Issue 42

Winners And Losers, The Difference Between Those Who Make It & Those Who Bomb Out - Anonymous Author

How do you account for the difference between those who "make it" and those who "bomb out" in any effort in life? Talent isn't the whole answer. Nor is luck. There is another element that separates winners from losers.

When a winner makes a mistake he/she says, "I was wrong." When a loser makes a mistake he/she says, "It wasn't my fault."

A winner goes through a problem. A loser goes around and never gets past it.

A winner says, "I'm good, and I can be better." A loser says, "I'm not as bad as a lot of people."

A winner says, "I'll be glad to do it." A loser says, "That's not my job."

A winner listens. A loser just waits for his/her time to talk.

A winner takes responsibility for his/her actions. A loser blames others for his/her problems.

Greg Donio's Response to Patrick Smith

Several months ago, Patrick Smith wrote me a letter that was printed in Club 3000 News. He asked if I "really" made those option spread trades described in my CTCN articles. Asked also if I were a broker or a systems-vendor or a money manager trading other people's cash or a huckster of penny shares for Sloppy Joe's Eating Emporium. Well, maybe not the latter.

I sent a reply to Club 3000, but they neither printed it nor forwarded it to Mr. Smith. Whether that outfit's recent "change of command" resulted in a canceling of scheduled jousts I do not know. Anyway my Pony Express message was lost in the cactus.

I, hereby restate my reply: I am an independent trader and a free-lance writer. Period. The transactions detailed in my articles are quite real and also appear on Form 1040 Schedule D. My advertisings were and are for the sale of federally-copyrighted free-lance manuscripts on finance that I wrote. People who phone Dave Green and want to contact me are informed by him that I am a financial writer, not a financial advisor or a manager of other people's money. I independently trade my own capital.

As for "systems-vendors" who charge immense amounts, I am a hide-bound skeptic. When someone writes a "break the bank" book on dice or roulette, the question persists of why the writer does not continually scoop up fortunes at the gaming tables, why he has to sell these books to make money. The absurdity reaches elephantine proportions when systems-vendors charge $3,000 or so. If that system will take you to the financial moon rapidly and easily, what is its vendor doing in Peoria glad-handing check-writers?

Pat Smith mentioned commissions. Admittedly, spread strategies are commission-heavy, with two commissions going in and two going out. However, I find that not much of a problem because of that potent ingredient native to spreads: Other people's money.

In the November/December issue of CTCN, I told of buying $6,250 worth of Dell January options and paying for most of it by selling $5,000 worth of Dell Decembers. I paid the difference of $1,250 plus about $250 in entering and exiting commissions. Other people's money totaled four times my capital and 20 times my commissions. I should weep?

Spreads are an alchemy formula welded to bookie tactics: It works thanks to the influx of other people's gold. One need not be a broker to "take bets" from other traders. The "short end" of the strategy includes that. Also, there is no better axiom than, "Handle speculation like a business, not like a gamble." Buying 10 options and selling 10 amounts to a nice Cartier-gems-in-the-satchel way to do business. Gems, not rhinestones, Mr. Smith.

All businesses must tolerate a certain amount of risk and a certain amount of overhead. I have found that spreading with options transforms the crap game risk inherent in puts or calls to a business risk. As for overhead, I live in Manhattan where shops and firms pay foundation-straining rents. A quarter of a point ($250 an 10 & 10) is far from a bone-breaker, especially since it usually comes off the optioning profits.

If Patrick Smith also wonders whether I am "really" a free lance writer, I shall mail him a copy of my article "Ghosts & Demons of Old New Jersey" from the Atlantic City Press, sections of which appeared on the front page of a Wall Street Journal Halloween issue. One night near the Absecon salt marshes will make a believer out of Patrick!

"Buyer Beware!" - Marc Mitchell

About various trading systems by David L. Wright, PO Box 611741, Port Huron, MI 48061 and also of 33 Fourwinds Road, London, ON, Canada, N6K 3L1. And: Grant Bloomfield of 443 Exeter Road, London, Ontario N6E-2Z3.

In December 1994, I purchased David Wright's S&P system called CHERRY PICKER for US $895.00, also purchased Trade Station for approx. $1,800 and invested in a real-time quote service for about $500 so I could trade the system. I paper traded only. I called mid-December various times to clarify questions, David was on vacation but his trading associate Grant Bloomfield answered.

I noticed he didn't have clear answers so I asked him point blank if he trades the Cherry Picker. He hemmed and hawed and finally said no. David has such great results on his promo, one winning month after the other, no losers, I said why in the world wouldn't you trade it since you're working with him and could learn first hand? His answer was, he has his own system. Make sense? No, not when you see David's promo piece - spectacular returns!

Trading one unit
May 1994: + 530 points=$ 2,150
June 1994: +2900 points=$14,500
July 1994: +1740 points=$ 8,700
August 1994: + 725 points=$ 3,625

I wanted to trade successfully. So when David came back from vacation I called him daily, going over every signal that occurred to make sure I was doing everything right. I continued tracking every trade. When there were losers (of which there were more than winners) I pointed this out to him. David's answer: "Well, yeah, I don't really trade every day, let me see...." But on every winner his response was pretty much: "Yep, that's the Cherry Picker alright, made good money today."

Once he spoke about how one could make 6-digit figures. I got fed up with this so I got an S&P tick by tick database for 1994 and went back to his daily track record on the promo, comparing every trade the system gave with his track record. Nothing matched.

He must have totally arbitrarily thrown numbers next to each day and given it to the printer. Luckily I never traded it with real money, so I never lost money trading it.

I then put an ad in a futures newsletter asking for other's experience with the Cherry Picker. About 15 people called who had the system or knew someone who did and not one had been able to use the system profitably.

I also found out from these traders in the previous years to my trading he has promoted and sold at least one Bond system, Pork Belly system, another S&P daytrading system called Dual Cross, then he came out with the "better" Cherry Picker, then the "Mid Day Pop Star for S&P," "Pop Star for T-Bonds and Currencies" and "Wonderbar Custom Indicator for S&P." The last one he's selling due to the "many requests lately from folks who would like to become profitable full-time day traders." This was early 1997. All of these have on the promo back side astoundingly profitable track records.

David Wright has been selling one system after the other for at least ten years. After he's covered mailing lists with one system, he creates another system and another and another, each worthless. So buyer beware, he's getting your money and you're getting next to nothing of value in return.

Then there's Mr. Grant Bloomfield, 443 Exeter Road, London, Ontario N6E-2Z3, the earlier mentioned trading associate of David Wright. In October of 1994 I received his promo piece, made up just like David's but selling his currency trading system, called the Little Gapper.

The Swiss Franc results:
April 1993 $867 May $1,227
June $1,263 July $423

August $1,375, and so on, not one losing month. Looks great, doesn't it? Too bad, it doesn't work.

He has a special offer of course, generous as he is, for $310.00. Totally mechanical. So I called him for his Real-Time track record since I had been already been conned by David Wright. Grant's answer: "If I got involved in sending all that information out to everybody, I wouldn't make anything on the system, at the price I sell it." I guess he takes me for an idiot. The reason he won't send the real-time track record is because he has none.

Late 1996, I received Grant Bloomfield's promo on SP4, an S&P Daytrading system for an offering price for limited time of $595.00. Again he has printed on the back the hypothetical trading results, looks fantastic, results tested with Trade Station.

I've done the same thing within a few hours with TradeStation, looking for bar combinations that would give good results and kept fine tuning it as I back-tested it. It's child's play, but means nothing for making money in the markets.

So folks, don't be a victim to these guys. If you are contemplating buying a system because the results look so tempting -- any system for that matter -- call Futures Truth and see if they tested it in real-time and what the results are -- they'll give you the facts.

Good trading to all of you from a fellow trader.

Electronic Order Entry on the Internet with LFG's ZapFutures - Mark Byrd

First, I would like to thank CTCN for providing an excellent vehicle for the free exchange of ideas and opinions (both good and bad). As a new member to CTCN, I have enjoyed reading the back-issues and reading about the trials and tribulations of other traders.

Before I describe my experience with ZapFutures (Zap) I need to give you a brief background on myself so you will understand what by biases are.

I have been in the technology business for 25-years and attended a training class in 1973 at a little unknown company in California called Intel. I started out as an engineer and used to design microcomputers. In the early days, the designers were also the programmers. I eventually decided I preferred programming to hardware design so in 1981 I started a software company that catered to the real estate industry. I grew the company to a multimillion dollar company and sold out to one of our competitors in 1996.

I believe one of the major reasons for my success with this company was that I paid careful attention to the small details, both as they applied to our product and to our company.

So with that little bit of background, if I told you I was a techno-junkie you might understand why. I have seven screens on my desk, 5 computers and 2 TVs, all of them providing a specific function. I use TradeStation and BMI real-time data feed and some of my own software to monitor the markets and my trades.

