Issue 48

If I Had Found CTCN Sooner, Would Have Saved Thousands - Paul Bennett

Singing Praises for CTCN - The Learning environment in this business is made extremely difficult because a large percentage of vendors prey mercilessly upon consumers greed and laziness. Everybody wants the quick buck.

The problem arises when a serious student is on a quest for legitimate and quality information. Here is where Commodity Traders Club News really shines. Ironically enough, I have learned more about the reality of trading and vendors by reading Commodity Traders Club News back-issues for free than I have spending thousands of dollars on the self-proclaimed experts!

I like the way you publish an opinion about a method or product and then a contradictory opinion will follow.

I like the way you publish opinions written by end-users rather than the vendors themselves. How can the reader gauge the validity of a certain product when the only information available is from the vendor himself?

Finally, by following the Futures Truth wars, I gained a realistic idea about the packaging, marketing and manipulation of many trading products.

In short, if I had found CTCN sooner, I would have saved thousands and my learning curve would have increased exponentially.

P.S.: I realize you can’t really publish this statement because you are trying to sell a product - not give it away. However, I wanted you to know and thank you anyway. The truth is you put a huge number of complete text back issues on the website in my opinion, too many! By the way, awesome newsletter.

Editor’s Note: Thanks Paul, for giving us the option of not publishing your comments about giving too much away free on the Web. However, we prefer to publish everything, even things which may seem to be non self-serving in nature.

Our goal is to give as much free information and knowledge to traders as possible and also make our websites the number one source of commodity trading knowledge on the web.

By the way, the fact we have most of our back-issues free online should not effect our sales as many traders prefer our printed booklet format. This way they can read them while at the kitchen table, in bed, laying around the house, or outside, something which is difficult with online publications.

In addition, though we have the full-text of Forty-five CTCN Back-Issues online, the most recent six months are never available free online but are only mailed to our paid club members.

Futures traders can use all our free online knowledge to get on the road to trading success.


Drawdown Minimizer Money Management - Mal Hamilton

Read your article in the Commodities Futures Knowledge Network about the Drawdown Minimizer (Logic) money management method. It’s a method I figured out some time ago and always use.

Had a question though - you mention "maximum adverse movement (excursion) of past winning trades." When you back-test to establish the optimum drawdown for each commodity, aren’t all trades winners?

Editor’s Note: As explained in our website's Free Special Report on Drawdown Minimizer Logic, we only care about Adverse Excursions on the back-tested trades which turned out to be winners.

We do not really care about the adverse negative excursions on the old losing trades as we assume the losers would have been filtered out by the recommended stop loss numbers in use, based on the winning trade adverse excursion statistics. The resulting stop-loss is much smaller by not using losing trade excursions, only winning trades.

You have to assume you are right about direction (up or down) and test to see the required risk. I have a printout on the wall with "Average Risk" "Optimum Risk" and "Alternate."

These are the levels of risk corresponding to different percentages in various commodities. i.e.: Gold gets an average risk of $34 which clicks 58% of the time. An optimum risk of $101 for 97% wins and an Alternate risk of $1, which believe it or not brings in 40% wins - on days when there is no adverse move away from the opening.

As to methodology, I tested in a bear market and may get different results in a Bull market. Since we are in a Bear market (or an "extraordinarily prolonged bull market" as Greenspan blathers) I don’t have current data yet. I used between 10 and 120 trades in each commodity - the different numbers were because I selected trades for high volume and high liquidity (open interest). Some commodities (like rice) have poor open interest and thus had fewer meaningful samples to test.

It Is not a great idea to risk more than you need to, unless you have a bottomless trading account. For instance, my sampling of Bean Oil was 115 trades and the average risk to win was $40, which made $4,648 with 71 wins, (62%). $500 stops made $9,498 but so did $250 stops.

In fact, the smallest stop required to make the highest money of $9,498 was $211, which I listed as optimum. As it happened with this sampling, $211 stops brought in 800 wins. The difference here is $4,600 in risk to gain $4,648 (average) and $24,265 to gain $9,498 with the optimum stops. Alternate risk of $12.50 costs $1,437 in risk for $3,644 in gain.

Major differences become apparent here. If you consider the amount you risk on stops as investment money, the return on investment for Alternate stops is respectable, prohibitive on Optimum stops and the healthiest for your trading account with the Average stops.

All this assumes you have the movement direction correct and doesn’t address commissions or fees. When you factor in commissions and fees, the study shows there are some commodities to stay away from - at least in bear market.

An interesting result of this testing was that an $11 (or $101) stop is a large percentage jump better than $10 (or $100). This being because it is slightly different to a natural number, selected by various means by most people. Of course, if Corn is 206.50 you can’t use a $31 stop, the way my printout shows for an average. You have to round it up to $37.50, because of the increments in which grains trade. Having this printout on the wall does take the guesswork out of stop placement, but I am still influenced by support and resistance lines.

It is useful to look at both methods of stop placement, knowing that many other folks know how to read charts too and edging the stops just a little more than the chart says. If there is a large disparity between the two methods, I usually look for other opportunities. Looking back at the end of the day, I seldom regret standing aside.

Slightly off the subject, but perhaps of interest is one matter I’ve observed about close-in stops. On the bigger money commodities, floor traders probably seem to gun for stops about an hour after opening. They sell off to create a buying climate for themselves or vice versa.

In the process, nearby stops get filled. I found I have to pussyfoot around and stay away from their favorite targets around an hour after trading starts. Or you can go with them and ride their coat tails, once you identify where they are operating.

These are small movements and nothing to get rich with. I assume it is floor or local traders operating. There is not much profit in following them and it would hardly be worth the while of anyone who has to pay commissions.

Probably none of these observations are new, but I thought I would pass them on in case they are a blinding revelation to someone.


Off The Top of My Head - Some Thoughts on
Successful Trading - Stan Tamulevich

Futures trading is a very perverse activity. It requires that you make the right moves when it is often extremely difficult to bring yourself to do so.

Take systems trading as an example. Many systematic ways of entering the exiting various markets have significant merit over time. The difficult part is that no matter how good a system is, it will have its weak points. It is just those weak points that wear on a trader when the system is in a drawdown stage, i.e., losing money.

At those times, human psychology serves to defeat us. We reject the potential of our approach and stop trading the system. Unfortunately, we become hooked on an approach only after it has had a successful run. There is a direct correlation between a system’s recent success and the number of traders using it.

I put my 14 published approaches together with one idea in mind. Whether you are a beginner or a veteran trader, you want to find the ideas that might give you that extra edge in your personal trading. There are no iron clad techniques or easy ways to profit all the time while trading futures. As a trader, your primary interest is to make money on-balance on a consistent basis.

These techniques should serve to give you ideas that you can use, either straight from the book or with modifications. Countless modifications may always be applied to any method. The beauty of using a modified approach is that it is yours! Your system’s stops will not be in the same place as so many others.

As individuals, we all want our trading to meet our personal requirements. I encourage you to take the ideas of others and modify them to serve your own specific purpose. This is what we should strive for, as opposed to using any cookbook approach. To-date I have heard from customers with dozens of modifications to my Universal 3-In-l Reversing System. They are all rather fascinating, successful variations of the methods they originally purchased from me. I hope that you succeed in doing it too!

SOME INSIGHT TO TREND TRADING

A trader should be alert to repetitive price patterns. They frequently lead to high probability outcomes.

In the 1970’s I developed a trading plan based on a time parameter, an entry parameter, and a risk parameter. I did not know why the plan seemed to work, but it was a common occurrence to see good trades develop with high frequency.

I developed my style by studying approaches of other successful traders and adapting them to my own comfort level. For example, a lot of my basic market instinct was confirmed by an article about Richard Donchian that appeared in the September 1980 issue of Commodities and a book by a plastic surgeon, Dr. Maxwell Maltz. Each seemed to confirm certain aspects of my own approach. Together, they provided me with a powerful tool to interpret as well as anticipate market movements.

We are all familiar with the saying "the trend is your friend," but few of us actually utilize trading approaches that key in on the trend as the main consideration in their trading plan. Donchian, a pioneer of trend-trading, used a combination of a number of systems in his trading. I want to key on two things: how to determine the major trend and how to trade it.

Intermediate or counter trend rallies /reactions offer profitable trend trading opportunities once the counter trend move has run its course. The key is in knowing when the move is complete and when the market is ready to resume the major trend, preferably with a vengeance.

I have always keyed on my observation that counter trend moves commonly run their course in about 15-trading days. Using that as a given, I watch for potential turning points. That turning point would define the resumption of the major trend. A properly placed stop serves as an entry point as the major trend resumes (see the Soybeans #1 technique by this author).

Enter Dr. Maxwell Maltz, a plastic surgeon and the 1960 author of "Psycho-Cybernetics." Having discovered his book in 1989, I was totally enlightened on reading his comments on changing ones’ self-image. Dr. Maltz says that following plastic surgery, it usually takes a patient a minimum of about 21-days to get used to his new face. Indeed, he points out that after amputation, phantom limbs persist for about 21-days as well. Many observed phenomena tend to show that it requires a minimum of about 21-days for an old mental image to dissolve and a new one to jell.

These facts startled me. Twenty-one calendar days equal fifteen trading days! Just when most traders are about to get comfortable with the perception that the trend might be changing (they are finding comfort with the market’s "new face"), the major trend is ready to reassert itself.

We are all creatures of habit. We get to know what we are comfortable with because it usually benefits and insulates us in various ways. To the futures trader however, a successful plan usually contains elements that by their very nature cause a great deal of anxiety or discomfort. If you are a trader, you have undoubtedly already noticed that it is usually the ideas that make you uncomfortable that invariably work out the best.

How can you use this information to formulate a trading plan? Pick up any chart book and observe the trend of any market (the direction of the 10-week moving average defines the trend for me). In downtrends, pick out those days that are intermediate lows on the chart. Count those days as the number one, and observe market action from that day through approximately the 15 trading day.

You will note that counter-trend rallies commonly last about 15-trading days after which the market will attempt to resume the major trend. It is important to note that while the fifteenth day will not necessarily be the high of the recovery in a downtrend, it will often be near the end of a recovery based on the time parameter. Be careful to observe that a 3-week rally may turn out to be a poorly defined three-week congestion. The key entry point is usually significantly sooner than the actual day that the market hits new contract lows.

Often, the best way to reenter a major trend, is to stop yourself in as the trend resumes (Donchian’s entry). I prefer to reenter a bear trend much sooner than the actual realization of new contract lows. The 15-day parameter gives you a feeling for when to be alert to such opportunities.

Of course, mirror image observations apply to bull markets equally well.

Stan has published Marketline Daily Futures Advisory since 1982.


Estimate Your Potential Reward - Rick J. Ratchford

Whenever you are planning an investment, it is always a good idea to first estimate your potential for returns. When you go to your local bank and open a savings account, you inquire about the interest rate. When you buy a piece of investment real estate, it is likely you would have determined in advance the amount of money it should bring in as opposed to going out. Maybe you like to buy used furniture at yard sales to fix them up and resell them for profit. No doubt you would know what your costs will be and what they would sell for when fixed up.

Yet, when it comes to trading, many novice traders enter trades without first estimating what their potential reward will be. Usually this occurs due to some indicator or cycle date, depending on their method of choice. The signal comes and they jump on-board the market express, not knowing where it will take them.

Regardless of what method a trader decides to adopt, it is always a good idea to estimate the potential reward. This should be done in relation to risk. For example, due to fact that trading futures is a highly leveraged occupation, and extremely risky, a trader contemplating a trade should determine if the reward is worth the risk. At the very least, a trader should not consider any trades that provide less than a 2:1 reward to risk ratio.

Say you were going to risk $300 using one contract, you should be expecting at least a $600 reward or more. If your ability of picking good trades has reached an average of 50% wins (correct half the time), you need to make sure your wins are larger than your losses to see any kind of gain in your account. You cannot do this if you’re not pre planning your trades with an eye to potential reward.

Also, considering the fact that you are dealing with probabilities here, anytime you decide to move away from consistency for even one trade, that may be enough to break the camels back. Therefore, you will need to put the odds in your favor by estimating your potential reward on all trades you make, not just some of them.

Steps You Need To Take Before Each Trade

1. Determine your entry price.
2. Determine your risk (where will you place ?)
3. Estimate your potential reward (how far do )
4. Determine if your potential reward justifies

If you find the trade justified, then by all means take it without further consideration. Use an initial stop-loss or whatever you prefer to limit your risk to the amount in your reward ratio calculation. Don’t deviate from the plan.

The above section of this article dealt with the importance of estimating your risk/reward ratio prior to putting on a trade. The purpose of this final part is to provide some simple ways to make estimates of where the market is likely to move at the very minimum.

There are some things that must be taken into consideration when making estimates on moves. One very important item is trend. Is it up, down, or are we in a sideways channel?

When a market is strongly trending up, for example, retracements will usually occur to the 25-38% level for very strong, down to 50% for the moderately strong, to the 62%-78% for a weakening trend.

Let’s first work with this scenario. You have determined, likely by noting past performance, that market is trending upwards. You notice that from the very bottom, it has moved up and retraced once already. The retracement, let’s say, found support at the 38% level and is now moving up again.

