camron systems - methods training education - know-how

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education and training

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The distinctions between

education (obtaining know-how)
training (exercising know-how)
trading (applying know-how)

education

There are few education facilities.
Futures brokers and exchanges provide handbooks that describe futures contracts.
They contain contract specifications, rules, usage, mechanics of buying and selling.
With electronic trading, the terminology is becoming obsolete.
Account application forms include obligatory warnings and disclaimers. It must be hazardous.
The sfe has a short list of 4 member-brokers who provide education seminars. whereas :-
The sfe has a longer list of 36 authorised data vendors. A distinct imbalance.
There is a world of difference between knowing how the game is played, and actually playing the game.

authoritative references
SFE education section at www.sfe.com.au/content/sfe/education/intro.htm
SFE brokers who provide education seminars at www.sfe.com.au/content/sfe/private/seminars.htm
SFE authorised data vendors at www.sfe.com.au/content/sfe/trading/contacts/datavendors.htm

training

The hard part. The practice, practice, practice and more practice.
Where can you practice. There are not a lot of training venues available.
No gymnasiums where you can strap on the gloves, find sparring partners, get a workout.
To most, practice means developing a trading plan or system, and back testing. Offline.
We know of only one broker-system that enables live trading (on the DAX) using a play money account.
It's live. Speed cannot be controlled. If you get it wrong it can't be rewound and reviewed. Still. Not bad.
One software vendor provides a still-frame slide-show recall system
camron systems provide a genuine trade-by-trade replay system.

The SFE now provides a "live" trading simulator at http://sfetradinggame.if5.com/home.aspx

intra-day training helps position trading

Middle and long distance athletes use speed work over short distances to sharpen up.
Similarly, sprinters use distance work for conditioning, and development of stamina.
Same principles apply to to the thoroughbred industry. What makes financial trading any different.

Position trading is a common trading method. Take a view, open a contract, and hold on.
Anything longer than 2 days, is position trading. Medium to long term.

It is said, position trading has two advantages.: • Positions don't need constant monitoring. (really ??); • Allowing traders to engage in normal employment.
Position trading develops a mind-set with a preference for: • putting the entire range for the day in the bag.; • not sitting in front of a screen all day.
That pre-supposes the spi will: • open on the low, rise all day and close on the high, or; • open on the high, fall all day and close on the low
It rarely happens. Frequently it rises one day, falls the next. Taking back gains. Position trading works, so long as, on balance: • rises are greater than falls for long positions; • rises are less than falls for short positions

how to manage position trades to better advantage
The SPI is a carefully controlled and precisely managed market.
It's still not necessary to sit in front of a screen all day. The trading area for the day is known before trading begins. Knowing where the spi is going for the day, position traders can improve results by managing positions on a daily basis. Such a review, conducted at 09:50am, as the market opens. With camron boundary know-how coupled with broker estimates and pre-open guidance, knowing if the target range is reached to the high side, long positions can be exited, with re-entry at a lower price. Similarly if the target range is reached to the low side, exit shorts, with re-entry at a higher price. NB: confidence in this method requires a lot of hours of speed work (replay training) over shorter distances to see it happening.

The SPI is a carefully controlled and precisely managed market. repeat.
At its simplest. .. If holding long .. then .. when broker estimates, together with pre-open boundaries, indicate a down day, it will be a down day. It makes little sense to hold long positions open and give away 15+ points, when they can be closed just inside the high boundary, providing it occurs in the first 2 hours, with an "if-done" re-entry just inside the low boundary which will occur later in the day, with a cancel-if-not-done by 12:00. Vice versa for shorts.

Footnote:
The boundary method is independent of intraday trading. Knowledge of it arose out of intra-day trading. Only short distance athletes know about it.

do it yourself training - why

The futures market is a professional arena, for use by professionals, who are presumed to know what they are doing. Private traders will never be a significant force in the futures market in the forseeable future. While that state of affairs exists there is little incentive to establish quality education facilities in australia. Consequently, for new entrants, it is a "diy" self-learning process. One sfe data vendor has an attrition rate among futures data customers of 100%.

why is this so ? - probable reasons why
Broker-in-house trading and broker-affilliated-hedge-funds comprise 85% of total daily volume. One single broker accounts for 50+% of the total daily spi volume. Or 60% of the 85%. That one broker is not an educator or seminar provider listed in the sfe web-page. Given the vested interest in trading outcomes it is perhaps understandable that vested interests do not offer training facilities. While brokers dominate the market, it is most unlikely they will divulge their "real" trading methods at a seminar. Also unlikely hedge-funds will take on the role of educators.