I began trading futures about a year ago and was extraordinarily lucky to meet a broker here in Dallas named Ray Flowers at Dillon-Gage. I was relatively new to commodity trading but not to trading in general. I opened a managed account with him and while I let him call the shots I monitored every trade at my desk. I would normally speak with him 2 to 3 times a day. Ray would call or Fax me any time he had entered or exited a trade. I would enter all the information into an Excel spreadsheet, plus monitor the trade in TradeStation. Having Ray as a mentor was worth every penny of the extra commission I was paying. As everyone knows, the commissions are one of the biggest costs of doing business. After about 6-months we were trading quite a few contracts per day and I had taken over most of the trading decisions by this time. I used Ray for advice and to place orders. I (like many others) had settled into daytrading the S&P. After reading what I should be paying for commissions, I asked Ray if we could adjust the commission since I was making my own trading decisions.

While I knew he wanted to keep my business, he was caught in a trap. He had a cost that he had to cover by being a broker for Dillon-Gage. He was able to lower the commissions slightly, but it was nowhere near where I thought it should be. For reference, I was paying $70 RT and he reduced it to $60.

In doing my research I found a company called LFG which was marketing their Internet based trading program called ZapFutures (actually the program is called LeoWeb but they market it as ZapFutures so I will call it Zap here). We were able to negotiate an RT rate of $22.54 for the S&P (this includes all fees). So I regretfully switched from Ray to LFG.

The rest of this article describes my experience with ZapFutures. First, I will tell you that if you don't feel comfortable with technology then don't use Zap. When things don't operate as they should (which can happen) you need to be quick on your feet. I use a dial-up ISBN Internet account. While ISDN is certainly not required, it does come in handy when the connection is broken. Reconnecting takes 5-seconds, not the 15 to 30 seconds required for a modem to dial and negotiate a connection.

I was trading using Zap as LFG went through some of their development efforts. Zap has not always had all of the features that they have today. The process basically involves typing in an order on an Order screen and pressing Enter Order. This does not actually Send the order but simply moves the order from the Order screen to what Zap calls the Pending Orders screen.

This screen resembles a spreadsheet and each order is listed. You can go back and Edit an order at this point or press Send. This will send all of the orders (with one exception which I will cover in a moment) over the Internet and print an order ticket on your printer which has the Order Number and a Date/Time stamp that you can use to challenge an order in the event of a problem.

The two newest features that have been added to the program recently is the ability to receive the fills back (via the net) on the screen and the ability to place (they call it Park) orders on the Pending screen with a "check box" next to it. If the box is checked, it means that this order is parked and will Not be transmitted when the Send button is pressed. This is one of the best improvements that they have made in my opinion.

You can have several different orders pending (or Parked) for how you might want to enter the trade. It might be a market order or a limit order. Since I can see the real time data on my screen, many times I will place a limit order (typically and/or Better order) close to the market. Once the order is filled, you can begin to enter your exit strategies in the pending screen.

Naturally, I always enter a market order opposite of what I used to get in plus a reversing order that would reverse the trade. The market order is my Stop. I never place physical stop orders. Why should I? I am sitting in front of a real time data feed and have an order already entered on the screen, so with one simple mouse click I transmit an "at the market" order and I am out.

If I were going to leave the office for an extended period of time I could enter a stop order. The only order type that Zap doesn't support is OCO (Order-Cancels-order). So far this hasn't been an issue.

LFG Faxes confirmation of the fills, but the Faxes can lag the trade by minutes to hours. LFG uses a service for this. It is not a big deal since I already have the fill on the screen. The fills generally take about 10 to 20 seconds from the time I press the button (or on limit orders from the time I see the market go through my price) until I hear an alert sound on my computer indicating a fill has been received. One mouse click and I can check the fill.

LFG transmits the preliminary equity runs and the final equity run via Fax or e-mail. I prefer e-mail. I can say that while there is still a possibility of human error, in the 8-months I have been using LFG and Zap I have not had one single error on the statements. This was not my experience with Dillon-Gage who used Rosenthall-Collins as their clearing firm. I keep track of my own equity on an Excel spreadsheet so I simply open the e-mail and verify that my account balance matches LFG's.

A few of the details as I have been given them is that LFG is hooked up electronically to the pits with S&P being the most advanced. S&P orders go straight from my screen to an electronic card deck in the S&P pit. In other markets, the order is printed out next to the broker in the pit and he has it in seconds after pressing the Send button.

I have to say that when everything is working, this is a great way to trade. But as they say "Stuff Happens" and you need to be prepared for it. LFG has an "Emergency Order Desk" that you can use if your Internet connection goes down. You can place orders or check on fills. I have had a couple of times that the connection was broken and because of where I was in a trade I wanted to know the fill price. This was before LFG started sending back the fills on the screen. I used to have to wait for a Fax which could take from 2-minutes to 45 minutes.

My only complaint is that the account rep that I have is not nearly as knowledgeable as Ray was. I generally circumvent him and go straight to the president's office which I hate doing. I have complained about this rep but the president simply says to call him. But then again, for a discount broker I guess you get what you pay for.

I have looked at several other companies that offer a similar service but the ability to Park an order is so important to me that unless they have that feature I am probably unwilling to consider them. The last thing you want is to try and type an order when you don't have a stop in place and the market falls out of bed. While I consider myself a fairly high speed typist (I should be after 25-years), I would rather be able to enter all of my possible exit orders ahead of time in a nice relaxed state of mind and then choose the one that fits the trade best at the moment in time that I want to exit.

Since I currently don't trade any market with Zap other than the S&P, I can't respond to how well the system works with them. LFG claims it works best with the S&P, bonds, currencies and grains. While you can place orders before the market opens, this system is not well suited to an "If - Then" type of trading. What I mean by that is, if you are following a system that requires you to place an entry order if the market trades at a certain price then you will need to be in front of a screen and watching the price action. That is the benefit of a live broker. You can give him a set of instructions and he can follow them.

As a software designer, I have spent some time on the phone with LFG's technical staff describing features that I believe would make the software more usable without changing the underlying design. Believe me, not all programmers have the ability to sit in the user's chair. They program what is easiest for them, not necessarily what the user needs. The order entry screen could be made a lot more user friendly.

I will also tell you that the first time you trade with Zap you will be a nervous wreck. There is no manual. LFG relies on the help files. If you are not comfortable with calling a broker and placing an order don't let Zap be your first exposure to this world. However, if you are familiar with the different order types, you call your own shots and you have a reasonable amount of technical knowledge, then Zap may be right for you. LFG operates two separate Websites. One is www.zapfutures.com and the other is www.lfgllc.com. You can download a demo of zap from either site.

The first thing most people want to know when I tell them I use the Internet to trade is how well did the system hold up during the October 97 crash. Unfortunately, for you and fortunately for me I was out of the country for two weeks during that time and frankly because of where I was (on the USS Vicksburg with my son in the Caribbean) I didn't even know what was going on. I wasn't in the market and didn't care. So I can't tell you how well it performed during that period. Once I got back, I read all the e-mail that LFG had sent to its customers telling them to either NOT trade or be very careful. I didn't hear anything about whether the system had any problems during that time.

If anyone would like more information than what I have provided here feel free to call me at my office in Dallas at 972-699-7788 or e-mail at markb@mbyrd.com. I will be happy to try and answer your questions and tell you what my experiences have been with this new way of using the Internet to place orders. I guess I should put in the standard disclaimer that I'm not affiliated with LFG in any way.

Patterns Taught in Ken Roberts Course Wrong 70% of Time but I Am
Winning More Than in the Past - Edward Lord

I enrolled in Ken's course more than two-years ago and have been trading about two-years with real money. Of course, the course material convinced me all I had to do was what he said and I would be rich in no time.

What I did not know then was that you could not do it on a $1,000 margin account, as your chances of "picking" the right commodity or right 1, 2, 3 or sideways channel or option is impossible. Nor did I know that the technical patterns he teaches are not correct 70% of the time.

I have learned since in order to be successful with his course you would need a huge margin account, so that you could go in every market that was forming one of his formations as well as to buy/sell every option he recommends. The odds are than with you that you will hit that market that will make up for all that you loose.

I have also learned that you need to read a great deal more on controlling your emotions and treating this business as a business. Read more on what others have to offer and teach yourself how to slow down and look for those opportunities that meet all the requirements of a good technical formation.

I lost the first year about $4,000. The first half of the second year about $3,000. But now I have more experience in the markets. Read a lot about formations and management, have a goal of increasing my margin account, so I will be able to play more markets, and I don't get in every market that is in a pattern. I place my orders a little higher or lower than is recommended and my stops where I think is resistance or support.

I have been winning more trades than in the past and amaze myself sometimes with my ability to take profits. Recently I took profits on hogs 24-hours before the market dumped. I am learning more as each day goes by and am still very excited with this new knowledge and the markets.

I hope to learn more by reading, subscribing to publications like yours and getting the hands-on-experience in the market to reach my goal of trading full-time in five-years.

Request: I would like to hear from other Ken Roberts course members and how they are doing. Also, from other traders who took other simple courses and how they are doing. I would like to learn of books and courses that would help me at this stage of my development. Please write via CTCN or E-mail me at mrblue@pcnet.com

"Oh No, Not Again!" - J.L. from Wimauma

I think that's what my "significant other" meant when I announced my latest "breakthrough" and she just covered her face with her hands! Could she be saying that she's heard all of that before? You guys know what I mean. Rare is the mate who wants to hear anything about commodities! That's not surprising since rare is the person who will even recognize the #1 business in the world. A good analogy is sailing a sailboat.

