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Status of accounts in commodities trades

Spenninck Aaron — Thu, 02 Sep 2010 09:37:18 +0000

The depository account of a family is often opened in the name of the elder most member of the family. This is the same procedure followed by banks for opening a account. However, the depository account of a minor undergoes several changes in rules across different geographical boundaries. The depository account will be opened in the name of the minor but the guardian’s name will be mentioned in the account, as the latter will be giving instructions on behalf of the minor.

With commodities trading also some of these rules are followed, but in a different manner. All commodities trading companies insist on a minimum balance requirement, even though the depository has not prescribed any minimum balance requirement in the account maintained by a trader. The depository accounts can even reflect a zero balance, but that privilege is mainly enjoyed only by the prominent traders and business people.

The time taken to open a depository account especially when involved in commodities trading varies widely. In the developing countries to open a depository account before signing up with a commodities trading company may take up much time and will involve tedious decision making at different levels. On the other hand in the advanced countries it is possible to open an account at the click of a button. A customer will have to surmount many hurdles in this respect. Normally, it may not take more than 2 to 3 days to open the account. If a depository participant has access to the virtual trading system, the account can be opened immediately.

The commodities trading companies offer certain legitimate rights to the traders as per the byelaw and business rules prescribed by the regulatory authorities. The bylaws clearly specify the rights and obligations of participants and clients, the rules involving in opening an account etc.

On the other hand, the business rules are more specific. They specify,
• Guidelines governing relationship between participants and clients
• Opening an account
• Account transfer in case of transmission of rights
• Closure of an account

An Interesting Thought!!!

owaispoul — Sat, 30 Jan 2010 05:06:00 +0000

Hi Guys,
I saw the movie "The Animal" recently, though the movie was not a very good one to recommend you to watch but the most interesting thing about the movie is it's concept. I just couldn't stop laughing thinking about the concept of the movie: A human being having different animal organs sounds something out of the world, but it is worth a thought. If you are given a chance which oragan of your's would you like to replace with that of an animal?
It would be wonderful to have your posts on this question.

Broken Wing Butterfly Options Spread Strategy

Rob McDonald — Tue, 26 Jan 2010 10:44:18 +0000

A few good sources for a topic you don't see pop up that often. I have opinion or experience with the authors but the info is sound & presented well.

http://www.futuresmag.com/Issues/2010/Fe...terfly.asp

http://www.youtube.com/watch?v=Wbh3i5ynSME

Good source of Options educational materials

Rob McDonald — Mon, 25 Jan 2010 11:53:31 +0000

I came across this site a while back and it seems well organized with excellent payoff diagrams for the various options strategies you can deploy. I think it's the education arm of OptionsHouse who I have no experience with, but a good information site all the same.

http://www.theoptionsguide.com/

There is a good example for all of you out there who have been tempted by the "rent out your shares for income" theory that is popular amongst the less reputable "trading riches" educators. They tend not to focus on the negative aspects during their sales pitches:

Bull Call Spread: An Alternative to the Covered Call
http://www.theoptionsguide.com/bull-call...-call.aspx

Kicking Off 2010

Rob McDonald — Sun, 24 Jan 2010 18:13:59 +0000

Well we've been going nearly a year already and after a somewhat accidental start to this forum it's starting to take shape, both physically, and from a direction and "what am I doing with this thing" perspective.

After much brainstorming and asking hard questions of myself as to what is my view of trading and now to approach, it I've settled on what I think is a logical forum structure. This will by no means cater for everybody, but I feel it gives a good balance of the key requirements for successful trading, while allowing room for each traders unique personality and style.

Moving forward I'll be posting up some topics and ideas I have been kicking around to use the forum as a sort of repository for trading information, do with it what you wish, feedback and challenging my ideas is always welcome - it is how we learn.

Keep an eye out for updates as we continue to evolve the Trading Communities project :-)

The Traders Expo – New York, Feb. 14-17, 2010

Rob McDonald — Sun, 24 Jan 2010 17:48:28 +0000

It's almost that time of year for one of my favorite trading expo's in NYC. If you are looking for new ideas you will certainly find plenty to think about by attending this event.

If you can't attend register for the MoneyShow site for plenty of free online replays from key speakers -

http://www.moneyshow.com/nyot/

More moves to limit FX leverage in the US - 10:1 possibly

Rob McDonald — Sun, 24 Jan 2010 16:02:50 +0000

CFTC Forex Proposal; US Retail Market to Disappear?

Tue, Jan 19 2010, 08:48 GMT
by James Bibbings

Turnkey Trading Partners

On January 13th, 2010 the Commodity Futures Trading Commission (“CFTC”) issued a press release regarding its highly anticipated rule proposal for the regulation of retail forex transactions. The proposal seeks to adopt a new regulatory scheme to implement the CFTC Reauthorization Act of 2008. In particular it strives to address the way the federal agency will deal with off-exchange transactions in foreign currency with the retail public. Currently the CFTC’s proposal is open for public comment for sixty days (60) and was published in the Federal Register on January 7th, 2010. Before anyone can comment though, they’ll have to fully understand what the proposal says.
What the Proposal Attempts to Establish

The following is a summary listing of the major provisions included in the CFTC’s proposal. While reading through these items please note that they are not the only changes to the law which have been proposed. Rather, these items represent what will be the most significant changes to the industry through the eyes of a former regulator and industry professional; they are presented in order of most important to least.

