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3/16/99
Several months ago I recommended to the List a first rate monthly Net
magazine, "Applied Derivatives Trading" (www.adtrading.com). It is posted at
the beginning of each month; I simply save the various sections and then read
them at my leisure. Worth your attention, and it's free. (I have no connection
to the magazine, other than being an admiring reader.)
A few excerpts from the March issue follow to engage your interest:
"The big news of the month was, of course, the GLOBEX Alliance announced by
the CME, Matif and Simex, which will provide the first global electronic
trading
alliance and is slated to begin in Q3.
Members of each exchange will have cross-exchange trading privileges with
respect to one anothers' electronically traded products, with everything being
run on Matif's NSC electronic trading platform. The alliance - which is
discussed in more detail elsewhere in this issue - also intends to establish
cross margining arrangements, in order to reduce members' capital
requirements.
A few interesting snippets emerge from the CBOT's Project A February fact
sheet:
•It really is rather a parochial system, with 89% of the 568 workstations
being located in Chicago, 8% elsewhere in the US and 3% (which do 10% of the
total business) in London.
•99.4% of Project A volumes take place when the pits are closed.
•Only 6.7% of financial volumes and 0.5% of the agricultural business is
traded on the system.
The future of this exchange is discussed in more detail, elsewhere in this
issue, but Mr. Brennan and his merry members are in for a very rude awakening
if they continue to think that all will be merry and bright if they just
implement some fancy technology for speeding the flow of orders into the pits.
Quite frankly, this is a pathetic excuse for a strategy for the future,
particularly for an exchange of the size and standing of the CBOT. Wise up
people, or cash your chips in while they're still worth something!
********
And an E-mini version of the Nasdaq 100 stock index futures (on similar lines
to the E-mini version of the S&P 500 futures) is also planned, subject to CFTC
approval.
********
Bas Iserief, a dealer at ABN AMRO in the Netherlands,... went on to note that
simple run-of-the-mill indicators do pretty much the same as some of the more
"new-improved!" versions. Indeed, they're pretty much all based on momentum,
trendiness and break-outs. Simple models don't do much worse than some of the
more fanciful ones. In fact, I couldn't agree more with this latter point. It
never ceases to amaze me that some traders regard the sort of "new improved!"
indicators being touted by certain marketeers as paradigm shifts, when in fact
they are just tweaked or marginally upgraded versions of the classics.
In the book Campaign Trading, John Sweeney notes:
"I'd like to report that the more exotic approaches work better, but after 13
years of reviewing what's publicly available, I've seen scant improvement in
trading signals from those given by [moving] averages."
**********
Meanwhile, at the core of Linda Bradford Raschke's excellent presentation to
the 1998 IFTA conference were the following nuggets for intraday and short-
term swing traders:
1.Approach the market with a directional bias. This does not mean that you
have an opinion - only that you have determined whether there are higher
probabilities of an advance or decline.
2.Concentrate only on making one well executed entry or exit for the day. Do
not put pressure on yourself to day-trade.
3.In the majority of time, there is a key "play" for the day. For example, a
market might open, go down and test the previous day's low, and then trend
upwards for the course of the day, the "play" being to buy it for the day.
4.The market tends to trade from low to high or high to low. If you catch a
morning reversal or find yourself in sync with the opening, don't be too eager
to take profits. Holding a winning trade throughout the day and overnight
usually makes the largest gains. (from the February '99 issue)"
Best wishes,
Ralph Love
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