Once price moves above the last swing top, the one prior to the retracement, the trend is continuing. Soon, it will once again retrace back down.

Now assume that price is retracing once again, and you note the support price levels for 38% and 50%, the first two likely areas for buying pressure. Say that this time, price finds 50% support and based on whatever method you are using to decide entry, you are getting a buy signal.

Okay, here is where you need to make your estimate to determine whether it is worth the risk.

In a moderate to strong uptrend, the likelihood of prices at least reaching the last top from which the current retracement has fallen off from is very high. The probability is high it will go higher to at least 25% - 38% (of the retracement move down) above previous swing top. This probability drops off as you head toward 50% above, and so-forth.

Now, since the probability is very high to at least make a double-top at the very minimum, is the 50% move enough profit to justify your risk? You see, that is the question you need to ask yourself.

If the risk you are considering, possibly placing a stop-loss below the next support level down or the bottom at the 50% level, is not at least half that of what the 5O% up move would net you, is it worth it for you? I like to at least get 2:1 profit/risk. Therefore, if my entry to stop-loss exit price is a risk of $300, then the 50% up move to the last swing top should be real close to at least $600 to make the trade worth it.

This is what estimating your profit potential is all about. Making educated guesses based on market action and mathematical probabilities.

Now, let’s assume we are in a sideways market. Prices are moving in a channel. Let’s say that at the moment, prices are now coming off the channels top. You might enter this trade and use the top of the channel for your stop-loss, to get you out or reverse if prices break out. If you enter your short here, you estimate your risk to your stop-loss location.

Say the risk is $250. Is the distance from where you are shorting the market to the bottom of the sideways channel at least $500 or more away? If less, you are getting less than 2:1 profit/risk. Maybe you should reconsider.

Estimating is simply working with mathematical probabilities to determine if the odds are in your favor, and the profit/risk ratio is as well. Now let’s use some expansion math to figure out breakouts.

Let’s now assume that the market has made a daily swing top and prices have been falling for a few days. Next, you note that prices are rising again and it appears the last swing top may be taken out. You decide that it would be a good trade to place a buy stop order just above the last swing top by a few points to enter at the breakout.

Okay, now it’s time to estimate your profit potential. You note the distance in price from where your buy stop will be placed to where you feel your stop-loss order should be. Suppose you feel that a minor swing bottom pivot 2-days ago would be a good place to put your stop-loss. Now, you calculate the distance of your stop-loss to entry buy stop and determine a $325 risk.

You need to determine the minimum move by way of estimation to see if the trade is worth the risk. One way is to use expansion ratios.

Expansion ratios that appear to work well many times are 25%, 38%, 50% and 62%.

Now, the probability is very high that if prices went above the previous top in an uptrend, that it will move up at least 25% (of the previous retracement) above the last swing top. Calculate how much you would make on 25% move.

Is it enough to justify the risk? Let’s assume that it is only $300 move to 25%. This is nearly 1:1 profit/risk ratio. If the market made a retracement prior to this breakout of only 25-38%, then you can determine the probability is very high that prices will not stop at our 25% expansion but go higher. This being the case, note what the profit would be at 38%, since a strong trend would have a high probability of reaching that level. If you find it near 2:1, then it may be worth the risk. Maybe even figure the 50% price. If the profit/risk ratio is 3:1 or better in a strong trend, you have a 50/50 chance of it getting there.

But if the last retracement was more than 50%, say 62% or more, then the trend may not be as strong as we might like. The 25% expansion would surely need to be at least $600 or more to make the trade worth it, since getting to the higher percentages of expansion price would have their probabilities of success dropping off dramatically. In other words, in a weakening trend, you have a good probability of reaching 25% or 38% expansion, but to reach 50% the probability is much lower. Therefore, the first expansion level needs to fulfill our profit/risk criteria of 2:1.

Keep in mind that you need to take all the factors into consideration. The strength of the trend by using retracement sizes as a quick gauge (unless you have some indicator for market strength), as well as noting the size of channels in sideways markets.

If you determine the trend may be strong, you can allow 25% expansions to be 1:1 profit/risk since going higher is very high. If the trend appears weak, you would want your 25% - 38% expansion levels to achieve the 2:1 or higher ratio before considering the trade.

Keep in mind all these are in relation to your risk. Small risk entries, where your entry price is not far from your exit price (stop-loss) allows you to meet the 2:1 criteria, even in a weak trade at the 25% mark a high percentage of the time.

Estimating, your profit potential has nothing to do with forecasting. It simply has everything to do with probabilities. When you have developed enough experience in watching market prices, you start to notice how markets tend to expand beyond previous tops or bottoms in a trend, or stay within a channel in a sideways market.

Use these common occurrences to estimate the areas of very high probability, high probability, and good probability. Your first level calculated will usually be in the very high or high area, and then you work down from there.

I hope you find this information as useful as it has been for me. For some it may take a little practice, but practice itself is not risky. Before you put on your next position trade, try to see if you can use these ideas to estimate your profit potential.


The CFTC Wants to Regulate The Internet -
By: Scott Bullock - Sr. Attorney - Institute for Justice

Government regulation of the Internet will be on trial this spring. The Institute for Justice will argue in a federal court bench trial starting on May 3 that a federal agency may not impose licensing restrictions on those who seek to share their opinions over the Internet. As this is one of the first cases to deal with First Amendment rights on the Internet in a context other than "indecency," the potential ramifications of this litigation are immense.

IJ represents publishers of websites, software, books, and newsletters designed to assist people in analyzing the commodity and futures markets, and consumers who subscribe to the sites and use the software and publications to make their own investment decisions. The publishers do not invest customer funds; they do not give person-to-person trading advice; nor do they act on behalf of individual customers. Instead, they simply provide information and advice to their subscribers, a classic exercise of First Amendment freedoms.

One of the essential attractions of the Internet is that it provides a low-cost forum for speech, giving huge numbers of people an outlet and an audience.

But government, as always, wants to establish the authority to regulate and license anyone who speaks on topics under its jurisdiction-in this case the financial markets. The Commodity Futures Trading Commission (CFTC) claims that it must grant an individual the right to publish information on commodities.

The CFTC demands registration as a "commodity trading advisor" before one can publish any information on these markets. Registration requires fees, fingerprinting, background checks, and perhaps most onerously, production of a list of one’s subscribers and being subject to on-demand audits by the CFTC.

Even if you obtain the government’s approval to speak, your license can be revoked if the agency believes you are not operating in the public interest. If you fail to register and publish anyway, you risk $500,000 in fines and up to 5-years in prison. Although these regulations were designed as a means of regulating traders who handle large sums of other people’s money, the CFTC claims that they equally apply to individuals who simply "speak" by providing information and opinions about the markets.

Unlike the important litigation surrounding the Communications Decency Act and its progeny confronting "indecency" online, this case and its First Amendment implications on the freedom of speech address ordinary speech on the Internet and who is allowed to speak online. It will also likely resolve whether the First Amendment protects who may provide information on websites and in computer software on the Internet.

The Commodity Futures Trading Commission is one of the first federal agencies to assert jurisdiction over those who publish on the Internet and intends routinely to scour the Internet for unauthorized publishers. In the CFTC’s mind, only those approved by the (U.S. Government) agency are allowed to speak.

Unless the CFTC is stopped, its efforts will encourage other government agencies to license individuals before they may offer information. For instance, if you want to write a piece of software analyzing mortgage rates, you had better be a licensed mortgage broker. Want to establish a website that offers your opinions on various legal topics? Better go to three years of law school and pass the bar.

If the CFTC’s efforts to license speech are successful, the development of computer software and Internet websites will be dramatically curtailed as governments attempt to control who provides information and advice over these new media.

The judge in this case identified specific factual issues he wants addressed at the trial, including exactly what information is available on the Internet-complete with live Internet access in the courtroom, exchanges between websites, and demonstrations of software programs.

With the opportunity to showcase the tremendous freedom and potential that the Internet and software can offer, we will use this trial to forestall government’s efforts to regulate this exciting new medium even as we vindicate the fundamental free speech rights of our clients.


Daytrading Review Sought - Bloomberg News Service

Lawmakers in the U.S. House have asked the General Accounting Office to evaluate the risks of day-trading.

Four Democrats on the House Commerce Committee said in a letter to the GAO, they want a report exploring recent news accounts about the "questionable" practices of day trading firms.

"Specifically, we are concerned about the adequacy of investor education and risk disclosures with respect to day trading and the adequacy of the Securities and Exchange Commission, for policing this marketplace, maintaining its integrity and responding to investor complaints," the letter to GAO Comptroller General David Walker said.

The request comes after recent warnings from regulators about daytrading. The National Association of Securities Dealers has asked its member firms to report any questionable day- trading practices.

Last month, SEC Chairman Arthur Levitt said he is concerned that day trading is too risky for inexperienced investors!

Editor’s Note: Talk about more Big Brother watching over us! When will the U.S. Government realize we have a Constitution and First Amendment Rights to both freely publish and to receive information and knowledge, without heavy U.S. Government intervention and monitoring.

Of course, government agencies may have to investigate abuse or fraud, but it's another issue.

We agree, day-trading is very risky. Most every firm engaged in trading or trading products warns about the high risk involved. Isn’t this sufficient?

As mentioned by the Institute for Justice, do we want the U.S. Government, be it the CFTC (or the SEC) only allowing someone to speak or teach a subject providing they have been pre-approved or licensed to speak by the Government.


Some New Year’s Resolutions - J. L. from Wimauma

I promise to: Not do what I did last year (i.e., buy and hold in this deflationary tailspin).

Trade less. I could have bought a good used car with the commissions I paid at only $15+ a "pop!" A cost is still a cost.

Agree with Rick Ratchford’s idea to use weeklies and monthlies to help me get on the "right" side of the trade (last issue). Watch the direction of the 14-period Fast-K Stochastics Line between 20 & 80 to help confirm the last resolution.

Also agree with Rick’s "probabilities" (I always did) by getting on the right side of the "count" (see below).

Try not to take a trade until the previous day’s hi or lo is taken out. Until then could just be "market noise."

Save my butt from overnight losses with stops in the overnight markets that allow them (and don’t short those that don’t?).

Realize that I don’t have to trade. I’m playing more piano now which helps with this as suggested by other contributors. (Is it possible that the more I can "hate" to trade, the more good trades I’ll actually make?)

My goal will be to have one of three outcomes for every trade:

1. Take a very small loss if wrong, based on 25-minute or even 15-minute opening bars because, remember, I don’t have to trade.
2. Or break even on a stop after a move my way fails (for the same reason)
3. Or ride the pony until it’s time to roll over.

As for the "count" mentioned above, I for years have given a +1 to a day that first took out or equaled the Hi of the previous day and added "1’s" until prices took out the Lo of a previous day (a -1). Inside days keep the previous count and outside days go with the close within the day’s Range (a +1 or -1). Buying "minus" signs and selling "vice-versa" keeps me with Rick’s "probabilities."

Tip: It took me 12-years to figure out the only true "hedge" is an opposite position in another account. Am I a slow learner or what? Some brokers have a problem with this but after they realize you can simply do it with another "house" they "see the light. I’m urging you to do this only with winning positions that you wish to hold as doing it with losers is just trying to deny "rollover" day (exc., a good scale-trade).

Oh yes. With crude oil at $12, an exception from my three ‘outcomes" screams for a scale trade. One more thing, I never thought I’d do it, but I’m getting an $800 plus jump on the year by quitting my quote service and re-entering prices manually into my SuperCharts, free (via my broker’s "InfoLine"). I’ll let you know how it works. You can bet I’ll be trading from my weekly charts, but so far so good.


A Collection of Satire and Stuff About the Futures World - Ted Nash

LOSSES ARE PART OF THE PROCESS

Who takes losses? Everyone.
They’re part of a trader’s life.
Prepare to deal with them before they’ve begun
and they’ll cause you no undue strife.
When your system tells you to take on a trade,
figure the loss you’ll bear.
Then after you’re in and the price starts to fade, you’re stopped out with no despair.
A loss to a novice with his ego trips
is quite a blow to his vanity,
but to a market wizard who expects these dips,
it’s not a great calamity.
If you suffer a drawdown from a string of losses
with the red ink really flowing,
then one nice run on a red hot colossus
and your account will be back gong hoing.

DIALING FOR DOLLARS

Nightly hotline trading advice
is often merely a roll of their dice.
They’re quite precise,
their tips entice,
but you’ll pay the price
if you skate on thin ice.
Their money is made, not on how well they trade, but on how many listeners have signed up and paid. However, I must admit to the fact that some will help you to clean up your act.
So select one whose counsel might bring you delight and hope that their nightline will "make your night." If you choose to abide by their guiding light, keep your fingers crossed and your stops in real tight.

A FINANCIAL SLEIGH RIDE

(sing to Jingle Bells)
Dashing with the trend
It will always be your friend.
Watch your nest egg grow
as you get to know
when to take a trade
when you should evade.
Just make sure you’ve got the hay
when you start out in your sleigh.
Buy and Sell, Buy and Sell -
trading all the day.
oh, what fun at the closing bell
when the market went your way.
Buy and Sell, Buy and Sell -
isn’t all this grand?
Such good fun just makes me yell -
it’s better than Disneyland.

