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You are looking at this with one eye closed. The commercial users
and Commercial producers use futures to hedge positions or to guarantee
future trade. If you bought product for delivery at a later date
and sold a future against it, you have locked your position. If the
price of the product goes up so does the future. It would show as
a loss in that futures account. The offset for the rise in price
of the product doesn't show. Large options traders do the same thing
with the underlying. There isn't a bank, trader or country that can
change the direction of an item for more then a day or two. You have
seen it in the currency markets when intervention fails. I haven't
looked at the numbers in years, but look at the annual reports for the
major brokerage firms and see how many have profitable trading accounts.
When I was keeping track there wasn't one. Remember, there are always
two sides to a trade and many times the numbers printed only show you the
part that proves their point. Ira
<p>Scot Billington wrote:
<blockquote TYPE=CITE><style></style>
<font size=-1>I don't know who or
what the alleged "Big Boys" would be, but there is a very interesting article
in Futures magazine concerning the Commitment of Traders report.
It breaks down the net P/L for Commercial, large spec, and small spec in
the 1990's for Cotton and the JY. I would assume that when one spoke
of a "Big Boy" a commercial, whether it be Allenberg or Dunnavant Cotton
Companies or a major international bank trading Yen, would be at least
part of that conspiratorial "Big Boys" group. Large speculators are
mainly CTA's, hedge funds and other professional money management groups.
Many of the large specs are far from secret, as they must register with
various government agencies. Regardless, I would call these commercial
traders, particularly as a group, "Big Boys" and insiders as much as anyone.
This is what the commercials did in the 90's in Cotton and the JY.
You can check my facts on page 46 of the April 2000 Futures magazine.</font> <font size=-1>Cotton</font> <font size=-1>Commercial
users $(430,040,000)</font> <font size=-1>Commercial producers $(244,772,000)</font> <font size=-1>Large
speculators $710,317,000</font> <font size=-1>Small traders $(35,506,000)</font> <font size=-1>Basically,
Commercials lost $675 million during the 90's. Pretty inefficient
manipulation in my book. All of that was lost to large speculators,
who I would guess the majority are registered money managers. By
the way once you control a position of a certain size, you have to register
with the CFTC as a large trader. Any conspiracy would have to therefore
include the CFTC.</font> <font size=-1>The banks, brokerages, and
multi-nationals did no better trading the JY.</font> <font size=-1>Commercial
useres $(2,151,609,000)</font> <font size=-1>Commercial producers
$(2,766,093,000)</font> <font size=-1>Large specs $3,081,803,000</font> <font size=-1>Small
specs $1,835,900,000</font> <font size=-1>While some of those losses
may be 'hedges', I brokered trades for commercials for 6 years, and I would
guess that MAYBE 5% of the trades were pure hedges. They hedged when
they thought the market was going against their cash position and took
it off when they thought their cash position would profit. Perhaps
others have had different experience with commercial traders.</font> <font size=-1>Lastly,
the floor myth. The failure rate for floor traders is roughly the
same as off the floor. This is remarkable because floor traders have
the built in edge of the bid/ask spread while the off the floor trader
must overcome that edge. That means that floor traders must trade
much worse than an off the floor trader to lose. Many floor traders
make millions trading. They think it is because of whatever they
do to predict the market, manipulate the market, or whatever. (Some
FT's have had winning systems or methods. This example goes for the
majority.) However, upon close examination, one sees that they trade
1,000's of contracts a day, and that they buy on the bid and sell on the
offer. Even in a tight market like the Bonds, that advantage is large.
Just buying the bid and selling the offer with a spread of one tic makes
one $31,250 per day trading 1000 lots per day. There are about 250
trading days in a year making me $7,812,500 per year. Wow, I really
called that market well. I really manipulated that market.
I can make $1 million on 128 lots per day. Even with that advantage,
the majority of FT's fail.</font> <font size=-1>The floor takes money
from the public, not because the public is dumb, nor do they manipulate
the prices (even though many of the smartest think that they do).
They take the money through the bid/ask spread.</font> <font size=-1>sb</font>
<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>
T-Bondtrader</div>
<div style="FONT: 10pt arial"><b>To:</b> realtraders@xxxxxxxxxxxxxxx</div>
<div style="FONT: 10pt arial"><b>Sent:</b> Thursday, April 06, 2000 6:45
AM</div>
<div style="FONT: 10pt arial"><b>Subject:</b> [RT] Manipulation...</div>
<font face="Arial"><font size=-1>When I was shown around the CBOT
and CME by a member, I was told, while walking through the pits and in
the midst of all the action that the general consensus of the floor was
that it was simply "taking money from the public". The best
way of viewing what was going on was to think of it as a game.
The Big Boys (a term I use to cover a multitude of market makers and movers!)
who control everything, could only make money when the market moves, so
they make it move. They take it up and they take it down.
