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Stocks & Commodities Magazine - Z. S.
I would like to submit my unbiased and independent opinion to you regarding your comments about your
dealings with Technical Analysis of Stocks & Commodities Magazine in last months CTCN, August issue.
S&C is a well-known futures industry magazine and I find that you acted on behalf of the prospective
customers of the system when you submitted Swing Catcher to S&C.
S&C, as a third party, if it prepares a system evaluation, needless to say, it should be unbiased and adequate
informative. Errors found afterwards should immediately be corrected and published. Because the opinion
of a well-known third party publisher is highly appreciated, the errors without prompt corrections can have
serious consequences, first of all in futures trading.
You mentioned that S&C promised and failed to publish an in-depth review. In the first place, the
prospective customers of Swing Catcher have been negatively affected, for due to the lack of the review,
they may be could not obtain another third party opinion of the system or they were not even aware of the
system and they may have bought another system that performs inferior to it.
It is evident that in order to prepare a sophisticated evaluation of a computerized mechanical trading
system, one should install all the program and see how it really works. Because, some systems don't work
in real-time trading.
Prior to real-time trading the system, the best way is to generate walk forward (out of sample) tests or to
paper trade the system for a short while, in order to obtain a simulated "real time" performance figure, with
no Hindsight, based on a statistically significant number of trades. The system they did not install even
allows testing on portfolio level.
You mentioned that S&C prepared a Quick Scan review, containing errors and without installing the
software and without immediate error corrections, so I think it's OK that you canceled all ads.
I find it unfair that the ballots used for the S&C Readers' Choice Award, do not allow the readers to
discretionary vote for a certain system, but only for the systems display advertised in S&C.
Right now, I have the 1994 S&C bonus issue in my hand. On page 69, the introduction to S&C Readers'
Choice Awards states that "this listing represents products and services that S&C subscribers are using
and/or find useful."
There is no indicating that the listing is limited to the advertisers. In addition, foreign subscribers were
excluded from the voting, this is a pure discrimination, and reinforces the limited style of the S&C
Readers' Choice Award.
Therefore, the "novice" reader has the feeling that the systems not ranked in the S&C Readers' Choice
Award perform poorly compared to the listed ones) and are not worth future investigation.
CSI Data - Matthew Chiang
I switched to CSI data service a few months ago. Compared to my previous source (Genesis), CSI's data is
"very clean and reliable."
Turtle Strategy Seminar Attendees -
If you also attended one of the first four Turtle seminars in August/September 1992 and were given verbal
or written assurances by either Larry Williams or Russell Sands that the Turtle Strategy Seminar would
never again be offered to the public by Russell Sands, please contact George Glendenning at 702/435-7500
or FAX 702/458-1933.
I have found that the best trading methods are the ones that are produced by yourself. Also, the best way of
testing your method is not by using system writer or other testing software, but by taking 30 charts with
your indicators and to see the profits your method produced one day at a time. This way you will gain
confidence in what you developed and you can tell how many bad trades in a row and how many good
traders in a row. It will take much longer to test, but you will also start seeing market action and chart
I used PPS in 1992 with excellent results, enough to win a championship. In 1992, I used the manual and
was very cautious as the signals I used. In 1993, I changed to the software and experienced losses, many
losses. I no longer use PPS.
Now I use volatility of 1-day with a constant of 1=65 as my entry point. I use a filter of the opening price of
six days also. If the open is above my entry price, it is a good signal price for a buy, but if the open is
below, I will not take the signal. So, if volatility equals X and open from six days ago is Y, Y must be
greater than X for a buy and Y must be less than X for a sell. Depending on your risk aversion will dictate
of stop loss point. I never take a loss on close, I would rather try again tomorrow.
This method really is buying/selling on strength/weakness after a retracement/rally. If you apply this
method consistently or for that matter any trend following method, you have a better chance of producing
than inconsistently jumping around from system to system.
I believe all methods need some type of a filter, either moving averages, oscillators, envelopes, stochastics
or RSI. It will keep one from overtrading and making your broker happy.
I just read two outstanding books, "Trading for a Living" by Dr. Elder and "The Innergame of Trading" by
Koppel & Abell, wish both were written seven years ago.
Timer Digest - Vern Nord
In my last article, I mentioned the best method of trading mutual funds. Timer Digest is a newsletter
published every 3-weeks by Timer Digest Publishing, PO Box 1688, Greenwich, CT 06836-1688 - $224
In each issue they track the Fidelity Select Funds and rank them by relative strength as compared to the
S&P 500. They recommend splitting your investment money in thirds and buying equal dollar amounts of
the top 3 ranked funds.