do it yourself training - how

camron systems offer a three part self-teaching solution to these problems.
(a) These articles providing detailed understanding of elephants in action.
(b) Verifiable methods supporting the conclusions presented here.
(c) Replay systems with the ability to replay any day in slow motion. Repeatedly.

six aspects of education

know how components: The concepts of futures, long, short, margins, drawdowns.; The electronic market - where the game is played; The game - how its played, it changes every day; The large players - with direct influence on the game, who they are, and how they play.; The small players - with no influence on the game, can only react to what the opposition do.; The tools - what they are and how they're used
There is plenty of external literature that deal with the mechanics. ie: futures - what they are, comparisons to options, warrants, and shares etc; trading - day trading, scalping, short term, position, pattern, long term.; the trade - what to do - a 1 page book that says - buy low - sell high.; the psychology and motivational apsects of trading; the tools - there are many - third party software systems.; technical analysis and indicators.

training methods

Training exercise

find your level of competence
Paper trading is not rated very highly by (m)any books on trading.
You need to discover how much the market will give you easily. Your competence zone.

The following exercise will assist in finding your level of competence in reading the market.

Stage 1
Paper trade the SPI based on your techniques, using 1 lot look for 1 point profit.
Only when you have achieved 9 successful trades in a row move to stage 2.

Stage 2
Paper trade the SPI based on your techniques, using 1 lot look for 2 points profit.
Only when you have achieved 9 successful trades in a row move to stage 3.
If you make 9 losses in a row, go back to stage 1.

Stage 3
Paper trade the SPI based on your techniques, using 1 lot look for 3 points profit.
Only when you have achieved 9 successful trades in a row move to stage 4.
If you make 9 losses in a row, go back to stage 2.

Stage 4
Paper trade the SPI based on your techniques, using 2 lots look for 1 point profit.
Only when you have achieved 9 successful trades in a row move to stage 5.
If you make 9 losses in a row, go back to stage 3.

Stage 5
Paper trade the SPI based on your techniques, using 2 lots look for 2 points profit.
Only when you have achieved 9 successful trades in a row move to stage 6.
If you make 9 losses in a row, go back to stage 4.

Stage 6
Paper trade the SPI based on your techniques, using 2 lots look for 3 points profit.
Only when you have achieved 9 successful trades in a row move to stage 7.
If you make 9 losses in a row, go back to stage 5.

Stage 7
Now commence trading.

see also Blackjack and Probability as a training exercise.

cross training - for day traders

For day-traders who day-trade stocks and shares.

For best results, one piece of advice we can give - learn futures trading, first.
Don't need real money. Find a Forex broker with play-money accounts, and practice.

Cross training is commonly accepted in many elite sports. Highly recommended. eg. racquet squash can be used to cross-train for any sport requiring high speed visual and physical reaction times. A squash ball travels 8 metres, at speeds of 200+ kph with any combination of speed, direction, angle, and height.

Trading futures will develop the skills to read an ever-changing, high volume, high speed market.
One trading day in futures, is equivalent to 10 days in one stock compressed into one day.
By comparison, action in a stock will then be seen in slow-time suspended animation.
You will see it coming, like a slow freight train coming round the bend, in slow motion.

the marathon

Trading can be likened to running a marathon. As anyone who has run a marathon will know, you cant step straight out and run a marathon. It requires considerable training, preparation and conditioning. You need to be able to run one kilometre before you can run 42 kilometres. If you cant run one kilometre, unlikely you can run 42 kilometres. Serious marathoners will build up to running 250 kilometres per week in training, week in week out for 6 months, culminating in speed work over the last month. Thats running 1 kilometre and repeating it 250 times. Similarly the novice trader needs to understand the very short term first. Pick a time frame. ie the opening session from 0949am to 1000am. Focus on that one single time period. Dissect it. Examine it. Master it. Do not trade any other time period until you have mastered it. Once mastered, move to another time period, or extend the chosen session. Like the marathon you will not last the distance if you do not understand or cannot perform over the shorter distance. Repetition is a very large part of any athlete's training.

repetition - why it's important

Repetition is the mother of learning.
Quote: many have become chess masters - no one has become the master of chess - Siegbert Tarrasch.
The 4 stages to achieving mastery - from Tom Hopkins

(1) Unconscious incompetence - you dont even know you dont know what to do

(2) Conscious incompetence - you now know you dont know what to do

(3) Conscious competence - you know what to do, if only you can do it.

