Issue 15

Futures Truth's Numbers Are Accurate -
Key To Currencies System - John Hill

We standby the current numbers we publish on Dr. Greenwald's Key To Currencies System and firmly believe they are correct. We initially published numbers based on back-engineered logic on Dr. Greenwald's system.

We received a copy of his program logic anonymously from someone who has back-engineered the blackbox. This was tracked in Futures Truth using actual contract prices instead of continuous data. He decided to send us a copy of his blackbox system for a closer comparison. We were able to essentially duplicate results during this period.

Our historical tests with our program showed very similar results to his advertised results, except British Pound (see table below). His system is intended to be traded as a basket, thus the overall drawdown may be less (or more) than that shown for individual futures.

We were not aware of his dissatisfaction until the article in last month's Commodity Traders Club News. Because of his expression of displeasure and the possibility that he may have changed some of his basic logic since the blackbox he sent us expired, Futures Truth will cease publication immediately of numbers on his system in our Master Performance Table.

A private individual performance report will be available to investors on what we believe is his basic methodology.

We have always told vendors to show us where we are wrong and we will immediately correct them. This option is open to Dr. Greenwald and anyone else. We sincerely believe we programmed his basic methodology correctly.

Obviously, we cannot keep up with day-to-day changes, if any, in the methodology unless the vendor keeps us appraised of the changes and that is why we will cease showing numbers on his system.

If something is sold to the public, I believe Futures Truth has every right to publish results on those systems for the benefit of it subscribers only, irrespective of how the methodology comes to us.

(see P&L report on page 8 -Report in Print Copy)


John Hill on Russell Sands & Curve-Fitting

Russell Sands points out that all systems in Futures Truth are curve-fitted without every seeing a copy of our report. I believe that to be true... including his system. Technical analysis is simply taking past data and forecasting future results which is curve-fitting.

Mr. Sands' main argument is that his system does this better than others by money management or less curve-fitting. This may be true, but I suspect there are a number of systems in our reports that will do jut as good as his.

We also only present numbers without the benefit of hindsight, so this is an attempt to show the real world.


This Newsletter and It's Contents are
For Members Only - Wayne Roberts

For several years, I have subscribed to Club 3000 newsletter. Maybe you have too. Not long ago a contributor (he's been in there several times, don't remember his name, but it definitely wasn't Fred Montgomery) said he called the trading desk at Ira Epstein and got an answering machine.

As I understand it, he was trying to put on a trade, or maybe he was trying to get out of a losing trade, and what he got on the other end was a recorded message. I couldn't believe it!

When I read those words, Ira Epstein Co. was immediately crossed off as a broker, where I would ever be interested in opening an account.

Also I came to the realization that it's possible criticism could have been bought off via regular advertising or maybe scared away, as in a lawsuit, so it was possible we would have never seen that letter.

Would send you a photostat of that letter, except to do so would be breaking the law. Just like "Ray Simpson" broke the law. Unless he's a subscriber, Fred Montgomery's letter was never suppose to come before Epstein's eyes.

CTCN is confidential, closed-circuit for members only. What somebody doesn't like, or even want to know about these little insider tidbits, are one of the reasons we subscribe.

As I see it, Epstein's use of the word "publication" is a bit of a stretch. CTCN is more like a bunch of old boys chewing the fat at the corner service station. Anybody can say anything, because what is said never goes outside the group. The outside world never knows or cares what was said or isn't suppose to anyway.

Perhaps you've already taken care of this, but Commodity Traders Club News should be a separate corporation, completely divorced from any of your personal assets or trading accounts. CTCN's assets should be described, such as printing press, rented room, etc. Listen to me, I'm a high school graduate.


How to Trade Successfully - Mike James from New Zealand

To be a success as a trader, I believe that several things are important.

A sound game plan is vital. It needs to define:

a. A trading method with a positive outcome;

b. A money management strategy, that prevents the drawdown that occurs from taking you out of the game;

c. The psychological makeup to follow your plan faithfully.

I believe that investment success requires internal control more than any other factor. Unfortunately for them, from what I can see, most novice traders stop at point (a).

Sure you need a game plan that gives you an edge, but more importantly you MUST control risk, but in my experience that can amount to naught unless you make sure you don't sabotage yourself (read, not follow your rules).

So presuming you've got a trading method that your happy with, what's the next step.

For a start I'd like to recommend a couple of books that I've found very helpful. If you haven't got them in your library, I'd suggest you get them.

The first book is "Money Management Strategies for Future Traders" by Nauzer Balsara. For me, I found this a lot easier read and more practical than Ralph Vinces' two books.

