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How I Became A Successful Trader By Reading CTCN & Now
I Can Stay Home & Trade - Dan Fretter

I have purchased a dozen books in the last 2-years to learn how to trade. I purchased Recurrence IV (what a mistake). I've spent another $3,600 on The Natural Order from Steve Cox (Natural Order Educators), teach Elliott Wave - very promising, but not easy. I also purchased a method from a local trader in the Detroit area, along with 3-days sitting next to him to learn how to trade. He used so many indicators you could barley see the price bars and he didn't even take one trade in 3-days. One of the days was a 10-pt day in the S&P, what a trend there was.

I was all set with live data and would come home from work and look at the markets. Keeping track of my trades everyday (divergence, STOC, RSI). Thinking to myself how most of these days I would have made a killing. So I quit my job as a cad-cam automotive body designer and started to trade, but what a difference when trading live. I wasn't doing well. I spent another $1,800 on the Cherry Picker and Intra-day Lil Gapper Systems. I couldn't trade them.

I received an ad in the mail for CTCN and as I read through some topics, I became interested in Anonymous Trader. I immediately sent for a 1-yr. subscription and all back-issues. I called Dave and asked if he would rush the package. (Thanks a million Dave). When I received the back-issues, I devoured all the articles and found that I knew all this stuff, but I was usually counter trend rather than with the trend. The next day I took a trade in the S&P. My first trade was a $825 profit. This stuff works. Now most of my trades are profitable.

I almost went back to my old job, but now I can stay home and trade. Thanks to CTCN and Dave Green.

Isn't it amazing that when you take a phone call during trading, you miss a beautiful trade.

I would like to hear from anyone who also thinks Recurrence IV is trash.

Bob McGovern's Spread of the Month for December 1995

Long March 10 Yr. T-Note/Short March T-Bond ("Buy the March NOB")

Historically, the March NOB (Notes vs. Bonds) has never been at current levels. That doesn't mean that it won't move out to a "negative 224" (7 full points, Notes under the Bonds) before a return to a "normal" relationship between Notes and Bonds. Usually, in the cash market, 10 Yr. T-Notes trade at a premium to the 30-Yr. Bonds, paying a lower interest. A higher interest would have to be paid to holders of a 30-year bond, making the 30-Yr. Bond lower in price. Why would anyone be interested in buying a longer-term instrument that paid less interest?

Since 1982, Notes have fallen below Bonds only during the last half of 1993 and the early part of 1994, before this year (see chart). In fact, as late as 4/95, the 10-Yr. Notes were 21/32 over the T-Bonds.

The bailout of the Japanese banking system, which has been assured by our Federal Reserve in public statements could swamp the bond market with supplies released by the Japanese banks in exchange for US dollar liquidity provided by the Fed. I would think the spread between bonds and notes should narrow on such action.

Due to the tremendous corporate merger activity and stock buy-back activity this year in the United States, I believe that any slowdown of our economy could create a cash-strapped situation where demand for cash at higher interest rates could occur quite rapidly. High debt credit card consumers are already paying higher interest, as mentioned in a CNBC commentary this week.

Of course, the Mega-mergers of banks almost require the surviving entity to raise interest rates as a matter of "good banking practice" and stockholder responsibility.

My suggestion: Buy the March 10-Yr. T-Notes, and Sell the March T-Bonds at a negative 185-190 (Notes 5 25/32 - 5 30/32 under the Bonds). I would not take over a $500 loss on the spread if it went against me, which would be 16/32, as each 1/32=$31.25 per spread. Margin is $890 per spread. Target would be 3 00/32. Notes under the Bonds, with a possibility that the spread might go to even money on a really good washout in the Bonds. Profit on the spread, if it narrowed to

3 00/32 from approximately 5 25/32 would be around $1780.

(Note: The chart which appeared here in our print edition is not available here online)

Recap Of Past Articles & Planning For New Year & More Details On How To Trade Successfully - Successful Anonymous Trader

Well, again it is that time of year again. That is the time that most people reflect on their success and failures and try to plan ahead for next year to make it productive and prosperous. It has been a very interesting year to say the least. The markets were all moving in big swings like copper, coffee, lumber and cotton. Some were trending more than anyone thought like currencies, bonds, stocks and stock indexes.

As I look back at the year and examine my style of trading (intraday trading the S&P 500) I am even more excited and committed to this type of trading. Why? Well here are some points that I will review that I have found to be beneficial to myself and hopefully to others. These are all points that I have brought out during the year, but it is a good time to reflect, review and plan for next year.

Many people are still searching for a trading method and have been for years. This is one of the most frustrating modes to be in, because how can you plan for a prosperous year if you still don't know exactly how you are going to trade or approach the markets. You simply cannot have any confidence if you do not have a method or way of identifying trades along with money management guidelines. You're lost in the woods, so to speak. I was there for many years. What did I do? This may help a lot of you.

I threw out 99% of all the crap I learned about oscillators, divergence's, Elliott Wave, cycles, timing, seasonals, Gann, pitchforks, volume, fractals, RSI, stochastics, overbought/oversold (this is a good one - the stock indexes, currencies and cotton for example everyone said were overbought and topping in February and March this year). Look what they did. Needless to say, I don't pay attention to this anymore either, etc., etc. The list goes on to infinity almost. I went back to the basics. I went back to a few simple chart patterns, (a simple moving average and trendline now and then for a visual aid).

I came up with a low risk money management plan and put it together with trading with the trend and wah-lah, presto, an effective and time tested trading plan. The plan is simple and has worked since trading began and will last me a lifetime. What a relief not to have to spend countless hours every night trying to find a new way to trade. I am sick and tired of that after 7-years.

When the day is done my analysis for the next day is automatically done in less than 5-minutes on my own software program I had developed and I'm off to enjoy my evening. No more, honey, I need to analyze the charts till midnight again and all weekend. Now I can concentrate on improving my psychological or mental skills during the trading day.

This will be an ongoing lifelong challenge. Nobody ever stops learning and trying to be a little better. Is my method perfect? No! (None are) am I perfect? Surely not. But it is the simplest and most accurate way of trading that I have come up with, and I've looked at lots (tons) of ways of trading. My method or approach works just as well on daily, or weekly charts. I choose not to trade that way.

I really enjoy and believe in the daytrading concept. There are so many advantages. No overnight exposure to huge gaps, not getting sick to your stomach over the weekend if it rains in Iowa and your long soybeans or some government official makes the wrong comment over the weekend on "Meet the Press" and your life flashes before your eyes, because your long currencies and they're going to tank on the opening Monday morning. I've been through it and so have many of you. No thank you anymore. Every day is a new day. You start fresh with a clean slate.

You slept at night. You enjoyed your weekend with your family. If you made a mistake yesterday, you can try to do better today. I realize that some traders cannot trade during the day because of other commitments. That's OK, you will just have to deal with the overnight risk. So trade small size and use stops. Perhaps use the Mid-Am or a smaller equivalent to the market you're trading if available. If you can have some access to intraday charts, you can use this to establish a longer term or intermediate term position with very low risk.

For example, when a daily trader sees a trade setup, they can go to the intraday chart and wait for the same setup intraday. Establish the position with a fraction of the risk, turn the monitor off, walk away, and then monitor it from a daily perspective. You just need to be aware of gaps (there's that nasty word again) of which you have no control. So daytrading even has a place for the position trader.

I also believe at becoming an expert at one market and its behavior and then putting all your skills and energy to work in a concern(traded) manner. Get good at that market and trade the heck out of it. Increase your size over time and you'll make more money with less effort. There are lots of professionals that do this. Look at some floor traders or locals that stay in the pit for many years trading one market exclusively.

You say you can't do it. I have two words for you. Tom Baldwin made all his money watching, waiting and learning the intricacies of the bonds until he could trade them in his sleep (which I'm sure he did, I do it all the time, most traders do!) and then traded the hell out of them. Point Made!

One thing that I have learned this year, is that I am trying to cut back on the number of trades I take and be more selective and not trade in congestion as much as I did before. I miss some good trades out of congestion, but I save myself a lot of mental energy, buy myself some more free time during the day, and get better more profitable trades.

My attitude is changing now to one or two good trades, and that is all I need to make my week (a triple or a home run, so to speak). There are plenty of them during any given weeks time. There are also a lot of singles and doubles to add to that and a few strike cuts or losers to absorb. This is part of the learning process and part of getting older. So I pass these observations on to you, in order that you may profit from my experience. Don't try to reinvent the wheel.

Trading is fun. Once you have a method and money management in place, it allows you to concentrate on trading and not on searching and researching. That gets old and frustrating. Make it your goal to find a simple method for next year. One that you can hang your hat on and that will last you a lifetime. Trading is simple. Remember that it's the Execution or implementation of your trading plan that is the bigger challenge.

Most people make finding the method the big challenge. That is because there is so much junk thrown at traders. They feel like a child in a candy store and have to try every doodad in the place. When they are done, they are sick and never want to see another candy store (trading gizmo) again. They could have had the plain piece of milk chocolate at the front of the store (simple method price patterns) which would have done everything they desired and fulfilled all their needs.

I think CTCN has evolved into a very good sounding board for ideas and interaction. I'm glad to see a lot more discussion on the psychological aspects of trading. I feel that this is where the most improvement for traders will come.

I wish to all a great new year. I hope some will be able to end their journey in search of the holy grail or indicator that will turn their life around. Search for simplicity. You will be surprised what has been right under your nose all the time, right there in front of you on the chart or price bars. Pay attention to what they say and they will tell you everything. You need to listen and get to know them. It can be that simple.

How Can I Communicate With Knowledge
Group Participants? - S. Jackson

I just got the recent newsletter. How can I become a Knowledge Group participant?

I'd like to communicate with several members who write articles. I wonder if it might be possible for you to compile a list of members who don't mind giving out their phone numbers or addresses and make that list available to the rest of us?

Editor's Note: New members are asked on their Response Coupon if they want to be an optional Knowledge Group participant. If they do, they are able to call or write CTCN to obtain the phone numbers of other knowledge group participants who have agreed to share their information on products they own or use in their trading.

Older members who did not join by completing the Response Coupon can simply send us a note and ask to join the Knowledge Groups. You should also list the products or services you own or are familiar with, so they can be entered into our computer data base. That way we will be able to do a search to identify members who have listed the requested product or service. We will also try to give the phone number of members who are in the area of the requester.

The editorial about forming a lending library between members, most of your comments seemed to be against the idea, for fear the book writers "would not be happy." The writers may not be happy, but so what? CTCN exists for its members ... the majority of whom purchase books and don't write them. A lending library would benefit the members, and should be pursued. Members would no doubt also like to exchange systems and software they have bought and no longer use, and this should be explored.

