Issue 18

Larry Williams on Copyrights

Let me shed some light on the legalities of copyright problems. The following is what I learned because of three trials where I sued people for knocking off my systems.

First, John Hill is only partially right that you cannot copyright an idea. Ask George Arndt, in my suit against him that was his main argument. The judge said that if a copy "was substantially similar" it was the same as a copy. He used an interesting analogy; Arndt had converted my copyrighted manual to computer code that was 99% the same.

The judge said that to not allow me to be compensated would be the same as letting someone translate Hemingway into French and then freely sell it as it would not be an exact copy of the English version. Arndt's lawyer, a former copyright and patent office employee made a big deal about the "idea" argument but it got him nowhere, other than a $400,000 judgment against Arndt.

I am convinced that any unauthorized work that is substantially similar to a copyright protected piece will net a judgment against the publisher/promoter of the copycat work. What's more I have, at various times, sued not on copyright infringement but the legal theory of unjust enrichment. All suits were won or settled in my favor.

This theory says that if I produce something and you make a similar version of it, it is not fair for you to profit from my work. Therefore, you will have to turn over all your income, not profits, and are liable for punitive damages as well. Note, this applies to works that have not been copyrighted as well, and includes punitive awards!

I'm no lawyer, but I've hired enough of the loopholers to know above will hold up, it did for me, and may give some security to people that do come up with new ideas and at the same time put the fear of large judgments into the copycat cowboys out there who never had an original idea in their life. P.S. Dave, keep up the excellent letter.


Update on Continued Pursuit of Advanced Trident Developments
Along With Charles Lindsay & His Whereabouts - Bill Kruse

You and I are familiar with the frustrations of others and lack of success in this pursuit. We sent a detailed request (Priority Mail) for information to Charles Lindsay via Windsor Books.

Upon receipt of this material, we decided to pursue some adjacent inquiries because of the uncomplimentary nature of many comments, both written and oral, that came up during our past pursuit of Advanced Trident and Mr. Lindsay.

Having at last, an address for Mr. Lindsay, Mrs. Kruse contacted the Better Business Bureau in Santa Barbara. The Better Business Bureau's rating of Tradebase Network is "Unsatisfactory for failure to respond to consumer complaints," with 2 complaints referred to District Attorney within the last 3-years.

When she phoned the District Attorney's office, she was informed that they handled one complaint and indicated that Mr. Lindsay had been "totally unresponsive." The D.A. turned it over to the federal authorities for postal fraud. (Please let me say at this point that Mrs. Kruse's excellent telephone techniques and determination are a large element in this project and in many others in the past.)

Study his materials as to content, and consider my comment on the quality and features: In his book, Mr. Lindsay repeatedly stresses the need for accuracy in thought and action; however, Mr. Lindsay's communications contain spelling and punctuation errors (with attention given to the idea we have no knowledge of Mr. Lindsay's age or his physical or mental condition).

Note - We know of one trader who complained to Windsor Books he couldn't establish communications to receive Tradebase signals. (We are offered three days of free signals. Wanted to correspond with you and pool our thinking before proceeding.)

Note - Would you or CTCN Members by any chance have a friend or trader in the Thousand Oaks, California, area? Just a thought should we want to eventually check out this address and see just what kind of an establishment Tradebase Network is. Will stop at this point. We do not want to influence your thinking before you have studied the materials, especially software descriptions!

We don't want to abandon this yet, but we want to be very careful how we proceed.

Editors's Note: The latest address we have for Mr. Lindsay is: 560 N Moorpark Rd. #192, Thousand Oaks, CA. 91360. Phone 805 379-4744. Our data base also has another trader with a different name at the same address (a different apt #), who may be connected to him.


A Simple But Very Profitable Approach For Trading Commodity Futures - David Stone

I have been using this methodology to trade the commodity markets successfully for some time now. The method is really quite simple and easy, but surprisingly profitable.

It involves buying higher swing-lows and selling lower swing-highs. Also known as pivot-points.

A definition of these swing-highs and swing-lows is appropriate here: A swing-high is a high bar with lower bars on both sides of it. A swing-low is a low bar with higher bars on both sides of it. The more lower bars to the left of a swing-high the better. The more higher bars to the left of the swing-low the better. That makes them more significant and presumably more powerful swing points. However, only one bar on either side is acceptable (but two or more to the left are usually stronger signals).