When I owned my sailboats, I had many "landlubbers" aboard. 95% of them thought it was "peaceful and quiet." That other 5% wanted to sail the boat and above all, demanded to know how we could be sailing almost directly into the wind! Now that 5% would make good commodity traders!

This brings me back to my title. We all hear about the latest mechanical, back-tested system and how after you buy it, it might only work for a while, if at all. Since the market is the ultimate living, breathing animal, how could we expect a mechanical system to always work? But there's more to it than that. It's no surprise that few of us can sit thru the inevitable losing periods and still keep executing such a system. You may not like to hear it, but I believe I have the answer.

It ain't the money! After 15-years, I've discovered the source of all human joy is accomplishment! I'm reminded of when I first started trading, didn't know a chart from a fart, and got my trades from copying another trader's trades at Merrill Lynch. When silver went limit down I made $5,000 and I felt nothing. Years later when I perfectly executed a trade and made $400, I was on top of the world! So much for mechanicals. Even when you make money, the human animal in us is flat unfulfilled. Ask me how I trade now and again in a week, and you'll probably get a different answer!

Warning! Lend me your eyes! I've touted scale trading in many of my articles, at least as a fine learning level. Now I'm forced to say "Never again" -- at least as an individual trader. I am forced by a sudden incident.

Last Friday, a gentleman for whom I traded quite a bit of money, fell dead from a heart attack - four hours after our usual phone conversation! Little had I realized that such an occurrence automatically closes all open positions. Had we been deep into OJ as we were two months earlier, a great investment would have become a huge loss! I'm sure that Robert Wiest, the scale trading guru, has faced that problem with his limited partnerships, but individuals Beware! (Could this be another argument for not taking losses home with you?)

In closing, who would have guessed that "M.K." was a "girl?" I didn't until she kissed her husband good-bye. (The fuzzy slippers didn't tip me because I used to have fuzzy slippers.) She says it well with her sympathy for the "go to work each day" crowd. (Do you think she includes her husband in that number?) After all, we are commodity traders! I just have to say it: she's almost as clever as I am! M.K., keep those cards and letters coming'. We love 'em! (And after you kick the day-trading habit you'll probably start making money, or at least give yourself a fat raise by going to delayed quotes. I couldn't resist that.) So, fellow readers, let's all accomplish!

Trading Systems - "Secrets of the Masters" A Book Review
Raymond Kohn

Joe Krutsinger is one of my favorite people. His first book, "The Trading System Toolkit" was absolutely fabulous, it will no doubt become one of the great trading classics of all time, if it is not already. When I heard that Joe had written another book, I knew I had to have it.

Joe really knows what he's talking about. And he won't waste your time with a lot of "BS" and "meaningless fill." His personal qualities of character and integrity come through loud and clear in everything he does. When Joe tells you something, you know it's the absolute truth, and he'll never "fake it" just to pad his responses, or his writings.

"Trading Systems - Secrets of the Masters" is no exception. 246 Pages, McGraw Hill, 1997, $50.00. The premise of the book is just fascinating. Go out and interview some of the best traders in the country. Let these traders talk about themselves, how they got started, and what they are doing today. Get some of their personal trading insights -- And then, ask them for their "very best trading systems and ideas" (getting as much information out of them as they will give you) so the reader can understand how these guys think and trade. And then, to top it all off, provide the reader with the necessary "TradeStation" code to actually run their trading systems. And, if that wasn't enough, "back-test" the code over the past 10-years and give the reader a complete "TradeStation Performance Summary" in order to evaluate the trading systems provided by these "master traders. "Now that's a book!

Joe sent out a series of 31 questions and a blank audio tape to 15 system developers/traders. These traders shared their knowledge, experience, and understanding of how the markets work. Naturally the traders were a bit reluctant to share every detail of their best trading systems, but that's where Joe's knowledge and insights of the entire trading process comes in. Because of Joe's experience as a "master systems developer/trader" himself, he was able to fill-in the occasional blanks and ultimately provide us with the necessary TradeStation code in order to back-test these systems and actually trade them. (Please note some of the systems currently being used by the master traders were "expert systems," and therefore so complex that it was impossible to consider such a conversion. In those cases, the master traders suggested alternative systems which were more basic, but still in keeping with their trading styles.)

I have to admit I have never heard of some of the people interviewed for this book. However, no one has ever heard of me, and I've been a systems' developer trading successfully for almost 20-years.

The format of the book is quite simple. The book is divided into two parts. Part One contains 15 interviews with the "master system developers/ traders," and represents 85% of the book. Part Two contains the trading system code and performance results in TradeStation format. The 15 interviews are all structured in the same fashion. Each system developer is given his own Chapter which is referred to as "Interview One," "Two," "Three," etc. Each interviewee was given the same list of 31 questions to answer. Both the questions and the trader's answers are reprinted in the book.

Below is list (paraphrased for brevity) of questions asked. As you read them, try and imagine how great it would be to have these questions answered for us by some of the greatest traders in the country:

1) Tell me about yourself. Give me a brief biography.
2) Tell me about your technique . . . How did you develop it?
3) Tell me about your best current trading system. What makes it tick?
4) How long ago did you write your first trading system?
5) Tell us the rules for that first trading system.
6) What caused you to abandon or modify that first trading system?
7) When you look at another person's trading system, what is the first thing you look for to tell if it's a good or bad system?
8) What is the least important aspect of a trading system?
9) Do you use a mechanical approach, or is judgment involved?
10) Do you use TradeStation or SystemWriter? Or, something else?
11) Is your current trading system for sale?
12) Can you share the concept behind your current trading system?
13) What advice would you give system developers who are starting out?
14) Who do you think is the best system developer, other than yourself?
15) What time frames do you use?
16) Which is your favorite commodity?
17) Which is your least favorite commodity?
18) Where do you get your ideas for your systems? What is your favorite technique for coming up with trading system ideas?
19) I want you to write a trading system for me. It doesn't have to be a great system, just something that you would look at and test out.
20) What is your typical day like?
21) What is the ideal way to run your system? Would you have someone else run it for you?
22) If you could only select one book, what book would you recommend. What information source would you avoid?
23) Is it necessary for a developer/trader to have tick-by-tick real-time quotes?
24) What kind of quotes and software do you have? What would you avoid?
25) How much data is necessary to properly test your trading systems?
26) Why do some systems consistently perform year after year, and other systems fail or need to be continually optimized?
27) How important are draw-downs, or average trade size in your research?
28) Do you do portfolio management, or pyramiding?
29) If you died and left a sealed letter to your heirs, which contained the secret of your fortune which would allow them to continue their lifestyle, what one sentence would be in that letter.
30) How would you write an imitation of your system in two lines or less in TradeStation language? (Note: Some responses were longer than two lines.)
31) Give us an example of some of your work, and put it into an English-type language for a system.

Below is the list of 15 Master Traders interviewed for this book: Michael Conner, Joseph DiNapoli, Stan Ehrlich, David Fox, Nelson Freeburg, Lee Gettess, Cynthia Kase, Joe Krutsinger, Glenn Neely, Jeffrey Roy, Richard Saidenberg, Randy Stuckey, Gary Wagner, Bill Williams, and Larry Williams.

As I look back over the entire book, one of the most fascinating aspects is the relationship that exists between the trader's biography and their style of trading. You can see how the trader integrated his life's experience into the trading approach he had developed. This is what made their trading approach and styles individually unique to each of them.

Yet, despite their highly individualistic trading styles, there remained a common thread which connects each of them together -- They all have a deep understanding and personal belief as to "how the markets actually work" -- And what becomes the unique difference, is how each of them has learned to tap into that universal market understanding.

The types of traders interviewed range from Corporate Consultants putting together trading systems for major corporations, so they might better manage their proprietary trading operations -- To the guy working out of the house trading his own account. And everything in between.

Every single interview provides the reader with valuable information, and it was easy for the reader to find a common ground with each interviewee. However, I personally felt a kindred spirit with one trader in particular, Randy Stuckey. His emphasis on developing a "robust trading system" which literally becomes "one with the market," has also been my personal focus for the past 10-years. (It was nice seeing the concept in print.)

The one missing element that would have been a nice addition, would be a brief statement from each of the interviewee's regarding their typical annual performance and the amount of money they trade, both personally and under management. It would also be nice to know what percentage of their annual income comes from trading their personal accounts, and what percentage of their income comes from "other sources and activities." This would have been a very helpful perspective for the reader.

Part Two, "The Systems," was also fascinating. I don't know how many of you are familiar with the TradeStation or the SystemWriter "Performance Summary," but there is nothing like it for giving you a "feel" for how a system trades. If you read Joe's first book, "The Trading System Toolkit," it would give you some important insights into evaluating the "Performance Summaries" provided in this book.