GO FOR IT

To succeed in trading
you need good aptitude,
but much more important
is the right attitude.
When your doubts overwhelm you
and you’re seized with fear,
these doubts will undoubtedly
interfere with your career.
If this enemy within
affects your mental state,
throw out this evil demon
or your trading will stagnate.
The best way to do this?
Focus and analyze,
build discipline and confidence,
and go straight for the prize.
So don’t let those fears
grow bigger and bigger -
Just pick up the phone
and pull the trigger.

A PORTRAIT IN OIL

If you like to trade in a great deal of turmoil
take a position at the right time in crude oil.
Like that time in Iraq
when that whack
caused a flack
with his desert attack
and crude blew its stack.
To deal with all that wild volatility,
you need the use of all your ability.
You never know just how, where or when,
so be ready when all this happens again.


Did The Markets Have A Heart Attack? Jim Allen

I got one of those, too. Better hurry, though, only 50 will be sold to lucky individuals, and they will not accept orders from brokers or institutions. Take that, Sally, Morgan, and all the rest of you big trading bullies! The lucky 50 John Q.’s will be kicking your butts any day now.

"Profits have been phenomenal . . . trading is highly accurate . . . We’ll take all the risk on your purchase." Safe . . . profitable . . . simple, but only 50 to be sold.

Although it’s supposedly based on new research, and a newly discovered technique, it sounds a lot like Peter Prophet’s Pentagonal Parabolic Profit Prognosticator. Ole Pete spent one entire rainy Saturday afternoon, with a CD-ROM full of prices all the way back to the good old days.

I put his TradeStation in the "stun" mode, and fiddled around optimizing everything all nice and cozy, and came up with a system that just beat the daylights out of every other trading system, hypothetically. Of course, it never made anybody a dime in real life, except Peter (and not from trading!), but if you could figure out a way to go back and trade the left side of the charts, you could really clean up!

This CPR is really a classic! Don’t miss the "clear, precise, ironclad guarantee," or "My Pledge to You," or "Profits to be used for Research!" This is just too much for an ordinary human to stand!

All you newbies ought to get a copy of this classic come on and tack it up on the wall so you can see from where you sit to write checks for trading systems!

Rod Daniels wrote: Let me take a wild guess that I’m not alone on this one. A bulk mailing arrived in my mailbox today that suggested I send an M.D. by the name of Horovitz $10,000.00 to purchase his CPR commodity trading system. You see, the Doc is a "part-time" trader when he’s not practicing psychiatry or doing revolutionary research on mass human behavior patterns.


$42,704 A Month Avg. for 3-years! A Hard To Believe
93% Correct - Jim Allen

Who could believe it? Now, there is yet another way to wealth beyond your wildest dreams. Thanks to TradeWins, and that tireless creator of instant wealth without working, good old George Angell.

We can spit on that guy last week, who wanted $10,000 for HIS trading secrets. George will rush you his newly discovered secret methods, in a full length book, plus bonus new audio tape, for only $95.00, and is willing to let you look at it for 6-months before shelling out the inevitable refund.

This one is different. We’ve pretty much gotten to the point that anyone wanting to market a new trading system can’t rely on bogus, hypothetical or "simulated" results anymore. Yessirree, it takes real actual put-your-butt-on-the-line trading in this cynical crowd, and George does not disappoint. He’s been "taking trades based on the Precision methods for many years . . . with excellent results." I am certain that only the high cost of IBD’s ad space prevented him from showing the trade statements, but no matter. I’m sure George would have no problem laying those statements on the table upon request.

"Traders following this program have been right on as much as 225 out of 240 days they trade each year . . . that’s over 93% correct." "There simply cannot be large drawdowns, because of the system’s design." WOW! And, day trading does not mean you have to track each tick of the market all day long. There are techniques, like this one, that allow you to do your analysis ... place your orders . . . and ignore the market." Just imagine, minimal drawdowns, 93% right, doesn’t interfere with golf or sailing . . .

Man, oh man, I want to unlock the door to staggering profits, even if it takes explosive insider secrets to do it. I don’t care what it takes! George says it made $1,537,366 in profits in 3-years, starting with only $36,595. Jeepers! That means with $1 million (less the $95 for the book, of course), a person could afford his own private 757 in just about the time it would take to learn to fly one! And since you can ignore the markets, it wouldn’t interfere with your flying lessons! This is just too perfect!

Let’s see, if you are right 225 days out of 240, and there are minimal drawdowns due to the design of the system, and you’re making $2,000 or so per day, golly. It sounds like, could it possibly be, it’s hard to believe, but it sounds like, you can’t lose!

Do you think they would consider a trade-in on a slightly used copy of Peter Prophet’s Pentagonal Pyramidal Profit Prognosticator? Or maybe George Angell’s Complete Day Trading Course. Probably not, the Daytrading course made only $408,075 in 32-months of trading, a far, far cry from the over $1.5 million in 36-months with this new miracle secret method!

I wonder if I flew to Wilkes-Barre with $95, they would give me one on the spot, so I can get started tomorrow? Happy trading!


Aren’t Commodity Vendors Really "Better" In Some Ways Than The U.S. Legal System? - Dave Green

This is in response to your reply regarding my e-mail "though many trading systems and methods may not work to your satisfaction or expectations, nevertheless you and others may get some valuable ideas from them, to help in your trading."

I also apologize if you do not like my statement about my belief "many commodity trading product vendors are "better" overall than the U.S. Legal System, Judges and Lawyers," generally speaking. Of course, CTCN members and contributors who are in the legal profession are excluded from this general opinion about the U.S. Court System.

Here is my story: My great unhappiness and lack of respect of the U.S. Court System started as a young man many years ago with an alcoholic homeless man, as he suddenly stepped in front of my car from a Center Island Bus Stop as I was crawling along in congestion on Chicago's State St.

He was gently bumped and obviously unharmed. He easily brushed himself off and walked away with no limp or bruises but strangely was followed by a Chicago Police Officer Traffic Cop, as I watched.

It later was discovered the Cop was connected (on the payroll) with a well-known Ambulance Chasing Lawyer and a participating fraudulent Doctor, also on the payoff from the Lawyer. A short time later I was served with a $100,000 lawsuit (not by coincidence the exact amount of insurance carried at the time). The lawsuit said the drunk was critically injured with numerous broken bones (arms and legs) and serious internal injuries.

It made me lose about 20% of my respect for the US Legal System.

Next, the dishonest Attorney for my Insurance Company in the above incident tried to cheat me by stopping payment on a check he had (very reluctantly) written to pay for all my time in giving depositions for his client, my insurance company.

By luck, I went directly to his bank after leaving his office and managed to cash the check. This was no more than 30-seconds before the bank teller told me a stop-payment had been placed by the lawyer, but luckily I already had the cash in my hand.

This above incident made me lose about 30% of my respect for the US Legal System.

Next, many years later (late 1980’s), I had a Small Claims Court Pro-Se Judge who was seemingly half-senile, and seemed to misunderstand the case and real issues involved. He did not understand my basic defense at all.

When I tried to educate him as he seemed bewildered by my defense, he said "one more word from you and I will hold you in Contempt," so I had to stop talking as he meant it!

Just before this he let the Plaintiff and a false witness talk nonstop for about 20-minutes, mostly unrelated (to the issues) garbage and character assassination and a few lies also, with no actual evidence to support their suit. Next, he would only let me speak for about 45-seconds, before abruptly cutting me off short.

During those 20-minutes of B.S. by the Plaintiff, the elderly incompetent Judge was staring at me the whole time and shaking his head at me and showing a super negative expression and mannerism, obviously believing I was 800 guilty and a bad guy.

But I was totally innocent and didn’t owe the plaintiff any money as she never delivered what I had ordered, but a totally different and inferior product without my agreement and request.

He refused to even let me call my own witness, but allowed the opponents witness to talk a bunch of false negatives about me for a long time. He told my witness (my wife) she could not testify at all, without any reason given.

He found me guilty and ordered me to pay for something (I think it was only $250 or so) which I never ordered and was done contrary to my explicit instructions, with many errors and was worthless to me. In fact, the finished product was so different than what was ordered, it was of zero value.

It wasn’t the minor amount of money involved but the Kangaroo Unjust Unfair Court I hated. It turned me extremely negative on the US Legal and Judicial System.

As a side note, some months later I learned this Judge was far from being unbiased when I happened upon a local newspaper photo and an article about the Country Club and its members. My seemingly "half-senile" Judge and the Plaintiff’s Husband were members and long-time golfing buddies at the local Country Club and photographed together at the Club.

The Judge obviously should have withdrawn from hearing the suit. Is it any wonder he was so biased. When I later tried to complain to the Court System, it was stonewalled. I was basically told there is no way to complain about a Judge, as there is no one above him to complain to.

At this point in time I had lost about 50% of my confidence and faith in the Court System, which at one time I had strongly supported as a Right Wing Conservative in the past.

Next, when an obviously proven 800 Guilty (with absolutely no shadow of any reasonable doubt) O.J. Simpson was found innocent by his almost totally black jury. Obviously on his side because of his celebrity status and alleged minority bias because the DA allowed an almost totally black jury, rather than mixed along actual population and racial statistics, I lost even more faith in the asinine US Court System.

At this point I lost 60% of my faith in the court system and was now becoming a Left Wing Leaning Liberal in my dislike of the Court System!

Next, CTCN was involved in a lawsuit with a would-be trading seminar vendor who once wrote a popular series of articles about daytrading. We can’t discuss the legal issues due to a Federal Court Settlement Agreement in which neither side is allowed to discuss the details of the matter or even refer to the other party by name. All we are permitted to say is the lawsuit dissolved our one-time business partnership and we are not connected with each other.

The opposing attorney also allegedly lied and misstated the facts in his pleadings. It was not the litigation itself which turned us so negative but the terrible advise we were given by our Attorneys and the alleged false pleadings used by the opposing law firm. Both our attorneys, including our law firm principal partner told us we have no right to local venue in the matter and must go to an out-of-state court. He also said h would be glad to travel out-of-state for trial, at a substantial fee of course!

Some time later, other attorneys informed us, (including two who are CTCN Members), the legal opinion about venue and jurisdiction was most definitely wrong. We had a right to local venue and jurisdiction since our contract was drawn-up in our State and the products were located in our State.

However, due to us not having venue in our own state and not wanting to travel over a thousand miles to another State (and the alleged false pleadings), we were forced into a Court Settlement to put it behind us. If we had the venue locally we would have demanded (and no doubt achieved) much better terms and conditions.

After this we had lost 70% of our faith.

Our next encounter with the terrible U.S. Court System was when the U.S. Commodity Futures Trading Commission was investigating us from 1996 thru 1993-2014 (but now fortunately fully settled, I might add). We first sued the CFTC ourselves (pro-se) at the Arizona District Court to stop them from getting our bank records (and other issues) via a number of subpoenas duces tecum they had sent different banks in two states, going back several years. This was a form of "fishing expedition" by the CFTC, to search bank records, to apparently use financial information gleaned from them against us.

The CFTC ended up sending the Chief Judge of the District Court something called In-Camera Ex-Parte Evidence. Quickly, we were shocked and amazed to hear this means it’s evidence only the Judge is entitled to see. I was told by the CFTC and Court Personnel and the Judge himself we are not privy to the evidence in any manner and had no rights to it at all!

It was both devastating and amazing to hear potentially misunderstood, misstated, exaggerated or false evidence may be used against someone, with no right to even learn of its nature, let alone the specifics and no defense is possible!

Naturally, with this unknown and perhaps exaggerated or misunderstood evidence being used by the Judge it was not surprising the Judge was on the CFTC’s side and promptly dismissed my lawsuit and unceremoniously also dismissed our many Motions To Quash, allowing the subpoenas to continue.

Amazingly, later on this U.S. District Court Chief Judge even apologized to me by saying in his bench-ruling the so called In-Camera Ex-Parte evidence put me at a major disadvantage. He also said in his ruling he did not approve of it being used BUT there was NOTHING he could do but ACCEPT it at FACE VALUE! Incredible, isn’t it!

Is this America? Is there a Constitution? Is there a Financial Privacy Act? Is this Just, Ethical and the Right Thing? I think not! Even the Judge agreed but still accepted the In-Camera Evidence at Face Value! What a Travesty of Justice and violation of the U.S. Constitution and Financial Privacy. We are sure the CFTC has also done this in the past and will continue to use this highly questionable tactic, as the Courts allow it. After this episode we had lost 90% of our faith.

Finally, the straw that broke the Camels Back involved a Florida based Lawyer we hired based on the recommendations of two product providers we had known for some time, Curtis Arnold of London Financial and another product vendor, Mr. Richard Tokheim, who has a Pork Belly Trading System.

This attorney, Mr. William Summer Scott, who is licensed in the State of Florida, was hired to handle our original pro-se lawsuit against the CFTC. He promised in writing to refund our last $1,000 payment to him in the event our Appeal was not heard for any reason." A few days after mailing the check we received word from the Court our Appeal was in fact dismissed.

