Are you prepared to take "the road less travelled".
If you're not interested, or don't have the capacity for hard work and patience - don't bother.
Approximately 100 topics cover 5 broadly related subjects. Items common to multiple subjects are included in the topic in which they have most weight, and linked to from topics with less weight. Appreciation of topics 1-5 needs awareness of topics 95-100. Each area has equal weight. Presentation does not lend itself to a straight-read-through, start to finish. To do so would require repetition of common items, double the size of the site, and sacrifice significance of inter-relationships. Paradoxically, best first-time through is to browse each page without following the links.
The nuts and bolts of trading systems - no jargon - no buzzwords - no psycho babble.
Forensic expertise is based upon an understanding of every aspect of a chosen discipline.
Trading expertise will only come from a forensic understanding of each component of trading.
The simplest introduction is to say what it's not. It's not a (a) how-to-trade handbook (b) magic formula (c) magic bullet or even (d) another method. The opposite. It's an examination of the critical components.
Trading is a dynamic-complex-compound activity. There are many books on trading. There are also many quality text books, that deal far better, with each separate component as a topic in its own right. We reduce "trading" to its component parts, identify relationships that exist between scientific principles and other recognised disciplines, and how they are the foundations of Futures Trading. Each topic is dealt with briefly: enough to provoke an interest in pursuing detailed investigation into the better texts found elsewhere. The number of possible combinations of components, create many different ways to trade. It will take a lifetime to try them all. This site is vast. Almost the size of a book itself. Which should indicate why a single book on trading can never do justice to the subject.
Provide a guide to the hidden world of trading, ask the right questions, seek answers. examine the building blocks of trading generally and the SFE SPI200 in particular, providing hard facts where possible, with supporting authorities.
This site .. arose from questions. Questions we couldn't get answers to.
Which raised further questions as to the difficulties of obtaining answers to simple questions. A wall of silence. Much of the site represents answers to many questions.
questions and decision making - 1
if you dont ask the right question you will never get the right answer
Start with the origins of the search for the holy grail - what it really is.
Parzival - Quest of The Grail Knight
source - origins of the Legends of the grail and the Fisher King from
University of Idaho
Chrétien de Troyes's unfinished work Percivale or Conte de Graal (c.1190). Chretien's story inspired one of the greatest romances of the Middle Ages, Wolfram von Eschenbach's Parzival (1200-1210). As in Chretien's story, Wolfram's Parzival is initially naive and foolish, having been sheltered from the dangers of the chivalric world by his mother. In both versions Percivale/Parzival is the guest of the wounded king whose lands have become barren and desolate.
Parzival/Parsifal/Perceval/Percivale/Le Conte du Graal
Parzival witnesses the Grail procession at the Grail Castle of the wounded Fisher King. Having been taught it is impolite to ask too many questions, he fails to ask the significance of what he sees. This failure is disastrous because asking the question "whom does the grail serve" would have saved the king and consequently the grail .. etc
Parzival spends five years wandering in search of answers, yet they are far and few between. He eventually learns the full story of the wounding of the Fisher King and the malaise affecting his realm. Returning to the Grail Castle he does ask the question, and frees the king of his suffering and the land of its desolation.
source - The Quest Of The Grail Knight Katherine Paterson's revision of Wolfram van Eschenbach's "Parzival"
Parzival leaves the castle, to begin his quest ........ read ... to begin trading ??
The gate was open and the drawbridge down. He galloped across, but when he got to the end of the drawbridge, someone yanked the cable so abruptly that Parzival was nearly thrown, horse and all, into the moat. Parzival turned back to see who had done this to him. There standing in the open gateway was the page who had pulled the cable, shaking his fist at Parzival. "May God damn the light that falls upon your path!" the boy cried. "You fool! You wretched fool! Why didn't you ask the question?".
"What do you mean? .. Question?" Parzival shouted back at the page. "What question?"
search for answers
The quest was never a search for a chalice, but the search for answers to many questions. The moral of the story. Return to basics, seek answers, ask the right questions. Question everything. Accept nothing at face value. Just because everyone says it's so doesn't make it so. Keep an open mind. Put all possibilities back on the table. Read the contents of the site first. Then make up your own mind.
compare a narrative description of the legend tailored to trading by local Chris Tate at
compare the different inferences.