As well as chapters covering such ground as "Limiting Risk through Diversification" and "Managing Unrealized Profits and Loses". The Appendix (which occupy some 80 pages) not only gives computer code that can be used to calculate risk of ruin but also gives information on the correlation coefficient for 24 different commodities. This can help in portfolio selection to make sure that your open positions are not unbalanced by being, say for example short three different currencies at the same time.

I would also strongly recommend the book the "Disciplined Trader" by Mark Douglas, which offers a lot of useful information on psychology, as well as another book I've just read, "The Inner Game of Trading" by Robert Koppel and Howard Abell.

The "Inner Game" has several interviews with top traders that make the book worthwhile just for that fact alone.

We've all heard the statistics. 95-98% losers. So here we have a business that is a zero sum game where the odds are, that at least 90% of people will loose! I'm sure if most of us were looking to start up a company in an area with a known failure rate of at least 90%, we would not go ahead in the same blithe manner that so many traders seem to.

Don't be fooled. This is a serous business that requires dedication and discipline to succeed. Arm yourself with the best tools you can find and make sure your own personal amour has no weak points.

I read somewhere that those who choose to trade subconsciously choose elements in their trading that not only complement their strengths, but will also confront their blind spots and weaknesses.

Think about that the next time your stress levels rise because you neglected to follow one of your rules.

What your trying to do on a subconscious level, is not necessarily gain financial reward but experiences such things as facing fear, self-worth and increase or decrease of personal power.

We have the choice of confronting our blind spots to heal them and move on, or reject that process and switch trading system or broker, etc.

You need to continually work on yourself. Just as markets change and must be adapted to, life itself for us as human beings is an evolutionary process. Hard, questioning self-analysis will go along way towards confronting our blind spots, to not only improve our trading results each month but also to enrich our personal life as we discover more about ourselves.


Trading Discipline - Ed Forys

I have found that the discipline problem is mainly one of exiting a trade. Therefore, before I enter the market, I know exactly what parameters will get me out. When that time comes, I exit the market, no matter what.

A trailing stop helps a lot to automate the exit.

I am not a "born trader" (most people aren't); this forces me to be a strict rule follower.

I think Larry Williams once said that one of his main winning characteristics is that he could follow a mechanical system faithfully to the letter.

While I am in the market, I don't change any of my rules to exit the market, especially if the trade

is in a losing position. When the exit signal comes, very seldom have I been able to override the rules and turn the losing trade into a winning trade (more so when trading S&P).

Sometimes, by overriding the rules, the losing trade becomes a big loser which one must absolutely avoid. It also helps me a great deal to have a panic message appear on my screen like "Exit Now! Trend has Reversed!"


Opinion on How Hillary Did It From A
European Trader - Stuart from Sweden

Per the article in March CTCN titled "If Hillary Made Money In Commodities, Why Can't You?" As a non-American living overseas, I have to say that my instinctive answer is "Because my husband is not a Governor."

I am not a jealous person, and I accept that Hillary is a highly intelligent women. But I simply do not believe that anybody, not anybody, can turn $1,000 into $100,00 in a year, and then stop playing the market.

There simply has to be fraud in there somewhere; whether it's her, Bill, someone else or whoever. This neither interests nor bothers me, (although that money was stolen from the likes of you and me), nor does the reason for such fraudulent activity, unless it eventually erupts into a Presidential scandal, which will affect the markets.

Surely nobody is naive enough to believe that she seriously made that money honestly, are they? If anybody is, what do you Americans know about politicians/lawyers that the rest of the world doesn't?


Precision Day Trading System - M. Kuhn

I purchased Precision based on its great track record published in its brochure and the fact it had a money-back guarantee.

After trading it for a couple months, I came to the conclusion it was not profitable.

I returned it for a refund. It took lots of effort and letters before I finally received my refund. However, I did in fact get the refund.

In my opinion readers of CTCN should avoid purchasing this system as it is not profitable as it's advertising indicates.


Simulation - Playing What If - Verl Philliber

Don't you sometimes wish that we could take an early peek at the effect of today's price action? It may be helpful to know, for example, that today's price action will:

Here is a way to use Swing Catcher's data management module to take a peek at the effect on today's action.

  1. Gather today's intra-day data. Your broker can provide it, or you can use data from CNBC.

  2. Starting at the Swing Catcher Main Menu:

Press <7> Utilities/Update/Edit/Rollovers
Press <F2> Edit/Update data
Press <F1> Select file to edit

Enter the number of your contract. This will bring up the Edit Screen. Press <U>pdate. Use the arrow keys to move the cursor, and insert values for Open, High, Low and Close (actually the last trade). Move the cursor to the bottom of the screen and press <R> return to menu.