Editor's Note: OK, if members want to pursue setting up a lending library that's all right with me. However, I doubt I could do it, because of all the potential time involved. In addition, I do question the legality of CTCN operating it, as we are not a government run public library. Therefore, someone other than your editor would need to volunteer to actually run our "library."

System developers and software writers may not like members exchanging, loaning or trading materials they have purchased, but again . . . so what? The Supreme Court has decreed that books and software belong to the purchaser, and purchaser may give it away or loan it to whomever. The software shareware industry has found that if a program has value, it will be bought by someone allowed to try it out for a limited time. The same would be true of a book or trading system.

If members wish to participate in these exchanges, why not have those of us interested send you a list of books/systems/software we have bought and would lend? You could then make the list available to interested parties. If you are unable to do this, I'd be glad to help compile the list, and would make it available to anyone who wanted it.

Do Seasonal Trades Make Money? - Dave Reiter

Basically, I use two types of trading methods (a short-term breakout method and a long-term method). My long-term method is based on seasonal trading patterns. I'd like to discuss the pros and cons of using seasonal trades.

First, please allow me to provide you with a definition of seasonal trades. Seasonal trades are repetitive price patterns that occur at approximately the same time each year.

Personally, I've been using seasonal trading patterns sine 1992. Overall, my trading results have been quite positive. However, seasonal trades (like other trading methods) are not perfect. For example, some seasonal trades have a tendency to experience "contra-seasonal moves." In other words, they move in the opposite direction of their "normal" seasonal pattern. Obviously, these trades will lose money.

Why do "contra-seasonal moves" occur? They occur because "outside forces" cause these markets to "abandon" their normal seasonal patterns. Examples of "outside forces" are droughts, floods, early freezes, wars, and anything that disrupts the natural flow of the "commodity channel" from producer to consumer.

The good news is that contra-seasonal moves do not occur very often. The bad news is that we never know when an "outside force" will enter the market or how long it will last. However, sooner or later the markets will return to "normalcy" and the seasonal patterns will begin to work once again.

As most traders know, there are a large number of vendors who sell seasonal trades. Some are better than others. However, the major problem with most "seasonal vendors" is the fact that they offer an excessively large number of individual trades. It's not uncommon for a seasonal vendor to include 200 to 500 trades per year in his/her "seasonal package." A trader who purchases this information is overwhelmed by the number of trades. Obviously, it would be virtually impossible to take every trade (unless you had a extremely large trading account).

The trader who purchased the list of seasonal trades is faced with a major dilemma. Which trades should be taken and which trades should be ignored? At this point, most traders simply pick one or two trades and hope for the best. As is usually the case, the trades that were picked end up losing money and the trader quits in disgust. Unfortunately, the trader is now convinced that seasonal trades don't work.

In order to reduce my seasonal trading list, I adhere to a very strict rule which each trade must possess. Specifically, each of my seasonal trades must have an "accuracy rating" of at least 70% over the past 20-years. In other words, these trades have shown a profit at least 70% of the time over the past 20-years (or longer).

By using this "rule of thumb," I have managed to reduce my list of seasonal trades to 25 or 30 per year. Therefore, I generally establish about 2 or 3 new trading positions per month.

Based on my research and experience, I have found that seasonal trades will perform best during periods of moderate economic growth (2% to 3%) and moderate inflation (2% to 4%). It also helps to have a "calm and peaceful" trading environment (no wars, droughts, floods or international crises).

I've also found that "industrial commodities" contain the most accurate seasonal price patterns. Examples of "industrial commodities" include: Copper, Cotton, Crude Oil, Lumber, etc.

In conclusion, seasonal trades are certainly worth looking into (based on my trading experience). However, seasonal trading methods do require a great deal of patience and commitment.

Not Very Successful Until I Developed My Own Methods
Of Trading & Misc Comments on Others - Bob Perry

I've been reading Commodity Traders Club News for about a year now and have run across many good ideas. Unfortunately, there are many readers who have good ideas that want to keep them "secret" so that they can make a buck from selling them. I'm a daytrader and have gone to seminars, bought systems and tried ideas from several major vendors. I wish I would have saved my money instead. Until I developed my own methods of trading, I was not very successful.

It has been very refreshing to read the articles written by The Anonymous Trader. He clearly dispels the notion that you cannot make a living from day-trading. I like his mental approach to trading and have found that most of the problems a trader has is of the mental variety. I recently received an ad for Ruth Barrons Roosevelt's Power Trading Strategies, that he also endorses. This looks like a good program to look into, because it address the psychological and strategy side of trading.

I am also glad to see that B. E. Kramer is weighing in on the subject of trading. I talked with him for about all hour on the phone last year when I purchased Kent Calhoun's notebooks. B. E., along with Pat Raffalovich, were quite helpful in understanding the 5VBTP analysis technique and I hope he decides to write more articles.

I never realized there was anything like this. I've been so fed up with all the "vendor sharks" out there, that I have grown cynical of the commodities industry. Just when I resigned myself to the thought I would only be able to "just make a living," I am actually starting to build my trading account up slowly and look forward to the day when I will trade multiple contracts and still just take 50 to 75 pts/contract and 1 to 3 trades per day.

Reading CTCN has definitely paid off for me. I continue to look forward to each issue for all the great ideas that people have discovered and share with their fellow traders.

Editor's Note: Bob goes on to detail his experiences with a trading product and method which was previously mentioned (positively) in CTCN by other members. However, that vendor located in a Northwest State was upset and had his attorney send CTCN two very intimidating certified mail letters threatening a suit against CTCN for "several hundred thousand dollars" if we somehow reveal trading information he claims his client has copyrighted. Of course, we would never knowingly do that anyway. However, due to his saber rattling threats we have decided for legal reasons not to publish his name or information on his so called "network." That's a real shame because most of the information and feedback on it have been very positive, not negative.

Therefore, due to this vendor's threats he is not getting a lot of very good free publicity published in Commodity Traders Club News. Instead he is spending lots of money adverting heavily in various over-priced magazines and publications trying to get sales for his product. What a stupid and dumb thing for this vendor to do. He is missing out on all this excellent free and very valuable testimonial type of publicity, just because he was worried his copyrighted trading method may be revealed. We would never knowingly violate his copyright or anyone else's.

Random Thoughts AboutDaytrading the S&P 500 - Don

I started collecting intraday data the later part of Feb 95 - delayed data for the first couple of months or so and real-time data for the past 5 months. I have done very little trading during all of this time. My advice to most people new to day trading would be to do likewise. You may have the right knowledge, signals or method for daytrading the S&P, but you may not have the right psychology. Inability to trade your signals in a consistent and decisive manner is a problem you can never fully appreciate until you begin daytrading the S&P.

Here's why I fail to trade my signals: Stress avoidance--stress of a possible loss--stress of picking up the damn phone and calling in the order--stress of picking up the phone and moving stop loss to break even--stress of having a position in the market--stress of having to follow up a loss (perhaps very soon) with another trade--stress of continuously and aggressively looking for new trades--stress of acting decisively during moments of uncertainty.

My signals often come at tops and bottoms and that's when you have to have tremendous confidence in the probabilities of your signals. You have to believe, without question, that you may lose on this next trade and will lose on many trades-- but you will definitely come out ahead, in the long run, if you consistently trade your signals. A considerable amount of psychological adjustment may be necessary before the inexperienced daytrader can act decisively in this very uncertain environment. Again, acting decisively without hesitation, and without undue emotion during times of considerable uncertainty can be really tough for the newcomer.

The old saying: "He who hesitates is lost" is extremely pertinent to the daytrader. I often find myself hesitating and then looking at the other S&P charts for confirmation. Then it's usually too late to take the signal. By other S&P charts I mean the tick and 5-min charts. The 3-min bar chart is my main S&P chart. 1-3 minutes is all the time I have to take most of my signals. I may soon stop using 4 chart layouts and have only a 3-min bar chart of the S&P on my screen. Then, I'm more "locked-in" to taking my signals. I may delete all markets, except the S&P, from my hard disk. The S&P is really where it's at!

The stress and emotion of daytrading is much greater than that experienced by the long-term trader using daily bar charts. The "live" market confronting the daytrader is much more intimidating than the "sleeping" market the intermediate and long-term traders deal with. I recall the relaxed environment daily charts and longer-term trading afforded me. I would often call in my orders at 9 or 10 p.m. Very quiet, calm and relaxed. Also, the long-term trader doesn't have to experience his losses while they happen! And, he doesn't have to take the next signal within the next few minutes. Big, big differences!

The famous trader and author Larry Williams once expressed his definition of what a trader should be. He was called the good trader, "The Impeccable Warrior." Impeccable meaning his trading approach and psychology are viable and warrior referring to the positive aggression effective trading requires. These are my definitions of what Larry means.

I gave Dave a copy of a new form I made-up. It's a sheet of paper with the title, "Daily Signals." Date: is to the right of this and numbers 1 thru 7 follow below. After each number are the words, "Took ---- Missed and several spaces followed by the word Why? Just my way of holding myself specifically accountable for each and every signal that occurs throughout the trading day. Expect such a form would be of help to many.

My failing to trade my signals has not resulted in a complete loss of time and money. I have continued to learn more about how the S&P moves during the day. One thing that really stands out is the fact that the price will very often do the unexpected. No, my signals have not been proven wrong. In fact, I have more confidence than ever in them.

When I say "the unexpected" I mean unexpected to the typical trader. I have heard it said that to be a good trader you must be able to turn your head around 180 degrees. There's a lot of truth to this. Larry Williams said you have to learn that what looks good is usually bad and what looks bad is usually good. Once again, from the viewpoint of the typical trader.

I find that often there is a false move and then the really big move goes the opposite direction. A kind of "set-em up and stick it to-em" procedure! Newcomers Beware!

An Opinion That The Vendor's Side Should Be
Heard, But Delayed - Sam Jackson

While it is proper to give individuals or vendors an opportunity to respond to critical comments, I don't think they should respond in the same issue as the critical article. I accept your statement that you are not taking sides, but by giving some vendors (and not others) a chance to respond immediately, it appears that you're at least more kindly disposed to them. This is simply because other individuals or vendors (like Lind-Waldock Brokerage and Robert Wiest) apparently are not given the same immediate opportunity (or perhaps they declined to respond?). There is no harm in having responses appear in next issue.

Editors Note: A very god point. In fact, a few other members have said the same thing. To be completely fair and unbiased to all vendors, it's better to either give everyone a chance to respond in the same issue (very difficult to do), or simply let them reply (if they want to) in the next issue. Therefore, effective immediately, we will normally not advise a vendor in advance about a negative article. However, the vendor may still reply in the same issue in the event the article author (not the CTCN Editor) let the vendor know in advance about it.