My trading methodology requires two (or more) consecutive swings, with the second one being a higher swing-low than the preceding one for a buy. Alternately, the second swing-high must be a lower swing-high than the preceding one for a sell.

The actual long trade entry takes place on a buy-stop two ticks above the high price of the last bar (the bar following the swing-low pivot bar), for a buy. The short trade takes place on a sell-stop at two-ticks under the low price of the last bar (the bar following the swing-high pivot bar), for a sell.

Your stop-loss order is placed 6-ticks under the lowest price of the last swing-low bar on a long trade. The short trade stop goes 6-ticks above the highest price of the last swing-high bar.

You can make some really outstanding money using this simple, but very effective trading methodology.

The signals look like this - in print copy only


Ideas on Sharing Knowledge So We Can All Benefit - Ismail Valiallah

As a new member of CTCN and CTCN being relatively new, I could not help myself formulate a set of guidelines that will be beneficial to all. I take it that our objective is to learn from one another, and also our and other members' mistakes.

To gain the most out of CTCN, certain requirements have to be addressed.

1. Traders: some of us are novices, others experienced. If we work on the assumption that all of us are novices/amateurs, everyone would benefit. Not only will the novices understand what is being discussed, but the experienced may uncover details that they overlooked.

Articles must contain full disclosure. That is if you are going to write about a particular system or method, don't assume that the readers are familiar with the system or method. It does not make sense to write about a system/method, assess its results and not tell you what the system or method is. Please don't assume that the readers are familiar with your systems/methods.

2. Programs/books/seminars: my guess is that all of us have one type of program or another. The same applies to books. But as you well know, a lot of it is junk! Therefore, I submit: a) If you are in the market to purchase a program or book lets help each other buy the good ones; b) A monthly review of specific programs/books/seminars will go a long way to help each other.

The way to go about this is very simple. If you have filled out Dave's survey, we have a starting point. It asks for what programs you own. A statistical analysis will decide which programs are owned by how many. Dave then can request opinions for a particular program in the upcoming newsletter for review in the following newsletter.

Your opinions should cover:

1. Name of program

2. Cost

3. Method it uses, i.e.: moving averages, Elliot Wave, trend following, algorithms, day trading, swing, etc.

4. Markets tradable

5. Good in predicting or signaling

6. Deficient in predicting or signaling

7. Ways to improve deficiencies

8. Overall performance and/or statistics if you have

9. Customer service

10. Can a fellow member discuss the program with you?

Note: No program is perfect. But what one may lack another may make up for. Some of us may be using a program incorrectly, therefore not getting the desired result. However, someone out there may maybe able to help you. If you need help, place a request in the newsletter outlining your problem and what sort of help you need. Let it be known that the help you receive should be free. The last thing we need is someone trying to make a fast buck.

3. Advertising: Lets not do what other newsletters and magazines do. Often an author/manufacturer will write one or more articles extolling the virtues of their methods and demonstrating their phenomenal profits just to facilitate the sale of their products. I do realize their may be a conflict of interest with the editor, therefore I propose that Swing Catcher may be discussed if it makes it more profitable, reduces the drawdowns, or improves it in other ways. This I think is fair to all parties concerned. It should be treated as any other product being reviewed or discussed.

4. Trading method: we are all looking for trading methods. Methods for determining a trend. Methods for determining when not to trade. Methods for determining entry points. Methods for determining exit points. Methods for determining stop loss points. Which markets they're applicable in. What works best in each market?

Each month we can cover a particular topic or a little article on each of these topics.

5. Brokers: How to choose a broker. Full service or discount. What services they offer? Bad experiences, if any. This is not an effort to blacklist anyone, but to make you aware of what needs to be checked out and whether they are capable with your trading style. Who offers least fees and is worth it.

6. Complaints/miscellaneous: Often there is a lesson to be learned from someone's bad experience, but lets avoid the name calling.

7. Confidentiality: This information is for our members only. Many times we will discuss articles/products, etc. that will offend authors/manufacturers. To keep from suffering any repercussions, I suggest you submit your articles and ask Dave that you wish to remain anonymous.