If at any time after a 30-day holding period, one of the funds goes below its 21-day moving average, you
sell that fund and buy one of the current top 3 funds that you do not already own. There are a few other
qualifications and sometimes you will roll over into the Money Market Portfolio, but I won't give the whole
This simple method was the top timing system for last year, the last 3 years and the last 5 years. The yearly
results are as follows: 1989 - 35%, 1990 - 1%, 1991 - 55%, 1992 - 1%, 1993 - 52.9%
This track record looks like it has a two year cycle built-in. Maybe you should buy mutual funds in odd
number years, and money market funds in even numbered years, but I am getting away from the point.
What if you ranked all commodities and stock indexes by relative strength as compared to the CRB Index.
You would end up with a list of 30 some commodities with the strongest trending commodities at the top
and the weakest commodities at the bottom. Then depending on the size of your account and how much
risk you can take, try the following: Long one contract of the strongest commodity vs short one contract of
the weakest commodity. There is an unlimited number of options available depending on your risk capital.
Examples: Long one each of the two strongest commodities vs short one each of the two weakest
commodities. Long one each of the three strongest commodities vs short one each of the 3 weakest
commodities. If you have a bullish or bearish bias you could alter the ration 3/2, 3/1, 2/3, 1/3 etc. Add an
initial stop of $400 to $500 on each position, plus a trailing stop on each position any you are in business.
I want to make one other point regarding commodities to trade. I assume that any system you trade is
basically a trend following system. If this is true you should forget about commodities that are poor
trenders. In the January 1992 issue of Technical Analysis of Stocks & Commodities, there was an article by
E. Michael Poulos entitled "Futures According to Trend Tendencies." Mr. Poulos developed The Random
Walk Index which ranked 28 commodities according to their inclination to trend. If you start with this list
and modify it by the profitable trading commodities in Futures Truth and by "Trendiness in the Futures
Markets, by Bruce Babcock or any track record you want to, you will find out that over half of all
commodities are poor trends and unsuitable for trend following methods. Throw out the stock indexes,
meats, metals, grains and most soft commodities. This doesn't help you diversify your portfolio since you
only have left the currencies, interest rates, and a few energy contracts to trade. But why waste your time
and money trying to trade commodities that don't trend. If you feel that you are missing the boat by not
trading everything, then devise a long term channel breakout system that will get you into a runaway
market that only happens once in a lifetime. Don't trade poorly trending commodities just because you are
afraid to missing a major move. This will only waste you trading capital through commissions and slippage
and you won't make a dime.
P.S. - I am not in any way connected with Timer Digest other than being one of their subscribers.
Why Optimize? To Learn - Kent Calhoun
Russell Sands has incorrect assumptions about the basic nature of technical analysis, including
optimization. I base this statement on statistical facts, not opinions. To optimize anything is to view it in the
best condition po*sible, and this is no crime. Optimization informs professional traders how their systems
perform before trading them, valuable information.
There is a correct method to optimize any system that is statistically valid, 30 occurrences with 95%
accuracy. My article will be published by Futures Magazine concerning optimization and its research value
The key to optimization is to select stable parameters with an equity shift less than the parameter shift after
equity spikes have been eliminated. This process creates stability for optimal parameters shifts within the
four technical m4rket phases. Parameter shift is always geometric, but equity shift decline relative to
unstable parameter selection is usually exponential.
The Value of the opening Price
Historical testing should include the open, omitted by Sands, since it offers an additional price reference
point for qualifying price action, another entry option, and a statistical price relationship as to where a
market will close that day. Most markets that open lower tend to close lower that day, and the lower a
market opens the more likely it is to close lower.
All systems are optimized to some degree. As soon as a trader chooses to enter a trade on the open opposed
to the close, he has made a decision as to how a system should be traded. Does he know the close entry is
better than the next opening for an entry? If not why not? A potential 28% difference in profitability exists
for channel system entries between opens and closes.
The purpose of trading is to consistently make money. This is done by having the best information
available. If a trader does not know the best entry for his system, what is he trying to prove? That the
system isn't optimized? To lose money because a trader is ignorant of his systen's best parameters is
Russell Sands Uses Optimization
Mr. Sands, I am told, is a likable and intelligent trader. I phoned Sands to discuss this letter. Sands id a
blackjack player. When I asked him if he always double his bet and split aces and eights, he responded yes.
