3 - How to Make Consistent ProfitsTrading Futures Part II

Direct Access Electronic Trading The issue of direct access is an important one and it becomes more important the more short term your trading is. The market can change from a state of seeming paralysis to one of shocking volatility and activity in a flash. The length of time it takes between you deciding to enter an order and the order actually being in the market is obviously important. When I first started trading I used a phone broker and was dismayed that my fills would often be so far from the price the market was trading when I first entered the order. The first time I visited the trading floor, I discovered why. When I called in an order, first my discount(!) broker would check my account equity, then he would call a phone booth on the floor, the phone broker on the floor would then write the order down and pass it on (by phone) to a booth next to the appropriate pit, at that booth my order would be written down again and then signaled to a broker in the pit to be executed. As you can imagine this would take quite a long time, even longer of course if the market was very active, as this would mean that the broker in the pit would be too occupied to take new orders. Compare this to my experience of trading as a pit trader. In the pit I was in the heart of the market and could observe every single order as it was executed (there was no delay in my price feed!). To initiate a trade, whether it was to buy or sell at the market, or join the bid or the offer, all I had to do was open my mouth. You can start to see the huge advantage that trading on the floor gave me over off floor traders; and that doesn’t take into consideration the fact that my round trip costs fell by 96%. Now the floor no longer exists, not in Europe at least, so why talk about the advantages of pit trading? Well the level playing field is now open to all, but very few take advantage of it. Trading with an electronic trading platform is exactly the same as trading in the pit, except I can sit down, it is much quieter and there are no crude jokes flying around. I can trade with the click of a mouse; my order shoots to the exchange, enters in the market and appears back on my screen before I have time to blink. I think the advantages of direct access trading are clear and any futures trader still using a phone broker should move to direct access, they will also find their commissions are less (around £8 for private client traders). The next question that arises is why trade futures? That is an important consideration given that there are a variety of alternatives vying for your trading capital (spread betting, CFDs and options), but in my opinion, futures are the only option (no pun intended) for successful short term trading.

4 - What is The Law of Charts™?

The Law of Charts was discovered by Master Trader Joe Ross. As he likes to say, "It was there all along. It just happened to fall on my head much as the law of gravity was discovered when an apple fell on Isaac Newton’s head."The Law of Charts defines four basic formations known as 1-2-3 lows and highs, Ross hooks, trading ranges, and ledges. These occur in all time frames because the depict human action and reaction vis-à-vis price movement.What makes these formations unique is that they can be specifically defined. The ability to formulate a more precise definition sets these formations apart from such vague generalities as "head and shoulders," "coils," "flags," "pennants," "megaphones," and other such supposed price patterns that are frequently attached as labels to the action of prices.A 1-2-3 high or low comes at the end of a trend or swing. It forms as the result of a change in the direction of prices. The 1-2-3 low forms as the result of buying pressure overcoming that of selling pressure. The 1-2-3 high forms as the result of selling pressure overcoming buying pressure.A Ross hook™ always forms as the result of profit taking in an trend or swing.A ledge forms as a result of profit taking, uncertainty about future price direction, or both. You might consider it as a pause in the overall movement of prices in a single direction.A ledge is the smallest of a number of consolidation formations: it never consists of more than 10 or less than 4 price bars. It is denoted by containing two matching or nearly matching highs and two matching or nearly matching lows.A consolidation consisting of eleven to 20 price bars is called a congestion, and a consolidation consisting of 21 or more price bars.As simple as these definitions are, the have been found to constitute a "law." Any data that contains both a high and a low, will form these patterns; even data that has nothing to do with markets and trading.Learn more about The Law of Charts, it is a free resource on our website. Study it as much as you want. And while you are visiting take a look at the Traders Trick™ entry.