8. Bonus: We may want to have best trade for the month. Strictly optional. This may give our readers the confidence they need. Another way is to introduce members to other members in their own area. Someone they can discuss trading with.

I would take it that most of the discussions are with either a software developer or broker. As you know, they mean well, but more often than not, getting you to buy the software or making a trade is what counts.

Now on a more philosophical note: In all religions, be it Christianity, Islam, Judaism, etc., underlying messages are "give and thou shall receive," "sharing is knowledge," "teach others so you may learn" and "all things come from God," so lets make God proud of us. Amen!

If you wish to contact me, my name is Ismail Valiallah and my # can be obtained from the editor. I'm assuming that you have a policy of not giving out member phone numbers. As a result, could you as a favor, get in touch with Ashif Jumma (author of articles in the newsletter) and ask him to give me a call. Much appreciated. Editor's Note: That's correct ... members' phone numbers and addresses can't be given out.


On Telerate/CompuTrac Conference and Blackjack - Russell Sands

The 16th Annual Telerate Technical Analysis Conference in Las Vegas last month was a great success. I would like to thank Tim Slater for putting on a great conference, and for inviting me to be a guest speaker. I would also like to thank all the people who came up to me during the weekend with kind comments about my presentation. But Jamie, you didn't bring your backgammon set!

I also learned a lot by listening to all of the different speakers at the conference. While I still strongly believe in my own trading methods, there is obviously more than one way to skin the market cat.

Finally, I found it a little amusing that for all the interest in trading and technical analysis, I think more people actually asked me about Blackjack than about Turtle Trading. So let me tell you right here and now, that Blackjack is the only casino game that can be beaten by the player in the long run!

I not only had a profitable result at the tables, but actually got the casino to pick up most of the tab for my stay. I have just written a book on Blackjack, nothing really original, but nonetheless a comprehensive treatise on why and how the game can be beaten. And believe me, winning at Blackjack is a lot easier than trading futures. The book is about 100 pages, complete with tables, charts and everything else you need to know. Retail price is $59.95. CTCN members get a 15% discount. Call me if you're interested (800) 532-1563.


More on Futures Truth & Key To Currencies System - Dr. Gerald Greenwald

In a grand display of utter confusion or obfuscation (or both), John Hill of Futures Truth has tried to hide the facts, which are:

1. After I explained and gave him the correct procedure for using and reporting on "Key to Currencies Software" he failed to do so.

2. He readily admits to using a system his people programmed, but failed to use my program as directed.

3. When I notified him of his failure to please correct it, he ignored it.

4. He admits to having received an anonymous copy of my system's logic! Give me a break.

5. He believes he can ethically and properly use my material which he received anonymously or back-engineered with his people's help. This is tantamount to my finding. The combination to a safe with $10 million in it, taking the money and saying, "but I discovered or found or was given the combination, so it's all right." Well, John, ask your local DA, if he/she agrees.

6. As for his accusing me of "Slander" Brilliant, John! There is no slander (or libel, which at least would be the correct terminology); but if you think there is, so sue me. But do so very thoughtfully and carefully.

7. You say that "the person who sent it to us could have purchased the system." That is a moronic statement. Why would he anonymously give it to you?

8. I won't argue copyright law, because I don't know much about it. But if there are any lawyers out there, I'd be interested in opinions.

9. I enclosed for Dave Green's personal viewing, a printout of the system's output which was requested recently by a customer. It's for only about 2+ months, but it shows $15,375 profit and 800 profitable trades (9 for 9). It's true that I took my system off the market on 7-94, but felt obliged to start selling and leasing it again, because of global requests.

Readers, please scrutinize my ad at the back of this issue. I invite your inquiries, etc.

And to John Hill, enjoy your apparent dotage. In this battle of wits, you are unarmed.

Editor's Note: I did receive four P&L Report printouts from Dr. Greenwald's computer showing the performance he refers to above. However, there is no way to tell if they are real-time trades, hypothetical or back-tested optimized trades.

The only way to correctly judge the trades would be to see actual brokerage statements showing all the closed trades, or alternately receiving the signal reports prior to the opening and following each trade on a daily basis.