Our check had not cleared the bank yet so my wife begged me to stop payment on the check as she questioned if Scott would refund the money. Like a fool I told her I did not want to do that as I did not want Mr. Scott to be upset over a stop-payment and the resulting bank service charge. I also told her I did not want Scott to feel we did not trust him. What a fool and stupid person I was for not listening to my wife.

This happened exactly one-year ago this month and Scott has refused all requests for the refund. He has claimed all kinds of nonsense such as I owed him money for his time and excessive work involved. All a lie, as he was hired on a flat fee basis, not an hourly rate.

We have filed both Better Business Bureau complaints and Florida Bar Association complaints against him. Those complaints are still pending. However, this very week we received a letter from the Florida Bar Assn., in which they strangely want copies of our business telephone bills so they can see how many times we called Scott, apparently to see how much work he did for us.

It's a ridiculous request as the case was dismissed almost immediately and the refund request was made the same day we received word from the Court about the case dismissal, almost immediately after our check was sent, not giving Scott any time to do any additional work. Not only did Scott cheat us out of these funds, he also allegedly did a real bad job representing us.

For example, he had been previously disbarred involving another CFTC case but we were never informed about his earlier disbarment. If we had known of it we would never have hired him in the first place! As a result of being disbarred, Scott's reputation with the CFTC was no doubt questionable, at best.

In addition, Scott was slow and negligent in getting registered to practice law (on our behalf) with two out-of-state Federal Courts, thus delaying legal representation and hurting our case. In fact, one reason for his delay in getting court approval was the fact the Court's learned of his earlier disbarment so they subsequently questioned his credentials and reputation.

After this final episode involving this alleged dishonest lawyer, I was now basically 800 Negative and had lost all faith in the U.S. Justice System and most everyone connected with it, including the Lawyers, again generally speaking. As a result I'm sorry to admit I now have almost zero respect for all U.S. Courts and most everyone connected with the legal system, including Judges, Court Employees, Court Clerks and Lawyers, again, generally speaking, of course, J. A., since you are an Attorney yourself, which I was not aware of until your recent letter was received.

I had become an Ultra Left Wing Radical in this regard, hating the U.S. Court System and everyone even remotely connected with it. However, luckily I remain a Right-Wing Conservative on almost all other issues. I am only Left Wing and Radical regarding the Legal System in this country, not on other issues.

I probably would end up going to jail rather than say I Honor the Judiciary and show respect to The Courts and a Judge, if I ever go to Court again! Same with Attorneys (generally speaking, of course, I dislike them as much as the Judges and U.S. Court System.

I now believe fairer and more honest and legitimate trials are held in third-world countries than the USA. I would feel more comfortable in court in Iran than the USA. At least they are really super religious in Iran and it’s no doubt a non-corrupt legal system there, also many other foreign countries.

I think this legal system sucks and don't understand how you can work in such a field! Sorry to say I think you (J.A.) are in a much worse line of work than I am in and many other commodity trading product providers and trading system vendors. I have much more respect for the overall fairness and honesty of trading system vendors than I do for the Courts and Attorneys!

It’s noted you amazingly have only lost two cases in your long legal career. Congratulations, J.A. However, be honest, have you ever mislead people to win all those cases, or not told the whole truth and perhaps said half-truths, or even somehow twisted or minimized the evidence, as many lawyers routinely do.

Or have you ever known some evidence was completely valid and legitimate but still you fought hard against it anyway to get a client off, or worse yet perhaps knew the client was guilty but still got him off! Is this honest? I think not!

As a side note, personally, I would never defend someone in court for any amount of money and no matter how much I could make, which client I knew for sure was guilty of a crime!

Unlike many (probably most all) Lawyers, I could never live with myself knowing a guilty man was set free because of my use of legal tricks and legal loopholes and client confidentiality issues involved, to get a guilty party off and found not guilty by deceiving and tricking the jury or judge.

How can lawyers do this and sleep at night? Isn’t it better to have someone walking the street selling commodity trading systems (even if they are losing systems) than criminals on the street due to a sharp lawyer, or a stupid or biased Judge, an insignificant legal technicality, or a ridiculous and asinine court system?

Perhaps you should change occupations and get into a more honest field and become a Vendor of Trading Systems. (Just kidding J.A., but am I really joking?)

From knowing many system and product vendors over the past 17-years I can say they are much more honest (generally speaking) and have higher morals, than most attorneys do. Of course, CTCN members and contributors who are in the Legal Profession are not included in this general blanket allegation.

Even though the public may not think too highly of trading product vendors, I believe the majority of vendors I know would never condone or help a criminal or known guilty party be found not guilty so they can make money or improve they stature and recognition as a result of it.


Get Out Now! Predictions: Stocks & Real Estate
Will Plummet - Michael Calo

This report is meant to scare you, so take heed. I know many already think I’m crazy, so this is no news. In recent issues, I have warned repeatedly about being long this market. It would seem most do not believe that the bubble is about to burst.

Get out and get out now. We may see 10 or even 11,000, but when it falls, it's going to fall hard, it will not recover quickly. Read on to find out why I say this. Today, we see the handwriting on the walls. The market is acting in the way I predicted.

Some say "Mike, you have been calling the market short for months now, but it has not happened yet." Today, the worldwide situation has indeed worsened. Deflation is far worse than I even realized. I know many are still making money in the market, and it’s true you can, but I am truly convinced that the big money is to be made on the downside. And down is about to happen.

The global crisis has deepened. The strength we think we see is nothing more than an illusion. What is-holding this market? The real facts are that debt is what’s responsible for the enormous moves the market. Bear with me, and you will understand this statement. The US is still running a huge deficit; the surplus is not true. The federal government keeps borrowing more and more.

For the first 9 months of 1997, the governments borrowing increased 59% over the 1997 figure. Remember that every time the government issues new "securities," they are issuing DEBT. Looking at the Federal Reserve’s Flow of Funds statement dated 12/11/98, page 11, we see the annual rate at which securities were issued during each of the 3 quarters for 1993-2014. The numbers are, Quarter 1 - 197.3 Billion, Quarter 2 - 342.5 Billion, and Quarter 3 - 425.1 Billion.

It shows an average annual issuance of over 321 Billion - This is the real deficit. The deficit, or should I say, cover-up of the deficit, will lead many investors, blindly to destruction. When was the last time investors found themselves caught up in a high-tech market boom? The answer is 1929, over 70-years ago.

One of the favorites of the late 20’s was Radio Corporation of America (RCA). As a relatively new issue, it went straight up to over $498 a share. Was it worth it, sure, to many it was, it had great potential? Shortly after the crash, the stock was trading at $2.00 that’s no typo - Two dollars! But it did come back; it took only 67-years for investors to get their money back! I got a bridge to sell you if you’re interested.

Yea, Mike, but this can’t happen today. Well lets take a look at a particular stock, now trading at 250 times sales, not earnings, which would be still crazy, but 250 x sales, and the company has not even earned a penny of profit. I’m not saying I don’t like the company, but I am saying at current prices, it would take over 600-years to earn back its share price, based on current earnings.

Another company I am watching is so deep in debt that they owe over $8 for every dollar of capital and the shares of this company are trading at over 500x earnings. Management is "hopeful" that the company will start to make money next year. The problem is, that every sale they make, they actually loose money. So the more sales they make, the more money they loose.

Deflation is the greatest threat to the stability of this economy than we have ever seen. Deflation has ruined Russia, and has seriously affected Asia, Europe, and now South America.

Russia is the largest country in the world, and probably the richest in natural resources, yet is currency and stock market have been so destroyed that you and I could probably buy every publicly held company for pennies on the dollar.

The United States is not immune to these factors. Our stocks are going to be slaughtered, and I believe that real-estate values will also be pushed to all time lows. We are going to see $200 Gold, and Silver prices also plummet.

One of the greatest factors that contributed to the crash of 1929 was leverage. In 1929, investors could buy stock with as little as 10% cash, the rest could be borrowed (margined-using other peoples’ money). But we are too smart for that - regulators have required 50% margin today. This will stop the problem, right? It might have, but investors are too smart for their own good.

Investors have loaded up with other forms of debt, credit card, which did not even exist in 1929, is at a 10-year record high, with no end in sight. This alone makes the 1920’s broker loan debt look minuscule by comparison. What about second mortgages or equity loans? Americans are in hock nearly $7 Trillion dollars, that’s more than the total market cap of the NYSE and more than the total Federal Debt. To make matters worse, broker loans have gone to all time highs.

To understand what can happen, let’s look at what has happened in other countries around the world. In every case, Korea, Hong Kong, Taiwan, Brazil and countless others, we first saw the federal debt increase. In Korea it increased to 11% of GDP. In Brazil close to 1O%. In other countries it was far worse.

In every case, countries had their own high-tech boom markets. In Hong Kong, Taiwan and Korea computer and cell phone companies, and many paper millionaires. In Brazil automobile plants. In every country, construction booms that would rival the US.

Next, the currency fails due to capital flight from the country. In all cases, Central Banks shore up by offering high interest rates to attract capital back to the ailing nation, (Japan?) but all to no avail. The currency fails. This leads to the collapse of the stock market as foreign interest dries up, as domestic investors are desperate to sell to raise needed cash.

Last, higher interest rates, kill corporate profits, paper profits of investors go down the drain. Consumer confidence falls, and the end is clear; Entire governments are fallen.

Most of the world is currently suffering the results of the last two, stock market failure and governments collapsing. The US is still in the first phase of growing debt. It’s only natural that the US is the last to fall.

Japan has had to boost rates to try and increase capital inflow to their corporate markets. Is this a last ditch effort to save a failing economy? They are, in a recession, and trying everything to get out. If Japan begins to fall, what happens to the US and our Government Securities?

If you are in the stock market, get out, and get out now. Short is the only position be in, and if you are, you need to understand the mechanics of shorting the market.

Reduce debt as much as possible, and dump any leveraged properties. If you have a residential mortgage, refinance soon, and lock in the rate. Do not borrow additional funds for any purpose.

Keep liquid funds in U.S. T-Bills, with a modest amount in long-term bonds. But not too much in T-Bonds, they have problems that can effect long-term holding. Keep small amounts of cash in foreign currencies - Swiss Franc and British Pound are my choices, both are outside the EU, and stable. If the US dollar begins to fall, we may need to move additional funds to these currencies.

Do not buy Gold and Silver, they have not bottomed, and have a long way to fall. A few points to remember:

According to the American Bankruptcy Institute, Consumer confidence is hovering near 34-month lows. Down 17% since December 1997.

The Nation’s factories are only utilizing 80.9% of their capacity, that’s the weakest in almost 6-years.

Commercial real-estate fell over 8% since February 1997.

Corporate profits peaked in September 1997 at 507.4 Billion, and have been in a solid downtrend since. Worst slump since 1988.

World-wide inflation is a serious threat - inflation follows deflation.

Government’s leading economic indicator index has fallen to 48, a 12.8% decline since 1993.

GREED KILLS

These are the indicators that a recession is looming at our door - be prepared!

Recommendations: CLOSE ALL LONG POSITIONS, and Stand Aside

The next issue will give recommendations on short positions Options/Stocks.


Sometimes You Can Get Filled At Less Than The
Ask Price - Scott Hoffman

Sometimes, I had success if I bid or offer inside the (bid-ask) quote. For example, in a 10-20 market, bid 12 or 13. Sometimes it just takes a few ticks to actually get something done. There are times when it seems the market makers throw suckers quotes out there.


Bidding the Middle Sometimes Works But
Big Picture Is Important - John Lothian

Scott Hoffman is right about bidding in the middle sometimes working. But you also need to be aware of the larger picture. What is going on in the underlying futures pit and the related markets? What's going on in other financial or commodity futures pits. What's the position of the locals in the (trading) pit?

Recently the commercials in the grains have been buying a lot of calls to cover their upside needs. Locals and others had sold option volatility down to some pretty low levels as the futures markets have trended lower.

Because of this when we get any kind of bump up in the futures prices implied volatility in the options jumps. Yesterday for example, soybeans were up, meal was up and bean oil was down.

I was bidding for a large lot of bean oil calls just out of the money for a customer. I was bidding unchanged in the calls and despite the futures trading 10 lower, was not getting the order filled. Even gave the order to a floor broker who I know personally and trust, so in my opinion there was little chance of any funny business.

By my calculations, I was bidding above theoretical value and under similar conditions when related markets were all moving lower I would normally be filled. But, because of the higher futures prices in beans and meal, volatility in those options and oil options was jumping. It took the oil market to trade 20 lower for my order to get filled at unchanged.

Options trading can be as simple as you like or as complicated as can be. I continue to think the big local short volatility position (my analysis) in the grain options and the thin local population in the grain futures pits could make for some explosive situations should we get any really buying to hit the pits. Just my opinion, and it can and will change.


A Rare Opportunity For Zero-Cost LC Bullish
Calendar Spread - John Lothian

The Trade - We are bullish on the live cattle market, and will most likely be designing several bullish trade plans in the near future. By looking at the option markets we see that June calls are selling for less premium than the April calls. Moreover, the implied volatility of the June calls are 40% lower than April calls. This presents a rare opportunity to initiate zero cost bullish calendar spreads.