(4) Unconsious competence - operating subconsciously on total reflex

The way to perfect a process is to repeat it until it becomes automatic, without the need to think. It takes 21 days to make a habit.

Recognising the value of repetition, our analysis screens have been designed with replay to provide training by constant repetition.

the white line effect

If you drive a long distance at night on a highway that has centre line white markings, you will find when you arrive at your destination, and try to sleep, when you close your eyes you will still see the white lines passing in front of your eyes for quite some time. And yet you are not aware of it while it is happening. This is an example of repetition. Because it was happening constantly, repetitively, hour after hour.

extract from - The Face Changers - Thomas Perry - 1998.
She closed her eyes, consciously relaxing the muscles at each of her joints. For a time her mind struggled with the bright impressions of headlights and the reflective signs along the superhighways and white dashes between lanes shooting toward her out of the darkeness like tracer bullets. Then darkness came and she began to dream.

a parable - miyagi - the ways of the master

Daniel, an innocent, 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.

repetition

Repetition is the mother of learning. Camron analysis replay software can select any time session for any one day and replay it repetitively until you are satisfied you understand the interaction of all the traders who were active during that session. You can examine the presence or absence of commercial trades and assess the results. A day can be replayed in 5 minutes. A day can be replayed 10 times in one hour. Live trading sessions do not provide this type of training because it is slow and no one session is ever the same. Because any one session can behave quite differently over a 5 day period it is important to obtain an understanding of the behaviour. It is not possible to say the opening session today will be the same again tomorrow. If you had a successful trade 1 year, or 6 months ago, with our software you can go back to that session, and examine the market behaviour prior to your entry point through to your exit. The principle is to find out why you got it right.

reference site : repetition 1 users.skynet.be/beatola/publiola/princip.html

reference site : repetition 2 www.mapletop.com/supermemo/manual/m_intro.htm

the $5000 weekend course

A true story of two clients who went on a $5000 weekend technical analysis mechanical system course.
Both were successul small business professionals who were also friends of one another. Client.a attended the $5000 technical analysis course first, found it to be excellent value and achieved great success following the course. Client.b was impressed, and having not enjoyed much success, attended the next available course. Client.b's subsequent trading results declined. Same course. Same methods. Same disciplines. Same educator. Client.a's run of success lasted about a year. Then gave trading away after a series of large losses.

A number of issues arise out of this.
a. what works for one may not work for another.
b. systems that work today may not work tomorrow.
c. ability to identify changing conditions is absent and therefore
d. ability to adapt to changing conditions is also absent
e. demonstrates the dangers of a mechanical system
f.. a perfect example of the holy grail syndrome

Needless to say, being a weekend course, the presentations were static, not online. Doesn't work.

What will never be known is whether :-

the methodology was valid and

client.a understood it and applied it correctly, while

client.b did not understand it and applied it incorrectly
or

the methodology was invalid and

client.a misunderstood it and lucked in, while

client.b understood it and applied it correctly

back-testing - 1 by the scientist

note: what makes this quoteworthy are references to, (a) claims based on backtesting alone, (offline and not realtime), (b) importance of volume versus system, (c) discretionary, (d) conditioning (repetition) and (e) observation. All in one paragraph. Says it all. Go Have a look. EliteTrader at www.elitetrader.com/vb/showthread.php?s=&postid=394479&highlight=hong+kong

Two contributors "scientist" and "dt-waw" from the EliteTrader trading forum December 2002.

dt-waw Well, first of all this system is back-tested, it trades 1 contract at a time. The average profit per 1 contract per year was 80k. Is that not enough to make a living? scientist replies. You should just get a bit real man - You think any automated system can make 80K a year on 1 contract? You know little. I have programmed systems for years. I even posted a shot here on EliteTrader, which far "outperformed" the results of your system. Yet I never traded it much for real. Why?. Because it's not worth it. You and your friends with your silly systems are never going to be making anything like that. Why? Because markets follow the volume, as opposed to systems. You may be able to get a small razor-thin edge trading a (lagging!) system, but you'll never be able to top-perform unless you trade what you call "discretionary", namely conditioning yourself to be objective and observant and then go with the flow and take exactly what the market is willing to give you.