Opinion on TBSP Advertising & MetaStock 4.0 - Mike Daley

A thought and comment on recent issues of CTCN. First, kudos to George Moldenhauer for his appraisal of TBSP Right-Time Programs. This is a good example of the kind of information that makes CTCN so valuable to subscribers.

TBSP's track record looked pretty suspicious, especially the bet-the-ranch style of money management they employed to show such huge profits. It's hard to imagine anyone actually trading this way - you'd likely be broke or retired (probably the former) before you ever came close to the numbers they were showing in their advertising. Even if the program worked, trying to trade 1,000+ lots at a time would be hellishly expensive in terms of commission and slippage for anyone but a floor trader. Enough. Thanks again, George.

I don't know if other Metastock 4.0 users have noticed what I consider being a serious flaw in the system testing portion of the program. The problem comes when you try to use stops as part of the testing procedure. When I ran tests on my system, I was constantly showing losses greater than those I had specified when I set up the test.

Upon closer examination, I realized that my stops where being activated on a close only basis, though I had intended them to be triggered on an intraday basis. When I called Equis Intn'l about this, I was told that this was the way the program was set up.

To my thinking, this makes the stop portion of the test program useless, or worse, because both gains and losses may be overstated. When this happens, of course, all other numbers based on the amount of profit and loss, such as the equity curve, etc., will all be incorrect?

If, as a part of my system, I bought T-Bonds at 99.00 and was using a 1/2 point (.500 or $500) stop, I would expect to be taken out at 98.16 if the market traded there during the day. The program, however, uses only the closing price to determine whether you will be stopped out. If Bonds closed at 98.00 you will show a $1,000 loss instead of a $500 loss. On the other hand, say the market traded down to or below 98.16 but then came back to close at 99.00.

Over the next several days, it rallies two points and you get out with a $2,000 gain. In reality, you would have had a $500 loss due to your stop being hit, but instead there is a two-point gain, or $2,000 profit shown for the trade. With this kind of situation, it's easy to see how the numbers can become completely meaningless.

This is extremely frustrating because if you design a system that looks promising and want to test it with different sized stops, you will lack the ability to do so. If you do, results you get will be very misleading.

This is not intended to dump on the MetaStock software or discourage anyone from buying it. The program (with this small exception) is well thought out and support is always top notch. When I talked with the company, I was told they're aware of it. I'm not sure what that was supposed to mean, but the windows version is due out in the fourth quarter and hopefully this problem will be rectified.


Words About Optimization - Russell Sands

When Kent Calhoun called last month to 'educate' me about my misunderstandings regarding optimization and other aspects of technical analysis, the first thing I told him was that I hope we didn't get into a public pissing contest over this stuff. Then, I read not one, but two letters from him, attempting to correct my 'opinions' with his 'facts', while at same time blowing his own horn about his trading prowess.

I will not get into a debate over this issue. All I will say is that everyone is entitled to his/ her opinion with respect to technical analysis, how and why the markets work, or anything else for that matter. In fact, if everyone had the same viewpoint, we would not have a marketplace to trade at all, as there would be nobody to take to the other side of my trades.

So Mr. Calhoun, I will stand by my own opinions, as you are welcome to stand by your statistical 'facts'. And thank you for disagreeing with me and thus providing me with a continuous way in which to earn my livelihood.


Don't We All Wish We Had This Much Tax Obligation - Edward Forys

Mr. K.'s article 'Rags to Riches' in another newsletter (most subscribers will be familiar with the story) was indeed interesting and uplifting, but his performance table left out some very critical details, like; 1.Who paid the income tax on the profits he made in 1984, 1985, and 1986? 2. Where did the money come from to pay those taxes? 3.There were several large additions to the account; what was the source of those funds? 4. Why didn't he include in the table $30,000 he lost in prior years?

Taking his track record year by year, for 1984, his gross profit was $19,515. Withholding 30% (just to keep it simple) for Uncle Sam results in a net profit of $13,660.50 for the year. He shows an account value of $49,515; so he must have added $5,854.50 to the account to bring it up to that value. (In other words, he paid the $5,854.50 tax out of his pocket. This will become more significant later.)