I asked him why. He stated if I ran a few million blackjack hands through a computer, the strategy makes
money. Right again for Russell! The computer analyzes a conditional set of historical statistical data and
provides the best trading strategy; this is optimization.
As I told you?. last week, I got stopped out on the first trade in feeder cattle, but with the Swiss Franc trade
I was able to use my day trading knowledge of the currency markets to lock in a $850.00 profit going up
(courtesy of Swing Catcher), last week and a $975.00 profit going down, on Monday and Tuesday, in spite
of the long signal from Swing Catcher.
I am guilty of not following the target prices, but the currencies are in the process of making their annual
double top and the target prices were past the high the marketsmade back in July.
In any case it is fun and exciting being back in the futures markets once again. I really enjoy using Swing
Two questions: The monthly parameters testing: Should I do it this weekend 8/27-28 or the following
Also, I had an outstanding credit with Omega Research from my day trading days (TradeStation) and they
are sending me SuperCharts. Will the CSI/Swing Catcher data work withSuperCharts?
I hope to bolster my trading account with additional funds in a few weeks so I can trade all of the f: signals
on a consistent basis.
A Trading Tutor - James R. Burke, Jr.
I took a one-on-one somirsar with John Brown at All Time Trading in May and learned what market action
is really about. John teaches market principles, price action and how to spot opportunities with $200 stops.
This is in the S&P! His trendline analysis is the best by far and he taught me how to use it. He doesn't
necessarily show you how to trade his "system', but how to devslop a trading plan for yourself, based o n
your personality. He does show you severe systems that work very well, one in Eurodollars that is
profitable and easy.
John's methods apply to thres-minute bars, hourly, daily or weekly and again with very small amounts of
risk and a high percerage of winning trades. I have entered a trade that started as a day-trade and progressed
into a long-term one, so his methods will work on longer-term trading.
Two days in Iowa for $1,000 was worth the trip. I have made five times that amount in two months since
our meeting. Also, if I have a question, I can call after market hours, 3-5 Central time, and John makes time
available. If you want to learn, give John, a call at 515-472-4606. My number is 915-821-7345, mornings
only (in Texas).
Re: Key to Currencies - Futures Truth
We take strong exception to Gerald Greenwald implying that we are unethical and are in receipt of stolen
property. This is outright slander. In the first place you cannot copyright an idea. You can copyright a
manuscript. We have never received a copy of his manuscript or material except from him (a computer
disc) which had a limited life. We worked with him during this period but quit publishing the first time he
expressed dissatisfaction. Someone anonymously sent us the logic or ideas which we published the results
on. This is not stolen material. As far as we know, the person who sent it to us could have purchased the
system. It was back engineered by others to determine the logic. Again, you cannot copyright an idea. We
did not turn around and resell the idea which we could have legally done. We merely show the results of
other people's ideas. We fail to see how this is unethical or immoral or using stolen property. Our numbers
show nowhere near the numbers shown by Dr. Greenwald on drawdown. We believe our numbers are
correct , however there is no way of resolving this issue, unless he decides to cooperate. Most currency
systems have fallen on extremely rough times in the past few months. Could this be the reason Dr.
Greenwald has quit selling his system?
Futures Truth started as an idea to bring some truth in the system vending business. Apparently, the NFA
and the Federal Government are powerless to act as this interferes with freedom of speech. The article in
the last issue of CTCN regarding TBSP is a case in point. It may indeed be extremely profitable, however I
have never heard of anyone who has made any money with this program . They continue to point out the
enormous profit in their promotions. Frankly, Futures Truth is a thankless and profitless operation. We
have been threatened many times with lawsuits and have been sued once. (This suit so far has been
dismissed by the judge for lack of jurisdiction.) I guess we continue as we do get some satisfaction out of
dampening the style of the many fast buck operators in this business and also reporting on the systems that
do show positive results.
One should remember that the best numbers a system will show are right after it is released for sale. I have
never seem a system which consistently makes money. Many "good systems" will go for 6-12 months and
not make money. That does not necessarily mean the system is no good, but most traders will discard a
good system right at the turn around time. I have done this on many occasions. The real key is
money management and trading a number of dissimilar systems.
Re: Chris Ongley's request for information on JulesGreenstein's Prime/Line - Ed Forys
Call Bo Thunman and inquire about his experience with Prime/Line several years ago.
I bought the manual and went to an all day training session given by Jules and found that
Prineline was more suited for position trading than day trading (which I preferred) and so I did not go
much farther with it.
