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Re: on line trading info



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<DIV><EM>FTG told me that they were the best thing since sliced bread!&nbsp; 
They claim to have an automatic backup system to their electronic trading which 
automatically falls in to place if there is a failure in their primary 
system.&nbsp; That was what appealed to me and some problems I had had with 
PMB.&nbsp; They told me fills on market orders should be received within 15 
seconds on Spoos and about a minute with limit orders.&nbsp; My commissions were 
supposed to be $17.&nbsp; </EM></DIV>
<DIV>&nbsp;</DIV>
<DIV><EM>My first day of trading, market order fills came in after 1-2 
minutes.&nbsp; Limit orders, 5 minutes or so.&nbsp; In fact, I thought I had not 
been filled so I took an opposite position, only to find out a few minutes later 
that I had been filled and I had a position in the other direction!&nbsp; When I 
complained about the timing of fills, I was told that the broker's obligation is 
to fill orders and not report fills!&nbsp; </EM></DIV>
<DIV>&nbsp;</DIV>
<DIV><EM>Then, when I received my statement, my commissions were showing 
$22!&nbsp; That was eventually corrected but my relationship with FTG lasted 
less than a week!&nbsp; I went back to PMB through Farr Financial and am very 
happy!</EM></DIV>
<DIV>&nbsp;</DIV>
<DIV><EM>P.S.&nbsp; Before any account is opened, get something in writing from 
the broker stating what commissions and fees are.&nbsp; I recently had another 
experience (yes, I have had many different firms as brokers but it is hard 
enough to trade let alone having to worry about broker issues so I will continue 
to open new accounts in search of honesty, reliability and service) who quoted 
me $15.&nbsp; He then told me his boss wouldnt allow that low of rate and so it 
would be $18.&nbsp; Discussing this further, I understood it to include all 
fees.&nbsp; I opened the account and placed 2 trades.&nbsp; Statements showed 
$18 plus about $9 in fees round turn!&nbsp; When I spoke with the broker, he 
told me the $18 wasnt all in and that my small volume couldnt support that type 
of rate!&nbsp; I was in his office with a friend who confirms the rate was an 
all in rate.&nbsp; Nevertheless, the account was closed immediately and I even 
considered filing a complaint with the NFA.&nbsp; They pissed me off in other 
ways too!</EM></DIV>
<DIV>&nbsp;</DIV>
<DIV><EM>If anyone is considering switching firms and have narrowed it down to a 
few, let me know who they are and I will confirm whether this "BAD" firm is 
included in the list.&nbsp; </EM></DIV>
<DIV>&nbsp;</DIV>
<DIV><EM>Gary</EM></DIV>
<BLOCKQUOTE 
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
  <DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
  <DIV 
  style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
  <A href="mailto:tedco@xxxxxxxxxxxxxxxx"; title=tedco@xxxxxxxxxxxxxxxx>corinne 
  stampeen</A> </DIV>
  <DIV style="FONT: 10pt arial"><B>To:</B> <A 
  href="mailto:realtraders@xxxxxxxxxxxxxx"; 
  title=realtraders@xxxxxxxxxxxxxx>RealTraders Discussion Group</A> </DIV>
  <DIV style="FONT: 10pt arial"><B>Sent:</B> Friday, May 07, 1999 8:02 AM</DIV>
  <DIV style="FONT: 10pt arial"><B>Subject:</B> on line trading info</DIV>
  <DIV><BR></DIV>
  <DIV><FONT color=#000000 size=2>hi all, actually my name is TED, dont know how 
  to get my wife;s name off this thing, any way&nbsp; the software from what I 
  gather was a joint effort between THE FUTURES TECHNOLOGY GROUP based out of 
  L.A, CALF, an IB firm and ROSENTHAL COLLINS who are clearing for them, the guy 
  to talk to is GENE SHUE- AT 310-556-7718 OR FAX-310-556-2240, GENE in my 
  dealings with him is a very helpful person in helping u get set up with the 
  software etc, also one can actually talk to the guy who designed the software 
  at ROSENTHALS should anything weird happens etc, who also is a great a to deal 
  with, sorry I dont know their web address, as far as commissions go its pretty 
  standard the more u trade the lower u can talk them down, for the 1 lot&nbsp; 
  -1 aday trader it is still only about 22$ a round turn, anyway&nbsp; hope this 
  can be of some help,, good trading</FONT></DIV></BLOCKQUOTE></BODY></HTML>
</x-html>From ???@??? Fri May 07 06:59:36 1999
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Date: Fri, 07 May 1999 09:37:24 -0400
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From: Bob Fulks <bfulks@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: portfolio allocation
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At 10:26 PM -0400 5/6/99, Ross Kovacs wrote:

>1. What portfolio allocation are you using?
>2. How did you decide on this allocation?