(On a Personal Note: It is essential that you understand how to interpret the "Performance Summary," and understand some of the qualities which are considered to be desirable in an ideal trading system. Some of the trading systems provided in Part Two may be considered "unacceptable" by certain standards of evaluation. Therefore, I would suggest that you skip forward, and carefully read the "Performance Summaries" provided for Joe Krutsinger's two trading systems, and use these system results as a "standard of comparison," before reviewing other test results.)

We have all read the "over hyped" exaggerated advertisements for the next "Holy Grail" trading system which promises phenomenal triple-digit returns in as little as 5-minutes a day. Well, if you ever needed a "hit up-side the head" combined with a "cold splash of reality" for you to finally get the message concerning these fraudulent advertising claims, just review the "Performance Summaries" in Part Two of this book. The traders interviewed for this book are professionals. They make their living trading. Many of them are up at the crack-of-dawn and work late into the night. So when you review the performance results over the 10-year test period, and see: Irregular returns; Heavy drawdowns; Large numbers of consecutive losses; A single large profit dominating overall returns; And, a low percentage of profitable trades. That's reality folks . . . And it doesn't get much better than that . . . So the next time the "Holy Grail Seminar Company" comes to town, ignore the promises of unlimited wealth, and save yourself a lot of money and aggravation -- Instead of going to these get-rich-quick seminars, rent yourself a video of "Trading Places," and have a pizza.

This book is another fine example of Joe's commitment to "telling it like it is." And, providing solid information and usable trading techniques that traders like you and I can actually use as part of our regular trading methods. Congratulations Joe, on another job well done.

On a personal note: As you read through each of the Master Trader biographies, I am struck by how often each of the traders has "other sources of income outside their actual trading accounts. Some Master Traders are brokers, others actively market their systems, or offer seminars, or newsletters, and others have regular pay checks or are consultants. Now, I have no doubt that for many of the traders interviewed, their personal trading profits represent the lions' share of their annual income.

(It would have been nice if Joe had included personal financial information on each of the interviewee's.) But, I have a feeling the more stable and predictable flow of income, from these "other sources," can be psychologically quite supportive and beneficial. The reason I say this is because I had a personal experience that I'd like to share with you when I stopped "working," and began trading full time. In the past I had always viewed my regular "steady income" as "real money," and my trading profits and losses as just numbers that I used for keeping score as I played the game.

It was very easy for me to separate and detach myself from the daily trading profits and losses. It was never real money to me and I was totally insensitive to the daily fluctuations. A $50,000 daily drawdown meant nothing to me, it was nothing more than just a negative number for that day's gaming activities, and had no lasting impact on the grand scheme of things. When l stopped "working" and the steady flow of "real money" stopped, I lost my perspective for awhile and began to think of my trading profits and losses as "real money" instead of just numbers for the purpose of keeping score as I played the game.

My psychological attitude briefly changed, I no longer was as detached as I had been in the past -- I began "holding on too tight" and I was "losing the edge." I began making poor investment decisions which were motivated by the fear of losing. Once I realized what was happening, I had to make a conscious effort to regain the previous detachment that I once had. The entire process took me almost a year to complete. But now, I'm back again.

With the wisdom of hindsight, I can see where it would have been far easier to just replace the lost flow of steady income with another source of steady income, and avoid having to deal with the problem altogether. I have a feeling that these Master Traders deliberately maintained their steady flow of "real money" income, so they could keep their "edge," and maintain that very necessary detachment and perspective regarding their trading capital. It is my hope that this personal story may help some of you make the transition to "full-time trader" a bit easier).

A Hard Look At Daytrading
Reprinted with permission of Technical Traders Bulletin

We receive more requests for articles and advice on daytrading 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 daytrading 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 this sounds like fun, but as you might imagine, there are many pitfalls along the way. We've come to realize, after talking to numerous traders who have attempted or are about to begin daytrading, 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 daytrading 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 exchange floors 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 Odds

As 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 daytrading, 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 daytrading 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 daytrading 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 Daytrading

As we pointed out earlier, there are very few markets that have wide enough infra-day price swings to make them suitable candidates for daytrading. 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 daytrading 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 daytrading. 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 daytrading 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 daytrading in only those markets with very high volume. Otherwise, you can be making good timing decisions and still be assured of losing money.

Technical Analysis Deemed Fraud by U.S. Government - Frank A. Taucher

Sometimes our leviathan government strikes a decisive blow before its opponents even realize the fight has begun.

Such a blow appears to have been delivered against the study of technical analysis in several recent government decisions culminating in CFTC vs. R & W TECHNICAL SERVICES INC. In this case, government concluded that those who engage in the practice of technical analysis perpetuate fraud when they market their knowledge.

According to the government, "[R}espected scholars are virtually unified in their recognition that even the most legitimate technical systems (with their hypothetical and retroactive foundations) are incapable of providing the trader with any significant market advantage." (Note 75, p 41)

"The efficient market capital model emphatically contests the notion that financial markets are so inefficient that speculators can exploit these markets' inability to adjust to all types of information. Although the limits of the efficient capital market model, and its implications for regulatory policy, are a dependable source for endless debate, few dispute the model's general predictive powers. In fact, many important regulatory policies are predicated on the model's accuracy. See, e.g., Basic, Inc. v. Levinson, 485 U.S. 224 (1988) ("fraud on the market" action for a violation of Securities Exchange Commission Rule 10b-5); In re LTV Securities Litigation, 88 F.R.D. 134 (N.D. Texas 1980)." (Note 74, p 41)

"Virtually the entire economic community is in agreement, however, that the efficiency of the market is sufficiently strong so that all publicly available information is rapidly disseminated and is then almost instantaneously reflected in the price for any widely traded investment contract. As a consequence, investor analysis of specific investment contracts will not lead to superior gains, since it will require an analyst to predict value better than the market as a whole. Thus, while some traders will profit while others will lose the outcome of speculative investment is unlikely to significantly outperform chance.

See Dennis, Materiality And The Efficient Capital Market Model: A Recipe For The Total Mix, 25 Wm. & Mary L. Rev. 371 (1984); Posner, Economic Analysis of Law, Ch. 15 (4th ed. 1992); Comment, The Efficient Capital Market Hypothesis, Economic Theory and the Regulation of the Securities Industry, 29 Stan. L. Rev. 1031 (1977); Fischel, Use of Modern Finance Theory in Securities Fraud Cases Involving Actively Traded Securities, 38 Bus. Law. 1 (1982); Lorie & Hamilton, The Stock Market: Theories and Evidence (1973); Fama (1970)." (note 75, page 41)

Judge Lhevine relied primarily on past precedent, the book "Futures and Options Contracting" by Marshall (1989), pp 416-422, "The McGraw-Hill Handbook of Commodities and Futures" by Martin J. Pring (1985), pp 36-8, and "Declaration of [NFA employee] Daniel Driscoll" in discussing the "generally recognized deficiencies of technical modeling." (p 14) (It should be noted that the NFA was not a disinterested party since it proposed to administer R&W's restitution fund).

"Technical analysts . . . first make a deterministic (one might say spiritual) leap of faith that non-random price patterns exist. They then illogically posit that these patterns, once revealed to the few (or indeed -- through marketing -- to the many), may be successfully exploited in trading. To accomplish this, of course, the 'pattern' must remain undetected by others (otherwise the increased market activity defeats the 'pattern' by driving the price to a point where speculation is no longer profitable). See Marshall (1989) at 263-264. Public policy presumes that markets are not so witless. 'The presumption is [] supported by common sense and probability [as] recent empirical studies have tended to confirm Congress' premise that the market price of shares traded on well-developed markets reflects all publicly available information . . . Basic, 485 U.S. at 246." (Note 75, page 41)

Government has further concluded that the fraud perpetrated by technical analysts extends to "registrants and non-registrants alike' (p 27) and to those who are not even involved in the opening of a trading account (see note 56 and Hirk v. Aqri-Research Council, Inc., 561 F.2d 96, 104 (7th Cir. 1977) pp 30-31). "[A]ny solicitation fraud is consummated without a showing of actual trading or injury" (p 31). "A finding of intentional wrongdoing may be supported by inferences from circumstantial evidence." (p 34)

Think your honest intentions provide a defense? Then consider that "no amount of honest belief that the enterprise would ultimately make money [could] justify baseless, false or reckless misrepresentation or promises." (p 36 and United States v. Boyer, 694 F.2d 58, 60 (3d Cir. 1982). In fact, "intent to injure [the] customer [is] not [even] required" for the government to prove fraud (p 36 and Haltimer v. CFTC, 554 F.2d 556, 562 (2d Cir. 1977). "[P]roof of actual injury is not required. [Government] need not show that customers actually relied to their financial detriment on respondents' misrepresentations." (Note 70, P 38)

Furthermore, don't plan on relying on the success of your product, either. In the R&W matter, for instance, government's own witness, Prudential Bache broker, Thomas Otten, testified that he "generated $60,000 profit, and that he generally likes the product." (p 16) Such testimony was dismissed by the government, however, as "gossamer" and of "no weight" since the profits "could easily have been result of chance." (p 16)

"[A]ny marketers' claim of increased profitability or reduced risk through the use of these systems is likely to be fraudulent." (Note 75, page 41) Hence, the standard government has established as precedent is that the technical analyst is defined as a per SE fraud before the technical analyst even walks through the courthouse doors.