I also found that Primeline did require some skill in interpretation; sometimes, I had so many
lines to consider I could not confidently reach a decision as to where exactly the support (or resistance)
was. Further conversations with Jules did not help much, although I must admit that perhaps further
conversations might have resolved my problem as to how far back one had to carry the lines from. Also,
Jules has had ample time to work out the nitty-gritty details of his system and it might be OK now.
4.At the time I looked at Prime/Line (some time ago), Jules did not keep (to my knowledge) or publish a
track record; this might be disconcerting to some, especially if he is still in that mode of operation. And,
don't forget, Jules is a broker; how much of his income came directly from trading and how much came
from commissions was not public knowledge.
Re. Vern Nord's comment "Any type of system is doomed to fail';
1.If commodity prices are truly non-stationary, then why does someone like Gary Smith (among others)
consistently pull profits out of the S&P market over long periods of time? I think that when you really
examine your market data, you will find that sometimes, it is nonstationary random; but there are other
times when it is trending, other times when it is cyclical, other times when it is a trading market, and other
times when it is combinations of the above. The trick is to figure out what type of market it is (more on this
next time) and then act accordingly (fade a trading market, never a trending market).
Day-Trading System - Simon Bonanno
I am a mutual fund timer who would like to attempt trading commodities on a "day-trade" basis.
What I am looking for in a "day-trading" system is the following:
1) Today's trade position is to be determined by some arithmetic calculation of yesterdays open, high, low
and close of price; 2) The selected trade position is to be entered before the market open and exited
automatically at the close of the trade day; 3) Use of computers or quotation systems is not to be utilized.
If you have heard of a day-trading system with the above parameters, would you please let me know thru
CTCN where I can obtain this information? As a fellow trader your assistance in this matter will be highly
Letter To Ira Epstein - Russell Sands
I have been trading and managing money for ten years. In that time, I have traded through literally a dozen
brokerage firms, both discount and full serivce, and anywhere in between.
I have I never, ever, called to place an order and gotten a recording machine--if I did I would go totally
ballistic. I've also never, ever, boon told to 'hold on' by either a (live) broker or a phone clerk and had to
hold for more than five seconds.
In a business where literally 'time is money', and every second can cost thousands of dollars, your attempts
at explanations' are a joke. There can never be any acceptable explanation for what happened to Mr.
Roberts in his letter.
Quite simply Mr. Epstein, if your firm is so popular that all your phones light up when the markets get
busy, the only solution is to hire additional staff.
I've enjoyed reading "Commodity Traders Club News" and thought I would throw my two cents worth in.
First, I want to say thanks for all the help you've given me in getting going with Swing Catcher. As one of
the people who create and manually update their own files, I probably had a few more questions than the
average user. It's good to know that help is only a phone call away and the system vendor will be there
when you need him.
I haven't noticed much in the pages of CTCN about books your subscribers have found either useful or
useless, or somewhere in between. I had the minor misfortune to purchase a copy of "The Trading Systems
ToolKit", by Joe Krutsinger several weeks ago. I say misfortune because after reading a short distance into
the book, I realized there was little in it that would be useful. If anyone else is considering the purchase of
this book, they should be aware that all of the systems were designed on and coded for SystemWriter and
TradeStation. There is nothing necessarily wrong with that, by all accounts they are both fine products. But
if you don't happen to work with either of them, there may not be too much that you can get from this book
- at least not $55 worth in my opinion. In many places the text is choppy and disjointed, jumping from one
topic or example to another. As is often the case with books of this type, editing seems almost nonexistent.
Among the oddities I noticed was a reproduction of a screen image from TradeStation that was labeled as
live cattle 12/92 (page 44) and showed some price bars in the middle to upper ninety cent range. As far as I
know, live cattle have never traded at this price level. The next page (45) shows a chart with the same
labeling, live cattle 12/92, with some price bars below the 40 cent level! This may have something to do
with the continuous contracts and how they are labeled and displayed, but it still looks a bit strange.
As a stock trading system Krutsinger advises using Wells Wilder's Parabolic as opposed to a buy and hold
strategy. Buying 1000 shares of IBM on January 31, 1962 and holding them to March 19, 1993, he says,
would have resulted in a profit of $25,000+ (page 102). Whether TradeStation took into account dividend
payouts and stock splits during those years isn't mentioned, but if it didn't I would wonder about the
accuracy of the profit number. On the other hand, Parabolic made $138,000+ during the same period (page
103). However, it needed 126 total trades to do this. Forgetting for a minute that the Parabolic System
wasn't even available until 1978, when you take into account the commissions generated by trading 1000
share blocks of stock (no discount brokers for much of the period), the dividends paid out while short, and
the taxes paid along the way, I'm quite sure that the system profits would have been a lot lower than those
stated. Considering all of the above, I doubt that the Parabolic was all that much better than buy and hold,
at least not to the degree suggested in the book. I don't mean to nitpick, but it's this kind of fast and loose
figuring that tends to make you question some of the other examples in the book.