Here Is A Seemingly Highly Profitable System Based On
The Moon Does The Moon Help? - Harold Uney

Twenty years ago, I read about trading with the phases of the moon in a small book called "Trader's Instruction Book" by Burton G. Pugh, published in 1929, price $20.00.

I tested it with various commodities and found that it worked well with Pork Bellies. Then I had a costly drawdown period, and I stopped trading it.

September of this year, I thought I would test it again. The system is simple. Buy the open on the day of the full moon and sell and reverse on the open on the day of the new moon.Paper traded results for 2/ 96 Pork Bellies are in Print Copy.

In the above there are no commissions, slide or stops. If anybody has any experience with different ideas on how to trade with the Moon, I would like to hear from them. Please contact me via CTCN.

About Taxes & Trader Status - Jim Bunyan

Recently I read Ted Tesser's book, "The Trader's Tax Survival Guide," notably chapter 13.

Consequently, I am in a position to comment constructively on the article by Glenn Skirvin in the 4/95 issue of CTCN. Glenn mentions the disadvantage and complications of the self-employment tax and Schedule SE.

However, Glenn is mistaken. In chapter 13, p.249, of Tesser's book, he says that a trader's capital gains income is not subject to self-employment tax. Note, however, his advice to submit Schedule D for capital gains and Schedule C for expenses.

The explanation for the above is simply that trader's status (& no SE tax) comes from the courts and their rulings. Presumably one could look further by looking up particular cases in law journals.

As I understand it, the two categories: 1. floor trader and/or dealer and; 2. investor, were created by the IRS and/or Treasury Dept., while the courts have found these two categories inadequate to cover all traders satisfactorily. Therefore, thru its decisions it has created a third category. Thanks Ted for making this info available to us.

Comments On Precision Day Trading System - Charles Hardy

Based on several people having interest in this product, I will share my personal experience. I purchased this system in 1993. I was hoping to have a method that would allow me to produce a steady income, as I am trying to support myself totally from futures trading.

Based on my purchase of a number of other systems that failed to perform as advertised, resulting in substantial losses. I chose to paper trade this system to determine its viability and to develop a sense of confidence in it.

After 4-months of tracking the S&P 500 and Swiss Franc daily, I was down several thousand dollars. I never had more than a few hundred dollars profit at any time. Given my objective to have a steady income, I determined this wasn't for me. However, what I did like about the system is that it was very objective and mechanical. Everyone who trades it should theoretically get the same results.

However, when I contacted the developer and his programmer, they claimed their results were much more positive. Given that I was using real-time quotes from DBC Signal and that all rules were very precise on entry and exit, I was confused. Further research revealed that the data they used frequently had opening prices slightly different than mine. Due to the nature of the system, this could definitely alter trading results since your trade for the day is often determined by the opening price.

Bottom line, I added the system to my collection of purchased systems that I won't trade. I understand there is now a new version of the program which I am not familiar with. It may be much better.

Keeping A Trade Journal Is Important - Hypothetical Results Are Not Very Valuable - Comments On Good Trading Books & Misc - Mark Harris

I'm a new subscriber and a few weeks ago received my subscription. I honestly can't think of when I've read anything (i.e., concerned with trading) that I enjoyed more, that was educational and contained such high quality and thoughtful articles. Like many other readers, I'm extremely grateful to all the contributors who were willing to share their thoughts, experiences, 'war stories' and of course, to you for making it all happen. The downside is that having too quickly devoured all the previous issues, I now have to wait for almost 2-months before getting another 'fix'. Well, I guess I'll just start over and read through all the issues a few more times.

I got interested in trading when I was in my early 30's. (Well I was interested even before that - but I didn't have any loose money I could afford as tuition). Anyhow, that was more than 40-years ago. Still, I can recall my first wheat trade. I was convinced that wheat had a powerful (bull) chart pattern, so I went long a couple of contracts (details now forgotten).

Just a few days later we (the US) had some great confrontation with the Ruskies and either they canceled all their grain orders or maybe we told them they couldn't have our grain until they did this or that. What I do recall was looking at an almost instant loss of about $3,500 which, needless to say, was real money in those days.

After just a few years of trading (and mostly losing, of course) I got smart enough to realize that it's essential to keep a journal of your trading, thoughts and reasons for entering a trade, thoughts along the way, and of course, how it all turned out. Perhaps the most instructive book I've ever read is MMJ (My Market Journal).

When you've built up 20-years worth of scribbling, it's very instructive to go back and read what you were doing and thinking way back when. My early scribblings are about how the market or politics or whatever caused my losses - but I finally figured out who the real culprit was. As Pogo said: We have met the enemy and he is us.

Sometimes, I wonder whether I've really learned anything in 40-years. I humbly admit that I held a long position in Gold just prior to the start of the desert storm operation. Now (in the strong light of hindsight) this was clearly dumb! (A stop order was NO help here - look at gap on the chart!)

Now I'd like to say a few words about back-testing. I feel that only real-time trading where the market can (and does) react to your system has any meaning. Data mining and back-testing certainly have their uses as long as one doesn't get sucked into saying: "I could have made a million with this system between 1985 and now." Even walk forward testing is flawed in that it treats the market as static.

Like other CTCN members, I don't think much of hypothetical results and feel that ads such as: "you could have made $300,000 trading this system last year" are extremely misleading.

Suppose there were a 100 traders (the Yertles) using this (fantasy) system. They would have theoretically made 30-million bucks. My question is: where did the 30-mil come from? Look at it this way: the losers already lost their stake, closed their accounts and went back to dentistry. So the money came from winners! Now, instantly, one sees how silly the idea of "could have made" is. Surely the winners aren't going to sit idly by while you are taking away their hard earned bucks.

Let's load these 100 system traders (Yertles) into my time machine and take them back one year and let them trade their system for a year (hey, isn't this better than having tomorrow's Wall Street journal - you've got a whole year's worth of 'future' data!) I predict four things: 1. the losers will still lose; 2. the winners won't just sit there and let the Yertles have their 30-mil; 3. some of the Yertles will win and some will lose, but on the average it'll be a wash; 4. the data generated by including the (new) Yertles trading will depart drastically from the data we had before we sent our Yertles back in time.

What I'm really saying is that the market is a dynamic and most likely chaotic system and even a single order may cause large down-stream effects (the so-called butterfly phenomena).

I often read stuff that says: A few hundred traders using this system will not affect a market as liquid as T-bonds or currency futures or whatever. However with non-linear (chaotic) systems it's well-known that infinitesimal changes in conditions can completely change the system's trajectory. (There are a jillion books on Chaos & Complexity. A trader ought to read at least a few).

Books: I agree with CTCN reader's selection of must have books (i.e., Schwager, Elder, Plummer, Koppel and Abell, etc.). I didn't see any mention of Gallacher's "Winner Takes All" which, I personally think is a gem.

I highly recommend Grant Noble's "The Trader's Edge" (Probus 1995) and particularly his opinions on "the holy grail," the REAL costs of trading, and the importance of the open (which many ignore).

Also interesting is Fred Gehm's "Quantitative Trading & Money Management" (Irwin Prof. Pub, 1995) especially his exposition on catastrophic risk including a discussion on the distribution of prices which (as cited in a previous CTCN) Mandelbrot showed was clearly not normal (i.e. not gaussian).

Both books are available from either Lind-Waldock or Trader's Exchange.

Also, I note that there's frequent reference to the need for "30 samples or more" for statistical significance. This, too, is only true if one is dealing with a population which is normally distributed. There are, of course, distributions where increasing the number of samples will not increase the accuracy (i.e., increase the confidence interval) of the estimate. (That is, what we have is a population distributed in some unknown way and we are attempting to determine the distribution via samples chosen at random from the population - incidentally the "at random" is important as many a pollster has been chagrined to discover).

Well, I've thrown in my 2¢ worth. I hope all other anonymous traders will keep the "war stories" coming. As Dave says, your experiences and knowledge are valuable to us all.

PS: I suggest that members with e-mail addresses who want answers to questions (etc.) post their address along with their phone/Fax numbers. (Reply via CTCN.)

Reducing Investment Risk Modern Portfolio
Theory & Money Management - CC

Congratulations and thanks, Dave; the CTCN is a valuable forum for traders to share their ideas and experiences. We, the members, also deserve a "pat on the back" - for contributing and helping to make CTCN so interesting. Similar to many other members, I look forward to reading Commodity Traders Club News.

Modern Portfolio Theory: Several decades ago, the Nobel Prize was awarded to the father of Modern Portfolio Theory for developing concepts which showed the benefits of diversification. The underlying theme of the research is that diversifying an investment portfolio can materially reduce risk, without decreasing expected returns proportionately.

On the other hand, there is a school of thought which believes that investors should learn as much as they can about a given market. There is a clear tradeoff between 1. being an "expert" on a few markets and 2. diversifying a portfolio into other markets to improve risk and return characteristics. It is difficult to track more than a few markets - but the benefits of diversification should be examined. This is a personal decision since it is important to be comfortable with everything we do.

Quantifying the Benefits of Diversification: The following table shows the expected reduction in volatility a portfolio can achieve through diversification. It should be noted that the chart makes some simplifying assumptions - most importantly, that the additional markets are totally unrelated to the original markets. Many assets are related at least to some extent - due to inflation or currency effects. Table in Print Copy.

Money Management and the Use of Stops: minimizing losses is an important concept in money management, and indeed, the accumulation of wealth. Many investors use stops to limit their losses in the form of either 1. actual orders with a broker, or 2. a mental stop which the trader monitors.

Although stops are a very effective money management tool, investors should not blindly place stops for the sake of using stops. For example, if the stop is positioned too close to the current market price, the trader will be whipsawed by the "noise" in the markets. The magnitude of the stop should be a function of volatility, the investor's time horizon, and the characteristics of the trading system.

Feedback: I am interested in other people's experiences and ideas about the following: day-trading, short-term systems, counter-trend systems, and fundamental/seasonal trading. Readers: please share your ideas with your fellow CTCN members!

Important Question, Is It Trending Or In A Trading Range? Look At Big Picture If it's Not Trending - William Ward II

1995 has shown some nice trends. However, many of the markets did not trend considerably, in view of daily charts. Understanding traders have varied frames of time in which to trade, one question must be answered; Is this Marketing a Trend or a Trading Range?

If in a trading range, then trade the market accordingly. Step back and look at a bigger picture, maybe 6 to 9-months or longer -12 to 18 months, considering daily data. Look for the high and low price of that time frame, which become the boundaries of that time frame's trading range. Look at a daily chart of soybeans for 1995, for example. You should be able to see a trading range, some time during this year. A trading range may last for many months, which may seem discouraging. These are times when options strategies become useful. If options aren't for you, then be patient, the market will soon break out of its trading range, given some fundamental reason. Yes, another basic concept. But one that has to be remembered and used with each trade; Is this Market in a Trend or a Trading Range?