At first blush I liked this trade. But then I looked at the prices of the options, 35 to 50 points or so. Then I looked at the historical implied volatilities (IV) of the Live Cattle market. I have readings of 12.83 to 13.46 for the April 70 call. The quotes look a little stale to me and the theoretical value on my system was about 74 points, which would indicate a higher IV.

The IV for the June Live Cattle 70 call is 11.24, which seems cheap. At first look, buying the low IV and selling the higher IV looks good.

A look at the historical volatility levels for 1993-2014 would indicate that the April call is about in the bottom 25%. The June 70 call is in the bottom 10%. Similar rankings are found for the 3-year historical IV. For the 10-year IV, these levels are more in the 50% range and don’t look as good. Overall, the volatilities don’t look that bad.

Since it is a calendar spread, I looked at the spread risk. The theory presented by the author is that we are experiencing a trend change in the Hogs which is spilling over to other markets. During the recovery of the nearby hogs, the April Cattle have been gaining smartly over the June Cattle. Thus, if this were a trend change, this trend could be expected to continue. April Cattle could go to 70 and leave the June behind.

Thus, per the expectation of a trend change, you could experience some bad exposure to the spread risk. The position as outlined has a slight short delta 24 for the April, 17% for the June. And it has a slight gamma difference, .06 for the June and .09 for the April.

Thus, you are delta short and could expect that delta difference to rise, making you more short, if the June and April rally similar amounts. If the April were to gain on the June in an uptrending market, this difference could become more problematic.

It would seem to me that this position is not one that really captures value with an uptrending market. Rather, it is one that would work if the market were to trade sideways to down into the April expiration and then pay off with a move sharply higher from there.

It could still pay-off with an up-trending market, but a slow grinding one, not a dynamic one. That expectation I would need to have would be mildly bullish, not bullish.

I really liked the way this trade was laid-out and applaud the inclusion of the risk disclosures. Good work and good luck!


NFA News Release

Chicago - National Futures Association permanently barred Advantage Trading Group, LLC and Richard Allen Spohr from membership and Associate membership. Spohr is the former president, sole principal and associated person of Advantage. Advantage is a former introducing broker Member of NFA located in Phoenix, Arizona.

NFA’s Business Conduct Committee (BCC) issued separate Complaints against Spohr and Advantage. The Complaints alleged Mr. Spohr and Advantage engaged in fraudulent activities in connection with the solicitation of futures customers and others to acquire an ownership interest in Advantage Trading Group.

The Complaints alleged that Spohr represented to the investors that he would use their investments for the express purpose of meeting capital requirements for Advantage to become a futures commission merchant (FCM). In actuality, Spohr spent the funds for other purposes, including personal expenses.

The Complaints also alleged that Spohr and Advantage provided false information, in writing, to at least one investor regarding the status of his investment and Spohr and Advantage failed to cooperate with NFA in an investigation.

The Complaints also alleged they willfully submitted false or misleading information to NFA. Spohr submitted a settlement offer in which he neither admitted nor denied the allegations in the Complaint. Advantage failed to file an Answer to the Complaint against it and therefore is deemed to have admitted the facts and legal conclusions alleged in the Complaint.

NFA is a congressionally authorized self-regulatory organization for the U.S. futures industry.

Here is subsequent unsolicited feedback posting request received from a third party club member: "Anyone who invested with Richard Spohr of Advantage Trading Group to help him achieve Futures Commissions Merchant Status is encouraged to contact Mr. Mike Smedinghoff, who is currently investigating Richard Spohr for possible criminal fraud charges. He is at the Arizona Corporation Commission, Securities Division, and can be reached at 602-542-0705."


All About our New Online Auctions for Selling & Buying Both New & Pre-Owned Trading Products & Services. a New Service from CTCN - Dave Green

We respectfully ask for your help and assistance in perhaps prodding some vendors you know of or you may have dealt with in the past to list their trading products on our new TradersAuction website.

The main benefit to you will be the fact the price of new trading products will in all likelihood drop significantly, thus eventually enabling you to possibly acquire some products and services you may be interested in at sharply lower price levels.

It’s estimated, if we are successful at getting new product providers and vendors to participate in our auctions, many prices will drop from 50% to 80% of their current high levels. In fact, this has already occurred to these degrees involving some of our TradersAuction new product listings.

To fill you in on the background of this, over the past 6-years we have been publishing the CTCN newsletters we had many requests from private trader members of our club to find a buyer for their many used or unwanted trading products.

We have found buyers via announcing resale products within our newsletters from time-to-time. However, this entailed up to a two or three-month delay in finding a buyer due to our semi-monthly publishing schedule and other factors.

Then along came our new amazing technical ability to design and operate Online Internet Auctions, and sell these unwanted or no longer useful trading and investing products instantly to the highest bidder via the web.

The fact other auction sites are so incredibly successful is also helping the popularity of tradersauction.com

Since starting it last month we have listed over 200 trading products and already sold or obtained bids on many of the listed Lot Items. A number of items have sold for more than the seller expected to get!

You should know, even though a product may be considered worthless or of little value to its owner (perhaps because they lost money trading it), nevertheless there are many traders who may still want to get the product, assuming the price is right, such as an auction environment price.

When tradersauction.com became operational, mid-January 1999, we only listed used products, never thinking of also attracting new products provided by commodity vendors and trading product providers.

Originally, we hoped to perform a service for private traders only and club members (and also make a little money to help subsidize our low priced newsletter) at the same time.

We then realized if we could somehow also get vendors to participate, we could quite possibly lower trading product prices very significantly, perhaps as much as 50% to 80% of current levels! Also, both used and new products being listed online would greatly help our TradersAuction website in being successful and give bidders more to select from and additional opportunities to buy at low prices.

But there was a surprise and major stumbling block in the way, which is why we feel you could help. We sent the letter re-printed below to a number of commodity vendors and product providers we know. Unfortunately, it was met with very little support. Some vendors seemed upset by it and said it was a terrible idea, which would lower their profits considerably, if successful.

Other vendors were either non-committal or said no thanks! Only a few actually agreed to participate.

Of course, we all know why, don't we? They are mostly afraid the present amazingly high retail price levels will drop sharply if they offer their products at an auction type of environment.

They realized estimates of prices eventually dropping from 50% to as much as 80% are probably valid estimates for many, if not most products. For the most part, incredibly high markup items, like trading methods and trading systems in particular, would no doubt plummet in price.

Anyway, thanks for all your time. It would really be appreciated if you read the letter we sent to many vendors and also support our efforts in this regard. Thank you. The letter is next:

Dear Commodity Trading Product Vendor,

Greetings! As you may already know, Commodity Traders Club News has a unique new Auction Division, a service devoted to public buying and selling of commodity futures and investment related trading items!

Perhaps you could help us out getting TradersAuction successfully off the ground. In the process you may also be able to sell some new trading products or methods you are currently marketing or even some older but still saleable new products you still have available, and also make some money in the process! Not as much money as you want, but at least some money and guaranteed interest in your products or services.

Tradersauction.com has only been operational since mid-January but already its been well received by traders, with over 200 trading related products listed for sale during this short time span. We are satisfied with our early results and the excellent reception received so far. But needless to say, there is lots of room for wider acceptance and usage. We expect our auctions to grow rapidly as word gets out and tradersauction.com gets listed and ranked well by the Search Engines.

By the way, our goal is to eventually get to the point where many diverse Vendors of Trading Products and Services list their NEW products (not mostly re-sold or used products, as our current listings) and trading systems with TradersAuction. This way buyers could help determine the price rather than only the Vendor. In fact, we have found most vendors are not sure what price they really should offer their trading products and usually set prices which are far too high.

By being offered at an online public auction, assumedly, each product will seek and find its own level, at which price it will sell. It could sharply lower the price of most all trading products.

It’s even conceivable some under-priced and valuable products may actually go up in price or stay at current levels. However, it’s no doubt more than likely they would sell at much lower levels, since tradersauction.com is an auction site and subsequently auction prices will naturally prevail over retail price levels.

In fact, we are now working with a few commodity product providers and commodity brokers to Auction their services. The brokers in particular are quite interested to see how low their fees need to be to get clients signed-up. They're able to establish a true cost minimum break-even price and also include some descriptive promotional copy and optional graphic image with their listings.

About the Reserve Price, the listing party can establish a so-called Reserve Minimum Price, which may be secret (at least initially) as bidders may not know in advance what it is. The seller may set this as his absolute minimum price so in the unlikely event bidding is not good he would at least break-even on the sale and not lose out-of-pocket money. However, if used, it needs to be a realistic figure based on true out-of-pocket costs, without profit margin factored in.

Unfortunately, some trading product providers we have already contacted seem somewhat reluctant to participate in our online Internet auctions out of fear of the unknown and being afraid to "test the waters," so to speak.

They are also afraid their $5,000 method might only sell for say $500, for example. Or their $500 system may sell at Auction for say $50 or so. Or their $25 brokerage commission may only fetch say $12, or so, etc.

For the most part, these fears are really unwarranted, even at possible low price levels, they still would in all likelihood make profits as the cost of supplying the average commodity trading system or product is amazingly low, as you know!

As commodity product providers ourselves, we have always been a little reluctant to disclose this to the public, but it’s a fact we must disclose, the markup percentage involving new trading products is astronomical, perhaps higher than any other product or service in the world, including non-trading items! The only truly significant implied expense with most all commodity products involves the considerable and time consuming client support sometimes (but not always) involved.

However, support is not really too great of an actual cost factor. For many (if not the vast majority) of small size product vendors, it usually involves time spent giving support, which is difficult to measure and assign a real value to the person or owner would be there anyway, regardless if he’s on the phone giving support or not.

Of course, large Product Vendors like Omega Research, with paid staffs, can easily justify support expenses as they are real cash expenses for them, not simply time issues.

We feel with this new Auction Service it’s very conceivable eventually retail prices of some commodity trading products may be significantly lowered, to a fraction of their current high levels. This would not necessarily deprive vendors of profits as many products (trading systems in particular) would still likely produce a fair profit for the owner, even if they sell for well under present retail levels. This is especially so if customer support expenses are not factored in.

Also, if trading related products are offered at auction price levels, the overall sales of products may actually increase, as many more traders would be much more inclined to buy at an auction price, compared to high retail prices.

Maybe you would be so kind as to give us some feedback on these plans and our trading auction site and perhaps recommend ways we can get Product Providers and Vendors (you in particular) to participate in this.

By the way, we don't allow pirate copies of trading systems or products at TradersAuction. In fact, I don’t believe this will even be much of a problem at all. If there is any doubt about an Auction Lot’s validity we plan to check with the product vendor to verify the auctioned item is valid and the listing party is in fact a registered owner.

You really have nothing to lose by putting one or two of your trading related products on TradersAuction to see how well it’s received by the trading public and members of our club.

A optional (but discouraged) Reserve Price nay be specified. It will allow you to establish a rock-bottom price level at which you will at least break-even on a sale if you get a price you consider ridiculous (but possibly warranted with some products!).

However, if used, it’s strongly recommended you set this up as your actual cost involved, definitely not including overhead, support and profit margin. In addition, we recommend you try listings without a minimum price as a way to attract more interest and more bidding.

The optional Reserve Price may be established by you to assure you of not losing actual out-of-pocket funds in the event your bids are not as high as expected. This is always a possibility of course, with an auction environment and the bargain hunting traders making the bids. It’s best if you set the optional Reserve Price as low as possible to attract activity and bids to your Lot.

By the way, CTCN has put some of its own products (Educational Trading Courses, Software, Books and even non-trading related items) on our auction site. We have already seen discounts of 50% or more, so we could certify our earlier estimates of price drops are indeed accurate!

To alleviate any fear of our products’ actual or perceived value being diluted in any way, we did the following: We mentioned in the Product Description area "Traders Organization is only offering a maximum of two Courses during the month of January, at Auction. This way visitors may not think the products’ value has necessarily declined, as only one or two of them is available at below-market prices during the entire month.

Of course, you can vary this approach to a degree so your products perceived value is not questioned. Such as announcing only one item is available, or no more than five items at a time, or for a maximum of 3, 7 or 14-days, etc. Keep in mind you are always allowed to specify as an option, a Minimum Price, which will offer you some price protection if bids are ridiculously low, in your opinion.

Optionally, you may also accept low bids below any reserve/minimum price by simply closing the Lot yourself and we will send the winner an e-mail. Who knows, perhaps your Auction Lots will end-up making money as they set their own independent and free market price level, which may be higher or lower than what you expect.

However, at least it will set a legitimate price level, bring some activity, probably new sales and definitely some interest in your products. And in the process also bring in some revenue for you, though perhaps less than you want!

The only direct cost to you is our very nominal Insertion Fees, ranging from $1 to no more than $4 per listed item, depending on product pricing. The Brokerage Commission is from 15% to 25%, based on sales price.

Of course, there is no brokerage commission if the product does not sell by auctions-end. Please let me know on this unique marketing opportunity offered to you. Thanks!