Most of the other systems consist of moving average crossovers, channel breakouts and oscillators in
various combinations and time frames. Not a few require that you have access to intraday data for testing
purposes, which further reduces their usefulness. As expected, there are plenty of plugs for SystemWriter,
TradeStation and Robbins Trading Co., along with an offer by the author to do coding for you for $100 an
hour with, apparently, a four hour minimum.
On the other hand, Krutsinger does present an S&P 500 day trading method that is very innovative, simple
to trade and reasonably profitable. In five years trading (1/4/88 to 12/31/92) it generated $77,000+ after
commissions, averaging about $15,400 a year. Being somewhat skeptical, I checked the trades manually
using actual market data and actually did a bit better, netting almost $80,000 after commissions. Looking at
more recent system performance reveals that it broke even in 1993 and is up $11,000+ through July
31,1994. A minor problem with the system is that it requires the opening price. Now that the clack of
mental arthritics who run the Merc have seen fit to implement "stock around the clock", the opening price,
at least as published in the financial papers, has become somewhat meaningless. (Perhaps they'll finally rest
easy when we can all trade pork bellies at 3 o'clock in the morning, but I'm not holding my breath). In
addition to the above system, there are details of many others which could either be traded as is or modified
to conform to a person's own risk level. Indeed, the next to last chapter contains 16 trading systems that
Krutsinger suggests can be used as the basis for developing your own methods for trading the markets. Part
of his purpose here is to stimulate the reader's thinking on the subject.
Perhaps I've been too hard on the author. Krutsinger's forte is designing and testing trading systems, not
writing, and the fact that the book doesn't come across well speaks volumes about the lack of editorial help
he received from Probus Publishing. His candor is certainly refreshing. Toward the end of the book he
admits that when he started in the commodities markets he weighed 180 pounds and had a full head of hair.
Now, he says, he weighs well over 250 pounds, is almost bald, and has dark brown circles under his eyes.
He attributes his present condition to having watched every tick in the markets since 1976. As a result, he
explains, he now thinks up mechanical trading systems and has other people trade them for him. He also
confesses that what he has put into the book are his best "old" systems. The newer, presumably better
systems he keeps and trades for himself. Fair enough.
I wouldn't recommend this book for someone just starting out in the markets. A better idea would be to ante
up a few extra bucks and get a copy of "Technical Traders Guide to Computer Analysis of the Futures
Market' by Lucas and LeBeau. This book does a better job of explaining the elements of trading system
design. Apparently I'm not alone in this view because this particular book is cited by Krutsinger on the
acknowledgments page of his own book. For more experienced traders, "The Trading System ToolKit"
book may be worth a look, particularly if they are running SystemWriter or TradeStation. There are some
worthwhile ideas in this book, but you may have to dig a bit to find them.
A Strongly Dissenting Voice - Michel A. Gourbault
Re: George Bashar's opinion and apparently the Editor's decision - (August 1994 issue of CTCN) - that no
mention should be made of Swing Catcher or any other Trend Index product or service in subsequent issues
of CTCN. That the System Designer himself does not mention these products, it seems only natural
considering the stated purposes of this informal publication ... but it would be grossly unfair to purely and
simply prohibit any mention of the Trend Index products by name. First of all, because personally I would
want to share the results of my experiments using Swing Catcher in conjunction with Candlestick
Forecaster - a very short term trading system which nobody, it seems, has ever mentioned specifically in
this Forum after I have tested both systems together over a period of at least one or two months.
The second reason why I feel it would be grossly unfair to all of us, readers and users of your software, is
that, as you said yourself issue after issue, Swing Catcher, because of its time consuming nature, is no
longer being tested and evaluated by Futures Truth (whatever one might think of the objectivity and
thoroughness or methodology of these people).
Third reason: maybe some of us have devised, or are testing, novel, unusual ways of making trading with
the help of this system even more effective. Isn't it something that the other users, and yourself surely,
Dave, would be interested in knowing about?