I learned a great deal on the subjects of trading ranges, defining a trend, and options from the following authors: David L. Caplan - The Options Advantage; Joe Ross - Trading By The Book, Trading The Ross Hook

Of course there are many more wonderful books on these subjects, by very qualified authors. I plan on reading more of them myself. For me, a good source of learning material has been: Traders Library. (Contact via CTCN). They can supply the above books.

I enjoy learning from CTCN. There is much wisdom and experience from traders who write in and I thank each of them who shares.

Expect The Unexpected - DM

One of the most important things I have found out about the markets is: Expect the unexpected. You will be "setup" time and time again by the reverse psychology of the markets. This is especially true when daytrading the S&P 500, but surprises are also a part of the other markets and time frames.

Today, 11/15/95 (date article was written) is a good example of what I'm talking about. I'm sure the typical trader was thinking down. The market did make a rather sharp move down, but that was the setup. It then turned around, whipsawed a bit and then went up approximately $2,500 per contract. The reverse psychology of the market had once again put the screws to the common sense psychology of the average trader.

I have always disliked it when book writers would refer to a good trader as being a kind of artist. Seemed to me like mysticism was being given some credence. I still don't believe in calling a good trader an artist. However, I can see where having the ability to sense the psychology of the typical trader, and doing--or getting ready to do--the opposite, does approach an artistic rather hard to explain ability.

My signals are more than adequate. I will continue to develop my ability to sense the psychology of the average trader looking for the setup. I believe a trader is well on his or her way to success when most of the unexpected moves become the expected. Surprise is very much a part of the markets. Perhaps it's the primary thing that allows markets to survive and pros to prosper.

A flexible mind that can change its market direction mode of thinking, in a minute or two, is a very desirable thing to have when daytrading the S&P 500. Something I have to work on--always.

For Some Of Us The Older Version Is Better Than The Upgraded SuperCharts 3.0 - Tom Dyste

I got my SuperCharts 3.0 CD ROM upgrade a few days ago. Your readers may want to know Omega has revised the Quick Editor to prevent expansion of its capabilities in the way Shawn Halfpenny described in an earlier issue of CTCN. With SuperCharts 2.0, I had access to nearly all EasyLanguage capabilities, but not with SC 3.0. So, I removed SC 3.0 and restored my SC 2.0 configuration from tape backups made just prior to installing SC 3.0.

If any readers have figured how to bamboozle the revised Quick Editor, which now screens for semicolons to prevent multiple statements in the If clause, please let us know.

Should Book Writers, System Sellers, etc. Be Successful
Traders? - Don McCullough

I agree, they do have a right to sell their wares for huge profits. What I don't like is when they (or their publisher or promoter) make it sound as though they are extremely successful traders. They often don't say that exactly, but you can bet that is what they would like to have you believe. That is what's wrong and suspicious!

Like Gary Smith says, a lot of vendors can do the talk but can't do the walk. I have been a real sucker for book publishers' hype. I have around 120 books about the markets and now value only about 6 of them. Fact is, I could do without all but two. Those two are the "Market Wizard" books by Jack Schwager. In these two books you meet the real pros who have proven they know what they are talking about. These two books inspire!

Why is it that in all other areas of endeavor it is considered both prudent and proper to ask for credentials, while in the advisory business anything goes? Would you want to take lessons about how to perform brain surgery from a guy who only writes about it, or from a guy who has performed many successful operations? Would you want to learn how to farm from a guy who merely writes about farming or from the best farmer in the state?

Its been said: "Those who can, do. Those who can't, teach." Actually, good teaching is good doing but, it is so much better when the teacher can exhibit proof of his teachings in the real world!

K.I.S.S. - Don McCullough

I was pleased to see this "keep it simple stupid" abbreviation alluded to several times in the Oct/Nov 95' issue. That is the truth! I have messed with many of the indicators, moving averages and oscillators. I find them totally useless.

When I start to read an article and they start talking about systems, I go to the next article. Back-testing and all that baloney--I don't believe in it. I do think a few people succeed in this manner, but I simply (speaking of charts) "eyeballed" the damned things--for hours and hours and hours. Find your own answers to the markets is my advice, and expect to spend a good deal of time and effort before you do.

Then, have or achieve the ability to act properly with that knowledge. This proper action--made possible by a proper psychology--will probably be harder to do than you'd imagine. This is my current battle.

I've read lots of books about how to win in the markets, and many more on other subjects. About the best thing I can say about most of them is they helped to teach me concentration over long periods of time. You really need that ability when daytrading.

My guess is, if most people were told how to really trade the markets -- they wouldn't believe it. The "Gospel" they've been reading and hearing simply wouldn't permit it. These markets have been given a real "snow-job."

Comments on Swing Catcher System & Misc
Part One - Michael Maldonado

Here's the latest copy of the Fax. Sorry about all the scribbling on the last line,- but I cant help it, my streak of consecutive winners is like the energizer bunny - it keeps going and going and going.

P.S. - Just thought that I'd drop you a line to let you know how well Swing Catcher has been working for me. During the past year, I've decided to trade commodities full-time. I spend most of my time daytrading the S&P, but I still use Swing Catcher to trade the T-Bonds. I have been using (CTCN's) Swing Catcher (System) since Aug. 1992 and have consistently pulled out profits in 8 out of 10 trades in the T-Bond contract. I use the harmonic files exclusively and would recommend this program to anyone trading this market. In fact, I closed out a trade today for a small profit! This trade gives me 4 winning trades in a row during the past 8 weeks for over $3,500 in profits.

The last line on my original Fax (above) now reads: "This (Swing Catcher) trade gives me five winning trades in a row since August for over $3,800 in profits!" Feel free to quote me on that because what I wrote is the truth and I do recommend Swing Catcher for T-Bond trading.

Reply to Bruce Gould from Editor

Your anger about the negative experience of our member Robert Meadors is very surprising. Do you recall there have been a couple very positive comments about your system. One in particular we published was very positive.

Just because Robert had 3 or 4 losing trades doesn't mean your method is not good. Traders realize all systems sometimes have several losing trades in a row. As you know, there isn't any system out there that has nothing but winning trades. Yet you are mad because one of your clients says he has had several straight losers. Are you trying to say you have the only system that never has 3 or 4 straight losers? Do you want to say that? If you do, I will be glad to publish that in Commodity Traders Club News.

You are also mad because for some odd reason you are afraid I will publish your trading methodology. There's no way I would do that, with the knowledge it was in fact your exact method. However, it may be published if someone is speaking in general terms without specific violation of your copyright or nondisclosure. They may say your method is based on a method in the pubic domain, such as moving avg. cross-overs, for example, without actual disclosure of your exact rules.

What I was saying in my prior letter is a hypothetical case of unknown to my mutual client sending a method similar to yours and claiming it was his, without mentioning your name. You then said I would be liable if that occurred. That is ridiculous for you to say, how in the world would I know in advance it was your algorithm?

P.S. - Bruce, Is it OK with you if I publish your recent Faxes, so my members can benefit by seeing the reaction of a vendor to a member contribution not liked by the vendor? If I do not hear back from you, I will assume it's OK to publish them. Editor's Note: Bruce replied he absolutely did not want his words published.

About the Free G.E.T. Seminar & Andy Bushack - Ken Lindauer

I just attended a seminar given by Andy Bushack of Trading Techniques, Inc. on the Advanced GET software at the Newark Airport Marriott in Newark, New Jersey. The seminar was very well done and presented by somebody who trades for a living. It was approximately 7-hours long and included a buffet lunch which was surprisingly-good.

The morning session included a 109-page handout with charts and descriptions printed on both sides of the page. All charts were clear, generally up-to-date and easy to understand. This session included simple and clear instruction on Elliott Wave applications, the 5-35 oscillator, Type One trades (trading with the trend) which are trades taken at a pullback within an established trend at an Elliott wave 4, and Type 2 trades (top or bottom picking) which are trades taken at the end of a trend at an Elliott wave 5.

The afternoon session included a second 75-page handout that also consisted of many clearly illustrated charts and descriptions. This session included Gann techniques, Fibonacci methods, use of the Advanced GET software and analysis of current markets.

The presentation was done via transparencies and an overhead projector. Each transparency matched a page in the handouts. During the second session, the Advanced GET software was projected via the overhead projector onto a large projection screen for all to see. During breaks, three assistants and Andy were available for questioning about the markets, any particular tradable that was in their database (they would actually do an analysis for you of whatever issue you were interested in), and of course their software's capabilities (which are impressive). They had three computers connected to 27- inch monitors in the back of the room with the software up and running for demonstrations.

From what I saw of their software, it is impressive. It will automatically do Elliott wave counts (quite a feat in itself), compute seasonal plots that are graphed on the price scale, present Gann and Fibonacci lines, automatically pick change in trend dates and many other interesting things, including the ability to run searches of your tradables for various conditions. It also has all the standard indicators that you expect.

What I liked best about this seminar was that it was totally free of charge, even lunch and parking were free, and the course content was excellent. They provided useful information, 175-pages of charts and descriptions and the elusive free lunch. The material was applicable to any market whether you own their software or not.

I learned many valuable ideas and was exposed to interesting techniques. Much to their credit, they didn't do a hard sell. In fact, during the 7-hours of the seminar, I only recall a 10-minute sales pitch. It seems their philosophy is to show some useful techniques. Show the capabilities of their software and then let you decide.

I suggest members call Andy Bushack at Trading Techniques (contact via CTCN) and find out when they will be giving a seminar in your area. They also have an excellent demo and literature package you can request. In closing, I have no affiliations with Trading Techniques or any of their employees/representatives and I am not receiving any compensation for this contribution (other than an extension to this newsletter subscription).

CTA Recommendation - Gary Adamson

In appreciation for some helpful information extended to me by contributors to CTCN, I am returning the favor by divulging the phone number of a CTA who has more than doubled my money in a few weeks: Dan Parker. Editor's Note: Contact phone number given was not a valid number)

He works for Currency Cap of Deerfield Beach, FL, (Alaron). My brokerage statements from 10/13/95 (beginning equity of 5K), through 11/13: $13,264.84. Dan's fee is 25% of gross profits per month, going up to 30% 1/1/96. Should anybody wish to take advantage of this profitable opportunity, they are welcome. Percent of winning trades: 72% with a profit to loss ratio of 3.4. Rates of return for July through October were as follows: July 24.80%; Aug. (-8.73%); Sept 28.42%; Oct. 35.86%. It's a managed account in which Dan uses his proprietary program based on Elliott waves and Sequential.

