mine. I had a broker from Chicago contact me to tell me that he can trade the OEX successfully with the RTIP program, but he had to invent his own rules of entry and exit. I didn't open an account. Why buy an expensive automatic computer trading program if you have to make up your own rules?
I also appreciate the response from Don Good on the Pocket Quote Pro. I will stay with my Quotrek which gets good reception over a 50-mile radius from the St. Louis Arch. It is expensive, but when one S&P 500 tick is worth $25.00, it's worth having that accuracy. Quotrek also separates the Globex range from today's trading numbers which solves the problems mentioned by John Bowley.
I have purchased the Prime/Line System mentioned by Chris Ongley, but have not as yet figured out how to use it. I have been a trader for over ten years, so I am not a novice but this book seems to leave some information gaps. I haven't called Mr Greenstein for support, but will report on my results in a later CTCN after I give it a fair trial.
To Mr. Sands: I mostly trade S&P 500 futures and options with some OEX and stock options. I have learned a number of golden principles for trading that works in all markets, but I find that specifics vary from market to market almost as though each market has its own personality.
Some markets are as giddy as a school girl. Others are stoic. Some plod along like an old man while others run sprints. Some are swingers while others are slow and steady. It therefore seems to me that you must "curve fit" your systems to match the personality of the market that you want to trade. I have a hard time believing that one system works in every market without modification for that market.
I would be very happy to get one really good system to day trade the S&P and forget all the rest. There is more than enough action in that market to keep me busy.
Bob Buran's Grand Combo System Only Makes Money If
You Are Paying $2 Commission! - Mervin Pearson
I recently became a subscriber to CTCN; October 1994 was my first issue. I did however get all the back-issues and have enjoyed reading the articles. The editor has requested more input about Bob Buran. Here is my experience.
I purchased the video and system from Bob when it first came out. I usually don't buy systems because I have never found one that fits my trading style. The reason I bought Bob Buran's system was the way he touted that he was all for helping the little guy. Also the reason he sold so many was because he included monthly and yearly statements. The statements to say the least were deceptive.
The profit he actually did make; but not by following the Grand Combo System to the letter. A lot of the profits came from fills other than from the system. In other words, he used judgement in entries and exits. Also, in reviewing the statements, a lot of the profits came from crude oil and heating oil, leading up to the Gulf War or during the war. There were some months that if he didn't have the oil complex he would have lost money.
I traded the system for about two months. The markets I used were Mid-Am T-Bonds, Silver, Soybeans, Live Cattle, Crude Oil, Cocoa and Sugar. I called this my lucky seven portfolio.
I followed the signals to the letter. The system actually made money! (not much per trade) but it lost because of poor fills on stops.
Every entry order is in a stop. If the trade gets stopped out, than you have a chance for 2 bad fills. I was paying $25 in commissions and in two months I lost about $2,000. The system would work if you were a local only paying $2.00 per round turn.
Editor's Note: I spoke with Fred Montgomery who wrote about Buran last month. He says even paying $2 commission would still result in large losses due to slippage being a major negative factor.
A HARD LOOK AT DAY TRADING - Reprinted with permission of Technical Traders Bulletin - Part One
We receive more requests for articles and advice on day trading than on any other topic. Beginning traders are especially interested, particularly those that have been attracted by the glamour and intensity of the pit traders who seem to be constantly jumping in and out of the markets and reaping enormous profits.
It seems like almost all traders have tried day trading at one time or another. After all, it is very tempting to try and slug it out with the pit traders. Every tick is exciting. Every rumor or news item that affects the market either creates euphoria or is another nail in the coffin. When you have a position on, you can't stand the pressure, but if you're not in the market you tear your hair out every time prices act the way you predicted. Your heart pumps fast, your adrenaline surges, and you feel like you've finally arrived in the wild and woolly world of fast-paced futures trading.