Really, Mr. Editor, I would ask you to reconsider your decision. It is only fair that your system and services
be evaluated and referred to, by "us", the very same way as any other system or product designed for
traders. That's my opinion, and I believe it is as good and valid as George Bashar's (no offense meant,
George). I do not find his reasons for an eventual ban convincing. Of course, Dave, as originator and editor
of this 'Traders Forum', it is your prerogative to set such rules as you see fit; however, as a new user of
Swing Catcher, I am more interested in making the most of this as-yet unfamiliar trading tool - with your
help and other users' - than in purchasing and trying the 'hoftest' system on the market.
Together, we represent a broad spectrum of experience (from the novice to the seasoned trader) and some
of us are less experienced with the use of continuous-contract-based systems than others. I am also very
interested in hearing from someone who may already have tried what I have in mind with Candlestick
Forecaster - like broker Gerd Gwiss (CTCN May 1993 Issue) of Vienna, Austria. (Are you still around,
Gerd?). Many of us, I am sure, are duplicating on their own research, or experiments, that have already
been done. Isn't what this publication is about not just expressing opinions, but sharing the results of
Futures Truth - Kent Calhoun
John Hill is a valuable asset to the futures industry. There are few things in life John and I disagree, but the
issue raised by Gerald Greenwald is one of them. Club 3000 has refused to publish my letters raising this
issue of professional ethics.
Fact: If a person buys a stolen TV at a garage sale and it is later discovered in the purchaser's home, the
purchaser is arrested and taken to jail despite producing a bill of purchase. This is called receipt of stolen
property, and is often a felony.
Most system purchasers must sign a non-disclosure document prohibiting them from selling, copying, and
transferring any of the system's information to others in any medium. This is a legal contract and also
protected by United States copyright infringement law. Those who violate this law may be sentenced to
five years imprisonment and a $250,000 fine per offense.
Fact: The US Justice Department successfully prosecuted Japanese computer manufacturers for stealing
IBM "trade secrets," and awarded IBM a substantial financial settlement. The US Justice Department ruled
the architecture of computer and computer component designs belonged to IBM, just like the lyrics and
music of a copyrighted song belongs to its author. Does the original design of a trading system belong
solely to the developer?
When Futures Truth receives an unsolicited trading system, like Greenwald's, should they be held
accountable for deriving income from the developer's violated non-disclosure agreements? Is this the same
as receipt of stolen property? FT knows most systems are copyright protected, and is more knowledgeable
of this fact than purchasers of stolen goods at a garage sale.
The person who sent the materials to Futures Truth is clearly in violation of copyright infringement, yet
benefits by receiving a Futures Truth trading report. Futures Truth benefits by learning how the -most
successful trading systems are designed and financially. Is a law broken? That is a legal question that could
have with a very expensive answer for FT.
Futures Truth derives money three ways from a developer's trading systems. They sell research reports of
the system's performance, track the system's performance monthly in their Futures Truth publication, and
discuss system structure in video tapes and at FT seminars. Developers receive no direct financial
compensation from Futures Truth, but successful systems benefit from FT ratings via increased sales. FT
ratings raise another problem.
A conflict of interest exists when FT rates their systems, and FT admitting this does not condone it. Should
FT stop publically rating their own systems, and rating vendors' systems without paying for them? These
practices detract from FT's credibility, invite costly litigation, and undermine Hill's noble effortsto bring
mandatory vendor accountability to our industry.
I lost Russell when I Could not convince him optimization is the same for commodities as blackjack. Mr.
Sands did not accept the fact market psychology is different for different markets. Anyone trading without
the best information available from optimization neglects the two most valuable trading tools available, the
personal computer and individual intelligence.
Nameless Numbers and Knowing Beans about Bonds
"Numbers themselves do not have names." Excuse me? What is this called 0. I call this 0 number "zero"
because that is its name! Send Russell $250 for his seminar instead of $2500 and he'll remember its name
real fast. You want to identify a 0, call it by its name or you get nothing, not zero. A number with a name
has a history, just like a person. Consider the zero.
The zero symbolizes life and its cyclical nature, and is the only perfect geometric shape. Arabs believed all
men equal in the eyes of God, and saw their lives as a point on the circle equidistant from God, located in
center. The circle's inner space, the nothingness of existence, was enclosed by a line that defined its
existence, like the body defines and encloses man's spirit. When Leonardo Fibonacci introduced the zero to
Europe, the Roman Numeral System became obsolete because it had no zero.
"Computers do not recognize the difference between "Beans" and "Bonds." My computer recognizes Beans
from Bonds due to the nature of how it tells me to successfully trade those markets.
My English System sold December T-Bonds last Friday at 103-16, today they traded below 100-00.