In 1985, several large additions (source undisclosed) were made to the account and his gross profit was $203,459. At 30% withholding, Uncle Sam's share was $61,037.70; so the net profit was $142,421.30. Since Mr. K shows an account value of $408,274 he must have added $61,037.70 to bring his account up to that value. (He apparently paid Uncle Sam $61,037.70 out of his own pocket!)

In 1986, Mr. K's gross profit was $936,676. Uncle Sam's share was $281,002.80, leaving a net profit of $655,673.20. Mr. K shows an account value of $1,298,467; so once again he added to the account to bring it up to that value (to put it another way, that year, he paid a pretty hefty income tax of $281,002.80 (WOW!) out-of-pocket, so as not to disturb the funds in his trading account. Where did those funds come from?)

In 1987, Mr. K's gross profit was $1,589,695. Uncle Sam's share was $476,968.50 (OUCH!), leaving a net profit of $1,112,926.50 for 1987. Summing the net profits; ($30,000), $13,660.50, $142,421.30, $655,673.20 , +$1,112,926.50 Total $1,894,681.50

I realize Mr. K's tax rate was probably not 30% and he didn't have to pay his income tax until April 15 (Aug 15 with extension) unless the account was in an IRA account, so my figures are only estimates. But, without the IRA, someone had to pay income tax on the profits and the money had to come from somewhere (the amounts are not insignificant).

To be realistic, Mr. K's track record needs to be adjusted to account for significant end-of-year (or quarterly estimated) tax payments and large out-of-pocket additions. With 30% withholding, Mr. K's net profits, while impressive, are substantially less than what he claims (he didn't mention IRA). I haven't even included the $30,000 he lost prior to his opening this account. Using ratios, I think his total performance record should look something like this (per NFA rules): In print copy only


Too Many Data File Formats & Their Semi-Compatibility - Michel A. Gourbault

As I said previously, there are far too many data file formats on the market. Each new trading program that comes along seems to require a different building block (data file format), or a slightly modified version of an existing format. I don't know about you, but I would like to understand where the semi-compatibility or incompatibility problem originates. Could a little logic bring a little order to this question?

First, I will try to establish the links between all the parties involved. Who are those parties? 1) The North American Commodity Exchanges; 2) the Data Vendors; 3) the software "trading systems" Designers; 4) the Traders - i.e., you and me.

Group 1: The Commodity Exchanges. Group 2: The Data Vendors. The Exchanges sell the raw price data to the Data Vendors, who then resell it to us, the traders. Group 3: The system designers. They design their software programs around the raw data that the Exchanges sell to the Data Vendors, who resell it to us. However, unlike the Group 1 and Group 2 people, these trading system designers also have to keep in mind how the data that will be used with their systems will be collected or otherwise received.

So far, so good: nobody has a problem. But then, there is ... us...Group 4: the Traders. We will be using the data and the trading systems. And we will expect the two to work together harmoniously. Trading is a difficult enough business, we certainly do not need computer or software-related problems to complicate our lives. And we will also expect these "systems" to be flexible enough to allow us to choose the must-have data from any of the existing data vendors.

We all know from personal experience that everybody claims their "stuff" is copyrighted and that we, the users, the traders, have to abide by their licensing agreements.

What are those licensing agreements saying? Usually and basically, that we may only use their data or program for our own purposes and that we may not distribute them to a third party. However, here again, who owns what?

It is my understanding that the raw data is owned (copyrighted) by the Exchanges (Group I above). Therefore, logically, only the software program that manipulates (transmits and processes) that data can be owned and copyrighted by the Data Vendors (Group 2). Finally, only the "software trading system" that they designed can be copyrighted by the System Designers (Group 3).

And common sense tells me the more complex a program is, the greater the chances for incompatibility. Yet, one thing is sure: all trading programs/systems need the same building block - the price data file.

But here too, many choices are possible. In my previous article, I have mentioned several formats: ASCII (apparently several varieties thereof), CSI, MetaStock (perhaps several varieties of these too). Technical Tools, not to mention the broadcasting companies' formats: Signal, Bonneville, FutureLink, FutureSource, etc.

From my personal experience, most programs attempt to support as many of these data file formats as possible, but regularly, they omit one or two of even the so-called (depending on who you are listening to) most popular formats. Which means that if you are a trader like me, who takes all "success rate" claims with a grain of salt, you can easily run into this incompatibility problem when you want to combine several trading programs to hopefully increase your chances of making money in this tricky business.