Commitment of Traders Report Is On The Internet - Michael Ireton

The Commodity Futures Trading Commission (CFTC) has its own Internet Web Page and has the Commitment of Traders Report available for download either through FTP or as individual files. The WWW address is as follows: CFTC Home Page:

http://www.clark.net/pub/cftc/home.html
(Editor's Note: The CFTC & Commitment of Traders Reports may also be reached via a link from CTCN's Website www.webtrading.com)
Commitment of Traders Report Page:
http://www.clark.net/pub/cftc/home.html
This will allow a quicker access than waiting for the papers or news services to put it out.

Circular Progression, Not Linear - About Trading Plans, Money Management, Etc. - Ray Barros

It has been my experience there is a perception among traders that there exists a linear progression among the three requirements to be successful: psychology, money management and a trading plan.

However, my own experience as a trader suggests that the progression through these three elements is not linear, but a circular spiral.

Our careers as traders will be circular, because we will continuously move around the circle seeking to improve these three elements, incorporating new ideas and improving with the experience that only 'hands on' trading can bring. In the words of T. S. Elliott, "We shall not cease from our exploration and the end of all our exploring will be to arrive at where we started and know the place for the first time."

As novice traders, we need to begin by formulating a trading plan. Once a trading plan has been developed to the best of our ability, then we move on to money management and lastly to the psychology of trading.

I will come back to money management and psychology, but meanwhile let's look more closely at the trading plan.

The role of the trading plan is to provide a structure to work within an environment perceived as unstructured. This perception can give rise to the 'fear of the unknown'. The trading plan allows us to deal with this unknown. Also, once we have begun trading our plan, we need to have continued confidence in our ability to deal with the market. Here we are dealing with the efficacy of the plan to produce profits and our state of mind as the plan interacts with the market.

Our trading plan will need to have an edge. In my experience, the plans that deliver an edge have the following common elements:

1. Trend Identification of moves of similar magnitudes. This includes tools to identify probable changes in trend. Once the trend is identified, we can determine the appropriate trading strategy.

2. Low risk entry. This includes: identifying appropriate support and resistance areas; setups or warnings that alert the trader to a low risk opportunity; entry and initial stop placement techniques.

3. Trade Management. Once in the trade, we need to be able to manage the trade. Trade management includes trailing stops and where to take profits.

4. Finally, the trading plan needs some tool to tell us when not to trade. For example, when there is an increase in volatility to the point that the our previous experience is of no assistance.

The next point in the circle is the development of a set of money management rules. I believe that money management comes after the trading plan, because the money management rules will depend to a large degree upon the real-time results of the trading plan. Also, we will not truly appreciate the importance of money management until we have experienced for ourselves the erratic or disappointing results that come from applying a promising trading plan without a set of money management rules.

The questions the money management rules need to address are:

1. How much capital is needed to finance one contract in a particular market? For example, a trader may decide he needs $40,000 to trade one Bond contract and $30,000 to trade one Japanese Yen contract.

2. What percentage of capital is to be risked on each trade. For example, is it 2% or 5%?

3. Are opportunities across competing instruments treated as equal?

4. Are trading opportunities within the some instrument treated as equal?

5. Are successive opportunities in the same instrument treated as equal?

Once a trading plan and a set of money management rules have been developed, we need to take the plan into the market. It is at this point that we will not only discover more about our plan, but more importantly we will discover more about our own psychology. For instance, we may discover we are unable to execute the plan in the market, or we are unable to execute it flawlessly.

Before we can progress, we must remedy any problems that have arisen so far. To overcome these problems, we may need to adjust our trading plan and/or look closely at our own psychological makeup. For instance, the trading plan may need to be made simpler or more robust so that we find it easier to execute it. Another example, could be that we find our psychology is such that we are more suited to a type of trading other than the trading style of our plan, for example long-term trading rather than daytrading.

Once we are able to execute the trading plan flawlessly, then we can go to the next step - that is, are we ready to accept the rewards from the perfect execution of our plan? We may suddenly find ourselves unable to accept a steady stream of money from the market. This problem normally manifests itself with having a series of wins only to give back profits in one or two unplanned trades finishing from where we started. Again, we will have to go back and look at our own psychology and try to remove any blocks that are stopping us from reaping the rewards of our efforts.

At the completion of this task, we will be back at the beginning of the loop - the trading plan. After completing the loop we will not only have new ideas to test and incorporate, but also be able to adjust the plan to better suit our psychological development as a trader.

Once again to quote T. S. Elliot, "through the unknown, remembered gate when the last of earth left to discover is that which is the beginning."

Successful Traders Have Identified Low Risk
Opportunities - John R. S. Piper - England

I have a few thoughts on a few of the points raised in the last issue.

Firstly, Don McCullough makes what I consider to be an important point. He says he wonders "how many top pros can trade most of the market turns that occur during the day." I reckon the answer is "Zero." I think the question denotes one more of those things we might call "The Holy Grail" which serve to mislead those who are struggling towards trading success. But maybe I am wrong. Does anyone know anyone who catches most of the turns or even claims to?

On the assumption I am right, I believe the truth is that successful traders have identified a number of low risk opportunities and they have developed the ability to follow those signals without deviation. I think that is the secret - although really it is staring us all in the face.

Secondly, Robert Meadows suggests protection for those buying and selling systems. Yet the market is a far more devious combatant than any system seller. What is the next step? Further regulation of the market followed by closing the market down because it is too dangerous. Apparently in trading, we are our own worst enemy. If we learn that by being ripped off on a system, maybe the lesson will cost us less than if we have to learn it in the market itself. Trading is all about looking after yourself. If you think you need protection buying a system, maybe a trader's life is not for you.

Well-Known Vendor (Who Doesn't Want To Be Named)
Asks About Our Ethics

I have a general question for you personally, as a publisher and as a developer of trading systems. If one of your subscribers were to send you the precise mechanical details of a trading model or system that he/she did not originate and was copyrighted and/or protected by non-disclosure agreements signed by purchasers, would you feel free to publish these precise details? Or would you feel bound by legal, publishing or business ethics not to publish material protected by copyright, trade-secret or non-disclosure agreements or law?

What is your general publishing ethic regarding the publishing of the precise mechanics or trading details of any trading method or system copyrighted and/or protected by non-disclosure agreements? I would appreciate knowing your company and your personal policy in this regard.

Editor's Note: CTCN and its editor would never knowingly publish a vendor's trading methodology or violate their copyright or non-disclosure agreement.

Protective Stop Placement - Robert Miner

It's important for traders to decide the conceptual philosophy of each phase of a trading plan before constructing specific trading rules. Traders are often at odds as to the method of protective stop placement that should be incorporated in their trading. The concept of protective stop place should be: Place the protective stop at that price level which invalidates the reason to be in the trade. The protective stop signal must be determined by the same method as the entry signal.

A couple examples will illustrate this stop placement concept. My analysis techniques are oriented toward identifying trend changes at coincidences of projected time and price targets. While these time and price projections are very accurate, they are not prophetic (800 accurate). Trend reversal trades are usually only initiated if the market provides an initial trend change signal by making one of three daily reversal signals which are reversal day, signal day or snap back reversal. Since a reversal day pattern is well-known by traders, I will use it as the example.

Let's consider the market has trended into the coincidence of a projected time and price zone where we anticipate a trend change low will be made. We will buy on the close if the market has not exceeded the time and price targets, and the market makes a daily reversal signal where a new low is made on the day with a close above the prior day's close. The trade is entered on the close of the reversal day. There is only one logical place to place the protective stop loss; one tick beyond the reversal day extreme, in this case one tick below the low of the reversal day. If that extreme low is exceeded, the reversal day is no longer valid as the trend change signal.

The same method that triggered the trade entry signaled the exit strategy. The reversal signaled the trade entry. Exceeding the extreme of the reversal day invalidated the reason for the trade and signaled that the trade should be exited.

For another example, let's use stop placement determined by Elliott wave pattern analysis. Let's assume the market is in a bull trend and we enter a position on the breakout above the wave one high and believe the market is in the initial stages of a five wave, impulse advance.

An Elliott wave rule is that a wave four must not trade into the price range of the wave one. If our Elliott wave analysis determines that the market has completed a wave three and is making a wave four correction, the stop loss on a long position cannot be placed any lower than one tick below the wave one high. If the market declines below the wave one high, it has invalidated the reason to be long according to our Elliott wave strategy and rules and requires that we exit the trade.

The same method that triggered the trade entry (buying the breakout of wave two while anticipating a five-wave impulse advance) signaled the specific price which must be the extreme stop loss level. Other analysis factors may indicate that the stop loss be placed closer to the market than one tick below the suspected wave one high, but the stop loss must not be placed further than that level if the stop loss strategy is to complement our trade position strategy.

Every trading method that signals a trade entry also always signals a specific minimum dollar stop. If a trade entry signal and its corresponding stop loss signal require a capital exposure that is greater than what is acceptable for the trading plan, the trader has no choice other than to pass on the trade. When this is the case, he may only enter the trade if subsequent market provides a stop loss signal allowing a trade entry with an acceptable capital exposure.

For example, if gold makes a wide-range reversal day at a projected time and price for a trend change low with a close at $390.0 and a low at $384.0, the capital exposure will be $610. Trade entry on the close of $390.0; protective stop loss at $383.90, one tick below the reversal day low; $390.0-$383.90 x $100=$610. If a $610 capital exposure per contract on a gold trade exceeds the amount allowed according to the trading plan, the trade cannot be taken on the close of $390.00. If the maximum capital exposure allowed per contract on a gold trade is $500, the trader has no choice but to place an order to buy gold at $388.90 or better ($383.90 + $500). If the market declines to allow the trade entry, all of the conditions have been satisfied to enter the trade.

I assume all traders know they must have a specific maximum allowable capital exposure per trade as part of their trading plan. If a trader doesn't, he or she will not be trading for long.

The concept that protective stop losses are always determined by the same methodology that signals a trade entry is applied to any method of analysis and trading whether it's based on volatility breakouts, indicator crossovers, swing highs or lows, etc. The protective stop loss placement should not be a difficult decision to be made by a trader, as long as the trader is making decisions according to a plan that includes a well-defined methodology approach. If the trader has not settled on a definite trading approach, it doesn't matter where the stop loss is placed, as long-term success is impossible without a definite plan.

E-Mail For Members? - Ray Barros

Is there any way we can set up an e-mail address of CTCN members? As Internet becomes more popular, sent an address book would enable inexpensive communication between members in different countries.

Editor's Note: We are looking into this and will let you know. Our e-mail address is ctcn@webtrading.com

The Pros and Cons of Using an Oscillator - Dave Reiter

To determine if a particular market is overbought or oversold, most traders use an oscillator. For those who are unfamiliar with this term, an oscillator is a momentum index which is used to identify overbought/oversold conditions in the marketplace.