English is long Nov beans below 5.60, which closed today above 5.80. English system bought and sold
S&P's off the lowest and highest 5 minute intraday vertical bar every day this week. My computer knows.
How Prices Are Determined
Russell has misunderstood the basic nature of how markets trade from one price to another, by buying and
selling pressures! The physical nature of the commodity dictates its price volatility. Corn traders do not
expect S&P price volatility. Agricultural and livestock commodities respond to supply demand
fundamentals, which do not affect financial trading instruments. This partly explains why S&P's trade a
daily range often in excess of $2000, while corn seldom moves over $400 per day.
Each market has its own personality, which is the psychological composite of its traders. Market mass
psychology is based on individual belief systems about what price a market should be and this is different
for corn and S&P's. Traders' convictions are expressed by the dollars they willingly commit to the markets
and this determines price. Does a corn trader expect the same risk as an S&P trader? No. Markets are as
different as the individuals that trade them, how else could it be?
Judging a system invalid because the same parameters are not profitable for every market is ludicrous. It
doesn't make sense any more than stating all S&P traders must ware the same shoe size! The key to
understanding the real names behind commodity prices is to recognize Joe Smith is buying x contracts and
Tom Jones is selling 2x contracts at specific prices, and this determines the closing price today.
If Russell sits down to play blackjack with $10,000 and is paid 2 times his same bet and is right 50% of the
time, there is a 0.08 probability he will still lose all his money. Optimization tells him what the expected
payoff should be and percent wins at the blackjack table and in commodity trading casino.
I may never make $400 million like Richard Dennis, but I try not to confuse wisdom and intelligence with
material gain. A brokerage president asked me, "if you are so smart how come you are not rich?" He had
been a losing trader before my systems made him over $240,000 and I was stunned by the question. "If you
are so rich, how come you are not smart," I responded.
While Mr. Sands was winning trophies larger than Jake Bernstein, I traded $105,000 into $3.62 million and
sent the clients' names, addresses and phones numbers to the CFTC on May 16, 1980. The date is the one
year anniversary of buying 60 gold contracts.
This fact doesn't qualify me to be a commodity trading expert, but after 31 years of investing, 27 years of
stock trading, 17 years of commodity trading, 16 years of intense research and spending over $300,000 on
system testing, I have learned optimization is the most valuable trading tool available. I deal in statistically
supported market facts, not opinions.
It is a little known fact that Richard Dennis sent out tests to Turtle applicants. I scored over 90% and
wanted to know and discuss the answers I missed, and why I wasn't selected. According to Dennis, he only
selected traders who scored 60% or less. I was told I knew "too much." Apparently in the process of
teaching Turtles, Dennis overlooked a few valuable lessons himself.
I do not question anyone's honesty, least of all the wellrespected Russell Sands, but I would like to know
the names of the Turtles who made $100 million last year. Dr. Edmunson, who is a client of mine, had six
figure accounts with four Turtles, and he publically announced at my seminar none of the four were
profitable last year. I would like to see a name list of Turtles, for comparison to my client's actual trading
Optimization a crime? No. A crime is disseminating statistically unsupported market opinions as intelligent
trading knowledge to traders, who may not know the difference. Anyone can have an opinion. Few traders
possess statistically supported trading knowledge. The difference between the two is often the difference
between winning and losing, the optimization difference.
Here Is the international futures trading activity we discussed over the phone last weekend. These contracts
represent the most liquid overseas contracts. Volume figures are average daily '93 as reported by each
exchange. The "Start Date" is the first day of CSI data files and usually is close to the initial trading day of
Exchanae Contract Volume Start Date CSI #
LIFFE 3 mo. Sterling 47,000 10/29/82 173
3 mo. EuroMark 85,000 4/20/89 182
3 mo. EumSwiss 7,000 2f7lgl 155
3 mo. EuroL!ra 8,000 5/12/92 179
FTSE 100 Index* 15,000 5/3/84 209
Long Gift 57,000 11/13/82 174
German Govl Bond* 99,000 9/29188 181
Italian Govl Bond 38,000 9/19/91 284
DTB DAX Index* 16,000 1 1/23/90 131
Long Term Bund' 36,000 11/23/90 132
Medium Term Bund 20,000 10/4191 288
MATIF CAC-40 Index* 22,000 3/l/89 079
Long Term Notional Bond* 147,000 1/28/93 328
3 mo. PIBOR 47,000 3/l/89 078
TIFFE 3 ma. EuroYen 87,000 6/30/89 070
TSE 1 0 yr. Japanese Govl Bond 59,000 414190 158
OSE Nikkei Stock Index* 48,000 9/3/88 248
SFE 90 day Bank Bills 26,000 8/3/84 228
10 yr. T-Bonds* 19,000 1/11/65225
3 yr. T-Bonds 29,000 5119/88231
LME High Grade AJuminum 37,000 6111/87 092
HKFE Hang Seng Index* 14,000 12J31/86 119
*already included in Trendx International
In addition to adding the above contracts that are not alread-) included in the Trendx International data
files, I recommend removing the SFE All Ordinaries Index #230 and the LIFFE Japanese Bonds #180.