And they make exceptionally good money when they do it. They
are the guys who see both sides of what is going on, as it happens.
Consequently, the small illiquid pits are very loaded against the public
(it is just too easy!) and should be avoided at all costs, but the big
ones could be played as they played them, if, despite the size of your
account, you actually played according to their rules.</font></font> <font face="Arial"><font size=-1>Now
you have to understand how they move the market, how they play their game
and then play it their way. You have to put your little pads in their
big footprints. It is not point, for example, saying I use
a stop of X ticks according to my wallet, when what you need to do is use
a stop of Y ticks or Z ticks according to where the market is and where
it is going. You not only need to be in the market when the Big Boys dealing
the cards, but you need to be out of the market when they are not there,
too. You can hide quite a sizeable number of contracts in the
bonds that you couldn't possibly do many other markets. You
can get your price going in and coming out, if you trade the way the market
moves and not the way you want it to move. You may be a Little Boy,
but you need to behave like a Big Boy and you can only do that in a very
liquid market that you can afford to be in, in terms of size, range, volatility,
spread, etc, etc.</font></font> <font face="Arial"><font size=-1>Of
course, the markets are manipulated by the Big Boys and in that term are
a whole host of faceless types, which means a lot more than just the government
or the fed or any other agency. Whether you like it or not, they
do what they do when they want to and that's that! Some clever
people, using all sorts of predictive tools, may be able to say when they
are going to do whatever they are going to do - and if you can do that,
more power to your elbow. If you can't (for any one of a host
of reasons), then all you can do is be in a position to profit from what
they do, when they are actually doing it.</font></font> <font face="Arial"><font size=-1>I
am quite sure that there are some immensely powerful people around, who
can club together at the right time to do what they want to do in the markets.
Trading is, after all, the biggest endeavour that man does on this planet.
It is not so much a conspiracy, as a fact of life. It is being powerful.
For many, many people that is what life is all about. Since
the vast majority are the subjects of the powerful (not withstanding democracy!)
the best thing to do is find out it works and then gain from flowing along
with the power, rather than battle against it. But, you may say,
that cannot be done in many spheres of life, and I am sure there are many
examples where this is right - but it can be done in the markets, if you
apply yourself. You can do as they do, if the market is big enough
and that's about the size of it...</font></font> <font face="Arial"><font size=-1>Bill
Eykyn</font></font>
<br><font face="Arial"><font size=-1>www.t-bondtrader.com</font></font>
<br><font face="Arial"><font size=-1>"Learn to read the tape"</font></font> </blockquote>
</blockquote>
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</x-html>From ???@??? Thu Apr 06 09:21:48 2000
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From: "T-Bondtrader" <t-bondtrader@xxxxxxxxxxxxx>
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Subject: [RT] Re: Manipulation...
Date: Thu, 6 Apr 2000 17:02:38 +0100
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Status:
> 1 - How do you recognize the big boys are in,
Not always that easy, but they are in at the open, the close, for reports,
etc, and they leave the pit to the locals to run the stops in the middle of
the day. Tick volume (which is all you can get during the session) helps
according to the type of price action that is going on and, of course, it is
the price action itself which is vital.. Apart from moving the market down
a little, they are not much in evidence today - but then tomorrow is First
Friday...
> 2 - how do you recognize what they are doing..?
For positional players, Scott Billington nailed it nicely with the COT
reports and the breakdown of the four classes involved - look at the CBOT
site, it can be quite revealing - but what it can do for your trading is a
different matter. For the day trader, it is all a question of price action
at the key resistance and support levels. As has been said, they make a
bundle on just the bid/ask spread, but they need the market to move, to go
up and down. The way it moves, the way it ticks, literally, the patterns it
creates time and time again before it makes a particular move, the way
different time frames dove-tail or not, etc, all help to show you what's
going on. If you could be precise, rather than take an holistic approach,
you might be as rich as they are, but the key to following their actions is
the money management you use - so that you can be wrong more times than you
are right and still come out on the right side of the ledger.
Manipulation is not necessarily a conspiracy. It might be, but you'd be
hard pressed to prove it - and in any case it is irrelevant. We are
talking about manipulating the market, making it move. It only takes a few
of the movers to move and it will move. When you see it happening you can
apply your strategies and go with them - pads in footprints. It is very
straightforward, even if it is not easy to do. It is not a question of
beating them, it is a question of joining them. Remember, the competing
factions are on the floor, you are at your desk, seeing what is going on and
trying to go with the flow.
You gain enormously from the liquidity and the nature of this market.
Without the Big Boys it would be nothing - long may they exist and be the
strong hands. The object is not to be the weak hands that get crushed by
them.
Bill Eykyn
www.t-bondtrader.com
"Learn to read the tape"
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