Most oscillators fluctuate between 0 and 100. Generally speaking, a market is considered overbought when the oscillator rises above 70. Conversely, a drop below 30 signifies an oversold condition.

The most popular oscillator is the Relative Strength Index (RSI). Besides RSI, there are also several other "canned program" indicators which are religiously followed by many traders.

The major problem with oscillators is the fact that their entry signals tend to come early. In other words, the market will continue to rise (fall) for an extended period, though the oscillator has advanced into overbought (oversold) territory. For anyone who has traded the markets using an oscillator, this can be a very frustrating occurrence.

The "key" to making money with oscillators is to avoid the many "false signals" which will inevitably occur. Unfortunately, this is easier said than done!

Recently, I discovered a pattern which seems to work fairly well. The pattern is not perfect, but it's certainly better than using the "traditional approach" of buying when the oscillator falls below 30 and selling when it rises above 70.

Specifically, I wait for the market to reach an extreme overbought condition for an extended period (i.e., at least 5 consecutive trading days). The next step is to allow the market to fall below its overbought level (usually 70) for a few days. Next, I wait for the market to become overbought a second time. Ideally, the second overbought reading should not last as long as the first.

Finally, when the market falls below its overbought level for the second time, I enter the market on the short side. Obviously, the opposite scenario will occur for buy signals. As I mentioned earlier, this method is not perfect, but it certainly reduces the number of "false readings."

If you have specific questions concerning this trading approach, contact me via CTCN.

Very Reliable Way to Identify A Reversal - Ashley Howes

An item that Kent Calhoun pointed out: The so-called OVB. This means an outside vertical bar, or an outside day. If you look at any bar chart, you can identify the OVB's and calculate: 1. what percentage of the time they occur (usually around 5 - 15%); 2. what percentage of the time they give profitable signals. Also, how many profitable when other factors are present such as overbought/oversold at end of a trend, at beginning, etc.

One combination I have found very reliable is simply this: If the previous two highs are exceeded by the day's price action in a current bear market that signifies a reversal. In Kent's pure 5 vertical bar method, you have to have two days' data to get a reversal.

What he refers to as a POP or a SOP are proprietary break-out numbers that he has optimized for each market that are x- points above and below the open each day. They are used as entry and stop/reversal points in his daytrading methodology.

Can't Afford Real-Time? Look Into This LeRoy Jenke

If you like to watch market action, but need to be lean and mean, I have a solution that is cheaper than Signals' delayed quotes and on top of that is real-time. The requirement is a modem. For roughly a $100 startup, $25 per month and 10¢/call, CISCO offers a real-time update on the hour and every ten minutes interval past the hour. Simply call in on the minute and you have a real quote. CISCO is in Chicago, contact via CTCN.

For a little inspiration to hang tough in this difficult business, I reread Self-made in America by John McCormick, which is in the library. It's about recent immigrants who stepped on our shores with literally nothing more than the clothes they were wearing and became business successes.

Thanks for the support this club has offered to another reclusive student.

God Didn't Help Me Get Insight To Trading & Human Behavior, CTCN Did - My First Year - Charles McDaniel

You can't imagine how hard I have prayed this year. At first I was asking God to manipulate the markets for me. The pressure of these prayers was killing me, so I quit praying that way. It wasn't doing any good. I guess God felt it wasn't fair to everyone else. Then I joined Commodity Traders Club News and began to get real insight to trading and human behavior regarding the market psychology.

I read about daytrading and decided to try it. I made $100 and got out. This was the first money I made on my own and it felt good! The world was mine. Everybody should be a trader. The winners make you happy to be alive. The losers make you humble and bring perspective to us and what you really are. Just a common person living in the greatest country on this good earth. I relish our opportunities to excel in this economy. CTCN members write and tell us everything about trading. Help us grow. I love you all.

Gary Smith - Harold Neer

I have followed anonymous trader's letters with considerable interest since daytrading the stock indexes has come to be my main interest (forsaking position trading, bellies, bonds, cattle, grains, OJ, coffee, etc.). Now using the NYFE, maybe S&P later.

I have used Gary Smith's methods. I consider his books worthwhile; also, methods of my own development. CNBC and phone quotes; no quote screen as yet.

Way To Enhance Futures Truth Report
& Info Wanted - Phil Baker

Your newsletter is getting better, because more members are writing about how to trade, which is why I subscribed.

In each issue you list Futures Truth Top-10 systems for 12-months and since release. If possible, I would like you to list what kind of system each is, so we will have an idea on what kind of system is doing the best. Example, short-term breakout or long-term oscillator or intermediate channel break.

Editor's Note: A good idea. I will ask Futures Truth for their feedback on your idea and permission to publish more details on the systems. Perhaps we will start doing that commencing with the next issue.

I have SuperCharts and would like your readers to write about what are the two or three things to look at that can help determine if a system you have developed and tested will be profitable in real-time.

I would like B. E. Kramer or other members to write more on KCI and the 5VBTP and other systems. Plus info on a way to use different cycles then combine them and accurately forecast turning points in the future. Does anyone know what books or software have info on this?

CFTC vs. Kent Calhoun & KCI Seminars - Anonymous

I'm new to the markets, but not necessarily to the business world. For nearly 10-years I owned a profitable 7-figure business. Upon nearing forty, I grew tried of the same ole, same ole and decided it was time to change hats. I zeroed in on commodities, because I felt it was the ultimate business and still do. Different from my previous business (no employees, lawyers, on demand reports, financial responsibilities of meeting $½- million a year in salaries and fringe benefits), I saw commodities as a way to be my own person.

When I first "zeroed in" on commodities as a beginner, I missed my mark like too many beginning commodity students do. My first experience exactly 1-year ago was losing $230,000 in 90-days. All of this took place with a charlatan full-service broker in Florida, who practically described himself as being only one step below Jesus Christ (or was it one step above?) Either way, he ended up making $80,000 in commissions, which even at $100 a round-turn would have been acceptable then, if he had made $230,000 instead of losing it for me.

I learned very quickly, albeit not quick enough. The only way to make money in commodities was to become knowledge self-reliant and call my own shots. This I knew even then, was the only way I had ever made money in anything else I had ever done. Mid-life crisis. So, I began my search for someone in this business with real integrity. My personal search ended when I met Kent Calhoun.

My previous business allowed me to come in contact with more than 15,000 people each year. I still make mistakes in judging people as with the Florida broker, but my experience in dealing with so many people gave me a great opportunity to get to know and learn about people.

When I met Kent for the first time, I felt a genuine care and concern which came from him toward others who were genuinely interested in him teaching them to be successful traders, especially neophytes like me. I could tell he meant business and didn't really want to be associated with those who weren't willing to work hard and learn. There is nothing unusual about this. For in all of life's endeavors, successful people want to be around other successful people.

The CFTC investigation against Mr. Calhoun is, as far as I can see, totally without merit. Never have I ever failed to see a disclosure violation or fraudulent, unsupported advertising of any kind. I've never heard him say "I'm the best" or boast or brag in any way. Although, there are many traders who will gladly say it for him. In a recent conversation with a group of traders, they all said "Kent is the best teacher and his systems are light years ahead of what anyone else has to offer." They said this, not me, but with regard to many other good people in this profession, I believe it personally to be true.

My observations of the world are that the hardest thing for people to do is stay positive in a world engulfed by negativity. Those of us who know Kent, are grateful for all he has taught us about trading and life's integrity. We take great pride in watching him stand proud, tall and without fear against his adversary. This world is filled with so many people with damaged egos, jealousy, low-self worth, decayed self-esteem, points to prove (bosses to please) that the only way many can make themselves look and feel good is to make others look and feel bad.

If the CFTC wants to do something positive for traders (which at this time it appears they don't) they should clean-out the commission hungry full-service brokers who couldn't make a living trading their own account, but instead prey on beginners. Truth is, most of them couldn't make a living doing anything if it weren't for preying on suckers.

My thoughts since losing $230,000 in 90-days have been that no full-service broker should be allowed to advise the public unless he or she can show at least a 2-year track record, of positive returns of at least 25% per year. Do I have the attention of all you traders who have lost with the misguided advice of a full-service broker? I know you're out there. You have permission to crawl back out from under the woodwork and take a stand. Does anyone have the power to change what happens to most new traders?

So CFTC, its been 6-months. If you have "KCI" proof positive, let's see it in writing." If not, its time to issue a statement to the trading world that the wrong doing you suspected of Mr. Calhoun wasn't factually based, along with a formal apology to him. This way, Kent can get on with doing what he does best. Teaching others to be successful in life and trading.

I still have several thousand dollars to make back, and S&P 500 just dropped a thousand ticks.

Info Wanted On Market Timing Group In Dallas - Gerald Barrington

Steve Kelson previously marketed "Trade with $200 Stops" and now developed a system that claims to catch most major turning points.

He recently ran a pretty big ad in Investors Business Daily. He says the system was reviewed by "Club 3000." Has anyone had experience with "the System" or the developer?

Keltner Channels Designation Never Used By Me, But The Work Is Copyrighted By Me - Chester Keltner

I really don't know how anyone should be designating any of my work as the "Keltner Channels." That designation was never used by me in any of my writings or otherwise. What I think it is, pure and simple, is a reference to the buy and sell points explained and illustrated in the trading rules published in my book "How to Make Money in Commodities," by Keltner Statistical Service, Inc.

This work is under copyright by me and should not be published by someone else with the representation that it is theirs. This is the kind of infringement that could lead to serious legal trouble for the party doing it. I don't mind being credited for the work I have done, but I don't want my work passed on as belonging to someone else.

Failure Is Stepping Stone To Success & O.C.O.
Order Explanation - Mark Owens

I ordered (CTCN's) Swing Catcher trading system a couple of months ago, but shortly before receiving it, I decided I would "go it on my own" for a while before trying your system. If failure is indeed but a steppingstone to success, then I have a very bright financial future ahead. My losses appear even worse in light of the track record for Swing Catcher over the same period, and I'm now (better late than never) ready to give the system its turn.

I do have one question regarding order placement. I know that OCO orders are accepted for currency futures, so stop and target orders can be placed at the same time, but I am not sure how your system recommends doing this for markets that do not accept OCO orders. It seems a risky business to place separate stop and limit/MIT orders given that on a volatile day in some markets both could be hit: should I just trade with the recommended trailing stop order and get out at the open on the day after the target price is reached or is there another strategy?

Answer from Editor: About O.C.O. (One Cancels the Other) orders: They are accepted at some exchanges, but not others. It is required to place two separate orders on markets that don't take OCO. There usually is not too much risk, as the chance of both getting hit prior to your broker fill call back on order one is very remote. It is possible, but very unlikely! Once in the trade, only use the trailing stop.