All of this sounds like fun, but as you might imagine, there are many, many pitfalls along the way. We've come to realize, after talking to numerous traders who have attempted or are about to begin day trading, that most traders who start are not fully aware of the scope of the problems they face. To some readers the following discussion may be redundant, but we suspect that many of our subscribers may be embarking on a venture with only a limited grasp of the basics.
Cost of Doing Business is High
The day trader enters and exits trades during the same market session, normally a period of only four to six hours from opening to close. The very short term nature of day trading presents both advantages and disadvantages. The major advantages are the lower margin requirements and the absence of overnight risk. The disadvantages are the bad odds, time and effort required, the limited profit potential, and the burdensome costs of frequent transactions.
The transaction costs consist of both commissions and slippage. The commissions are a large and obvious cost of doing business. However the slippage is much more difficult to quantify. The trader might have a mental image of trading at the prices shown on a computer screen, but in reality he must continuously buy at the offered price and sell at the bid price. The spread between the bid and offer becomes a very substantial but hidden cost of doing business. In addition, as most of us have learned many times over, it is unrealistic to expect stop orders to be filled at our stop prices.
In the meantime, to offset these unavoidable costs, the day trader is limited to very small profits when he is correct in his analysis and completes a winning trade. Under even the most optimistic scenario, the day trader's potential profits are limited to a portion of the price range that is likely to occur within a few hours of trading.
Let us assume that our day trader has negotiated a discounted rate on his day trades and is paying twenty dollars per trade. Next let's be optimistic and assume that the spread between the bid and offer amounts to ten dollars buying and ten dollars selling. In order for the trader to complete a trade that nets $100 he must be smart enough to identify a move of $140 according to the prices on the screen he watches.
On the other hand, when his timing is wrong by only $140 he is going to lose $180. It doesn't take a Ph.D. in mathematics or an M.B.A. from Harvard to figure out that this is far from an ideal business environment. In fact, even the professionals on the floors of the exchanges must be intelligent, highly disciplined traders just to survive.
The public doesn't realize how many of these professionals fail in spite of the advantage of being on the floor and paying only minimal costs per trade. Imagine how small the odds for success must be for an off-the-floor trader faced with the costs we have described.
To have any hope of success, the day trader must strive to maximize the profits on the winning trades so that he can overcome the tremendous disadvantage of both the obvious and the hidden transaction costs. Unfortunately, the day trader has very little control of the potential profit to be obtained because the extent of the price range during the day absolutely limits the maximum profit that can be realized.
No trader can reasonably expect to buy at exact bottoms or sell at exact tops. A very good trader might hope to be able to capture the middle third of an infra-day price swing. That means that to make $180, the total price swing must be three times this amount or $540. How many futures markets have a daily price range of $540 or more? Very few. How many futures markets can produce a $180 net loss? Almost any of them.
Don't forget, the trader that is smart enough to find markets with $540 price swings and then smart enough to trade them correctly so that he nets $180 is only going to break even unless he has more winners than losers. To make money in the long run, the day trader must have a percentage of winning trades that is far better than 50% or he must somehow figure out how to make more than $180 on a $540 price swing (or best of all, do both). This also assumes that the trader is smart and disciplined enough to harness his instincts and emotions and carefully limit the size of the losses.
Beating Tough OddsAs you can see, the day trader is faced with an almost impossible task. We would venture a very educated guess that less than one out of a thousand day traders make money over any sustained period of time. Our best advice is to not even attempt it unless you are one of the many traders who is actually trading for the recreation and mental stimulation rather than the money.
If you are serious about making money, your time and energy will be much better spent perfecting your longer term trading skills. Even if you should succeed at day trading, it is difficult to reinvest the profits and continue to compound them. Day traders can only operate efficiently in very small size so don't expect to make your fortune at it, it's only a very enjoyable but hard earned living at best.
In spite of our sincere warning, we know many of our readers will attempt to beat the odds and become day traders for a while. Fortunately the lessons learned while day trading can be applied to more serious and productive trading later on. In the meantime, we will do our best to explain as much as we can about day trading and hopefully make the learning process less costly.