It thus becomes the function of government to but spin the wheel and identify the targeted analyst -- sort of a "fraudulent technical analyst of the month" club.

Sound like something out of the Russian Archipelago? It gets worse! Judge Lhevine admitted that Constitutional protection such as the First Amendment need not even be considered in such actions. (p 46)

Government has conveniently failed to incorporate existing controvertible evidence in its conclusion, such as how the two greatest trading achievements of our era, Larry Williams' 1987 increase of a $10,000 account to over $1,000,000 in less than one year and "The Seasonal Trade Portfolio's First Place finish in "The $40 million Investment Challenge" for having established the highest non-retroactive ROI from 1980 to 1993, were both accomplished by using pure technical analysis.

Nor is allowance made for the use of technical analysis as the primary investment tool in most futures funds and in many stock mutual funds such as momentum funds.

Nor are the accomplishments of the investment sources the government relies upon anywhere cited in its conclusion.

For example, what investment successes might that well-known trader and author of the "Declaration of Daniel Driscoll" and the other authors claim that would justify government's reliance on these people's opinion to the exclusion of all others? Or do their investment credentials consist solely of academic, Hypothetical studies and sales of books? Are these not pertinent questions since public policy is being determined on the basis of these "experts"' knowledge?

If Mr. Driscoll and the other authors have no noteworthy investment results of which to speak, then is government's conclusion regarding the value of technical analysis not unfounded, maybe even Hypothetical? If Hypothetical, did the government include its famous disclosure statement regarding the value of Hypothetical information when it rendered its conclusion? If government's conclusion is unfounded, then is government's technical analysis standard not intentionally meant to deceive and mislead the public as to the value of technical analysis? Is such deception not fraud?

Are we to condone fraud which is perpetrated by government?

If this standard is extended to other professions, will coaches be labeled as frauds when their players do not develop into Barry Sanders?

Look through your favorite publication. How many of the authors are to be thrown into government's dungeons because of their willingness to share their knowledge of technical analysis with the rest of us?

How many will continue to share their insights with the public after learning of government's new technical analysis standard?

Is government's standard not a prima facie example of First Amendment prior restraint?

Will I have to share a jail cell with Louis Rukheiser and his elves?

Will Abbey Joseph Cohen, Bob Farrell and George Soros be thrown in prison with me?

'Must I declare to my friends and acquaintances that my lifelong profession is "Technician," or should I print "Charlatan" on my business card? Which does government prefer?

Who's next? Astrologers? Psychologists? Gardeners? Priests? Jews? Republicans? Democrats? Slovenians? YOU?

A Qualified Apology - Trevor Byatt

In reply to Richard Bearse's letter (CTCN Nov/Dec 97 - Vol 5-No 6). I most sincerely apologize if it was construed from my letter in the previous CTCN that I was critical of attempts to stop the CFTC effectively stifling free speech and the dissemination of information within the futures industry. This was most definitely not my intention. On the contrary I heartily applaud your resentment of this unbelievably outrageous behavior of lazy, pompous government officials using taxpayers money (much of it 'stolen' from members of the futures industry in order to use it against them!!) to protect their cushy jobs.

Go for them fellows, as hard as you can, with my strongest encouragement from afar for what it's worth. It is of course so unfortunate and unfair that these slime-bags have infinite financial resources (yours!!!) to use against you.

Now for my qualification. I was in fact referring to the relatively private fights and, if you re-read my letter, you will see my references to the Advantage Trading Group and BMI - but no reference to the CFTC.

However, I can now see why Richard assumed this implication of my including the CFTC and I do not criticize him in any way for this.

OPTIONS & SPREADS: Devon Cream & A Fine Piece of Armor
Greg Donio

England. 1921. The writing desk of Logan Pearsall Smith: "I found it not difficult to revive with a certain vividness the memory of those cold and rainy November weeks that I had happened to spend alone, some years ago, in Venice, and of the churches which I had so frequently haunted. Especially I remembered the great dreary church in the campo near my lodgings, into which I would often go on my way to my rooms in the twilight.

It was the season when all the Venice churches are draped in black, and services for the dead are held in them at dawn and twilight; and when I entered this Baroque interior, with its twisted columns and volutes and high-piled, hideous tombs, adorned with skeletons and allegorical figures and angels blowing trumpets -- all so agitated, and yet all so dead and empty and frigid -- I would find the fantastic darkness filled with glimmering candles, and kneeling figures, and the discordant noise of chanting.

There I would sit, while outside night fell with the rain on Venice; the palaces and green canals faded into darkness, and the great bells, swinging against the low sky, sent the melancholy sound of their voices far over the lagoons. It was there, in this church, that I used to see Sir Eustace Carr; would generally find him in the same corner when I entered, and would sometimes watch his face, until the ceremonious extinguishing of the candles, one by one, left us in shadowy night.

It was a handsome and thoughtful face, and I remember more than once wondering what had brought him to Venice in that unseasonable month, and why he came so regularly to this monotonous service. It was as if some spell had drawn him; and now, with my curiosity newly awakened, I asked myself what had been that spell?"

What prompted these writing desk recollections and the "curiosity newly awakened," was the suicide of Sir Eustace Carr, a scholar noted for his explorations in the East and his discovery of tombs in the Nile Valley.

Pearsall Smith continued, "For I now sensed that the spell which had been on us both at that time in Venice had been nothing but the spell and tremendous incantation of the Thought of Death. The dreary city with its decaying palaces and great tomb-encrusted churches had really seemed, in those dark and desolate weeks, to be the home and metropolis of the King of Terrors. . . . Might not this be the clue to a history like that of Sir Eustace Carr's -- not only his interest in the buried East, his presence at that time in Venice, but also his unexplained and mysterious end?"

Unfortunately, Logan Pearsall Smith lent his Oxford scholasticism and creative writing flair to a British alehouse fallacy. Wherever tankards foamed, stories issued forth of Egyptologists struck down by "death curses" for invading the tomb of one or another pharaoh. Actually, the life expectancies of university archaeologists were no shorter than those of their counterparts in the Cambridge mathematics and literature departments. Nor does viewing Venetian twilights, rainfalls and candle-lit sarcophagi predispose one toward self-destruction.

Pearsall could be viewed as an object lesson regarding lack of skepticism, and financial traders need skepticism. Yet he deserved credit for addressing the "Where were you yesterday?" question and, relevant to that, the influence of context or milieu, whether crypt or saloon or pinball arcade or paneled clubrooms. The composition of a bowling team may not affect a singer's vocal cords but could affect a speculator's mental fine-tuning.

On New York TV after dark, a spot message appears asking "Do you know where your children are?" It never asks, "Where is the option trader or the stock trader or the futures trader, and what nefarious elements are influencing him?" Someone might say, "They are grown people and can take care of themselves." However, the 80 to 90 percent casualty rate among futures traders and the over 90 percent of out-of-money options expiring worthless indicate quite otherwise.

As an option spread strategist, I have been cautioned to stay out of dark places adorned with stone skeletons. Patrick Smith expressed doubt in prent whether it were even possible to profit from option spreads with any consistency. Warren Buffet declared that options should be outlawed! Carefully these men have avoided the pharaoh's curse and death's messenger in the darkening cathedral. Still I go forth with map and lantern.

Nevertheless, environment figures significantly enough that where you have a highball can be hazardous to your wealth. Classroom folklore at a New York University course in finance told of a man, the son of Italian immigrants. He took his degree in engineering, converted to Protestantism, and joined an all-white, all-gentile country club. On repeated occasions, he would return home, buy stocks and curse out minorities, both actions reflective of the talk he absorbed near the club's cocktail shaker.

He would invest in companies that had good strings of quarterly earnings, nice rises in share price, increasingly fine reputations -- all before he bought. He would purchase stock in companies that had just moved to larger headquarters, also thus-far successful retail and restaurant chains opening new units. An occasional club-member was an "insider," i.e., a corporate executive paid to say only good things about his employer.

What beatings that engineer took! He repeatedly -- in fact, systematically -- "bought at the top" to use the standard stock market phrase, and plunged along one downslope after another. In Biblical terminology he kept buying near the end of the "seven years of plenty" and suffering the "seven lean years." After enduring such plague and pox through 1992/93, he turned to bonds and became a devout coupon-clipper.

One could blame the tendency of many Italian-Americans to be "more Establishment than the Establishment." He swallowed whole the official optimism; predict only sunshine over the tennis court tomorrow. Another factor could be the loss of immigrant boat savvy. Sure, plenty of immigrants got suckered via three-card monte, and shell games in dives along the waterfront. Yet often money in a sock provided the down payment for a store. So whether the credentials are "first papers" or a degree, whether the surroundings are Duncan Phyfe and Waterford crystal or clam-shell ash trays, a wine barrel and sawdust on the floor, ways have been found to lose money or make it.

Like most independent traders, I am more than a tobacco can dollar-saver and less than a portfolio manager for Tiffany. Also, I am fallible. As mentioned in previous articles, my standard strategy is to position a call option spread (a horizontal calendar spread) above a stock that is trending upward and has a conservative price/earnings ratio or a put option spread under a stock that is trending downward and has an inflated price/earnings ratio.