back-testing - 2 by the day-trader

Extract from diary Of a Day Trader Sydney Morning Herald - SMH 8 January 2005
Wednesday, 5 Jan 2005. Back in the real world of daytrading. Encountered the following advice from an American Professor of Charting: "The magnitudes and decay pattern of the first 12 auto-correlations and the statistical significance of the Box-Pierce Q-Statistic suggest the presence of a high-frequency predictable component in stock returns". This means past prices are a guide to the future, Yogi claimed, triumphantly adding, "contrary to every warning that appears on every share price or unit trust recommendation. I back-tested the professor's study on 750 stocks over the past 50 years. It works. In short, we've been had".

law of unintended consequences

quote - The Concise Encyclopedia of Economics, Rob Norton:
The law of unintended consequences, often cited but rarely defined, is that actions of people always have effects that are unanticipated or "unintended". Economists and other social scientists have heeded its power for centuries. The concept of unintended consequences is one of the building blocks of economics. Adam Smith's "invisible hand", the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, "is led by an invisible hand to promote an end which was no part of his intention".

example : When beer sales were banned at football games, the number of people arriving at the stadium intoxicated, increased. Associated Press Nov 1.

the apprentice

There were these two old time floor traders. Spending their days in the sun, sitting under a mango tree, drinking mango juice, waiting for the surf to come up, watching the prices go by on their laptops. When along comes a fresh-faced graduate, straight out of the Academy of Trading with a Degree in Charting and a Diploma in Technical Analysis. Knew where support and resistance were, and all the indicators, moving averages, and Gann Theory. The old-timers look at one another and pat their $2 million lines of credit. And smile. One says to the other, whaddya reckon mate, reckon we can send this one down the paint store for some striped paint. The other replies .. yeah mate, reckon we can. They reach for their mobile cell phones ..

elliot's wave - goodbye

On 11 November 2004 the spi neared 3866, a technical hedge fund called a major elliot wave top at 3866 announcing they would stake their reputation on it (a fatal mistake) having shorted 4500 spi contracts. The bull elephants set about proving the call wrong. The phones went white hot. The best exit offer obtained was 3920. The hedge fund spent the next 2 weeks getting out at a significant loss. A true story.

a key technical level

One of our clients ("A") keeps a careful note of where key technical levels are. As it nears a key level "A" monitors commercial activity at that level. If a retracement down, and commercials start buying at the key level "A" will buy and follow in the slip-stream. If the commercials don't start buying, "A" leaves it alone.

globalisation - big brother - george orwell - 1984

One hundred years ago, Henry Ford said you can have any colour you want, so long as its black.
One color suits all. And so it was. The model-T Ford came in one take-it or leave-it colour.
The same is happening in trading as brokers discover broking is a Warren Buffet toll-bridge.

Fifteen years ago, electronic trading systems didn't exist. Floor traders, pits, data vendors, phone broking, software vendors, educators. Traders assembled the parts themselves. Now brokers provide the lot with electronic trading platforms, taking over the money making add-ons, but leaving education. Independent data vendors and software developers have gone. Education is being squeezed,

As a general rule brokers do not and should not provide trading education. While brokers trade large house-accounts there are ethics-conflict issues. Preferably the industry should establish chairs, fund scholarships and courses at universities and colleges. Successful SEC prosecutions against the broking industry over statements made with reckless disregard to their accuracy, makes it difficult to undertake education unless they have absolute belief in it, and base it on their own verifiable methods.

Up-side is, services become standardised and cheaper as brokers add-value to their services. Down-side is services are commoditised. Less distinguishing features, variety, choice. More people using identical products. Pulling the same levers. Looking at the same indicators. All at the same time. And the danger?. All together now. Simon-says do this.

Looking five years into the future. Standardisation of services, one size fits all.
Globalisation is a reality. Once there were hundreds of small to medium sized auditing firms around the world. They merged to become known as the "big six". The SEC caught Arthur Anderson with its thumb in the pie, and they became 5. With globalisation and electronic systems, broking is heading down the same road as the big-six. Each with 1/6th global market share. Monitoring the flow of orders flashing across their screens. Powerful stuff. Open to abuse, front run, tailgate, take the other side. Be hard to ignore. Large scale self-sanctioned spy-ware. Private traders cutting their own throats.

Dont be surprised. It's happening now. Just not global yet. That will come.
We know of one broker with exchange access, "skimmimg data".