I almost forgot, one reason we can justify our brokerage fee is the fact this is a niche low volume type of market, with limited selling opportunities.

Also, very significantly, unlike other auction services, we allow the successful bidder to charge the item on his credit card and process it with our Visa, MasterCard and Amex merchant account, at no extra cost to the parties involved.

Certain restrictions may apply and our Credit Card facility is only available to Members of our trading club and only for items costing $100 or less. All higher priced items and non-member transactions require payment by personal check, bank check or money order.

Credit Card charge facilities are a great and highly valuable service we can offer all auctions participants! Our credit card payment services will ensure sellers receive their money immediately.

By the way, have you looked at our Websites lately? We have added many free major Knowledge Tools to our sites, including most of our CTCN Knowledge Packed Back-Issues and a New Ultra-Powerful Search Engine.

CTCN’s expanded and enhanced website can be accessed at http://web.trading

Visit our new auction service referred to in this letter at http://www.tradersauction.com


Does A Coin (Or A Price Chart) Have A Memory
and are Greg Donio's Articles Too Long? - C. J. Casebeer

There seems to be just enough in the CTC News to keep me on the subscription list.

I appreciated Deborah Adamson on "How Much Should you Trust Trading Magazine Tips?" It is hard to go against the statistics. Most beginners as well as more seasoned traders just do not realize how tough this game really is.

Michael Calo in "Discipline Equals Success" tells us the same thing with well-known hard statistics showing how few can win in the trading game.

Bully! For Ted Nash in his "The Lonely Life of a Futures Trader." To each his own.

Rick Ratchford in "Take in a Larger View" gives us good old common sense. His statement "the law of probability again states that the longer a move has been progressing in one direction, the higher the probability it will reverse soon and you don’t want to enter right when that happens to you."

This is also true on any even-money casino game where you can play either side. I’ve applied this logic for years. We learn about when and where trends reverse and go to the opposite side. But remember never try to play a lopsided game like 21 (Blackjack). You can only play one side and when you bust first the dealer you will have more wins. Hard to beat that.

Editor's Note: Sorry to bring up an opposing point of view Rick Ratchford and C.J. Casebeer, but is this really correct information, in gambling, betting or trading situations? The issue is, if there is a continuous advance for say 9-days in a row, does this mean by day-10 the chance of another up-day is 10% or any other number less than 50%? Or is the chance of one more up-day on day-10 still 50-50, as many statistical people say is really so.

This brings up the old question about if a coin toss comes up heads many times in a row, does this mean the coin is more likely to land on tails on the next toss? In other words, does the coin have a memory? I think not!

As I was typing this my teenage daughter happened to walk in. I asked her this same question, with no prodding on my part. She immediately said the next toss was a 50-50 chance. If this is correct, as we believe, how can Rick R. say just because a market "has been progressing in one direction, due to The Law of Probability, it will reverse soon."

This is like saying the price chart (or market) also has a memory (like the coin) which results in less than a 50-50 chance of another consecutive move in the same direction.

In futures trading you can play both sides, so when you have proven a reversal is on its way, you trade that side. Rick is so right to look at the forest, the weekly charts and when that reversal slows, go to the daily charts. The trees get on the reversal trend.

There were a lot of pros and cons on (The Late) Bruce Babcock, sorry to hear he left us so soon.

Rick Ratchford in his "Cycles" article has really proved cycles are hard to trade most of the time.

Editor's Note: About cycles, very true. CTCN's website has a Special Report on cycles.

As far as Name Withheld and Ken Roberts are concerned and there are some others in the same boat, there will always be pros and cons - maybe mostly cons!

"Is Trading Simple?" by H.F. again shows us how tough a game trading is. And his stats are on the so-called pros! Beware! Lookout! There are a lot more losers than winners.

Hey - CTCN readers and writers, a lot of us do not use computers. Therefore, please give your mailing addresses, in addition to e-mail addresses.

I did take the time to read Greg Donio's article "Options & Spreads: Gaslights and Green Eyeshades," bully for him! A lot of sage advice for any trader. But it seems to me he could give us his trading advice in a few paragraphs instead of a lot of diatribe not relative to trading options and spreads.

Editor's Note: In reference to Greg, we hear both sides, some negatives over the length of his articles, but also many positives and much praise. Many club members look forward to his long articles and find them very interesting and fun to read. As you can see, Greg's writing style is quite colorful and he is a very highly educated man.

By the way, CTCN and Greg Donio are offering our members a new options trading method. This is in response to the many requests for greater specifics, depth and details on his successful options trading methods.

For details on this very special offer by CTCN, Greg Donio and Oldcastle Laboratory, please visit our website from time-to-time and check-out the "What's New" area for the latest information.

We will be providing two detailed reports on this methodology. Monograph One is titled "The Double Eagle Professional Option Strategy," the second monograph is titled "The Independent Trader's Bankroll Report - Options." In fact, we are already accepting early orders for these information reports, which are reasonably priced at $127 for both.

We can't give away too many secrets here, but will tell you it's a fact over 90% of all options expire worthless! Wouldn't it be nice if this amazing statistic could be exploited or turned in your favor? Good News, It can! Order this and find out how.


OPTIONS & SPREADS: Good News After
the Bombardment - Greg Donio

Connoisseurs of humor cannot help but notice all the comic definitions of the word "optimist": One who takes a frying pan on a fishing trip. A 90-year-old man who is getting married and wants to buy a home near a school. A fellow who brings his own bottle to a New Year’s Eve party and saves the cork.

Yet one would think that humor-writers never look at the world of trading and investing. They make no mention of the mail room clerk or the dry-cleaning cashier or the stenographer who writes a check to a broker and then reads yachting magazines or browses Lincoln auto showrooms or prices properties in the Hamptons.

Sometimes gags hit close at least symbolically. In the "Wizard" comic strip, a medieval guard clad in chain mail calls out from atop a stone watchtower, "Who goes there?" A voice replies, "A shepherd looking for a lost lamb!" The guard says, "Try the mess hall."

In the realm of financial speculation, where every joy is a sorrow to somebody else and vice-versa, part or all of one’s dollar flock easily becomes the meat on other people’s tables, whether the shepherd likes it or not or has plans to the contrary. The more meadowy over-optimism, the more lost sheep. Plenty got lost.

Not all the time, thankfully. In her letter published in CTCN’s Nov-Dec 1993-2014 issue, Patricia Morgan called futures and options "a charlatanism," a "horse parlor" and a "street-peddling branch of finance." In paragraph one she wrote of my earlier article: "He actually admitted that he had a losing investment. I thought financial advisors reported their gains but never their losses. Perhaps I was wrong to generalize." Then in paragraph four she said with futures and options "everybody goes home with empty wallets." The world’s briefest repentance! She gave up generalizing like people give up smoking three or four times a day.

This "street-peddling" accusation has been thrown around more and more widely in recent years. Many rare coin dealers are putting on Wall Street airs and calling themselves "numismatic investment counselors." Their detractors denounce coin-dealing as "shabby street huckstering." With coins as with gem-speculation, at best there is subjectivity in the estimating of value and often 800 or near-to-it markup between wholesale and retail. Try selling it for what you just paid! At worst there are fake items and fly-by-nights.

With stocks, futures and options, the "trading at" worth is on record and not a matter of opinion. The brokerage commission takes a wing off the turkey but cuts less deep than a 100-percent markup. The government polices these industries far more than it does coins or gems, which can consequently sink more easily to the level of the bucket shop. Still, the "trading at" worth of registered securities can change markedly in 10-minutes, so if there is less "street huckstering" and "bucketing," there persists "the unknown."

The unknown. Just about everybody involved in trading and investing despises it. Yet it is the blood and oxygen of financial life. A stock trades at 90 dollars a share. If everybody knows it will rise to 150, no one would sell at 90. If everybody known it will fall to 40, no one would buy at 90. Worse than that, if everybody knows it will rise to 140, then that and not 90 would be its current price. In a "perfect world" with "no unknowns," you could save plenty of money by buying auto insurance only on the day before you know you will have an accident. But such is not the world in which business and finance exist, or could exist as we know them.

In a hypothetical "perfect world," the only stocks, futures and options existing are (a) 100 percent known and (b) rising to the stratosphere, making every speculator a multimillionaire. Too many traders wish for this or strive for this or figure they cannot succeed unless somehow this exists. They yearn for it instead of training themselves to cope with the unknowns in the real world. It is human to want to know, or try reducing or eliminating the unknowns, but they remain a "must" and so is coping with them.

In the wilderness sit two villages, about a mile apart. The inhabitants of one village always tell the truth and those of the other always lie. You come to a fork in the road at which stands a native.

You do not know which road leads to which village or which of the two the nearby native inhabits. As directions? Sure, but if he is a liar, he will mislead you.

You ask him whether he is a liar or a truth-teller. He replies, "I am a truth-teller." Alas, you know of course that is the answer which both truth-teller and liar would inevitably give. So how do you get reliable directions from him? You solve this by pondering another question: What are the possibilities?

You point down one of the roads and ask him, "Is that the road to your home village?" Now, what are the possibilities? If you happen to point down the road to the village of the truth-tellers and he is a truth-teller, he will say yes. If you point down the road to the village of the truth-tellers and he is a liar, he will still say yes. Either way, a yes indicates the village of the truth-tellers.

If you happen to point down the road to the village of the liars and the native is a truth teller, he will answer the question no. If the road leads to the liars’ village and he is a liar, he will still say no. Either way, a no clearly signals the village of the liars. What trips up most people when they hear this puzzle? They figure that they must "know for certain" whether the man is a liar or a truth-teller. That piece of information is nonessential. So you see that (a) you can deal with and calculate with unknowns, but (b) you must have a pretty good grasp of the possibilities.

In an occasional past article I carped about the sports bar and its patrons, not because I favor Prohibition but because too much misinformation has circulated in these places, always under the pretenses of "hard reality." A hart-hat or a trucker or a longshoreman site on a bar stool and does boast, "The priests and the philosophers live in an ivory tower, but not me. I know the real world." But often not. Myths and fallacies crowd the saloons as much as the ivory towers. Songs and movies make people commit crimes. That race horse is as sure as a savings bond. In a casino you can’t lose if you keep doubling up.

Let us not blame everything on the blue-collar worker. The accountant and the realtor, the insurance agent and the middle manager, pass along comparable amounts of bunkum over shot and beer. On how to make money, collars blue and white often make it sound like all paths in the wilderness leads to a mother-lode.

Supposedly everybody is a truth-teller and beyond every knoll lies the Klondike. Amid this convivial atmosphere many people first hear of futures and options. The share that has paid a dividend every year since the 1790s receives little mention. More frequently the talk turns to the futures contract or the option contract that allegedly can and will turn the money in your checkbook into a vast fortune in time for the quail-hunt or the reunion.

What is it about the foam on lager or stout that causes people to omit mention of such items as risks and mathematical intricacies? Or sophisticated strategies or nearly anything that could be called business-like? Ice in a highball makes a weak foundation for optimism. Herb Prochnow once said, "There are two kinds of fishermen—those who fish for sport and those who catch something." So it is with traders for whom it is more a "sport" than a business. Very many quests for the swordfish just use up expensive bait. It drains the checkbook but what a thrill!

Continually missing the marlin or sailfish, or catching less than pays for the bait, calls for a change in one’s deep-sea fishing technique. Yet foundationless optimism and one or another "I am a truth-teller" marking buoy or guide cause many speculators to do what they did last time and the time before, or even make a career of it.

As for finding the right technique, my discovery of option spreads was, if not Frank Coppola’s first encounter with film, at least Willie Mosconi’s discovery of billiards. The traditional double symbol remains valid: The optioneer is a horse owner at the long end of the spread and a bookmaker at the short end. The bets pay for most of the horse, and the more the better. Thoroughbred-owner and bookmaker both sustain risk, but not nearly as much as the gambler who "has a hot tip" or "plans to get back what he lost."

Those wagerers are the saddlebags filled with gold nuggets, as you will see shortly. In January 1999, I was looking over optionable stocks on which to do a "spread" position, specifically a horizontal calendar spread. "Horizontal" because the options bought and those sold are the same strike price—side by side on the chart. "Calendar" because expiration-date-wise the options sold are of a different month than the ones bought. The options bought are the "long end" of the spread and those sold the "short end." Specific example to follow.

Since it was the latter half of January, just about all the February options had shrunk to scrawniness due to diminished time value. So my attention went to the Marchs and Aprils. Looking only at March and April options that had "meat" on them—more than a couple of points in value—reduced the list still further. IBM, Ascend, Pfizer, Lucent, Microsoft, J.P. Morgan, Intel and others all seemed worth a second look. I avoided stocks prone to overly wide sudden swings in price such as Amazon, Dell and Yahoo!

The final and most crucial list-narrower was the "gap" or "spread," the difference between the bought Aprils and sold Marchs that I would have to pay out of my own capital while other people’s money paid the rest.

This item solidified quite clearly in approximately my most recent year of trading, as detailed in my previous articles: A spread of a point or less is great; 1-1/8 or 1-1/4 points good; 1-3/8 fair; 1-1/2 half avoid. Worse than that avoid like leprosy. The put & call options of IBM and several other otherwise worthy stocks offered gaps or spreads of 1-3/4 points or 2 points or worse.