In late December of 1997, Microsoft (stock symbol MSFT; option symbol MSQ) hovered around 119 and 120, down from a high of 150, with the price/earnings ratio in the 40s as opposed to the average market PE around 18. MSQ "110" put options appeared close enough to the share price to be plump, but far enough not to go "into the money" on a slight fluctuation. I phoned the broker and said, "Buy 10 MSQ put options, March expiration date with a strike price of 110. Sell 10 MSQ puts, February, strike-price 110. With a debit of 1-3/8 points. The two orders going in together, each contingent on the other, with the "sell" covered by the "buy."

That closing statement is in fact a definition of this type of spread order. The "sell" cannot happen unless the "buy" happens and vice-versa. The bought options covering the sold ones make the latter a "covered sale" as opposed to a "naked sale." That the bought options have a different month as expiration date than the sold (buy March, sell February) makes this a "calendar spread." That the bought and the sold have the same strike-price (110) earns it the name "horizontal calendar spread." Also, since the bought Marches cost more than the sold Februarys bring in (the nearer expiration date, the less time resulting in less value), this classifies as a "debit spread," the debit being the difference that trader must pay. My telling the broker "a debit of 1-3/8 points" limits my cost on 10 bought/10 sold to $1,375 or less plus commissions.

The above is stated strictly for instructional purposes because the tandem buy/sell transactions did not occur. At the end of the trading day the broker said, "Nothing done." The next day, Microsoft shares rose nearly five points to 125 and a fraction. A temporary fluctuation, I told myself. Surely the stock is trending down. I moved my strategy up the map to the put options with the strike-prices of 115. Buy 10 Marches, sell 10 Februarys, I instructed the broker, this time with a debit of 1-½ Another "Nothing done."

That turned out to be most fortunate. Microsoft kept rising. At the time of this end-of-January writing, the shares are pushing 150, shrinking the February 110 and 115 puts to fractions and the Marches to not much more. The $1,375 or $1,500 plus commissions I almost paid would have been worth under a thousand and sinking. Didn't I say I was fallible? Also in previous articles that spread strategies are loss-resistant but not loss-proof? And that too large a portion of one's capital should not be floated on any one venture?

If luck was one factor in turning me away at the door from a losing game, another was my stinginess. Here may be the time to explain how I choose my "debit" figure when applying to open (begin) a spread position. On December 26, 1997, Microsoft's February 110 puts were priced at bid 3-¼; ask 3-5/8. The April 110s were bid 4-5/8; ask 5. The gap between the two bids was 1-3/8, same as the gap between the two asks. So 1-3/8 served as the debit figure I gave the broker.

The bid gap does not always match the ask one. Often the former is smaller so that is the one I choose. Stingy--remember? The next day, when Microsoft shares rose and I switched my focus to the puts with the 115 strike-prices, the February 115s were bid 3; ask 3-1/8. The April bid 4-½; ask 4-7/8. A 1-½ point bid gap but a 1-¾ point chasm in the ask. "A debit of 1-½ points," said the trader to the broker.

An option spreader who does not get at least some occasional "Nothing done" reports is probably paying too much at the "opening a position" stage. Not only does this risk a larger chunk of capital. It makes making a profit more difficult by setting a higher "figure to beat." Also, in my recent near-experience with Microsoft, the stingy size of the debit left too small a door for a bad deal to enter. Swindler George 0. Parker, the original "Brooklyn Bridge seller" of the 1880s, had a knack for estimating the financial capacity of his dupes before he formulated an asking price. Yet within the limits of their available capital, it was the insignia suckers NOT to say, "It's too expensive." If a mark had $10,000, then 10 grand was a "reasonable price." Smart money keeps the bets low.

The game is afoot, Watson! After the second "Nothing done," Microsoft shares kept rising and I abandoned any thought of a put option position around that stock. Despite my previous limited-time satisfaction with Dell Computer, that stock seemed to whipsaw volatile and hard to anticipate in its movements for a careful put or call strategy. A couple of New York bank shares caught my eye. Meaty multi-point options. Limited volatility.

During early and mid-January, Citicorp shares (CCI) moved between 132-¼ and 110-5/8, gradually narrowing its range to the teens, with a price/earnings ratio of 17. Chase Manhattan Bank (CMB) swam between 98-9/16 and 112-11/16 before floating in the lower middle part of that range, with a P/E of 13. I focused on Chase Manhattan because of its narrower range. I usually do not position puts under a stock with such a conservative P/E, but Chase appeared to suffer from substantial lethargy in terms of upward motion, more so than Citicorp.

On January 14, 1993-2014, Chase's February 100 put options were priced at bid 2-5/8; ask 3. The March 100s were bid 3-5/8; ask 4. The bid gap and ask gap were the same, a single point. I entered an order to buy 10 Marches and sell 10 Februarys with one-point debit. Same order to "open a position" the next day. Two "Nothing dones." The problem? Low volume in terms of the number of options traded. On January 14, only 34 CMB February 100 puts traded, all early in the day. 80 March 100s traded early in the day and two more later. Contrast this to the hundreds or thousands of puts and calls traded daily on many other stocks. For an option trader, low volume means the deer are spread too far apart in the forest.

IBM had and still has at the time of this writing a fairly conservative P/E of 18. Yet after hitting an all-time high of 113-½ it returned to the same pond it had been swimming in, between approximately 96 and approximately 108. On January 6 and 7, the shares hovered around 106 and 104, dipping a bit, climbing a bit. Appearing lethargic on the upside, it seemed a good candidate for a put spread. IBM's February 100 puts and April 100 puts were 1-½ in the bid gap and 1-5/8 in the ask gap. Stingily I entered a buy 10 Aprils/sell 10 Februarys order with a 1-½ point debit. Nothing done.

Subsequently, though gaps remained approximately the same, I raised the debit to 1-5/8 while entering an otherwise duplicate order to open a spread position. For a tightwad trader, an eighth of a point is a hefty boost of the ante and a quarter point raise is unthinkable. Finally the sweet words cometh: "You bought 10 April 100s at 5-3/8 and you sold 10 February 100s at 3-¾." I was in the game for a debit or "spread" between those two batches at 1-5/8 points, or $1,625 of my own capital plus commissions.

In the trading days that followed, IBM stock twice dipped "into the money" (99 & a fraction) but pulled "out of the money" before the close of trading. Since "in the money" options are "assigned overnight," there is no danger of an exercise during the trading day. Then the shares climbed to 108-3/8 in anticipation of the quarterly earnings report. The earnings were approximately on target, a couple of cents below some estimates, a penny above others. The next day (January 21) the stock fell to 100 and a fraction. Many stockholders believe that even if the earnings report is all right, it is the zenith and time to bail out.

The next day, the shares again dipped fractionally "into the money." During the final hour of trading, I saw that my options were going to close slightly in the money, but I chose to stand pat rather than pull out. My "short end" February puts or "obligation" options on the short end of the spread were bid 3-¾; ask 3-_. The "long end" April puts or "mine alone" options on the long end of the spread, were bid 5-7/8; ask 6. The chasm with my money in it had widened somewhat.

The value of the short-end options are a stopgap protection against exercise, which could wipe out the long end. If specific put options are one point into the money and trade on the market for 3-½ points, a put-holder could gain $1,000 by exercising 10 of them, i.e., selling stock shares for $1,000 more than their market value. In doing so, however, he would turn $3,500 worth of options he owns into spent cartridges completely worthless. The put-holder would do 250% better by selling those options.

As I have written previously, it is a protection I use for only one night because of another danger that the trend-follower in me guards against. If the shares continue in that direction and push the options deeper into the money, that tends to squeeze or reduce the size of the spread, a minus for the spread strategist.

Options that are deep in the money vary only slightly in price from one month (one expiration date) to the next, and that is precisely where the spreader wants mucho difference.

Less than an hour before the close of the next trading day, IBM shares inched up to 99-7/8. Wonderful! I anticipated them closing at or above the 100 mark -- out of the money. Then during the last half hour I phoned the broker repeatedly for quotes. 99-1/8! 99-1/16! No. Bail-out time. My Februarys were bid 3-½ ; ask 3-5/8; last traded at 3-5/8. My Aprils were bid 5-5/8; ask 5-7/8; last traded at 5-5/8. The best thing would be my offering to buy back the Februarys at a fraction under their high figure and offering to sell the Aprils at a fraction over their low figure. But there was not time.

With minutes to go in the trading day, I told the broker, "Buy back the Februarys at the market. Sell the Aprils at the market. Both to close the position." Although I hoped for the best, the worst happened, although the worst was still on the plus side. I bought back the Februarys at their worst or higher figure, the 3-5/8 ask, and sold the Aprils at their worst or lower figure, the 5-5/8 bid. An even two-point "spread" at exiting. A profit after commissions of $167. A 9.6% gain on $l,740 (with commissions). Although I had hoped for better, a 9.6% profit in two and a half weeks annualizes to over 190%.