With Help And Counsel Found In CTCN, I Can & Will Trade Successfully - David Fent

Thanks for creating this forum. Eight to 10-years ago I washed out on my first effort at trading commodities and haven't traded since. As a recent subscriber to CTCN, I have been greatly encouraged to the extent that I'm certain I will be successful when I resume trading in the future.

Now for the amplification. The reason for this wonderful new confidence is twofold: First, the contributions of those who recounted their trading misfortunes, exposing themselves to all that we may profit from their mistakes. Some of what I did wrong was present in many such articles, particularly having a strong opinion (mostly based on seasonal expectations) and therefore "stretching" my entrance signals because I wanted in. Also, getting overconfident and relaxing my vigilance after some initial success.

Secondly, the tips and advice from successful traders kind enough to share them with the rest of us. Thus to see that there are traders making a living using essentially the same market entry signals that I failed with, shows me that my trading tools will work if I can get out of the way and let them.

Recent articles by Robert Lahodny, present some worthwhile concepts. In short, my belief is that a person with a rudimentary acquaintance of trading from chart signals can make a living trading with no more information than the articles contained in CTCN.

It is scarcely possible to describe with words the despair you feel when you tackle the markets and lose, not only your stake of risk capitol, but also the hope of being able to succeed. Though I have not yet resumed trading, my entire experiences of what it feels like to be alive, has been profoundly uplifted by the certainty that with the help of the counsel offered here, I can and will trade successfully.

P.S.: David Fent wants CTCN member and article contributor Robert Lahodny to contact him (via CTCN).

Internet For Historical Data - Bill Quinn

I have been using the Internet for historical data retrieval and have found the CBOT site to be very extensive. I would like to see more information concerning other sites and their usefulness for traders. (CBOT is found at WWW.CBOT.COM)

Made Over $4,000,000 Using Gann Methods and Kept It! - An Anonymous Contributor

I enjoy the articles, especially anything relating to W. D. Gann. Lucky he existed or many would have nothing to argue about.

Trading his methods have been very kind to me and many whom I know very well. I have only had one article published in US That was in Gann/Elliott Magazine 1989. The forecast was for a top on 10-20-89, then a panic reversal. No question. In Australia I published a date of 10/3. The actual top came in on 10/4 at 1855, which was my exact call. Of course, we had the crashette of 1989 on 10/19-28. Gann works for me.

It has been worth about 4 or 5 million dollars, which I have kept. I have traded for 10-years. I always predominately trade by W. D's Methods. Suppose I should back this up with an article. I just don't need the flack that it sometimes produces. Anyway, thanks for a great publication.

Successful Interval Trading With Options - Mervin Pearson

For those of you in commodity land that insist on Interval Trading, I have a simple method that might be of interest. The example I use will be on soybeans, but it can be used in all markets. These markets should have sufficient liquidity in the options, so that you can get filled.

In soybeans I start selling the closest month bean Put, 6.00 right now, I am using the November contract. I sold the 6.00 Put for 10¢ or $500 per option. Sell another at 20¢, 30¢, etc. On the first option you sell - do nothing. All the others take a 10¢ profit; i.e., buy the 20¢ Put back at 10¢, then put in another sell at 20¢. Simple enough!

Hold your position(s) until the options either go out at 0 (worthless) or you are exercised.

Good Broker - Terry Davis

After 15-years of trading, I finally found the right place to trade. It is Index Futures, but more specifically Susan Green. Fills are excellent, and service is the very best I have ever dealt with. Contact her via CTCN.

Omega SuperCharts Tips & Questions Edited by Nom D. Pflume

Question: "Dear Nom - Fooling the Quick Editor as Mr. Halfpenny describes is great, but how do I learn about EasyLanguage? I can't buy only the manuals to TradeStation."

Nom Responds: "Learn mysteries of EasyLanguage at no added cost by studying the lxxxx.ASC, Fxxxx.ASC, and Sxxxx.ASC files, which contain all your built-in indicators, functions and systems. Basically anything they can do, you can do. Don't declare inputs, since the QuickEditor does it for you."

Question: "Dear Nom - When I run my system I get the ".EXE too big" message and my system won't run even though it 'verified' OK in the editor. Help!"

Nom Responds: "Unless your system gets really complex it should run when you employ these techniques to shrink it. First, and most important, if your system uses any built-in indicators or functions, or user functions, then rewrite your system (using Shawn Halfpenny's methods to gain full access to EasyLanguage) so these are called one-time even if you use them several times. For example, if you use the Parabolic stop, which is a built-in function, in 4 places, then assign it once at the top of your system to a variable, and use the variable 4 times instead. When SuperCharts loads your system it apparently adds space for the function for every time it is called."

Note that MaxList and MinList are only used once each in the following example, so there is no space to gain by assigning them to a variable.

Program example:
OLD:

IF ADX(ALength) blah-blah1 Volatildy(VLength) or MaxList(Value1, Value2, Value3) >=0 THEN ExitLong Next Bar at Parabolic Stop - 1 point;
IF ADX(ALength) blah-blah2 Volatility(VLength) or MinList(Value4, Value5, Value6) < 0 THEN ExitShort Next Bar at Parabolic Stop + 1 point;

NEW:

Value7=ADX(ALength); {The only tome ADX()appears now.}
Value8=Volatility(VLength); {Ditto Volatility().}
Value9=Parabolic; {the only time Parabolic appears now.}
IF Value7 blah-blahl Value8 or MaxList(Valuel, Value2, Value3) >=0 THEN ExitLong Next Bar at Value9 Stop - 1 point;
IF Value7 blah-blah2 Value8 or MinList(Value4, Value5, Value6) < 0 THEN ExitShort Next Bar at Value9 Stop + 1 point;

Secondly, reuse variable names when possible. For example you could reuse variables (Value1, Condition17, etc.) from long exit in your short exit, since a system is unlikely to be long and short at the same time. This saves less space than avoiding function calls, but it helps.

Third, do repetitive calculations only once. Example - If you calculate a stop and use it in many orders statements, rewrite it as shown and your system will shrink:

OLD:

If whatever THEN ExitLong Next Bar at L - lnt(50/PointValue) Points STOP;
If something else THEN ExitShort Next Bar at H + lnt(50/PointValue) Points STOP;

NEW:

Value6=lnt(50/PointValue); {only do this calculation one time, use results over and over}
If whatever THEN ExitLong Next Bar at L - Value6 Points STOP;
If something else THEN ExitShort Next Bar at H + Value6 Points STOP;

How to program an exit for the bar of entry: Many systems, especially breakout systems, have rules for exit on the bar of entry to control whipsaw losses on reactions. In EasyLanguage this can be a problem, but as an hypothetical example, to exit on breakout systems that enter from flat the following approach will work - -

{ Put code like this in near top of system, before entry orders }

Condition9=MarketPosition(0) <> 1; {Not Long.}

Condition10=MarketPosition(0) <> -1;{Not Short.}

{Example - IF EXIT ON OUTSIDE DAY REVERSAL ON ENTRY DAY }

IF Condition9 AND Condition10 Then EXITLONG ("IxEntRev") Next Bar at Low - 1 point STOP; {exits if entry day is outside reversal}

IF Condition9 AND Condition10 Then EXITSHORT ("sxEntRev") Next Bar at High + 1 point STOP, {see above}

Explanation of above example:

EXITLONG and EXITSHORT only work after an entry has happened. Your breakout system only buys new highs so if are long there was a new high, and if the bar then goes below the previous low it is an "outside day reversal." On the flat day(s) BEFORE your system gets long Condition9 and Condition10 are TRUE and the EXITLONG order is active, but after the first bar in a long position Condition9 is FALSE, so these orders only apply on the actual bar of entry. Hopefully, this will inspire fresh thoughts on how your system can have exits for the actual bar of entry besides those built-in money management stops.

Note: SuperCharts will sometimes exit on this order even when you doubt the exit stop price was hit later in the day/bar than your entry price.

How to program orders for the next bar after an entry bar:
{Put code like this in near top of system, before entry orders } Condition9=MarketPosition(0) <> 1; (Not Long.}
{After long entry order(s) code, put the following }
If Condition9[1] And MarketPosition(0)=1 Then Begin
ExitLong blah-blah
Sell Blah-blah2
Condition79=TRUE;
Value4l=3;
End;
{Same idea for short entry days too }
Explanation of example:

The manual says position variables are updated at the end of the day, but MarketPosition(0) is an apparent exception. The above IF clause catches the case where the system was not long yesterday (Condition9[1]=TRUE) but now the system is long (MarketPosition(0)=1). This is the definition of day/bar of entry, so any orders, exit variable initializations, etc., placed between Begin and End will only be executed on actual day/bar of long entry.

In a future issue, Nom D. tells a way to completely beat the 64KB size limit for systems without hiring a programmer to write DLLs or moving up to TradeStation. However, as noted by Robert Prechter, many good systems are destroyed while being made into perfect systems. 64KB is really quite a bit of room.

The most interesting tips and questions from you, our sharp and/or befuddled SuperCharts users, will be presented! Send in your items to share.

That's all from for this initial column. Send/Fax your Supercharts tips, techniques or questions to Commodity Traders Club News, Attention SuperChartsSwami (or whatever). DO NOT contribute any material that you consider proprietary. Nom's focus is on maximum effective uses of SuperCharts, so system ideas or indicators are only commented on incidentally to discussing how to program them. All materials become unrestricted property of CTCN when received from you. If your SuperCharts tip is printed, you get your choice of CTCN Special Reports, a $5 value, for only $5.01. All decisions of Nom D. Pflume, while admittedly arbitrary and inscrutable, are final. All submissions will be reviewed, but only those selected for publication will receive a response, since Nom also has a wife, three teenoids, a dog and cat to attend to, not to mention a job and multiple trading accounts. Nom, being only half Norwegian, has his limits, as Mrs. Swami so kindly (and frequently) reminds him.

Fundamental Analysis Of Grain Markets - Alice Sanders, CTA

Bean Talk - September USDA estimates of soybean crop was 2.285 billion bushels; its average yield estimate 37 bushels per acre.

One market analyst estimated frost damage at 100 110 million bushels; a 2.067 million bushels total crop size, an average yield 33.5 bushels/ac., carryover into the 1995/1996 crop year he estimates al. 250 million bushels.

The November 9 crop production report will be based more on harvested yields.

Soybean purchases seem more front loaded than corn; farmer may hold the beans in hope of higher prices.

Brazilian crop is 22 million tons (3 million tons short of last year's).

Argentina needs relief from draught. In view of above analysts predict: March soybean futures prices at: $6.80 up to $7.50 at a January pivot.

Wheat Talk - September USDA estimates of wheat crop is 2.187 billion bushels. 1995/1996 carryover is projected at 427 million bushels.