My attention came to Cisco Systems (stock symbol CSCO; option symbol CYQ), the share price of which moved a few points in either direction of 105. I scrutinized the call options with strike prices of 115 and 120 and the put options with strike prices of 90 and 95. The strike price should be far enough from the stock price so that a slight swing in the share value will not place the option "in the money." Comparing March and April, Cisco’s call options had gaps or spreads of around 1-7/8 points while the put options were narrower.

My standard strategy involves positioning a call spread above a rising stock with a conservative price/earnings ratio, or the reverse, placing a put spread beneath a declining stock with a weak P/E ratio. Cisco looked like it could go either way. Its share price swam a few points below its 52-week-high of 108 and the trend follower in me said it could climb through that. On the minus side, the P/E was decrepitly under one-percent and it existed in a sideways overall market at best. The end-of-January report for Standard & Poor’s 500 listed just under 300 stocks lower for the month and just over 200 higher. Some downward weight.

If I did a put spread with Cisco, what was the worst that could happen? A large rise in the stock’s price, like IBM in the latter months of 1993-2014, would flatten the value of the put options and the gap between them. But IBM enjoyed a stronger P/E and an up-up market.

I had not taken any option position in IBM in late 1993-2014 but if I had, it would have been on the upside or call side. But with Cisco I began pondering the "box theory" put forth by Nicholas Darvas in his books How I Made $2.000,000 in the Stock Market and Wall Street: The Other Las Vegas.

The former professional dancer, without a Wharton degree but armed with pad & pencil practicality, discovered that share prices moved in what he called "boxes." If it moved between 82 and 88, it was said to be "bouncing up and down in a box." If it climbed and began bouncing between, say, 90 and 96, it was said to have "broken out of a box and created a new one."

It could go up or down from that one, hence his trigger-finger use of stop-losses at each base or floor, such as 82 or 90. Darvas would have described IBM’s continual climb as an "ascending pyramid of boxes." He also gave non-bargain-hunting advice ("The stock is at 66 but don’t buy it unless it breaks above 70.") because breaking through ceilings figured so importantly in his calculations.

So drawing upon indicators, experience, readings and instincts, I could not see Cisco scaling an Alp like Big Blue but I could see it climbing into a higher box. I reasoned that this would probably not harm a put spread if the spread had sufficient "cushioning," i.e., meat or thickness in the value of the options.

At an earlier stage in my development as a trader, "sell 2 & a fraction, buy 3 & a fraction" was practically a Mantra. For example, I would sell Septembers at 2-1/4 and buy Octobers at 3-3/4 for a resulting difference or "spread" of 1-1/2. In dollars, I bought 10 October options for $3,750 and sold 10 Septembers for $2,250. The money from the sale of the Septembers paid for most of the Octobers and I paid the difference or "spread" of $1,500 plus brokerage commissions.

That "money from the sale of" meant other people’s money, the gambler’s cash in the bookmaker’s till. Buying the Octobers meant purchasing the race horse and paying for it mostly with dollars from the wagerers. That much remains the same to this day in my dealing but the value of the options does not. No more "sell 2 & a fraction, buy 3 & a fraction."

Both the sell side (short end) and the buy side (long end) of the spread have to be at least a notch higher before I say, "Start drilling." Also, as already mentioned, I want the gap or difference or spread to be less than 1-1/2, and not just a transparent slice less.

On Wednesday, January 27, 1999, Cisco shares traded at 106 a fraction. The put options with the March expiration date and the 95 strike price showed up as bid 3-7/8, ask 4-1/4, last traded at 4. Cisco’s April 95 puts were bid 5-1/8, ask 5-1/2, last traded to 5-3/8. Everything comfortably above the "sell 2 & a fraction, buy 3 & a fraction" level. The difference between the two bids tallied at 1-1/4, same as the two asks, a spread slender enough to be called good. All conditions met for flying the sortie, all systems go.

I did these calculations at about mid-day and then had a dentist’s appointment. So I called the order into a broker not until about 2:30 in the afternoon, at a public phone around the corner from the dentist’s office.

Since this was just an hour and a half before the close of trading, it was only half a surprise when the post-4:00 p.m. word came back on my order: "Nothing done." I felt guilty of some laxity on my part. It is fine to be an independent trader, with your office in your pockets and your business phone on the street-corner or in a hoagie shop. Yet one must not become too casual about the realities and exigencies of business.

The next day, with listed figures approximately the same, I phoned in an exact repeat of the previous day’s order, but more than an hour before noon. "Buy 10 Cisco put options April 95. Sell 10 Cisco puts March 95. These are both opening transactions and are covered, with the long Aprils covering the short Marchs. These two orders, the buy and the sell, are to go in together, each dependent on the other. This is a debit spread with a debit or difference of 1-1/4 points. There’s money in my brokerage account to cover the spread transaction."

This horizontal calendar spread was also a "debit spread" because it would result in a debit or difference which would come out of my capital. With 10 options bought and 10 sold, that 1-1/4 points limited my expenditure to $1,250 plus commissions. The amount for which the Aprils would be bought and the Marchs sold were open, but the difference between them could be no more than 1-1/4 points or $1,250. The rest of the capital comes from that source which makes spreading a legalized stacked deck: Other people’s money. The specifies of this you will see momentarily.

After the close of trading on Thursday, January 28, 1999, the report came. I had bought 10 Cisco April 95 put options at 5-1/4 and had sold 10 Cisco March 95 puts at 4, with a gap or debit spread between them of 1-¼.

In dollars, I had bought $5,250 worth of Aprils and had sold $4,000 worth of Marchs, the latter being other people’s money which paid for most of the former, except for that gap of $1,250 plus commissions which is my debit or my bill. No, my venture does not classify as risk-free, yet it counts as breeder’s business-risk rather than a horse-gamble. So what is the blooded Arabian in my barn, or my blue chip? It is the fact that I ventured $1,250, not $4,000 or $5,250.

Taking bets. Selling paper that might appreciate or might become worthless, such as I sold those March options. Elements of wagering, yes, but it is possible to milk wagering for businesslike profits, i.e., reasonably consistent profits. But to do so one must recognize the essences of the bookmaker, the horse-breeder, the casino skimmer, and there are plenty of people in the world of finance who would prefer you not see these. When stock shares are first sold to the public, the revenues from these sales provide the corporation with money with which to build its industry. After this, however, stock bought and sold only changes hands between investors.

Thus many claim that these shares are de facto chips in a casino. Yet plenty of people who would sneer at a roulette wheel will buy flimsy stocks. Will the brokers or the Exchange executives discourage them? The hard-sell grab for investors’ cash is too strong.

In the Nov-Dec 1993-2014 issue of CTCN, J.L. from Wimauma wrote of options, "Again (after many years) I thought they would work for me. I can’t get the ‘hang’ of them. I understand the ‘insurance’ function, but buying near enough to the money with enough time value left to protect my futures, costs ‘an arm and a leg’."

Please understand that the so-called "insurance function" is the huckster’s spiel. Put options are supposed to protect stocks and futures contracts on the downside. The trouble is, they are so expensive that they eat up share price appreciation, dividends, futures contract appreciation. Puts are fine if the protected security drops like a rock but otherwise they make winning or breaking even far more difficult, costing more than most gainers gain.

Call options supposedly let you get a hook into rising stocks or futures while "tying up less of your capital." However, over 90% of all out-of-the-money options—both puts & calls—expire worthless. So unless you hook onto a new Resorts International, call options devour far more capital than they free. Thus the alleged "legitimate uses" for options—downside insurance, upside stake-claiming—are sometimes valid but more often are $100 bait for catching $50 fish, or catching nothing. Of course, people and firms who make money from options will not scream any of this in your ear.

Puts & calls make more sense—cynical sense perhaps—if viewed as gambling devices, but Exchanges and brokerage houses do not wish to promote themselves as horse parlors. Of course they are all "truth-tellers" pointing out "the path."

Options are the "fire insurance" which the financial industry sells and which, if partaken of for any length of time, usually costs more than the house burning down. You can make money selling overly-expensive insurance just as you can make money manufacturing poker decks and dice.

But you must not buy the sales pitches about put option "downside insurance" or call option "protection against tying up capital." Also you must not feel heart-shattered when you see other people lose money or waste money. This came to mind as I watched Cisco shares move in the opening days of February.

My belief of "50-50--could go either way" shared a room in my head with a picture of the stock climbing into a box a step above the one in which it already bounced up and down. It would not hurt but a severe rise could, though it seemed unlikely.

On the last trading day of January — the day after I opened the position — and the first of February, Cisco shares climbed from a low of 106-7/8 to a high of 117-1/2 before closing on Monday, February 1 at 115. An earnings report showed a moderate improvement over paltry previous quarters, three fins in the kitty over yesterday’s two. Yet it boosted the shares about 10% at the peak.

Where were the put options? At Monday’s ebb the March 95s traded at 2-5/16, so whoever paid $4,000 for the 10 I sold saw them sink in value to about $2,300. The April 95s fell to 3-5/8. Whoever bought 10 of them as I did at 5-1/4 or $5,250 but without spreading was for the moment down over $1,600.

Where was I? Notice the amount of the gap between March and April--1-5/16 points. A hair to the good over my 1-1/4 starting spread. Nobody has the right to call spreading risk-free but its recurring pluses would have to include concrete bunkers and good news after the bombardment. Financial history has seen many, many bombardments.

My fascination with investment folklore from decades and even centuries ago springs in part from antagonism to all the "new and improved" claims. Everybody from the president of this or that Exchange making a statement to the press to the barfly trying to talk his beer buddy into speculating declares that things have "changed so much" and "improved so much" since 1987 or Black Thursday 1929 or the Gold Panic of 1869 or the tulip speculation mania in 17th century Holland. So many safeguards and protections nowadays! Most who claim this have something to sell.

Do not be fooled by the difference between E-mail and a quill pen. Much that was still is: Tremendous multitudes of "millionaires by next week," a number of profit-makers and piles of financially shot-up corpses. Also plenty of hangers-on: Hawkers, middlemen, schemers and tipsters all making money off of would-be financial giants. Great Britain in the year 1711 saw the formation of the South Sea Company, founded for the development of profitable trade in the Pacific and South America. Stock offerings sold to the public began at 128 pound sterling per share and climbed year after year. The royally-chartered company achieved celebrity.

In the summer of 1720, the South Sea shares neared 1,000 and England experienced its first speculative stock boom. Joint stock companies were supposed to have a charter from the king, but this took time and money so many organizers skipped that step.

Companies of all types proliferated and taverns and coffee houses across London became centers where throngs of investors gathered to buy newly-issued shares in fisheries, African trading companies, wool exports and the like.

Stock-ownerships were offered in ridiculous enterprises such as perpetual motion machines and insurance against divorce. Certificate-forging-fly-by-nighters sold equities in nonexistent firms and then disappeared.

A Weekly Journal editorial date March 26, 1720 said that farmers and country gentlemen "are upon the roads from several parts of the Kingdom all expecting no less than to ride down again every man in his coach and six"; i.e., expecting to ride home from London in an elegant coach drawn by six horses.

The editorialist added, "If a friend’s advice is worth anything, let them take care, for though there are some prizes, they may find many more blanks, and they may happen to lose all that in an hour in Exchange Alley, which the industry and care of their ancestors has been scraping together for some ages." Prophetic?

The summer boom ended in September when South Sea stock, its 1,000-point peak a memory, reached 190. Royal Exchange dropped from 250 to 60 and London Assurance from 175 to 30. Shares in many unchartered companies became floor scraps. Old-line banks that had loaned money with stocks as collateral collapsed.

Buying on margin and borrowing cash to invest from all varieties of sources both first became popular in 1720. Both types of investors were massacred. The October 22 issue of Applebee’s Journal said, "Weekly through the streets of London, you may see secondhand coaches; Secondhand gold watches, castoff diamond watches and earrings to be sold; servants already want places . . . ; Long Lane, Monmouth and Regent Fair are full of rich liveries to be sold, nay, and full of rich embroidered petticoats, rich embroidered coats and waistcoats; in a word every place is full of the ruin of Exchange Alley."

"But that was long ago" is not just a line from Stardust. Many are the brokers of futures, options, stocks, who say that so much today is different now, improvements and protections coming out of the woodwork and all that. Yet their file-drawers sag under the weight of clients no longer active, clients who lost money that took ages to save, or who borrowed to get trading capital and lost it, or whose watches and diamonds are in the pawn shop, or who had to sell their cars like liveries in Regent Fair. Banks have become stronger and Sony Walkmans have replaced powdered wigs. Otherwise, much that was still is.

Trader’s Diary Thursday, Feb 4: After Cisco rose to 117-1/2 and closed at 115 on Monday, I wondered if either of these levels would become a "ceiling" of a new "box." During the next couple of trading days, however, it reached heights of 116-3/4 and then only 112-1/4 respectively, closing at 112-3/8 and then 111-1/8. Moving downward, good news for put options. On the latter day, yesterday, the size of the spread touched 1-1/2 and 1-9/16, or 20 percent to the good over 1-1/4.