Since it is not my intent to promote or shoot down any particular trading program that I am using, I will only identify these programs as Program X, Program Y, Program Z, Programs X and Z effectively support at least one of the broadcasting companies' formats. Program X is apparently a fairly simple programming job. Program Z, which is primarily geared to the Day Trader, is extremely sophisticated and must be installed through Windows. Both are mouse-driven. Although neither of them requires the use of continuous contracts, both can use this contract.

Finally, both can issue buy/sell signals. Considering its special concept, theoretically, Program Y can sort out markets by trend and minimize losses and is flexible enough to maximize profit. My intent is to use Programs X and Y to confirm each others signals, and to review the same markets in Program Z which has the most sophisticated and flexible charting tools and overall plotting precision and capabilities.

The problem is the only common data file format between these three programs is MetaStock, and this format is only compatible with Program Y.

So finally, here we are, at the threshold of a definition of compatibility and incompatibility.

Special Definitions: Trading Software Semi-compatibility - The condition resulting from a software program or system running fully in one or more data file formats, but only partially in another format. (Note: In my opinion, this category, this type of hybrid program, should not be allowed to exist.)

Trading Software Incompatibility - The condition resulting from a software program or system running fully in only one or more data file formats, but not at all in the other existing formats.

Trading software compatibility is the ideal condition resulting from a software program or system running fully in all existing data file formats regardless of their "variety." Of course, this ideal condition does not exist at present time, and is likely never to occur if present proliferation of file formats and computer languages is allowed to continue.

Personally, I see no major technical reason why full compatibility could not be achieved. As in politics, it seems the only ingredient that is lacking, is the will to make it happen. As traders and users of these various trading or charting programs, are we not also part of the problem? If more of us complained loudly enough about the incompatibility/semi-compatibility issue, would we not force the Exchanges, the data vendors and the system designers to get together and tackle this issue quickly, reasonably and effectively?

Another problem I see with data file formats like CSI and MetaStock is that they cannot be read as to their content from a DOS subdirectory. Only the broadcasting companies' formats, and both ASCII and Technical Tools are clear.

Finally, size of the data file format can also be a consideration when a trader follows up to 50 different commodity markets. And it is worse when you trade in stocks, which are far more numerous. It may be good for the computer hardware business, but it is definitely not good for us. Can you afford to constantly upgrade both your hardware and software? I know I can't.

To conclude - I hope this overview of the technical aspects of computer trading will prompt more of you to complain to the "proper authorities" about this incompatibility/semi-compatibility problem and move them to tackle this issue quickly and effectively. After all, WHO is the King? We Are, Aren't We?

Remember IBM and Apple? "David" moved "Goliath" to give up its monopolistic spirit and lose "his" complacency - at the same time causing "him" to become more competitive. IBM and Apple computers are now interfacing with each other. And the price of computers and computer supplies dropped sharply. Who gained? Everybody, consumer most of all. How long did this process and this result take? How many millions of dollars, how many millions of frustrations did it cost the theretofore captive consumers? Will we wait as long for the data file incompatibility issue to be resolved to our complete satisfaction?


Darts Pick Winners 3 out of last 4 Contests, Experts are 26 vs 25 Against DJIA - WSJ

It was a knockout. A team of four investment professionals finally beat the forces of chance in the Wall Street Journals latest stock-picking contest chosen by throwing darts.

The victory was sorely needed by the pros, who lost in their three previous outings against the darts. A recent Wall Street Journal contest resulted in a different team of investment professionals losing an average of 10% while the darts gained 16.9% on average, was especially ego-bruising.

In a series of 51 overlapping six-month contests that began in 1990, the investment professionals have 26 wins versus 25 wins for the Dow Jones Industrial Average. Against the darts, the pros have done a little better with a 29-21 lead.

Editor's Note: Isn't it amazing how these very highly paid and well-known investment professionals have such a minor advantage over the Dow Average and someone who selects based on throwing a dart at the Wall Street Journal price quotation page!

The pros mostly use fundamentals. The Wall Street Journal contests once again demonstrate the questionable value of fundamental analysis and how difficult it is for an individual to predict the markets, regardless of his stature or knowledge.