Now when you run your chosen program, it will treat the new data as if it were end-of-day. If the price action is enough to trigger a trade for tomorrow, you may want to trade before the market closes today.

When you do your usual electronic download at the end of the day, most data services will simply overwrite the manual entries you made, so it's unnecessary to manually delete the intra-day data you entered.

Using this technique, you can alter the entries throughout the day as prices change. You can also insert artificial prices to see what levels prices will need to reach before a signal is triggered. This might be useful in setting stops.


Special Treatment of Hilary So She Made Money
Reprint with permission USA Today

Hillary Rodham Clinton had some special treatment while winning a small fortune in commodities, a four-week study by USA TODAY found.

Hillary Clinton's brief but spectacularly successful career as a commodities trader in the late 1970's looks more and more like a story out of the Wild West.

Like most Western yarns, it's filled with colorful characters, money, greed and shady dealings just this side of the law - and maybe a few steps beyond.

At an extraordinary news conference, the first lady told her version of the story: "The fundamental facts are ... I opened an account with my own money, I took the risk, I was the one who made the decision to stop trading."

She denied knowledge of trading abuses by her personal broker, Robert "Red" Bone, or her brokerage firm, Refco Inc. And she denied receiving preferential treatment from Refco's Springdale, Ark., office. "There's really no evidence of that," she said.

But court documents, regulatory rulings and other records reviewed by USA TODAY, and interviews with brokers and customers in the Springdale, Ark., office where Hillary traded, continue to raise questions - which she did not answer - about what she knew about Refco's trading activities, and when.

USA TODAY submitted a list of detailed questions to Clinton. In her news conference, Clinton and her staff answered those questions but did not address all the details.

Hillary says she knew nothing about any trading abuses in the Springdale office until months after she stopped trading with Refco. But records show many other Springdale clients, including her own investment advisor, longtime friend James Blair, knew about those questionable practices - and hoped to profit from them.

Court records and her trading statements also show Clinton repeatedly received preferential treatment from Bone in posting margin. Those favors enabled her to avoid large losses in July 1979.

By now, the main points of the story are well know. Between 10-78 and 7-79, Clinton made almost $100,000 trading cattle and other futures with Refco.

Her timing was perfect. In late 1978, the cattle market embarked on a wild ride, as prices first soared and then plunged. Many Springdale traders, including Bone, a some-time professional gambler, made and lost - small fortunes.

For the most part, Clinton correctly called each turn. She was aggressive, even reckless, sometimes opening and closing trades in a single day. But in July 1979, she abruptly stopped trading with Refco.

It was a stroke of apparent luck. In early October cattle prices collapsed. Springdale traders lost nearly $20 million. The Blair family lost $5.4 million, records show.

A number of traders, including Blair, filed suit against Refco and its chairman, Thomas Dittmer, charging they manipulated cattle prices in the summer and fall of 1979, causing the October losses.

Blair and Refco settled out of court. Records of the case were sealed. Arkansas juries ruled for the traders in several cases filed in federal court. Those judgements were later overturned on appeal.

Clinton closed her Refco account in 10-79. She says now she was too rattled by commodities trading.

But at roughly the same time, she opened an account with Stephens Inc., a Little Rock brokerage. Trading a variety of commodities, but not cattle, she made $6,498. She failed to pay taxes on those earnings until recently, when she paid $14,615 in federal and state taxes and penalties. In May of 1980, she left the commodities markets.

Clinton credits Blair for much of her success. "I trusted Jim Blair and it worked for me," she said. At the time, Blair was the main outside lawyer for Tyson Foods, one of Arkansas's biggest firms. He is now Tyson's general counsel. He is also a long-time activist in the Democratic party, and a donor to Democratic candidates, including Bill Clinton.

Blair's role has proven sensitive. While Clinton was trading with Refco, her husband was state attorney general, then governor. During Bill Clinton's time as governor, Tyson Foods received at least $7 million in state tax credits.

Records from the Springdale office also show that in 1978 and 1979, Tyson was one of the office's biggest customers, trading through three corporate accounts.

In 1977, Bone, a former Tyson executive, was barred from trading for a year by the Commodity Futures Trading Commission after a probe of manipulation in the egg futures market. Similar penalties were levied against Tyson Foods and its chairman, Don Tyson.

Hillary disclaimed close ties to Tyson. White House officials say she was not aware Tyson was a customer in the Springdale office. Tyson officials deny receiving any special favors from Bill Clinton.

Numerous efforts to reach Bone were unsuccessful. In interviews with The New York Times and The Wall Street Journal, Bone has denied any wrongdoing.