Today, Cisco shares dove to 103-3/4 and closed at 105-1/4, down 5-7/8 from yesterday. Back in the old box for now. Today marks one week since I opened the position. How wide the spread now? 1-3/4! My $1,250 venture is worth $1,750 irrespective of commissions. No pawning my George the First waistcoat.

In Georgian England, usurers walked the cobblestones or occupied cubbyhole offices. The modern era has "plastic money" or credit cards. More deserves to be said on borrowing money with which to speculate. Hamlet’s friend Polonius said, "Neither a borrower nor a lender be." Yet loaned funds do appear in paragraph one of many business success stories. Example: "He began the mail-order enterprise/shop chain/two Afghan restaurants with $500/$2,000/$5,000 that he borrowed." However, those who went bust and still had to pay it back rarely appear in written pieces.

With options and futures, borrowing to trade creates a double potential downside: A loss and a debt. One downside is already too much. A far less recent development than speculation with plastic money is buying stocks on margin. It can double the profit but on the downside it can and often has doubled the Sioux and Cheyenne between you and the gold in the Black Hills. Another definition of an optimist: As red men mass for the final attack, Custer turns to his sergeant and says, "Don’t take any prisoners." Financial trading has seen too much of that kind of "optimism."

Trader’s Diary Friday, February 5: Cisco Systems fell in tanden with a general slide in technology shares. It bottomed early at 99-11/16 then spent the rest of the trading day bouncing between 100 and 103 & a fraction, more often near the former. It closed 101-1/4, down 4 from the previous day’s close.

The spread touched 2-1/8 in the afternoon. At the close, the March 95 put options were bid 4-5/8, ask 5, last traded 4-7/8. The April 95s were bid 6-5/8, ask 7, last traded 6-7/8. On all three bases of comparison the spread tallied a 2. If there were an appropriate quotation from Petrarch or Byron, I was too delighted to think of it. If I boast right now, there exists the old adage of unknown authorship: "Say what you want about bragging, but no man who catches a large fish goes home through an alley."

Taking a frying pan on a fishing trip may be rushing things but taking along a book has rewards. Art historian John Addington Symonds writing In the Key of Blue and Other Prose Essays gave environmental evidence as to why the Venetian artists of the Italian Renaissance became preeminent colorists: "The lagoon toward Fusina takes the whole glory of Venetian sunset. The sun sinks down into the Lombard plain, (dying red) the vault of clouds and the vast mirrors of the undulating water floor. Colours which are cold by nature now assume an unexpected warmth. The blue of blouse and sash and trousers passes transfigured into gems or flowers. It is raised to amethyst, irradiated with crimson."

It is as true now as in the past: If trading is the most interesting or exciting thing in a person’s life, it will strain under the additional duty of having to entertain. Turning a profit is chancy enough without the trade having also to serve as a musical show or sporting event. Wanting consciously to make money, to profit like any businessman, while wanting unconsciously to be spellbound, stimulated, kept in suspense—this has to be the ultimate unco-ordination, Caesar and Brutus in the same skull working at cross-purposes. It impairs judgment, knack, decision-making, etc. Having other fascinations is best mental bracer and tonic.

Between the up-and-down bounces of Cisco shares, is the irrelevancy of 16th century art so off? It is far more wholesome financially than the side-bets and the wagers during the lulls between wagers for which Wall Street is notorious. There is hardly much 9-to-5 gambling among the advertising pros of Madison Avenue or on Jewelers Row or in the Garment District or along Sixth Avenue’s wholesale shops.

Only on Wall Street does business resemble a "gambling fever" brewery with many of its workers intoxicated. Exchange floor participants often labor under the influence of the Street’s bonded goods, no less than amateurs on the home phone or modem computer. Tempestuous music by Rachmaninoff makes a less expensive pulse-quickener. Titian’s frescoes and Boucher’s canvases bind spells less riskily.

The music encyclopedia article "Ballet and Music" by Lincoln Kirstein covered, among other things, the inclusion of ballet or dance numbers in grand opera. Kirstein said of two operas by Giuseppe-Verdi, "The danced chorus in the gambling scene of La Traviata is a curious jumble of Spanish, Italian and Hungarian ballet entrees. There was a strong pseudo-Oriental infiltration in such dances from Aida as the ballet of priests to sung accompaniment, but it was Egypt strained through a thick web of Italian orchestration."

Earlier this century, during the time of large scale immigration to the United States, a social worker in Chicago would visit the Italian families on her case-load and then would write on her note cards, "Still eating spaghetti. Not yet American." Apparently a web, thick or thin, of Italian anything was frowned upon. Do not think this attitude has died out. Oh, social workers have overcome their fears of manicotti and goulash and kabob. Del Monte Sauce has just sold IPO shares and Cinzano Wines are still with us.

Live Pavarotti and taped Pinza sing airs from Aida on TV. And yet . . .

Film actor and National Rifle Association president Charlton Heston spoke on TV recently during an interview by Mike Wallace on 60 Minutes. Heston complained about "the balkanizing of America" caused by Americans "returning to their various ethnic camps." Among the many Right Wing publishings that had already elaborated, on this theme was the article "Confederate Nation" by Noemie Emery in the May l9, 1997 issue of the conservative magazine The Weekly Standard: "The Right now wants a national culture, a common transethnic identity. Liberals, on the other hand, stand for things that divide. The things they back tend to fragment the culture: bilingualism, multiculturalism . . . Conservatives see one Union, composed of free people. Liberals see a loose web of tribal affinities."

God is in the details. The details of the "national culture" and "common transethnic identity" that "the Right now wants" can be checked on your Vintage Movies channel. 1939 and Made For Each Other: Jimmy Stewart as the new daddy gives his baby a bath for the first time. The baby wears a loincloth in the bassinet due to the film censorship ban on infant nudity.

1942 and Holiday lnn: While Bing Crosby milks a cow, the camera shows only Bing’s head and the animal’s upper half because of the rule against showing a cow’s udders. 1949 and The Prince of Foxes: Tyrone Power swordfights villains inside real, on-location Italian palaces and cathedrals. Wall paneling covers the frescoes because the bareness ban extended to red-tressed beauties of the palette. Same with marble deities. More was in jeopardy than just spaghetti.

Many of those reactionary "lovers of heritage" can remember all the way back to the dawn of time, when film censor Will Hays learned to shave. Regarding antiquity, they swear that they are all truth-tellers and there’s the right road. Expect them to show up in an opera house or a Venetian art exhibit on the day Grandma Moses boxes for the heavyweight title.

Now as in the past, I ask traders and investors cast themselves in the role of the old-order tycoon who was also a lover of culture and the fine arts. You do not need a charter from King George or a six-horse gilded coach. This grand country needs more people whose reckonings of tradition and heritage go farther back in time than Mickey Mouse.

Trader’s Diary Monday, Feb. 8: The Dow Jones finished down 13.13. Unlucky? Not with our spread closing at 2-1/4! A princely bag of ducats.


Just Because Vendors Sell A Profitable System is No Reason to be Suspicious As It's Risk-Free Money - Misc. Authors

New Author - I've said it before. You can find successful trading systems at your local library. If you do not know what to look for, ask for a catalogue from Traders Press, they have an ad in Stocks and Commodities magazine. Tick off the ones that interest you and go to your library and order them from Reference via an inter-library loan request. It is all free! I've read hundreds of books and systems this way. Many of the highly advertised garbage too. Software and videos are simply a new wrinkle in an old game.

New Author - I agree, you need to educate yourself before trading, and the person who will not risk $50-$150 on improving their trading knowledge probably doesn't have what it takes to succeed. But, there are so many books and systems out there, that the person who tries them all will probably have no capital left to play the game.

So what to do? Well news groups are an obvious place to speak to others who may have tried a system, etc., and should therefore provide a filter to catch the most obvious junk that will empty your coffers but not fill your mind.

Of course no-one can be objective, they all have their own agenda, but when a vendor posts to this group that this or that person is unwilling to learn because they won't fork out some cash for their system, the obvious question is "Why should I buy yours?"

Your own opinion is always the most important, but a little help weeding out the scam artists can never be a bad thing. I have been buying books and software for around three years now and it truly pisses me off when I waste time on a book, etc., that lacks any coherent ideas other than succeeding in extracting a few dollars from my humble bank account.

New Author - Rick Ratchford, Kent Calhoun, etc. have developed systems, methodologies, statistics, whatever. They choose to sell it, rather like selling a book? Kaufman, Sperandano have done it, many others too. OK, KC and Rick may or may not trade their systems - who cares? If I had a system, generated 75% successful trades, had minimal drawdowns, etc., then sure I could trade it - but it would have a risk associated with it - nobody can predict the unpredictable.

If I could sell it and make risk free money. Being risk averse then that's the path I would choose. I gain, subscribers gain access to a perfectly good system, newcomers may find something of value in the system itself. If I was a money spider then I would want to accumulate as much money as quickly as possible - then I would trade it aggressively. If I was a caring personality who wanted to help as many beginners as possible then I would give it away. Somewhere between the two lies my reality and I guess most others.

From my perspective as a futures newbie, I can only develop my own systems by considering what others have tried. I have to gain access to material, like books, videos, shrink wrapped systems, etc.

Some, probably the vast majority, of this material I will reject because I don't believe that it would complement my personality, or perhaps wouldn't accept the basic premise of a system - e.g., always buy S&P at 3 p.m. on Thursdays and hold for 1-day. This doesn't appear to have a basis for success but may actually be a winning system.

So, as a newbie I sort of like the idea of finding things out for myself. I can ask about past performance, both hypothetical and actual. I can pick up a phone, send a Fax, these things I am capable of. For $150 1 can buy a video, if I can't afford the $150, 1 have no business considering futures trading, right?

I could try a (Rick R.) F-Date subscription or tradehard.com, etc. I don't require the boys from the village to protect me from the evil vendors out there who are clamoring after my hard earned cash. I've got to learn some paths will lead nowhere, others to a more enlightened view of the market.

A serious question for the anti Kent Calhoun and Rick Ratchford personnel. How did you learn your successful trading methods? Sorry for going on a bit and no harm intended.

Editor's Note: Most have learned or designed a winning system from ideas gleaned by buying various trading systems and products, possibly unsuccessful systems, but nevertheless containing some good ideas and trading principles.


Member Requests

A person who has 26-months of gut-wrenching research is seeking to buy, borrow or barter for a copy of Angle Symmetrics. Write or call Willie Gene Peay, 1353 E. Northern Pkwy, Baltimore, MD 21239 - 410-532-7344. Let’s Make a Deal.

Starting with our next issue, member requests will be on our Website in the "What's New" area.

A New CTCN Feature - Our Recent Search Engine Queries

Waugh - Swing Catcher - Advanced Get - Bruce Kramer - Kent Calhoun - day trading - sugar - cotton - Real Success Tapes and Course - silver futures - silver - drawdown analysis - "the manager" - silver - Tom D’Angelo - Drawdown - SAT - spreads - essex - Trading Mentor Futures - terra nova - delta phenomenon - short term solutions - welles wilder - turning points - trading the rebound gap - tradestation - gandevani - wheat - options - optimal f - candle sticks charts - candle sticks - wilder adj delta - wilder and delta - futures forum - forum - orange juice futures - Delta - commodity calculator - sugar - trading systems - software - Fishback - odds - Metastock 4.0 - the trading calculator - trading by the book - troopergate - software - pattern smasher - "day trading" commodity futures - video-tape trading course - trading commodity markets - S&P - daytrading - trader - futur etrade - success - drawdown - low - stop - stoploss - traders - futures trading - seasonal futures trading - futures trading for beginners - margin.

Editor’s Comments

Though our computers keep track of all recent Search Engine Queries, it has no way to determine the source of the inquiry, so don’t worry about anyone knowing who you are!

What with the incredible popularity of the Internet and News Groups, we have seen many recent interesting postings on the Internet. Therefore, starting with this issue we may on occasion reprint an article which appeared on the Internet or in a News Group.

Since the author posted it there he obviously intended it for public consumption. Therefore, permission to republish is probably not mandatory, especially since Internet public news group articles which are non-copyrighted, are likely to be in the Public Domain. However, we will still normally try contacting the authors for permission to republish.

As previously announced, we have signed a Settlement Agreement with the CFTC in which we neither admit or deny their findings and allegations. We are more than glad, after 2-1/2 years, to put this matter behind us!

Please support our new tradersauction.com online Internet auctions website by either participating yourself or persuading others to list their products, vendors in particular. Please visit our new auction services division by going to www.tradersauction.com

Thanks to everyone who has contributed knowledge to this issue of Commodity Traders Club News. Without you this would not be possible.

We ask all members to please make a contribution to the next issue of CTCN. Don’t worry about your submission not being interesting or useful to Members . . . rarely is this true. Usually, most all contributions/ submissions/articles are quite interesting and valuable to other traders, but the author usually does not realize the actual value of his knowledge or experiences.

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.

P.S.: As a special reward for making just one contribution/submission per year, you’ll receive an automatic 50% price reduction on your renewal.


TopHomeNextBackbackissues

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.