DugDug

"Why on earth would anyone buy during a stock market crash and how come liquidity doesn't just cease?" In answer to your question - buyers include - market makers, long volatility option traders, short covers, bargin hunters, old orders, new orders, fools, smart people, value investors, people averaging in..... you name it. And really when you think about it - without hindsight ...... How do you know its a crash? also when you think about it - the liquidity does not necessarily dry up (though it can) its just that people will choose to exchange at price levels that are lower.

From the CME website INITIAL MAINTENENCE S&P 500 (SP)-S&P 500 FUTURES (SP) Spec $28,125 $22,500 Hedge/Member $22,500 $22,500 S&P 500 (SP)-E-MINI S&P 500 FUTURES (ES) Spec $5,625 $4,500 Hedge/Member $4,500 $4,500 So I am not sure where smaller margins of $500 comes from. Also I think they are largely looking to pick on FX for a few reasons .... 1) there has been phenomenal growth in the retail FX market in recent years - this always worries people due to bubbles, regulation not keeping up with progress and companies being able to over things like 500 x leverage. 2) its not on an exchange - one of the key ideas is that they are trying to push a lot of OTC business onto exchanges including the things that a lot of the institutions do. 3) FX retail is an easy target. However I would not forget that some of the big banks and institutions are getting close to being massively overhauled as well - its just they have better lobbyists to fight or at least delay and better influence the politicians.

thanks thalestrader - the exact reason why I don't think they should be privately owned. I believe they actually do very little for what amounts to a virtual monopoly (it is slightly different these days as they have opened themselves up to being public and hence competition) but I have always believed that its a paradoxical situation where by we have the best people to regulate the markets ie; the exchanges, also under an obligation to maximise their shareholders profits - hellloooo - potential for conflicts. They take no risk as they are not a market maker, the members and insurance companies are the ones who bail out defaults and are largely protected by government regulation and barriers to entry (as the dark pools and FX are now finding out)....what better type of institution to be operated by the government - yet administered by private enterprise under a different compensation scheme to profit in order to work as a public utility for the good of the participants. Funny - just like the old days when brokers collectively owned it. I apologise for the rant.....its a bug bear of mine, and its Friday afternoon. I took my own advice from another thread - made some money and then went to a good old fashioned long lunch.

yes mother - I am coming now, I'm sorry I forgot your tea.... no I was not talking to anyone, there is no one else here..... arrrghghgghh

There is a big difference between trading/leverage regulation and anti-money laundering (AML) anti terrorism regulation and the tax man. The AML and tax man are going to increase regulations regardless - this is what makes opening accounts, closing accounts, freezing accounts a pain. This is different to the leverage regulation -the main killer for a lot of retail traders. (larger retail traders will get around this most likely as they can be registered as companies or have enough money to qualify as non retail, or will have no problems shifting to offshore) AML and tax are not going to go away - and are a different animal. This is always moving to a more globally focused coverage. My first thoughts are that it will generally only hurt those companies that are operating on the edge which will then lead to more concentration into the existing bigger brokers, which means less competition which generally leads to higher costs..... never good for anyone. Most of the bigger more established companies already properly focus on the regulations and any costs to them will be marginal - it will hurt the smaller or more lax firms (might be a good thing). Clearly however the growth of the retail FX broking firms in recent years have been the driving force of reducing costs and spreads.....getting rid of competition is never good. However - If it pushes people onto the exchange futures... I am with Thalestrader....that works for me, and I dont necessarily see it as such a bad thing. (I find it hard to sympathise when people complain about the costs and the spreads as they are pretty good.) They will probably introduce minis.They have said previously they are worried about the growth of the largely unregulated retail FX market and at least they may head off possible future problems. Most retail people probably play with too much leverage. But a 10:1 restriction is probably too harsh. NET RESULT: regulators are missing the point (but are at least trying to head off an issue in the future), regulation is here to stay and going to increase, competition decreases, costs increase (after massive improvements in recent years), US continues to decline in world dominance of markets and trading. hmmmm.......not much really changing then. (I actually don't think the exchanges should ever have been left to run at a profit as private companies - but thats a whole other issue. ) The bigger worry is Wall street not being able to run prop desks.... that is more likely to push up costs and reduce leverage and move people off shore of the US.

thanks fx girl.... I really have no idea why i am jumping in early. "are you just excited to get in (ie., this is fun)," - possibly, - they are usually called boredom trades for a reason. But I dont find it fun, I treat this as a business so the answer is NO " or are you afraid you'll miss out if you don't jump in," MOST LIKELY - I have been picking the moves really well (except corn hurt me the other day and that was a position I built into over a few weeks), so its kind of along the lines of what I thought.... and you repeated - I just need to stop for a while.....walk away altogether - a few deep breaths wont cut it. thanks. Maybe I will take a few weeks off. "or are you at a place where you feel you rule the market? "- ha-ha. I have been doing this long enough that I am a great believer that no one rules the market. so NO Most of the answers are simple - its working the reasons for why we do things that is the tough part.