Obviously, we don't have all the answers ourselves or we wouldn't have such a negative outlook on the probability of success. We certainly have learned a great deal about this subject over many years of trading and the fact that we have elected to no longer play this game simply demonstrates our personal preferences in the allocation of our productive time. We hope whatever hard-earned information we can pass along proves helpful.
Selecting Best Markets For Day Trading
As we pointed out earlier, there are very few markets that have wide enough infra-day price swings to make them suitable candidates for day trading. Because they must monitor the prices so closely, day traders generally prefer to concentrate their efforts on only one or two markets. In addition to the fact that the prices must be watched continuously, there are very few markets that are suitable even if we had the capacity to follow more of them. Presently, day traders seem to have given up on pork bellies and tend to favor the stock indexes, bonds, currencies, and energy markets. From time to time other markets may become candidates for day trading because of temporary periods of high volatility.
We ran a test (several years ago) to see what percentage of the time various markets had a total daily range of $500 or more between the high of the day and the low. There were only five markets that had a $500 range at least two days a week or 40% of the time.
In addition to looking for a wide daily range, liquidity and the size of the minimum spread should also be factors to consider when selecting suitable markets for day trading. Our previous example of costs included paying a spread of only $10 on each side of a trade.
In the S&P market a minimum spread would be $25 each side while in the bond market a 1/32 spread is $31.25. If you are day trading bonds with $20 commissions, you must overcome total costs of $82.50 added to losses and subtracted from gains. Your average winning trade must run $165 farther than your average loss just to break even. This assumes a one tick spread which is the best case possible.
The element of liquidity comes in to play in determining the number of ticks in the spread between bid and offer. A one tick spread is the best you can hope for and most markets have a wider spread than that.
You can usually assume that the higher the average daily volume, the tighter the spread. For that reason, you will want to concentrate your day trading in only those markets with very high volume. Otherwise, you can be making good timing decisions and still be assured of losing money.
Too Many Data Formats - Michael Gourbault from Canada - Part II
Which brings us back (by a giant step forward for Mankind) to "Alan's" current troubles. Now, after connecting with his data vendor via modem, then converting the data to the MetaStock format, Alan decided to try his new MetaStock continuous contracts In all three programs.
Three programs, three perspectives. In they go in Program #1. Oh, how lovely, and educational! Everything works fine. Now, Program # 2 . . . , Bravo. (Ah, yes, perhaps we should tell you that Alan - well, Michel, if you must know - was also a professional French translator. Not an American, of course, but European French - this as a way of "explaining" his peculiar Ideas.) Where were we? Yes, Program #3. Nothing doing: the program rejects the appetizer being handed to it. Michel insists... even stooping as low as trying to coax the beast. No way, Amigo! His hot Latin temperament now fully aroused, Michel sees red, gets hot under the collar, loses his temper... Well, you get the picture.
Soon, the battle between the Beauty and the Beast was in full swing. (Don't get me wrong: a Beauty he is not - that's just a figure of speech.) Michel gets all of his wits and debugging tools and knowledge together and fires them one by one at the insolent target who acts like the stupid donkey that "it" is. For days on end he successively and systematically uses the following reasoning and investigative techniques:
1. He tries three continuous contracts (PL, SF and PB) in CSI format that came with his program which was in CSI format from the CSI company. The program works fine in every respect.
2. He tries the same three contracts from CSI-converted data from his own choice of vendors.
3. Now he uses the MetaStock format. A message appears that speaks of zeros in the data or insufficient amount of data. It quickly blocks any further processing.
4. He fires a barrage of Faxes to the program designer to inform him of the problem and of the different things he is doing to try to make it work. The designer, at first, does not believe there is really a problem; even gets a little fired up when he thinks Michel expects his program to be compatible with every other trading program on the market.