During the next two trading days, IBM continued downward to 95-5/8, squeezing the spread between the Februarys and the Aprils to l-3/8. While I certainly did not "break the bank," nevertheless I could enjoy pocketing some winnings and tipping the croupier a chip. This carafe or this half-decanter is some nice contrast to Warren Buffett and the buffeting of Berkshire Hathaway or the "Soros Funds Take A Bath" financial page headline or Victor Niederhoffer galloping like a financial Custer-knows-he-can't-lose.

One knows that one is doing something right when counting profit dollars while Elaine Garzarelli weeps on her manicotti (or growls over her beef Stroganoff, lest I be accused of sexual or ethnic stereotyping) about the liquidation of her slow-at-the-starting-gate mutual fund. After the "Red Baron" Manfred Von Richthofen shot down an enemy plane, he would have a Berlin jeweler make a two-inch-tall silver trophy-type cup as a shelf commemorative. Etched on the silver were the number in the Baron's sequence of victories and an abbreviation of the plane type that lost. For example, "36 B2" meant "36th kill, Bristol two-seater," a British craft. I do something a bit similar after taking a profit.

Following a win, I buy some permanent item for the drawer or the shelf. Recently I went to the Strand second-hand book store near Manhattan's South Street Seaport and bought the hardcover Book of Crowns and Cottages (dated 1925) by Robert P. Tristram Coffin who, like Logan Pearsall Smith, was an American who went to England, studied at Oxford, and became a noted essayist. Afterward I happened to stroll through the busy ground floor mall of the World Trade Center, New York City's tallest pair of buildings.

The Schwab discount brokers have an office near heavy pedestrian traffic there. Above the display windows, a horizontal-band electric sign showed current stock quotes in lighted letters and numbers moving from left to right. More than a dozen men had gathered to watch. A voice inside told me to keep walking and reminded me of the bagged book I was carrying. Always I have been adamantly against letting speculations or investments be a gambling-style addiction. That scene bore an uncomfortable resemblance to excited horse-players gathered around a radio. "Around the turn, Bluegrass Hank is gaining on Royal Sword!"

I sat at one of the metal tables on the Trade Center's giant outdoor veranda on the sunny but chilly afternoon. The cold lured me to the spring-ish writings in the Tristram Coffin book, particularly, "Saints & Creams & Devon Things." Coastal Devon or Devonshire constitutes the southwest corner of England, bordered on the south by the English Channel and on the north by the Bristol Channel. The population includes Anglo Saxons, Celts and some Danish ancestry from Viking days.

The resulting folklore includes English heroes, Irish Catholic saints and ghosts of Norsemen. Robert Tristram Coffin found just as noteworthy a certain delicacy from the region's cottage kitchens: "I shall never be able to describe Devon cream . . . I know now that it is all the work of the Devon saints and the Devon fairies. The cream will not rise into that thick foam of sheer delight in an alien place. Perhaps the virtue lies partly in the homemade crockery of Devon clay.

"But more certainly it is the witching marriage of the sweet savors of the sea with the matchless tang of thyme and odor of Devon orchards and meadows that makes the food of the angels going by the name of clotted cream. And to such things as these the fairies attend. Whoever has not heard of the Devon saints, or at least felt his religion to be something like apple blossoms or first humble bluets of a young year, full of the grace of simplicity--he has yet to find a real religion. The man who has never eaten his June strawberries with clotted cream has never known the taste of strawberries at all, has never found how closely Eden borders on our earth."

A delightful hillside of red and yellow marigolds for a winter's day! Elsewhere in the volume he wrote of a "spot in England where May comes with miles of bluebells until they look like smoke under the trees" and of the "angel down that is the English morning clouds over the elms."

"Mr. Donio?" I looked up from the pages. I recognized the 30-something woman as one of the assistants at the discount brokerage house that had my retirement account. She heeded my gesture to be seated. "I saw your name on our records," she said, "and the same day I happened to see your name in a Film Flubs book."

It was Film Flubs -- The Sequel by Bill Givens. Givens had printed my name in the book along with an "anonymous authorship" verse I had sent him, an old four-liner that joked about the lack of historical accuracy in Cecil B. DeMille movies: "Cecil B. DeMille/Much against his will/Was persuaded to keep Moses/Out of the Wars of the Roses."

She asked, "Why would a stocks & options man be interested in film flubs?"

"For one thing, I'm a staunch believer that traders should have other areas of interest. Too many of them pace the floor nervous horse-players. It's better to be like the diamond dealer who's also interested in chess or antique bronze." I fingered the hardcover. "Or my reading British essayists."

"Also, a trader needs power of observation and sense of detail, and screen foul-ups are one way to test this. The fellow who watches Paul Revere's ride on screen and doesn't spot the telephone poles in the distance probably won't spot the flaws in a speculative strategy. Somebody in a Wild West movie boards a train to go back east, and the train chugs off into the sunset. The trader who overlooks that could overlook a sly trend in one of the markets."

She responded by talking about an item from the Givens book -- The Babe Ruth Story starring William Bendix, set mostly in the 1920s but filmed in the late 1940s. In 1927 the Babe hits his landmark 60th home run, and runs the bases in Yankee Stadium past billboards for Calvert's Whiskey and Ballantine Beer. In 1927 the Prohibition police would not have liked that.

"I remember that movie," I replied. "The film makers were so busy trying to mechanically jerk tears with the boy in the wheelchair and the boy in the hospital bed that they overlooked things like the famous southpaw autographing baseballs after a game with his right hand, just after swatting lefty on the field yet! Didn't Bendix or the director have some tiny memory of the batter's box? A trader has to think more deeply than that and catch more details."

As armchair philosopher in an outdoor metal chair I continued, "I really hate to use that overused phrase 'contrary to popular belief' but a lot of what 'everybody knows' just isn't so, whether they get it from the movies or elsewhere, and a speculator should be one whose knowledge goes deeper than most, even for practice in other areas. There's no evidence that Christians were ever persecuted in the Roman Colosseum. There's no evidence that pirates ever made anybody "walk the plank." Vikings never wore horned helmets except in Wagnerian opera and on screen."

I added that the "quick draw" face-offs between cowboys were strictly a movie and TV invention. Firearms' experts say that if that were ever tried in real life, whoever started to draw first would have such an advantage that it would be no contest. And the Trojan War fallacies!

"There is evidence that the Trojan War really happened," she interjected.

"Yes, but it was Bronze Age, with tools that couldn't cut hard stone or marble. Brick buildings with wood columns. The carved stone temples with the grooved marble columns in the Technicolor movies -- that was Periclean Greece, Iron Age, five centuries later. Five centuries. Hector and Achilles with that background were like Columbus at a shopping mall. Then there's goddess Aphrodite with the vaccination marks."

She smiled. "Well, the set designer was ahead of his time. And the actress set a good example for kids getting their shots. That's one way of serving the community."

Serving the community. The woman and I both happened to be letter-writers to the congressman, senator, governor, editor, and were voters and once-each prospective jurors. I also wrote to a state legislator and a couple of city elected officials.

Home again. During the next three trading days and the early part of the fourth, IBM shares moved within the high 90s. I saw no reason to emend my calculations that the stock swam between the high 90s and mid 100s. I figured that a call option spread at the 105 level would be a good position if the shares showed a sign of pointing upward. Having 96-ed and 97-ed for a couple of trading days, early on that fourth day IBM rose two points to 99 and a fraction. The March 105 calls were bid 2-3/16; ask 2-5/16. The April 105 calls were bid 3-3/8; ask 3-½. The bid gap and ask gap were both a sliver under 1-¼, so that seemed a good debit with which to enter a spread position.

A pointed warning is in order here. "Keeping pets" or "having favorites" can be dangerous for investors and speculators. To think that such-and-such a stock "has" to do what I expect or "can't possibly" go the wrong way or "can't possibly" pull surprises -- beliefs like that create shortcuts to the financial graveyard. I do not claim that IBM is "perfect" or "infallible" or a "sure win" roulette number game after game. I only claim that step by step it has produced -- so far. Currently I decided that it fit my requirements after I looked at other fleshy or meat-on-the-bone options.

After giving the broker a buy 10/sell 10 order with a 1-¼ point debit, I bought 10 IBM call options April 105 at 3-3/8 points ($3,375) and sold 10 IBM calls March 105 at 2-1/8 points ($2,125) paying 1-¼ points ($1,250) plus commissions out of my own capital. What rules-hammered-out-by-experience was I following? The short-end options (the sell side of the spread) must be worth more than half of the long-end (buy side) ones, and preferably something like two-thirds. The March's 2-1/8 point value is almost two-thirds of the April's 3-3/8. Also, the value of the short-end options should be at least two solid points and preferably more. Less than that is too thin a slab of beef. Hence the March at 2-1/8.

For the spread strategist, shrinkage (time-decay) potential on the short end means profit potential. So it needs some kind of bulk to start, like a couple of points minimum.

A few days after opening the March/April spread position, I glanced at some Xerox pages I had of excerpts from the book Italy--Rome and Naples--dated 1869--by French art critic and historian H.A. Taine. Scribbled on the title page was a tiny notation I had made a couple of months earlier, "Views and Films Index. 1906. Art Museums." I reread what Taine had written about the art work in the Monte Casino Chapel south of Rome, work by a leader of the Neapolitan art tradition.