Here is an interesting related dilemma that I seem to have developed lately. Its driving me crazy and while I have my own possible solution.... stop trading all together for a while and refresh. I was wondering if FX girl has some other suggestions for this particular ailment. My problem - I am actually picking the market really well. Bearish equities, bullish bonds - not touching commodities. however I seem to be going to early. ie; rather than being gun shy I am being trigger happy....and hence getting chopped a little too much (the obvious reversal advice from just do it to just stop doing it might be all its needed) however I would be interested in what others do to curb this horrible horrible affliction.

Well worth adding the Soros theory of Relexivity - "The Alchemy of finance" Very topical in recent years - however while it is certainly not typical or used by day traders, some of the general ideas can be applied. This will be a very interesting thread.

To me it looks interesting only from the point of view that its where a lot of other people may not be looking. However it seems to me to be a combination of a few other ideas - buying a break of an ABC/ross hook in the 5th wave using elliot wave theory. ie; waiting for a pullback, then going with a continuation pattern of the main trend after that pullback. Unless it has a really really high percentage of winners it seems to me that its not a strategy that leads to running positions. (which is were the best money is made) Given it requires "strict rules" then I figure there are better ideas around that I would prefer to apply strict and uncomplicated rules on. But if it works for others - good luck to them.

the show was a comedy talk show in the UK called IQ - I think it was a repeat - it was not a serious documentary

Midknight - to help strengthen your belief (as I also sometimes get those feeling to - comes from being a market maker in my early days I think) George Soros - always used to remind himself that he was fallible - that he could and most likely would be wrong and would constantly remind himself, check himself and question if he was - and look at what a success he was. When it comes to picking the tops and bottoms I think about it this way - if the odds of you picking the tops or bottoms are say 1 hundred to one, then wouldn't the odds of the current trend continuing be the inverse of that. Helps give me some patience.

JBWTRADER - "I believe too many place too much emphasis on psychology in trading especially when no edge has been really found in the first place." very good point. you have to put the cart before the horse as they say, and practising good habits for trading will not do you much good if over the long run you have no positive PL expectancy. ie; no edge. Didn't one of the market Wizards sum it up - "we all get what we want out of the markets"

No offence FX girl intended - but I just had a laugh at reading this as my girlfriend and I just watched a comedy show about the difference between men and women. Most of the blokes said just do it, you had a lot of writing about dialogue, talking etc. All the same thing in the end result.....except most guys are are bit more blunt. well done rxs

CSI data - unfair advantage offers this - but its not cheap. Ultimately you should use excel and build your own as there are many ways to do it. I dont know of any indicators that do it (I am not very good in this area though) Plus how in the hell do you expect to be able to build a continuous contract without a data feed of some sort.....???? randomly generated numbers.

Ultimately - we are responsible for our own work, however I would say that definitely some people - be they traders or therapists - are better at others in getting to the crux of a problem AND then being able to explain why and how to fix it. (I myself find that I need to improve my descriptions of things when writing) So given that a therapist may be good if they are good at solving a problem, whereas a trader may actually be terrible at this element of it even though they have the experience and mean well. The best experience is your own.....and hard work. secondly...."Many of the issues faced by traders that are pparently 'psychological' , really have no psychological solutions at all" I think the original bet for the turtle trading experiment shows this to be false. They were given the same rules, opportunities etc. What caused some to follow the rules and succeed and the others to not follow the rules. As I could tell it was only down to the psyc reasons? If so then there are plenty of tricks/tips that are possible to do to improve the mental thoughts and habits to follow the rules. (testing, keeping journals, making plans, research, regular holidays, scaling down trades when on a loosing streak) Most of the success of people in all walks of life, but also in all forms or trading can be defined by their habits and thought processes. It always reminds me of a set of questions a few of us used to ask..... does an idiot/fool know they are an idiot? How do you incentivise someone who is inherently lazy and just will not do the work required - even if they have certain natural talents?