Too bad there is no Commodity Futures Contract on the Dow Jones Average itself. Some years ago one of the Commodity Exchanges tried to start one but was sued by Dow Jones & Co and forced to cancel it.


SuperTraders Books - H. Lowell Huber

For those who purchased the Super Traders series of books from Market Movements, Inc. (Frank Taucher) of Tulsa, OK, and are wondering what happened to the remaining two books (i.e. Book of Trend Changes and Book of Spirals), I was told by an MMI rep that both are behind schedule.

On another subject: I have seen references in advertising brochures that certain traders won't "touch cattle trading with a 10-foot pole." Having traded cattle contracts myself occasionally, I would appreciate it if someone could tell me why.


Who Has Done Well? - Ashif Jumma

I would like information on Model Accounts/Actual Accounts that have done well trading Futures with publicly available systems over a period of 2-3 years. That should be the acid test for any trading system.


Opinion & Trading Results on Bob Buran's Grand Combo System - Fred Montgomery

I purchased Buran's Grand Combo Trading System. At that time the cost was $895 plus $240 extra required for Lotus compatible software, which was required to run it. Plus, the cost of buying Lotus 1-2-3, which was $99 for a so-called Competitive Upgrade. My total investment was $1,234.00. Unfortunately, it was a complete waste of money (and time). My expenses were actually much more than $1,234 due to the untold hours I spent learning how to use the system, running it, and back-testing it.

The system had several 'bugs'. Not the least of which was the fact the back-tested P&L Reports were not accurate due to the software stating the stop-loss order was hit at the stop price, when in fact it may have got hit earlier in the day at a worse price. More than occasionally that happened at a much worse price than indicated by its back-testing. I saw many examples of that occurring, resulting in the losses sometimes being significantly larger than indicated by the software's closed trade P&L Report.

There were a couple of other problems with the design of the software. However, most importantly, the system's overall performance was just plain poor, or at times mediocre at best. When Bob was called about these problems or the system's poor performance, he was for the most part somewhat blasé about these matters. He was also impatient and had an abrupt manner about him.

However, all those flaws and bugs could have been minimized if the system actually performed as good as it's heavily publicized and highly hyped track record indicated it did.

Unfortunately, Grand Combo's performance, both real-time and back-tested was far from good.

Bob's extensive promotional activities (mostly appearing over a long time period in a competing letter, similar to CTCN), claimed he made over one-half million trading it. However, when I ran the system over my own CSI data base the results were far inferior.

I tested the identical commodities over the same number of years of data (10 markets), Bob Buran used to make his alleged half-million dollars. My back-tested results revealed an average profit per trade of only $26 with zero allowance for slippage and commission. When I tested the 35-commodities that comprise my large data base, the performance was slightly better, averaging $51 average profit per trade. However, once again that was with no allowance at all for slippage and commission. Note: One reason for the somewhat improved P&L over 35- markets (vs. 10) is that the system did comparatively well in a few markets not traded by Buran at that time, including Lumber, Orange Juice and Japanese Yen.

In some markets, such as Coffee and Cotton (and some others, when they are volatile), a typical slippage and commission figure is likely to be as high as $200 or more. Even when not volatile, the average slippage and commission that most trading systems employ is typically between $50 and $100.

You can see how this system would have actually lost tons of money if a realistic slippage and commission was factored into his P&L Reports. In fact, the losses would have been extremely high if multiplied by the many hundreds of trades Bob seems to have made during his track record time period.

When Bob was confronted with these facts about poor performance, he did not deny my evidence, and gave some very unsatisfactory and puzzling responses. For example, he said he somehow managed "to consistently beat the system" by getting positive rather than negative slippage and commission, a feat no one else seems to be able to do. He also said he was successful in bypassing certain losing trade signals his system generated (occasionally due to a gut feeling!)

These things Buran somehow managed to do can't be done successfully by others, and in fact they should not be done with a mechanical system. I will likely do a follow-up article about this in a future edition.


???? Trading System & Market Timing Group - George Moldenhauer

I just received an advertisement for a trading system. I would like to know if any members have had any experience with the system. The system is not disclosed by name in the flyer...it is only referred to as The ???????? Trading System. It is being sold by Peter W. Aan in Arlington, Texas. I would appreciate members' input thru CTCN for publication.