"Paintings adorn the cupola ceiling, extend through the nave, overflow into the chapel, take possession of every corner, and display themselves in enormous compositions over the portals and arches. Colour is as flattering to the eye as a ball-dress. A charming 'Truth' by Luca Giordano, has scarcely any drapery but her blonde hair, and another figure, 'Benevolence' is, they say, a portrait of his wife.

"The other Virtues, so graceful, are the gay amorous ladies of an age buried in ignorance and resigned to despotism, one no longer concerned with aught but sonnets and gallantry. The painter rumples and tosses about his silks and stuffs, hangs pearls in dainty ears, puts glittering gold necklaces on fresh satiny shoulders, and so pursues the brilliant and agreeable that his fresco at the entrance, 'The Consecration of the Church' resembles a sumptuous and tumultuous scene at the opera."

My ballpoint "Films Index" notation referred to a passage in Frank Walsh's book Sin and Censorship. The dawn of mass-audience silent movies was also the dawn of film censorship and relevant controversies. Walsh cited both sides, starting with the 1906 editor of the very first movie magazine Views and Films Index:

". . . To those who claimed that the movies were undermining the country's morals, he pointed out that, when compared to the fully clothed actresses on the screen, the undraped statues in public museums were far more likely to 'arouse prurient thoughts.' But the nickelodeon's enemies knew that no one had ever gone wrong in a museum. Reformers had always viewed the city as a difficult place in which to raise children; these fears were now exacerbated by the sight of boys and girls lining up to enter the dimly lit theaters.

" . . . According to the Illinois Supreme Court, the city's right to ensure decency and morals were especially clear in the area of movies because the low admission price attracted children and the lower classes."

The lower classes? Interestingly, those shabbily-dressed immigrants had, while in the Old Country, seen Giordano's cathedral nudes and Verdi's operas about regicides and soiled virtue, all without it ripping their morals apart. In the past I have criticized Middle American "born agains" of the Rush Limbaugh/Pat Robertson stripe. Yet their bucket of blame is not the whole five gallons.

When I was a boy in Catholic school during the 1950s, those nuns said the words "nude" and "naked" with even more disgust than they said "sin" and "evil." You can imagine how well they knew the works of the Venetian colorists! If Illinois high court judges of Methodist and Baptist persuasions did not swarm through the art museum or the opera house, then neither did the Dominican blackfriars or the Franciscan nuns or the Knights of Columbus. So what happens when people who think like censors attempt to think like artists?

What occurs when the fellow who puts the fig leaf on Apollo tries to sculpt? The film-art equivalent of this actually happened. After World War One, anti-Catholic bigotry became an increasing problem, with the rapid growths of the Ku Klux Klan and Protestant revivalism adding to already-existing anti-immigrant prejudice. Catholic groups and individuals thus far intent on censoring films tried making them, aiming for a "better image" for American Catholics with the help of the big screen. Among the organizations was the National Catholic Welfare Conference, which had a Motion Picture Committee (a de facto "ban the filth" arm) bossed by Charles McMahon. Frank Walsh wrote:

"McMahon himself talked grandly of enlisting the best Catholic writers in the country to tell the real story of the Church in America: stories of the Catholic founding of California, the Jesuit missionaries in the Mississippi Valley, and the Catholic soldiers of the American Revolution. Yet the few movies the Church did turn out, including a four-reeler documenting the work of the New York Archdiocese's charities, had little appeal beyond parish recreation halls.

"The National Catholic Welfare Conference's own effort was a five-reel film in 1919 entitled American Catholics in War and Reconstruction, which it hoped would silence anti-Catholic bigotry forever by documenting the church's role on the battlefield, the home front, and the revitalization of Europe. Unfortunately, a preview at the annual bishops' meeting in Washington indicated that the film itself was in desperate need of revitalization."

Of course, those decent, devout film makers would never corrupt their eyes by going to an art museum, never look at the huntress Diana covered by only a bow-string or the martyred Saint Sebastian, his naked body riddled with arrows, or a bacchanal mural by Rubens or Titian. This left them with only the faultiest sense of the visually vivid, and a notion of tradition very dog-act vaudeville rather than Veronese. The intention was to push the DeMille orgies off the screen and replace them with Catholics doing good works. The results were films with all the artistry and verve of the City Sanitation Code.

Famed director Vincente Minnelli had wanted to be a painter and it showed. So many of his sumptuously-composed movie scenes look like they belong in picture frames. How he must have beheld the art works and trained his eye, developed his power of observation and sense of detail. He would have made a good trader. In your thinking and your touchstones, please be a Vincente Minnelli and not a Charles McMahon. In serving your community, be an enemy to bigotry, of course, but be not a friend to paint-by-numbers thinking in fine arts or finance or any other area of earthly existence.

Option Strategy Update: IBM shares are still in the high 90s. March 105 call options have slipped from 2-1/8 to 1-¾. April 105s have slipped from 3-3/8 to 3. Negative news for non-spreading long players in both of these. But for the spreader? Notice that the gap between these figures is still 1-¾ points. No profit yet, but a fine layer of armor. (Written February 6th)

Van Drivers, Hairbraiders, At-home Entrepreneurs Say to Government: "Give Me A Break" Institute for Justice Clients

Washington, D.C. - Demonstrating the stupidity and pervasive nature of government regulations that keep would-be entrepreneurs from earning an honest living, various Institute for Justice clients were featured on ABC News "20/20" (aired 2-9-98) in a segment titled, "Give Me A break." Among those who will demonstrate that consequence of government standing in the way of opportunity are: New York City dollar van drivers, African Hairbraiders and home-based Entrepreneurs, all of whom the Institute for Justice continues to assist in their quest for economic liberty.

The program showed the Institute for Justice in action and the people at the very heart of their litigation.

Editor's Note: The U.S. Government allegedly wants to license and regulate everything. The ABC Entrepreneurs included elderly women that sewed quilts & misc. to sell at craft shows. A black woman who baked and sold her baked goods in her neighborhood. She did this so she wouldn't have to go on welfare after losing her job. Soon everything we do, will be regulated by the government. Our freedoms are disappearing constantly with government's interference in our daily lives.

The Value of CTCN - R. L. Smith

Just a brief note to tell you how much I appreciate the great value of the very useful information in CTCN's collection of back-issues. As a beginner, I have already spent well over $1,000 on most of the popular books that a beginner should have. Although I have received a lot of good ideas from these other sources, the amount of helpful info in your newsletter far exceeds these other sources.

I find the first-hand accounts of the successes and failures of your wide range of members to be particularly instructive and even inspiring. I am presently re-reading many of the issues, because I find that as my own education increases, I get even more info from them the second time around.

Looking for Used Videotapes - Buzz

Buzz Ross would like to hear from anyone who has any of the following videotapes that they no longer need:

1. Curtis Arnold's PPS system;
2. Ryan Jones's conference presentation on Money Management.

Entry and Stop-Loss Methods - James Fu

I am using Larry Williams' basic approach. I follow his video course, his books, and his short-term entry techniques. I subscribe to his "Larry Live" hot line, 3-times a week without a miss.

I am currently trying to decide on a better entry and stop-loss methodology in addition to LW's observations. I would like very much to talk to:

1. Members who are experienced in using Dr. Alex Elder's 3-Screen method and particularly, his entry and stop-loss points - they are very close.

2. Members who are experienced in using R&W Technical Services' MasterSuite entry and stop-loss method.

3. Members who have experience using Linda Raschke's "Street Smarts" method.

The preferred way of communication is for club members to give information via CTCN for all to read and gain knowledge

Member Hans Brost has found what he thinks is probably the greatest commodities charting site on the web - www.tfc-charts.w2d.com . . . check it out . . . plus it's free.

Editor's Comments

As you know, our normal publishing schedule is to mail out CTCN toward the end of the issue month. For example, the Jan/Feb issue would normally be sent by the last week of Feb. Unfortunately, for some odd reason a last minute software bug developed on the day before we were taking CTCN to our printer, in our Word Perfect 6.0. This mysterious bug changed many of the numerals referenced by our contributors to some odd hexadecimal characters. This bug resulted in having to copy everything to a different computer and correct the numerical errors. Sorry for the delay with this issue being so late.

Our next issue will mark the end of our 5th year of continuous publication of CTCN. It has been a successful but also a difficult 5-years, what with lawsuits, U.S. Government CFTC involvement in our activities, threats of suits from places like the Lind-Waldock brokerage firm if we publish a negatively construed letter about them, etc. However, at the same time we feel like we have accomplished a lot as far as providing knowledge and information is concerned to our members.

We had lots of excellent contributions during these 42-issues of CTCN. A number of contributions were particularly good, but may have been missed by many of our newer members unless they ordered and read all of our back-issues.

Therefore, starting with this issue we are republishing an occasional past article or two that was extremely noteworthy and valuable. In addition to the benefit to our newer members, some of our long time members may also benefit from occasionally reading an article they may not have read or paid much attention to.

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: ctcn@webtrading.com Our Website address is 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.