>I ask this question since our discussions often center on the riskiest
>tradable. A newby may not realize that most successful traders have
>several portfolios with different risk profiles. Yes, I know we sometimes
>discuss portfolio alloction. I'm asking that individual Real Traders
>reveal their actual allocations and how they were derived; not theoretical
>or "what should be the right allocation."


I use the principles of Modern Portfolio Theory and find it works very
well. It is surprising to me that more traders are not familiar with this
work. The basic ideas were derived by Harry Markowitz in his monograph,
"Portfolio Selection" in 1959. The work has been greatly extended by others
including Prof. William Sharpe now of Stanford University. Markowitz and
Sharpe received a Nobel Prize in Economics for their work in 1990. Prof.
Sharpe is also known for his "discovery" of what is now called the "Sharpe
Ratio" which is the best measure of the worth of an investment.

This technique is now generally referred to by economist as the
"Mean-Variance" approach. An article in the Winter issue of "The Journal of
Portfolio Management" compared this approach with newer "Scenario-Based"
approaches and found the results equivalent and the mean-variance much
easier to use. (The only exception they found was with options where the
scenario-based approach was better.)

The basic idea is that investments alternatives should be compared by
comparing their Sharpe Ratios. The Sharpe Ratio (for stocks & mutual funds)
is:

   Sharpe_Ratio = (Annualized_Return - Annualized_Risk_Free_Return) /
                      (Annualized_Standard_Deviation_of_Returns)

and for Futures:

   Sharpe_Ratio = (Annualized_Return) /
                      (Annualized_Standard_Deviation_of_Returns)

Where: Annualized_Return is the % return of the investment
       Annualized_Risk_Free_Return is the return on 90 day T-Bills
       Annualized_Standard_Deviation_of_Returns is the standard deviation

Markowitz showed that by combining investments whose returns are largely
uncorrelated, the Sharpe Ratio of the combination will be higher than the
Sharpe Ratios of any of the individual investments.("diversification") For
any combination of investments, in fact, there is a particular combination
that results in the highest Sharpe Ratio.

This combination is very easy to find using the "Solver" tool in the Excel
spreadsheet. Using it you can easily determine the optimum combination of
US stocks, international stocks, bonds, etc., to mix in a portfolio, based,
of course, "on past performance which may not be indicative of future
performance." This mix can change over time.

An investment advisor will tell you that you should put X% in bonds and Y%
in international funds, etc.,  but most cannot tell you why. They are just
repeating what someone told them. But this method will tell you why and,
more importantly, when this seems to not be working well.

And, if you can find in investment that is negatively correlated with the
US stock market, you can combine this investment with standard mutual fund
investments to substantially reduce the volatility (increase the Sharpe
Ratio) of your portfolio. Then, with a high Sharpe Ratio, you can safely
increase the return of your portfolio by using leverage. The trick for us
traders is that by using the techniques we use to design trading systems,
we can "design" an investment portfolio that is negatively correlated with
the stock market and use this to increase the Sharpe Ratio of our overall
portfolio.

I use this principle to trade OEX index puts. Using a trading system to
pick short-term (2-3 day) highs and lows in the market, I can buy, for
example, 2 OEX puts at a high and sell one of them at a low, etc. This
results in a portfolio that has a positive return but which is negatively
correlated to the OEX. Then, by combining this portfolio with mutual funds
in the proper proportion, you get a decent return with lower volatility
than the overall market. Then, you can use leverage to get the portfolio
back to the market level of volatility but with much higher returns. This
particular mix leaves me with some put options at all times to provide
"crash insurance" which I think is important right now.

I also design my trading systems for the highest Sharpe Ratio (smoothest
equity curve), forgetting about the rate of return. Then, by using
leverage, you can get much higher returns with a level of volatility
comparable with the market as a whole.

For example, a buy/hold strategy for the S&P 500 cash index had a return of
about 20% per year for the last five years with a standard deviation of
about 15%. This is a Sharpe Ratio of about 1.0 [(20-5)/15].

I have one trading system that has a Sharpe Ratio of over 5 so that if I
leverage it to a standard deviation of the same as the market (15%), the
annualized return would be about 75%

So to answer your question on where my portfolio is right now:

50% in T-Bills and money market funds (the market seems too high to me)

40% with several "market timer" money managers, using 2:1 leverage, who are
in and out of the market every few days trying to catch only the "up days".
I hedge this with my "OEX puts" system for crash insurance and to lower the
overall volatility.

10% in a trading account that I "play with", trading various systems.

Bob