Finance newsflash June 2006 - the "big six" now the "big four" - source .. theaustralian.news.com.au

Broking newsflash Sept 2008 - the "big 5" now the "big two" Bear Stearns, Lehmans, Merrill gone.

globalisation - now - 2006

In a 2006 US court case it is claimed that trading platform supplier Trading Technologies controls 70% share of the electronic volume in the four largest global futures exchanges and "intends to control 100 percent of the global market order flow."

source Reuters CHICAGO, Wed Jan 4, 2006 01:06 PM ET
Judge backs Trading Technologies in Rosenthal v Trading Technologies suit. A Chicago judge backed software firm Trading Technologies on most counts in a lawsuit brought by trading firm Rosenthal-Collins LLC related to Trading Technologies's patented futures trading software. Over the past year Trading Technologies has sued several companies for violating its US patents for MD Trader, an order-entry system that shows market depth via a ladder-like display on an electronic trading screen. Chicago-based Rosenthal countersued, alleging patent invalidity and patent misuse, deceptive business practices and unfair competition by the software vendor. In a 23-page ruling, US District Court Judge James Moran granted a motion by Trading Technologies to dismiss most counts in a countersuit brought against it by Rosenthal. Judge Moran denied the motion to dismiss with respect to possible patent misuse by Trading Technologies, deferring an opinion on "alleged overreaching" by the software company. In its suit Rosenthal claimed Trading Technologies controls up to 70 percent of the electronic volume share in the four largest global futures exchange and "intends to control 100 percent of the market order flow." This week, Trading Technologies launched XTrader 7, a new trading platform incorporating the patented MD Trader it says runs faster and includes several more powerful analytical tools and synthetic order types. For the first time, the platform will provide access to BrokerTec cash bonds and derivatives on the Sydney Futures Exchange CEO of Trading Technologies, Harris Brumfield, said "XTrader 7 will help Trading Technologies increase its leading volume share and continue to spread futures trading around the world" see for yourself tradingtechnologies.com

In December 2004, the company asked the four top futures exchanges for a slice of their revenues - 2.5 cents per side for every electronic futures contract traded.

In 1850 John D Rockefeller demonstrated that "owning" the distribution of oil was more powerful than "owning" the production of oil. The same lesson was played out again in 2006 in the dispute between Russia (producer) and Ukraine (distributor) over the means of distribution of Russian gas. Russia capitulated in one day. The same contest is being played out in the search engine wars now.

It will be one small future step for those who control the means of distribution, to extract large fees from intstitutions who will be willing to pay to "see" where global money is going.

globalisation - next - 2006

Consolidation is gathering pace. Watch Macquarie Bank's bid for London Stock Exchange. Macquarie is already big on Toll Roads (distribution). An exchange, any exchange, is just another "toll road". Punch the ticket. Collect the toll, as traffic passes through. Add in TradingPlatform fees (above) and it becomes a future dual carriageway. With two toll collectors.

global technology - now

It's happening, now. On a small scale. Here is how it's done.

Watching a Globex Forex Feed during off peak times where the market-maker is almost the only participant, continuously populating both sides of the queue with tease-orders. Being mesmerised how the market-maker is able to move out of the way of an incoming order execution.

A trading platform is a software process with data inputs and outputs. A "box" with data inputs entering on the left and data outputs exiting on the right. The processes are performed inside the box, based on the requirements of the incoming data stream (orders)

example - Incoming order - sell 20 lots at market
status of market depth bid queue prior to order transmission

before
Market maker
Market maker
Natural Buyer
Market Maker

10 @ 5006
10 @ 5005
20 @ 5002
10 @ 5000

1 second later
Market maker
Market maker
Market Maker

10 @ 4990
10 @ 4988
10 @ 4995

The market-maker miraculously disappears. In nano-seconds. The trade is executed at 5002. Such behaviour is clear evidence the market-maker has access to the incoming order stream, and is able to remove the front orders, allowing the natural buyer to be hit. It's a question of the location of the market. During market hours, exchange and market-maker are separated. During non-pit hours they merge. Market-Making is electronic. The market-maker not only operates the market, they are the market.

If you decide to hit a market-maker sitting in the market, there is nothing to guarantee the order will be there when your transaction arrives. The market-maker can see your order coming. It can simply move out of the way and not be there when your order arrives. If your order is an "at market" order you will be dismayed at the result. You will hit the nearest natural buyer/seller

Ask the question - what question ?
What happens when a "participating broker", who is a market-maker, also owns the market (exchange) ?.

No complaint. Demonstrates what is happening. Dont take our word for it. As always, check it out for yourself.

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