These contracts oniy average about 2,000 contracts daily. The new intemational portfolio would be
composed of a broad cross section of exchanges with 22 liquid futures contracts. I think that most traders
would prefer a database of continuous contracts and the ability to maintain the back adjusted continuous
format during rollovers just as you provide your regular Trendx customers.
I ask that you please do us all a favor by making a contribution to the next issue of CTCN. Don't worry
about your submission not being interesting or useful to Members...rarely is that true. Usually, most all
contributions/submissions/articles are quite interesting and valuable to other traders, but the author usually
does not realize the actual value of his knowledge or experiences.
Futures Truth Reports
The Aug/Sept issue of Futures Truth's Master Performance Table is still available. Contact Commodity
Traders Club News so you can get it at the discounted price of only $25.00.
New systems that were covered are Jurrasic Trading's Raptor and Bear...two systems designed to trade the
S&P on a short term basis. Bear has not been tracked long enough to be ranked.
The Best Performing Systems
The Futures Truth Top 10 systems for past 12 months are: FutureSoft's Benchmark +162.2%, Future
Truth's Universal LT +81.8%, Joseph Stowell's ROCM +81.1%, Joseph Stowell's HAT +79.9%, Arnold's
Pattern Probability +69.0%, Welles Wilder's Volatility +52.0, Taurus' Grand Cayman +50.9, PWA Future's
DCSII +38.1%, Michael Miller's T-REX +34.6%, Vilar Kelly's Daycare +33.0%
The Futures Truth Top Ten systems since release date, based on ranking by annual combined percent
returns on required capital (3 X margin) are: Michael Miller's T-Rex +143.7%, FutureSoft's Benchmark
+125.6%, Joseph Stowell's HAT +101.4%, Futures Truth's Universal LT +81.8%, Arnold's Pattern
Probability +81.5%, Staman's Black or White +81.2%, Taurus' Grand Cayman System +81.0%, Joseph
Stowell's ROCM +78.0%, Dave Fox's Dollar Trader +77.8%, Hughes' S&P Pattern Daytrade +65.3%
Note: Trend Index Trading Co. Swing Catcher System was ranked for the period 1990 thru 1-94. It was in
fact ranked as the 5th best system since release date, with a 78% return, the last time it was rated by Futures
Daily Fax Service: Receive precise entries/exits/stops on 30 commodities. No day trades; each winning
trade lasts several days to months. From 2/1/94-6/1/94, the profit trading only one contract for each signal
is more than $50,000. Introductory two month trial is $2,000. Call 305-251-6762 or 800-392-2664, or FAX
305-254-3272; or mail to Einstein Investments and Trading, Ltd., PO Box 560637, Miami, FL
The reproduction, copying or publication of any part of this work beyond that permitted by Section 107 or
108 of the United States Copyright Act, and also World-Wide International Treaty Provisions, is unlawful.
ALL RIGHTS RESERVED. Written permission from the Publisher/Editor is required for reproduction in
any form and may be withdrawn at any time.
Commodity Traders Club News (CTCN) is a 'Clearing House' or 'Information Exchange' for members. We
do not, and we have not, verified the accuracy of the mathematics or numbers published herein, or the
accuracy of the comments and remarks made by the authors. In the event the contributor does not include
article headlines and sub-headers they are subsequently written and added to the articles by the Editor,
using verbiage the Editor believes highlights important points the contributor is making.
Subscription to Commodity Traders Club News...'Your Guide To Profitable Trading and How To Save
Money Along The Way' is $80.00 for 1-year (12-issues)...includes FREE First Class Mail within USA &
Canada (add $17 Overseas Air Mail). Publisher: Trend Index Trading Co., 2809 E. Hamilton Ave. #117,
Eau Claire, WI. 54701 USA. Phone 715-8331515. FAX 715-8338040. Editor: Dave Green. (There's high
risk in futures trading)
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