But court documents contain extensive testimony from Bone and other figures. Some specific allegations in those records:

Price manipulation. In 1983, Blair testified he believed Refco and Dittmer were manipulating cattle prices during the time he advised Clinton. He said Refco brokers and customers, trading together, "helped" move cattle prices, in part by controlling delivery of live cattle to market. "They wanted to see the market go up or see it go down. There wasn't any money to be made if it didn't move," Blair said.

During that time, Refco and its customers accounted for up to 40% of all cattle contracts traded on the Chicago Mercantile Exchange. Dittmer had sizable ownership stakes in cattle feed lots in Texas and Kansas.

Refco and Dittmer have denied any manipulation. But they, along with Bone, were disciplined in 1979 by the exchange for repeatedly violating exchange rules and reporting requirements while trading cattle in 1978 and 1979. The exchange levied a $250,000 fine against Refco, then the largest penalty ever imposed on a broker. Bone agreed to a three-year suspension of his right to trade on the exchange.

Trade allocation. Court evidence shows Bone and other Springdale brokers routinely placed trades in Refco house accounts, then distributed them to specific customers. Brokers and customers, including Blair, said trades often weren't allocated until after the mercantile exchange closed for the day.

That's a key point. Testimony shows Springdale brokers often executed large "day" trades, a purchase and sale the same day. By waiting until after the market closed, they would be able to tell which trades were winners and losers - before allocating them to customers. For that reason, block trading is closely watched by regulators. Holding trades until the end of the day is, and was, forbidden.

Blair now denies favoritism by the Springdale brokers. But David Jeffrey, a dentist who traded in Springdale during the same time as Clinton, raised the issue in a suit against Refco, and in a complaint he filed with the exchange against Dittmer, Bone and Jack Musteen, a Springdale broker.

"After the trading sessions ... orders were allocated to various accounts," Jeffrey charged. "In this way, defendants were able to illegally control the profit and loss characteristics of each account."

In 1983, the exchange ordered to Refco, Bone and Musteen to repay the $27,000 Jeffrey claimed he lost as a result of their actions. His lawsuit was dismissed in 1986.

Backdated trades. Two Springdale brokers, Bill McCurdy and Steven Johns, testified they participated in a cover-up of block trading in the Springdale office on a particular day in the summer of 1979. The pair were testifying as friendly witnesses for one of the investors who claimed he was defrauded by Refco.

The brokers claimed they were told to lock the office doors after the market closed, set back the clocks used to time stamp trader orders, and prepare phony customer order slips that could be substituted for the block orders actually placed during the day.

According to Johns' testimony, the date in question was June 27, 1979 - the day Clinton opened a trade that eventually would earn her $43,760 - her single most profitable commodities trade. It is also one of three days for which the White House says it can't locate Clinton's daily trading statements.

Johns and McCurdy refuse to discuss the incident. In their testimony, the two did not specifically claim winning or losing trades were back-allocated to specific customers.

Margin Waivers. Court testimony shows Bone frequently waived margin calls for certain customers - in effect, loaning them money to maintain their accounts. Clinton's records show she was repeatedly allowed to avoid posting margin, including on her June 27 trade. That shortfall peaked July 12, when her account showed a $61,000 loss. Under Refco's rules, she should have been required to add $92,364 to avoid having her account liquidated. Records show no deposit.

By waiving Clinton's margin call, Bone made it possible for her to wait until the market turned back in her favor. Ultimately, she made a profit of $24,631 on her trades.

Violations of account agreements. At her news conference, Clinton denied Bone could have allocated trades to her, because her account was non-discretionary, Federal and exchange rules require brokers to get customer approval before trading in non-discretionary accounts.

But numerous customers and brokers testified that Bone ignored restrictions on non-discretionary accounts. Blair said Bone often placed trades in his non-discretionary account without permission.


Validity of Seasonal Trading - John van Laar from the Netherlands

I have always been interested in seasonal trading. I have bought Frank Taucher's Almanac every year.

He claims good results, but there are so many trades in it. In his $upertrader's Almanac, there are 580 outright seasonal trades, 207 intra-market spreads, 389 inter-market spreads and 240 exotic spreads.

If you want to have positive results, you have to trade all the recommendations. You have to be a trader for a living to follow his recommendations and you need $100K for margin and drawdowns.

A method to reduce these huge amount of trades is to filter the trades. Maybe there are members who use this technique. I'm interested in hearing from these traders.

A far better system of seasonal recommendations is the Moore Research Center, Inc., who publishes the Moore Research Center Report. This is a monthly report with seasonal recommendations - spreads and outrights. In this 60 to 70 page report, Moore gives trade recommendations and articles about trading, trading techniques, etc.