The above extract, argues that the correct answer is obtained only when the right question is asked.
Tate's story takes an allegorical path where King Arthur believes finding the grail will be the answer to Camelot's inner psychological despair. see Edison's 1001 questions below.
search for questions
Robert Whitlow. "The Trial" 2001. It is necessary to review and identify every factual issue that is important. We are not as interested in answers as making sure we know all the questions.
the big question
Probably the biggest question of all - what business are you in.
Many fail to ask the question.
Are you in the business of making money, or, in the business of being right.
Use of charts, technical analysis, indicators and predictive tools, is the "business of being right".
The Hollywood case study. In the mid 20th century Hollywood was dominated by the major studios. They went broke when television arrived, failing to realise they were in the entertainment business, not the blockbuster movie making business.
General Motors USA. The largest manufacturer of SUV's. Sometime in the future a case study will probably conclude that GM made the fatal mistake of thinking they were in the SUV business, rather than the transport business.
nb. comment published 2005. fulfilled 2008.
1000 questions - or - what was it like to fail 1000 times
Questioned about his 1000 failed experiments leading to his invention of the electric light bulb Thomas Edison was asked "what was it like to fail a thousand times". He replied he hadn't failed. He had "discovered a thousand ways it didnt work". Each experiment is a question. Does this combination work?. Question 1001 was finally the correct one.
The section on training has one local futures data vendor with 100% customer turnover. The introduction section 2 notes 90% of all futures traders fail. A search of the web discovers the failure rate is nearer 95%. Almost 98% of material on the web are "answers" to just "one" question. Each new answer in effect proving the previous one wrong. Each new method defines its predecessor.
Two banners observed at FutureSource.com January 2005
(a) "the most advanced trading system available" and (b) "the newest way to trade"
Heck, they've been around for 15 years. These banners contradict all that has gone before.
Imagine Einstein coming out with a new and improved formula for e = mc^2 every year.
Caption on SFE data-CD March 2005 "a new way to trade the futures market" really?
decision making (2) - freedom to think, freedom to act
Once upon a time .. management and executive salary evaluations were conducted by consultants. Weightings were assigned to (a)
the responsilbility of the position and (b) the level of performance. Rankings were assigned based on whether the position was required to make decisions, given the freedom to think, and the authority to act. Lower weighting for shared responsibility, lower still for no responsibility, where the position holder received direction from others.
decision making (3) - straightjacket versus freedom
Another view of the "mechanical system". Or the preference for some-one else to make decisions.
Once upon a time .. a school teacher told us this story .. 80% of the people are like sheep, preferring a paddock with a fence around it so they know what they can, and cannot do. What the rules are. They dislike freedom. They need someone to set the rules. The other 20% cannot stand confinement. They need open space, the freedom to move, the freedom to think, and the freedom to act. They are decision makers. Remove the fence from around the 80% and they become lost. Place a fence around the 20% and they become lost.
More Pareto's principle.
If you search long enough don't be too surprised to discover
80% of the methods offered are based on technical analysis and charting.
80% of the searching is for the magic indicator or mechanical system.
80%+ of new traders use technical analysis and charting.
80%+ of new traders fail.
80%+ of the total daily volume are stops going off.
a parable - miyagi - the ways of the master
Daniel, an innocent who migrates to the big city with his mother, is set upon by a group of bullies, who are students of the local martial arts school. Miyagi, the quiet, zen-like master, in the guise of an elderly unassuming Japanese gardener, steps from the shadows and single-handedly saves Daniel. Daniel asks Miyagi to teach him the ways of the master. Miyagi agrees providing Daniel does everything asked of him, without question. Agreeing, Daniel turns up at Miyagi's each morning. The first week Miyagi puts Daniel to work painting his fence. Brush up, brush down. Brush up, brush down. On completion of each coat, starts over again. The second week Daniel has to polish and wax Miyagi's collection of vintage cars. Wax on, wax off, wipe on, wipe off, wipe on, wipe off. On completion of the last car, he starts over, again. Wipe on, wipe off. End of the second week, back to the fence. Wanting instant mastery, Daniel eventually asks Miyagi when is he going to begin to teach him the ways of the master.