I am looking for members that have direct experience with Market Timing Group and the trading system developed by Steve Kelson. His claims are almost unbelievable. I would appreciate a candid review of it by anyone having firsthand experience, including, but not limited to profits (or losses) drawdowns, avg performance on a per trade basis, etc.


TX Products - Prime/Line - John Maglovsky

I received my September CTCN and couldn't put it down until I read it completely. The information was very useful and helpful. I would like to support the idea that you continue to give information about your software trading system. Many of us became members of CTCN because of your trading system.

I have a comment about Prime/Line. Prime/Line is not a computer generated program giving buy and sell signals. It is for me, a time-consuming program assist. Prime/Line provides many of the same tools found in SuperCharts. Prime/Line is not for someone like myself, with a very limited time schedule. Thanks Dave, for your support, assistance and editing CTCN.


New International Portfolio - Recommended Based on Volume & Liquidity - David Lancaster

Below are the international futures trading activity. These contracts represent the most liquid overseas contracts. Volume figures are average daily as reported by each exchange. The "Start Date" is the first day of CSI data files and usually is close to the initial trading day of the contract. In print copy only

In addition to adding the above contracts that are not already included in your present CSI International Data Portfolio, I recommend removing the SFE All Ordinaries Index #230 and the LIFFE Japanese Bonds #180. These contracts only average about 2,000 contracts daily. This new international portfolio would be composed of a broad cross section of exchanges with 22 liquid futures contracts. I think that most traders would prefer a database of continuous contracts and the ability to maintain the back adjusted continuous format during rollovers.

Editor's Note: I have asked CSI to setup this new International 22-market Portfolio for downloading and will let you know when it's available.


Editor's Comments

Reference Larry Williams' article. John Hill said in last month's CTCN "you cannot copyright an idea." That may be correct but at the same token I agree with Larry that if a copy is "substantially similar" you likely will lose a copyright infringement lawsuit.

In reference to Mr. Huber's article...it's true, historical testing of Cattle reveals that market usually does worse than other markets.

There's an excellent and highly recommended book by Bruce Babcock titled "The Dow Jones-Irwin Guide To Futures Trading."

In the book Bruce tests a wide variety of well-known trading approaches and systems in 10 diverse markets covering a 5-year time-period in the mid-1980's. For some odd reason Live Cattle ranks at or near the bottom in most of the runs. In fact, Live Cattle was profitable in just 11 of the tests and lost money in 58 tests.

There is no clear explanation about why that market is so poor compared to others. Bruce Babcock also says in his book that he's never been able to understand the reason why the meats are so difficult to trade. Perhaps some CTCN members know the reason for LC's poor historical trading record. Perhaps someone could ask Hillary Clinton the real secret to trading Live Cattle, as it seems like no one else can trade it so successfully!

If you study the Futures Truth rankings in this issue, you will see that suddenly several systems have much improved performance and rank at the top or high on the top-ten list. Unfortunately, a lot of that is mostly attributable to the fact that just by luck they happen to trade for the most part (or exclusively) specific markets that are trending well (i.e. Currencies). Because a number of individual markets have been steadily moving for some time now, many of the Futures Truth Top-10 ranked systems have made lots of money as a result of simply following good trends. In fact, almost any system, such as a simple moving average likely would have made substantial profits of late in certain markets. The true test of these top-performing systems will be how they do once the markets stop trending, get choppy, or reverse direction.

Then it's very likely these top performing systems will either start losing lots of money and (or) have large drawdowns. In all likelihood their performance will decline significantly. Perhaps enough to knock them out of the top-ten list.

Most traders do not realize just how important the specific market is to their trading success. In fact, it is my contention the performance of the specific market itself is just as important, perhaps even more important, than the trading system being used! That may be difficult for most traders to believe, but I am certain this statement is correct. Does anyone agree or disagree with me? Please write with your feedback.

A poor trading system can perform well thanks to an excellent trending market. The opposite is also true, in that a well-designed 'good' system will likely lose money if trading a market having poor trending characteristics, including choppiness, or too much or too little volatility. Few traders realize this.


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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.