What is the most important: he gives reviews of last month's trades, with per trade the trade equity, peak equity and the largest drawdown. He has fixed entry and exit dates. In his review of the latest month, I controlled, he used the close of the day.

I have purchased two reports April and November. The results are: April - Review of the last month's outrights: 36 trades: Closed 13 and Open 23. 13 trades Trade equity: $11,229.70 (without commission etc.) Largest drawdown $460. Review of the last month's spreads: 38 trades: Closed 16, Open trades 22. 16 Trades equity: $9,475.75 (without commission etc) Largest drawdown $2,710

November - The numbers are outright: 43 trades: Closed 16 and Open 27. 16 trades equity: $3,699.30. Max. drawdown $1,887 - Spreads: 41 trades. Closed 14, Open 27. Trade equity: $5,044.10. Max. drawdown $1,240

You see these are good numbers for the two random months.

I am not trading this year. Next year I hope to have time available to trade and will subscribe to the Moore reports and see how the results are for a whole year. If the numbers are good, I will follow the recommendations.

Perhaps my trading system can help fine tune the entry and exit dates. Maybe someone out there has experience with this matter of fine tuning? I agree with Ed Forys in the June issue of CTCN, that there is much garbage in seasonal recommendations. I think the Moore Institute is a good exception.

Last remark - I don't have any connections with Frank Taucher or the Moore Research Center.


Editor's Comments

Thanks to John Hill for his two contributions covering Dr. Greenwald's System and his comments on Russell Sands and curve-fitting.

There is no way CTCN can tell for sure if Futures Truth performance reports are 800 exact and accurate. However, John Hill and George Pruitt are very highly regarded and are extremely honest. They also try to do as careful a job as possible in tracking all those systems and compiling their reports. Keep in mind their job is very difficult and complex and they do an excellent job under difficult circumstances and with a small staff.

In reference to John Hill's remark that all systems are in fact curve-fitted. I also believe that to be correct. It seems to me that there really is no way to design a system without a knowledge of past prices or past patterns. As a result, a certain degree of curve-fitting is inevitable.

However, if CTCN Members differ with that opinion, they are invited to share their opinion with all CTCN Members. Subsequently we can all benefit from an exchange of ideas about the important subject of curve-fitting.

About Wayne Roberts contribution covering Ira Epstein and CTCN confidentiality. I called Mr. Ira Epstein about it and he has a very good reason and explanation for the so called answering machine. His reasoning for it makes a lot of sense to me and his detailed explanation will be published in the August edition of CTCN.

Reference CTCN confidentiality, Wayne is absolutely correct. The opinions and statements made are for members only and NOT for the general public.

Ed Forys made an important contribution. Yes, you should never change the rules while a trade is in progress. Your Editor and many other traders have unfortunately in the past deviated from that advise, which then resulted in larger losses.

For example, canceling or changing a stop-loss order to a greater stop, because the original stop is close to being hit, on the belief the market will soon go your way. Doing that almost always fails and results in a small loser becoming a large loser, sometime becoming a disastrous loss.

Reference Mr. Kuhn's opinion of Precision. He is very fortunate that he received a refund. Most trading systems do not have a money-back guarantee if dissatisfied or unhappy with it's performance.

There are many reasons for that, including the fact there's usually no way to tell for sure if the system was actually removed from the buyers computer, plus the costs of filling the order, sending it out, and the support and other expenses involved. In addition, all systems, regardless of their prior track record or their cost, have losing time periods and drawdowns, which can sometimes last for a number of weeks, or even several months.

It's always possible a newly acquired system entered a losing period about the time you received it, and consequently you may want a refund. Keep in mind, it may take 6-months to a full-year to properly evaluate a system. That's presuming you make every trade, rather than pick-and-choose, as most traders unfortunately tend to do.

Also, many system developers (especially non-blackbox systems) feel that once you know their algorithm and trading techniques, you were privy to confidential information that only system owners are entitled to.

An Error Correction: Last month there was an article titled Five Vertical Bars by Kent Calhoun. It stated Donchian's 20-day channel breakout system made a buy when a market closed above the prior four weeks lowest low. It should have said buys were made whenever a market closed above the prior four weeks HIGHEST HIGH. It also should have also gone on to explain that sells were made when the market closed below the prior four weeks lowest low.


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Special Note: 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: web-trading, D.B.A. Our E-mail address is: ctcn@web-trading Our Website address is www.web-trading Editor is Dave Green. The opinions and recommendations are those of our writers and not those of web-trading, 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.