One analyst observes that export demand is the key issue. In South American: Argentina a major supplier of wheat is plagued by drought, may not be able to fulfill Brazilian demand. The European Union will be out of the market till mid-November. In view of these and some historical review, some analysts predict a strong market at year's end making contract highs this crop year, however they expect an even stronger market move later around March due to bad planting weather and light carryover in 1996: Dec. wheat futures price forecasts $5.00 - $5.11 - March wheat futures price forecasts $5.25 - $5.40

Corn Talk - September 29 USDA estimates of US corn corp. was 7.832 billion bushels: this is over 3% less than the August US corn crop estimate. A market analyst from Professional Farmers of America expects final crop size to fall to 7.55 - 7.6 billion bushels, since the September freeze may have cost farmers 365 million bushels. A commission house sees the final crop as low as 7.450 billion bushels. August and September frosts and continuing frost threats could force a consolidated corn and soybean harvest, according to a professional expert. This could result in a rapid basis price appreciation: 20¢ - 25¢ in first half of November due to weather.

Market may not feel its real tightness until December/January, he says. Farmers already have sold much corn forward, relative to beans, so they may hold on to the rest in hope of higher prices. An other expert adds: this time of the year corn prices have not reached such highs for the past fifteen years (above $3.00). Some analysts forecast a pricing turning point for January others for March 96.

December corn futures price forecasts: up to $3.50 if pushed by speculators; up to $3.40 due to need to ration usage.

Though exports are being front loaded, a rationing of demand may come in January, analysts expect. China now importing and Argentina having sold out most of its crop, just a small rise in wheat prices may send corn prices higher, says one analyst.

March corn futures price forecasts: up to $3.30 - $3.35; up to $3.50 - $3.60 depending on the involvement of importing countries.

One leading house takes a more conservative view, setting the general corn futures market in the $2.95 - $3.15 price range until January or later, and more volatile markets after March depending on US crop growing conditions.

Also Everything I Do Works Because I Learned How To Trade (Like The Anonymous Trader) - Joe Ross

I received your postcard and would love to accommodate. Believe me on that, Dave. However, my trading methodology is such that if I still haven't been able to get it down on paper after having written six books, with a 7th in progress.

My whole approach to trading is so vastly different from your own. From what I gather, you are primarily a systems trader with a methodology. My own trading style is eclectic. I approach the market with a vast toolbox full of techniques. I trade the markets dozens of different ways. You and your readers have seen one of them in anonymous trader's S&P trading. But frankly, I would be bored to tears if I had to trade only one way. My nature is that of an adventurer.

Though one simple technique for trading the S&P may suffice for making money, I can't stand to do only one thing. My trading jumps all over the place. I'll fall in love with Options and trade the dickens out of them. Then I get bored and switch over to Spread trading. Other times I look at outright futures trades. I usually trade on News if I feel it gives me some sort of edge. Seasonality plays a large factor in my trading.

I don't care if a market is trending or going sideways. I don't care if it is exploding or collapsing. As long as I have the right tool for trading what I see, I'll go for it. I have used and still use darn near every technical study ever invented. Yet I prefer to simply trade what I see on a plain vanilla bar chart.

In the last few years I have traded almost exclusively in the Interbank, because I don't have time for short-term trading anymore. Being an educator is my most recent passion. There is little thrill for me in only trading the markets. I want to teach others how to do it. The challenge of doing that is utmost in my life these days. I'm having a lot of successes, but there are still more traders who fail than who make it. Helping others has been the most rewarding thing I've ever done, better than just trading for money.

My trading methodology, if I have one, is to have learned how to read a chart and to know which tool to use and when to use it. Almost everything I do works, because I've learned how to trade. Much of my trading is intuitive, judgmental, and based on what I see happening when I go to trade. The least part of my trading is involved with entry. It's what I do once I'm in the market that counts. That aspect of my trading is almost entirely subjective, and based upon long years of learning personal discipline. When I am trading, I know who I am, what I can do, and where I'm going. To me, trading is at least 80 percent personal discipline.

Benefits From CTCN & Psychology Evaluation & Advice To Sell L. C. Puts - The Enemy Is Within - Robert Edwards

As a personal note, I want to thank CTCN for publishing articles about negative psychological perspective. I decided to be evaluated and was determined to be manic depressive. Through counseling, an anti-depressant (Zoloft) and a good support system that has been set up, I have made tremendous psychological improvements and my trading has benefited as a result.

I realize now that my obsession for technical analysis was a futile attempt to overcompensate for my psychological frailties. Realizing where the enemy is and learning to effectively deal with it, may someday make this my strength rather than my weakness. Well, thanks again, CTCN, I strongly urge other readers to study one of the many good books on the psychology of trading and seek help if they are not making money!

In closing, for those who have been following my option articles, I explained selling cattle Put options in an article a year ago. My recommendation of selling Put options this time of year in Feb. and April live cattle, appears to still be valid. I have progressed greatly toward the development of an unbelievably profitable program of selling out-of-the-money Puts and Calls (short strangles).

One trade I will have on by the time traders read this is that I will be short April Cattle 64 strike Puts. Contract lows in the April 1996 Cattle contract is 63.90 and it is highly unlikely we will make new contract lows this time of year.

Contact me via CTCN.

Options & Spreads: The Neglected Klondike - Greg Donio

Everybody wants to be wealthy. Economists tell us, alas, that if everyone were a millionaire, a loaf of bread would cost a thousand dollars. So what if there were a sure, quick and easy way of tripling your money? Everyone would use it again and again. We would all eat sirloins costing two or three grand per pound.

Many investors and traders overlook this hard economic fact as blithely as do horse-players and casino customers. Thus innumerable venturers in stocks, futures and options end in bankruptcy court, sitting next to an "I had a system" roulette-player. What could they have done differently? How about letting others pay for most of the chips?

With both option spreads and futures spreads, you buy one batch of contracts and sell another batch usually on the same day. The money from what you sell pays for most of what you buy, with you paying the difference or the "debit." That meaty buffalo herd--other people's money--beefs up your ability to make full and replenishable profits.

How much is an ample profit? No easy answer; wealth-seekers argue over this frequently, with opinions hemispheres apart. Let say that a gambler goes to a racetrack or casino with $100 and emerges with that plus $10. Disappointing. Barely pays for parking. He hoped to parlay it up to $500 or $1,000.

Hold on, Charlie. A 10% percent gain in one day annualizes to 3,650%. A federal bond or a certificate paying that much would be astronomically fantastic, an ecstasy of wealth if an agony of inflation. Yet the small-time gambler is disappointed. On the pittance end of the spectrum, a retiree tolerates one or 2% per year from a "blue chip" in his portfolio. "A good company! Well-established."

In the throes of speculation fever, many futures traders and options traders resemble the gambler in their notions of what to expect and what to call disappointing. They feel devastated if the complex, surprise-a-minute market does not function in their hands like an easy-to-operate money-printing machine. If the market dished out fortunes as easily as they wish or anticipate, it would make everyone a millionaire. It is a zero-sum game, not a money-printing game.

A zero-sum game means that someone must lose a dollar for each person who gains a dollar. This conflicts with the vision many have of a bountiful cash-crop, although plenty of bushels can be gained. W. D. Gann once wrote, "People expect more profits in speculation than in any other business. A man who would be satisfied with a return of 25% per year in a business is not satisfied if he doubles his capital every month in Wall Street."

Many people are satisfied with 4% in a savings bank, but when they come to Wall Street and put up $1,000 they expect to make $1,000 in two or three weeks. They are the people who buy on a 10-point margin and always lose. Do not expect the impossible in speculative markets.

You may think an average of ½-point a day, or 3 points a week, is too small a profit to bother with. Yet, in 52-weeks it would amount to 156 points. Make speculation a business, not a gamble. Go into it to stay, not to gamble all on a few trades, lose and quit. Be patient. If you can double $1,000 the first year and keep doubling it for 10-years, you would have over a million dollars.

I dislike gambling because it goes beyond mere risk or unknown factors. Racetracks and casinos are systematized against, mathematically rigged against the wagerer. Yet a glance at the track can instruct. There are professional handicappers who bet the races and win with fair consistency, but that is because they approach it differently from the masses of horseplayers.

Professional handicappers avoid any race in which the horses are too evenly matched or there are too many unknown factors. So they bet only about one race in 10, which requires more self-restraint than most horseplayers possess. For avid gamblers cannot scratch only one bad itch out of 10. Also, pros settle for about a 20% over-all profit. This requires less greed than grips the wagerers who craves to double their bankrolls quickly or better yet turn $100 into $500.

The parallel to the pari-mutual junkie can be found in the financial speculator. He itches to trade too often, over trades, craves astronomical profits, takes licking after licking, and writes one check after another to replenish his depleted brokerage account. With unbusiness-like Land of Oz logic, he expects a zero-sum game to disgorge easy wealth into his pockets. He overlooks the fact that with a more scientific map-reading and a better-engineered dig, he really could tap the mother-lode.

Gann wrote, "Make speculation a business, not a gamble." The spread strategist in either options or futures is, in effect, a combination racehorse-buyer and bookmaker. While purchasing the thoroughbred, he pays for most of it with bets that he took, i.e., other people's money. If the horse subsequently loses a quarter or a third of its market value, the trader nevertheless resells at a profit because his bankroll paid for less than half of it. Better still if, so to speak, the pony increases in value.

According to an old saying among racehorse-owners, "Nobody ever committed suicide while he had a good two-year-old in the barn." Also, the phrase "making out like a bookie" emblemizes prosperity. With spread strategy, the long-end of the spread is your thoroughbred in the stable and the short-end your lawful betting parlor. Not no-risk, but low-risk thanks to the admixture of horse-player bank notes to the greenbacks in your treasury. Not risk-free. Limit: A 10th of capital per venture.

Precisely how does one go about setting up the horse barn and the betting bank? I begin by getting a "fix" or a bearing on a category of underlying securities--in my case, an industry group of stocks and individual shares--that is gradually trending either upward or downward. After reading W. D. Gann's two books bound in one volume "The Truth of the Stock Tape" & "The Wall Street Stock Selector," I saw shares bounce between floors of support and ceilings of resistance practically in my sleep, and could notice them pulling toward the floor or the ceiling they would crash through.

The two-in-one Gann volume is available by phone and credit card from L & S Trading 303-586-6262 or from Lambert-Gann Publishing 509-843-1094. You may get results just as good from other technical-analysis systems such as classical Charles Dow Theory, Elliott Waves, Wyckoff point & figure, Darvas pyramids of boxes or Japanese candlesticks. These are not gospel, but can serve amply as a nautical almanac when you steer a financial ship through the winds and currents of trends. Gann's axiom: "Discover t

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Heard, But Delayed - Sam Jackson

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Part One - Michael Maldonado

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Opportunities - John R. S. Piper - England

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