the above, re-cast in a trading setting, reads as follows
Daniel, a novice trader migrates to the futures market, where he is promptly cleaned out by the merciless market. Uncertain as to why, he seeks the assistance of Miyagi a quiet unassuming master trader. Miyagi puts him to work watching every trade, every tick, every sale. Every bid, ask, bid volume, ask volume, trade volume. Writing them all down. Page after page. Week after week. Reading the market. Wax on, wax off, wipe on, wipe off, brush up, brush down. Impatient for instant success, Daniel eventually asks Miyagi when is he going to begin to teach him the ways of the master.
compare the holy grail above -
Parzival is naive and foolish, having been sheltered from the dangers of the chivalric world by his mother.
the riddle of the needle in the haystack
The topics in this web site fall into into two categories. Hard information, and soft information.
The soft topics, plus references, are included as supporting authorities for the hard topics.
Both hard and soft topics are intentionally intermingled. Dont want to make it too easy.
For those who wish to jump straight to it, without the hard work, here's a hint
Start with the topic of what is a "commercial trade". Then examine closely the topic on "fragmentation".
30%+ of all trades, are broken parts of a larger trade. To assess the true extent of commercial trading it is necessary to re-assemble broken trades.
The solution to this is in the answers provided here. Search as you may, you won't find it anywhere else.
Extract from www.wallstreetandtech.com - Seven trends for 2006.
As model-based trading continues to fragment larger orders and increase data volume, peak market data loads increased almost five fold this year (from 25,000 ticks per second to 120,000 tps). Overwhelming all but the most technically sophisticated and will force lagging firms to rebuild their market data infrastructure.
Help your fellow travellers
If you read these papers. And find a topic helpful. Help your fellow travellers. Let us know. Consider those who have preceded you. They have in turn helped you. In the long run, the continued availability of this site relies on feedback. Absence of feedback will result in our loss of interest and dis-continuation of the site. If you don't let us know, the benefit you obtain will be at the expense of future readers. Those who might also find a benefit here.
original aims were
This material has been gathered from dealing with many hundreds of specalist trading clients. Most had professional backgrounds. Medicine, Law, Finance, Engineering. A common characteristic to stand out was a determination to master it.
We became intrigued that so many professionals experienced difficulty in trading the SPI. If disciplined professionals had difficulties, non-professionals must also have difficulty. To fully understand the problems and provide appropriate solutions, we began trading ourselves. After 14 years, having arrived at these understandings, we searched the web, could not find any material remotely like it. The concepts are producing success rates of 90%. Our most successful client frequently trades in 100 lots or more with better than 90% success rate. Client reference and phone contact is available only on request.
best place to hide something is out in the open
If Alan Greenspan told me he was going to increase interest rates next week, I then stood in front of a conference of 2000 technical analysts and told them interest rates would be increased next week, not one would listen. There is very little risk of large numbers of SPI traders simultaneously using this material. So I am not giving a lot away.
parables analogies and allegories
Analogies are used to present a neutral view.
source Wikipedia encyclopedia
A parable is a story that is told to illustrate an idea, with the inherent probability of realism, taking place in a familiar setting .. they often involve a character facing a dilemma, or making a questionable decision and then suffering the consequences of that choice. Though not every moral narrative is a parable, many fairy tales would be viewed as extended parables, except for their magical settings. Though parables often have a strong prescriptive subtext, suggesting how a person should behave or believe, many parables simply explore a concept from a neutral point of view. Aside from providing guidance and suggestions for proper action, parables offer a metaphorical language which allows people to discuss difficult or complex ideas more easily. Recently there has been some interest in the field of contemporary parable, exploring how modern stories can be used as parables in our current culture. For a mid-19th century contemporary parable, see the parable of the broken window that exposes a fallacy in economic thinking.
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last updated May 2005
reviewed January 2010