He also takes exception to the comments made by his client regarding the "illogical" use of three different date formats, YYMMDD, MMDDYY, and DDMMYY, in the English-speaking countries. Calls it a 'trivial issue," not worth discussing. Michel, of course, was relating this to the possible file data incompatibility problem, if one vendor used one date format and another a different format; but failed to explain his thought clearly enough.
No, I won't tell you the end of the story. By order of my sponsor and, in any case, because my sense of ethics requires that I protect the identity of the guilty parties.
But I will add this, as the morale of this story:
Once upon a future time, a group of data vendors and software program designers will finally come to their senses and do like the Europeans and the Japanese have done at least for decades past: they will get together and, if only for their own sake in this Darwinian world of dog-eat-dog and survival of the fittest that they have helped create by their apathy or indifference, will try to stop the confusing proliferation of compatible, semi-compatible and incompatible data file formats, and agree at last on just two formats: one for all the modem oriented services, and the other for the FM/cable/satellite data vendors.
And finally the consumer or end user will live in a sane world. But this, alas, will be the world of the seventh generation to come.
How Welles Wilder's ADX Indicator Can Improve Other
Trading Systems - Giampaolo Bulleri from Italy
I write this article to share with CTCN's readers some experiences about the use of ADX indicator coupled with a typical trend following trading system (in this case Swing Catcher, but I want to speak in general and I want to know if these considerations can be applied to all trend-follower trading methods).
In the graphic below, I have represented a "stylized" ADX just to be clear in the exposition: Chart in Print Copy
We can divide this graphic in 5 zones (A1,A2,B1,B2,C):
Zone A1: ADX flat or descending with readings greater than 45, overbought territory, trend is over.
Zone A2: ADX flat or ascending with readings greater than 45, overbought territory, high probabilities of end of the old trend; Zone C: ADX readings less then 25, oversold territory, high probabilities of born of a new trend; Zone B1 : ADX is descending: no trend; Zone B2: ADX is ascending: trend.
These are in my opinion the general rules to follow if you trade with a trend-follower method:
Zone A2 and C: trade with a conservative approach (low risk)
Zone A1, B1: do not trade this contract
Zone B2: trade with an aggressive approach (high risk)
Well, the discussion is open!
Why Cattle Trading Is Difficult - Andy Dmori
Following is a response to H. Lowell Huber's wondering why certain traders do not trade cattle (CTCN October 1994). Curtis Arnold, developer of PPS, opined in PPS News, Issue 1, Fall 1992: "The meat markets, despite occasional sharp trends, are not considered to be good 'technical' markets.
They tend to chop around a lot and are replete with false breakouts and inconsistent price action. Being largely domestic markets, they have often been rumored to be manipulated or controlled by insiders. With the exception of a very few fundamentally-based professionals who specialize in these markets, the majority of the professional trading community shun them for the reasons cited."
What Exactly is A Swing-Low? - Rointan F. Bunshah
I am responding to David Stone's contribution on page 2 of CTCN's October '94 issue. It is a very simple system that is discussed. Unfortunately, a very important definition has been left out, i.e., what is the Swing-Low Pivot Bar? Is it the swing low for the second swing whose low is higher that the previous swing low? Perhaps a better set of diagrams would clarify the issue. They could have a horizontal line on the price bar to indicate the bar and price of entry.
If you can send me David Stone's address or FAX, I will be happy to write to him directly and he can then send in the clarification for the next issue. If you know the answer, please send it to me by letter or FAX. Thank you and keep the good work. I enjoy CTCN.
Here is my chart, it is correct? Chart in Print Copy
Editors Note: I have also printed a chart below Rointan's chart showing Swing-Lows & Swing-Highs.
The Facts about Futures Truth - John Hill
For the record, the facts are as follows:
1. Futures Truth(FT) will continue to publish the performance figures on publicly offered systems as long as a reasonable number of people want this type of publication.
2. We will stop publication when interest ceases. We do not depend on this publication for a living.
3. Profits after a reasonable amount of working capital, will continue to be donated to a homeless children's school. I personally have never taken a salary from this operation. We let one key computer employee go for lack of funds to pay salary.