reminds me of an old saying "The first step in a 1000 mile journey is the hardest" Try and work out WHY you have a fear. If its just about stepping into the unknown, then there is no other answer but to just jump and pull the trigger. If its about the fear of loosing. Then you need to understand the probabilities behind the strategy and remind your self that losses ARE inevitable. As a suggestion just buy and sell a few times on something liquid, whereby you will pay a little bit of brokerage, and cross the spread - take a small loss and just get into the vibe of the thing ( reference The Castle - an Australian movie from about 8 years ago)

A bit harsh JohnJohn1hew???? I thought the point of a forum was to seek out the help of others for those skills you may not have? you are right about people lying to themselves - Not everyone is able to help themselves - hence the need for psychologists. Imagine if everybody tried to do home surgery or medical self diagnosis? I guess it would fix the health budgets of governments.

i only have a rudimentary idea of this, but thought this was interesting.... I have no idea where to place point one yet (??) , and not sure if 4 has completed (???) but the AUD/USD daily chart looks interesting?

All of the above plus they go nuts themselves they were nuts before hand and any sort of forum feedback further hurts the self esteem. or possibly an open forum is not the best place for any sort of proper therapy and they come to the realisation that if they really are trying to help then its probably unethical/improper to be posting..... particularly if they are professional and searching for clients or have some valid ideas to pass on. Selling professional services such as these I feel are very different to offering a trading system or whiz bang idea.

thanks Kiwi - I wish I had the Bob Fulks article when we did it - might have saved some time. The consensus adjustment is an interesting one, as I assume you are talking about trying to work out a fair adjustment value - not just the difference in close prices on the day of the adjustment. (If this is the case) it makes sense to add a bit of discretion - do you do this everytime there is a roll when building continuous contracts from the past - or only on the ones AS you are building going forward? (hope that makes sense) Also I would have thought the most accurate adjustment going forward would be one whereby when you decide to roll the actual price differentials between the last trades (or the bid/ask) as if you actually did the trade would be preferable?

I also managed to stumble across this today from another forum. Note the second paragraph which mentions proportional adjusting.... "Futures are back adjusted correctly in a simple arithmetic fashion, in that the spread is removed during the splicing. So the entire data series is adjusted up or down so that the P&L is correct when holding a position over a long period of time, and over many rolls. It is OK in this case for the data to go negative. If you adjust your futures data proportionally in order to avoid negative prices, you are changing the actual P&L amounts for longer term trades. And in addition the early date trades will be less profitable than actual due to the compression of the price data. This is the incorrect way to back adjust futures data. "

Blow fish - even the ones who are not classified as true trend traders and are not systematic do much the same thing. While maybe not a wizard he is certainly the master - Soros swings for the big moves. Buffett - much the same. There is something in that for all of us.

good .....read, all this, understand what it is all about, then ask specific questions, as otherwise you will get a lot of repetitive information without learning anything new if you dont understand the basics. Knowing a little about rollovers, why and how etc is a start. BUT it is not going to actually build a continuous contract. To build a continuous contract, you basically need to back adjust all the previous months data to eliminate the backwardation and contago and treat the data as though it was one continuous contract. This will mean that a continuous contract when adjusted will not look anything like the past data contracts - but will in fact give a "true" return on what the contract looked like had you rolled - based on the rules set for the adjustments for the rollover - everytime. Just as if you had bought and held a contract. Hint: to understand it use a small section of data in an excel column over a period where a rollover occurs, and adjust the data to see what happens and how it charts to give you a better idea.

"Incidentally improving your % winners is (imho) possibly not an effective use of your energy (if making more money is your objective). Increasing size (obviously within your risk tolerance as calculated by RoR) will always yield far more." - Blowfish 100% agree. I believe that this is an important but often forgotten element of understanding money management and position sizing. - understanding the risk v reward ratios, positive expectation - risk of ruin - knowing how to manipulate the same risk reward parameters to incorporate the personality of the person based on their risk tolerance and risk of ruin. the first is up to the strategy itself and the traders ability to follow it, the second will not change, it is about maths, ONLY the third is entirely up to the trader. This is one of the reasons why when a lot of systematic traders know all the parameters of their system talk about "heat", and that money management and position sizing is the most important element of running a trading book - more so than the entries and exits.