4. We do not now, nor have we ever traded one single idea from all the systems we have seen without written permission from the owner. A pool we organized quit trading publicly offered systems about 3 years ago. Today, we only trade our own ideas and none of them include ideas that are not our own.
5. We do not intend to respond to the Futures Truth "Bashing." Life is simply to short. We ask our clients to consider the source.
6. In our judgement, we have done nothing wrong either legally or morally. We are the only persons we have to satisfy on this point unless someone would like to go to court. If our clients feel that we are wrong they will simply stop supporting this effort and we will quit. It's that simple.
7. We will continue to offer a few of our own systems for sale, as this small amount of income is needed to support the computer effort. This is a conflict of interest but it will continue.
8. We have never revealed anyone's system at the few seminars we give.
9. We also give Futures Truth "Bashers" one more source of complaint. As of 10/3/94, Futures Truth became a member of NFA and we are now a CTA.
Definition of A Swing-Low - David Stone
A Swing-Low is a low day surrounded by higher lows on each side. The more higher-lows on each side the better or more powerful the Swing-Low is. However, just one higher low on each side is sufficient to qualify it as a Swing-Low.
A "higher Swing-Low" is a secondary consecutive Swing-Low who's low is HIGHER than the preceding Swing-Low. After it occurs, entry on the long side is on the next days open, or on the close of the day after the low day, if you can identify it and get in before the close.
The reverse is applicable for Swing-Highs and subsequent short side trades.
The Specific Markets Performance Are Indeed Very
Important - John Bowley
This is in response to the editor's comments in the October issue. The specific markets used by any trading system are indeed very important. Many use only S&P, Bonds or currencies because these have the most liquidity. Each market may be trending or not at any point in time and is easily seen by drawing trendlines on price charts.
For example, I conclude that the Futures Truth Universal and Swing Catcher trend following systems make most of their profits when any market is trending up or down. Wilder's ADX, VHF and Bollinger's BWI all can help avoid trendless markets where the worst drawdowns occur. It is suggested that each market's equity run be optimized in this way before combining several markets in a portfolio if desired.
The Mother of All Systems - By Robert Alberto
(submitted by Alfred Wong)
This stock trading system needs two sources of info and has four trading rules. You need Investor's Business Daily and Standard & Poor's Stock Guide. Although the newspaper prints daily, looking at it weekly is fine. Standard & Poor's has yearly books. You need to took at a monthly guide. Investor's Business Daily is at most libraries. Standard & Poor's Stock Guide is not. But you can get a trial subscription.
Rules one, two, and four involve looking at Investor's Business Daily. Buy stocks that pass rules one, two and three. Sell stocks that pass rule four.
Trading Rule #1 - Buy stocks that have doubled their 52-week low. Scan the paper for "N H." This means new 52-week high. Then compare the close to the high.
Trading Rule #2 - Buy stocks that have an earnings per share (EPS) and a relative strength (RS) of 80 or better. Investor's Business Daily alone prints relative EPS.
Trading Rule #3 - Buy stocks that are making all-time highs. This means for the life of the stock. If Standard & Poor's does not cover the stock you'll have to call the company or a knowledgeable broker.
Trading Rule #4 - Sell stocks immediately whose relative strengths (RS) drop below 75. Of course you can sell earlier if you have a good profit.
Some Fine Points - Don't buy stocks that have risen more than 10% past where they've doubled. Only buy stocks selling for $2 dollars or more. Use a discount broker.
I haven't been able to test this system. Clearly it is a relative strength momentum system. It definitely selects few stocks now. A quick glance didn't reveal any recent buys. Maybe there are plenty at market bottoms.
I wonder about past stock price history. Do the two sources adjust for stock splits? I seem to recall some inconsistencies between the closing price and past price ranges. Trading rules one and three depend on accurate prices.
A Solution to the Problem of images Output to A Laser Printer
I received and installed a trading system upgrade recently, and was pleased overall. However, a little disappointed not to find images support for my HP LaserJet Printer. I considered trying to find hardware adapters mentioned in the system's "readme" file, but decided to check with friends that have been into the computer scene for many years.
Well, as it turns out, between their suggestions, something I was told a while back, and some experimentation on my own, I now have no problem printing my trading system's images to my LaserJet IIP Plus. It turns out to be rather easy, and my suspicion is that this method will almost certainly work on a variety of other printers.
I thought I'd share my findings with you, and any others who have an interest via the "Club News."
When I first asked if I could use my LaserJet, I was told that I might try replacing the "images.EXE" file in the system directory with DOS's "GR.APHICS.COM." This didn't work. A friend told me about a DOS command that would load a small memory resident program which would then be used on all "Print Screen" commands. The command is images. It needs to know the printer type, and the drive and path where DOS files "images.Com, and images.Pro" are stored. Several switches are also available for use with this command. These files are in my DOS directory, and since DOS is included in the path statement within my Autoexec.bat, I was told that all I needed to do was add a line to the Autoexec (after the path statement), as follows: images space laserjetii.
(Laserjetii is one of 16 parameters or printer types available with images command)...this didn't work either. However, after a fair amount of trial and error combinations, I found that loading the images program at boot-up (through the autoexec), and deleting "images.Exe" from the system directory, (actually, I just moved it to a temporary directory), allowed all images to be automatically printed during my system's auto run, or printed with Print Screen command when doing a manual run. The only abnormality appears to a message reported on the screen by DOS when loading it as follows: Unable to reload with profile supplied.
It now appears that the initial suggestion didn't work because there was no way to specify laserjetii from within the system directory. It would need to be called from the system's code. When the images command was executed by the program, it had no parameter for type, and I believe defaulted to "hpdefault," (the first type parameter listed in images.Pro). Also, loading the correct profile for my printer at boot-up was basically changed back when it was loaded, as long as images.Exe existed in the system directory. Editors Note: The solution is to write a new boot-up batch file that includes the correct images driver and switches.
Kenneth Phillips is interested in recommendations, opinions, comments or evaluations on Jeff Rickerson's, The Advanced Market Optimizer II, for sale again at $3,000, not sold since October 1990.
Ken Periso wants to know how to create continuous contracts and where to get software; how to collect cash prices to figure basis?
Karl-Hans Mohr wants to be in contact with other German members of CTCN. They can call me in Germany at 011-49-6221831301, or write c/o CTCN.
Steven Burningham wants info on Futures Pro.
Member George Moldenhauer is looking for members that have experience, real-time with the Recurrence IV Swiss Franc System.
Per my request CSI has setup a new International 22-market Portfolio for downloading. They also have given a super low price of only $19 per month, via long distance access, to download the above portfolio. In fact, if you agree to prepay for one-year ($228) they will even waive the regular $59 cost of account initiation and their QuickTrieve Software. Domestic users may prepay $288 if toll-free access is desired.
Note: You do NOT have to be one of our software clients to download the new portfolio. To sign-up for it simply call CSI at 1-800-274-4727 or
(1-407-392-8663 for foreign callers) and request the new Trendx/Dave Green/CSI 22-market International Portfolio. Be sure to mention that you are a Commodity Traders Club News Member. This portfolio is available for immediate downloading.
Thank you to David Lancaster for doing lots of research on this optimum portfolio based on volume, etc., as referred to in last month's CTCN.
Reference the Futures Truth discussions and issues. I know John Hill and George Pruitt. Both John and George are extremely honest and have great integrity. I am also convinced they are unbiased and try to do an honest and accurate job. Their work reporting on the many trading systems available to the public is difficult, complex and at times a thankless job.
There are a number of legal and ethical questions involving Futures Truth's operations that have been raised by certain parties in this issue and others.
CTCN Members are invited to give their opinions on these complex issues involving Futures Truth.
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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.
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