* 1) The CFTC has revised its definition of “commodity interest” (i.e. futures) to include off-exchange retail forex transactions (“forex”). This change grants the CFTC jurisdiction over the United States retail forex market.
* 2) With the authority found in item one above; the CFTC will create new registration categories for retail foreign currency firms as follows:
* A) Dealers (Currently FDM’s) in retail forex transactions will be required to register as retail foreign exchange dealers or (“RFEDs”).
* B) Persons or entities that solicit or accept orders for an RFED, a Futures Clearing Merchant (“FCM”), or an affiliate of an FCM will be required to register as Introducing Brokers (“IBs”).
* C) Persons or entities exercising discretionary authority over accounts will be required to register as Commodity Trading Advisors (“CTAs”).
* D) Persons or entities which operate or solicit funds or property for a pooled investment vehicle would be required to register as Commodity Pool Operators (“CPOs”).
* E) All persons who qualify as being “associated” with the foregoing registration categories will be required to become registered as associated persons (“AP’s).
* 3) All Introducing Brokers (“IBs”) and all applicants working towards registration as IBs in connection with retail forex transactions will be required to enter into a guarantee agreement with an RFED.
* 4) RFEDs and FCMs which engage in retail forex transactions will be required to collect from their customers a security deposit equal to no less than ten percent of the notional value of the retail forex transaction to be conducted; thus imposing a strict 10:1 leverage ratio.

The Implications

Items 1 and 2: Revised Definition of “Commodity Interest”: The definitional change of “Commodity interest” to include off-exchange retail forex transactions gives full authority of the US retail foreign currency market to the CFTC. Based on this definitional adjustment the CFTC will now have the legal ability to require forex professionals to register with the agency. It also means these professionals will be required to become members of a self regulatory organization (“SRO”) which in most instances will be the National Futures Association (“NFA”). Firms will be required to register by law as RFEDs, FCMs, IBs, CTAs, and/or CPOs to solicit for or accept retail customer orders. Many of these firm’s employees will then also be required to become APs and/or business principals.

Item 3: All IB’s Must Be Guaranteed by an RFED: This provision of the proposal is likely to be more devastating to the United States forex industry than any other. The reason? Requiring RFED’s to be entirely liable for the solicitation activity and performance of all their introducing brokers will prove to be impossible. Since there will be no such thing as an independent forex IB, it does not seem reasonable to think that the handful of RFEDs in the United States will be willing to take on the risk of guaranteeing all of the nation’s introducing agents. If they were to do so, the level of liability as well as the capital required to stand behind the performance of such entities would be staggering. Further this requirement completely eliminates the role of an independent IB as it calls for each guaranteed IB to introduce client accounts to only its guarantor RFED. This will greatly reduce consumer and IB strategy options and may also cause clients to open relationships with multiple brokerage houses. For these two reasons, and the requirement discussed below in item 4, third party forex brokerage as it currently exists will be under tremendous stress.

Item 4: Forex Transactions Must Adhere to 10:1 leverage: There has been more written about this portion of the CFTC proposal than any other and perhaps rightfully so. Currently in the US firms are able to offer clients 100:1 leverage, which is already lower than what is available in other parts of the world. At this time US customers appear to be satisfied with security deposit levels which currently reside at either 1% or 4% (by pair traded) of a contracts notional value. Although the CFTC may believe that lowering leverage from 100:1 may be better for clients (which in many cases it will be) I do not believe they have fully considered the ramifications of this action.

It is largely anticipated that in the event leverage in the US is reduced from 100:1 to 10:1 most US accounts will migrate to the United Kingdom. Individual traders have voiced publically that they are unwilling to post higher levels of margin to trade within the United States. Specifically many have shared that as long as well regulated, financially similar, trading venues exist internationally; staying in the US will not make sense with a 10% security deposit. Therefore, if the objective of the CFTC is to protect US investors with their new proposal and this occurs, they may actually be making matters worse. If US clients are encouraged to move their accounts abroad on to pursue higher leverage, the CFTC will then no longer have jurisdiction over the companies handling those accounts and the point will become moot.

In addition to potentially losing jurisdiction over US client monies, should a capital exodus occur on the count of reduced leverage, the CFTC will have also made US RFED’s less competitive internationally. The implications here are far reaching; especially when one considers the size of the global forex market space. Furthermore, reducing leverage by as much as ten times will also drastically reduce off exchange retail currency trading volumes for RFEDs. If this were to occur these firms would likely seek out new forms of revenue in order to supplement falling profit margins. They would likely do so through various fees and/or by additional commissions through wider trading spreads. This too will not be good for the US retail trader or the RFED’s which directly and indirectly create numerous employment opportunities. Worst yet, it is conceivable that an adjustment to the security deposit, especially when coupled with the requirement to guarantee IB’s, might move some RFEDs entirely out of the country.
Options and the Long Road Ahead

Share Your Thoughts: Now that the CFTC proposal exists, what’s next for retail forex traders and brokerage firms within the United States? The first thing that should be done if you’d like to comment on this proposal would be to submit your thoughts to the CFTC and your legislators. The CFTC will accept comments for at least sixty days (60) starting from January 7th, 2010. When sending in a comment it will be important to use the subject “Proposed CFTC Regulation of Retail Forex”; Federal Register - January 7th, 2010. After this be sure to include the proposals identification number which is RIN3038-AC61 in the body of your message.

Industry Professionals: Industry professionals that have not yet registered with the CFTC and elected to become NFA members; now is the time. It is possible that the CFTC may alter some of its proposed amendments if it deems the comments received from the public are reasonable. However, it is highly unlikely that the requirement for all forex professionals to become CFTC registrants and members of a DSRO will be omitted. In just a short period of time every forex firm in the country will be required to register and this will create a massive back log with the NFA. To learn more about this process it would be advisable to contact a regulatory professional and seek advice immediately. Due to the time sensitive nature of this requirement it would also be wise to look for a company that is well versed in forex compliance. Most importantly they should be intimately aware of the CFTC’s current proposal.

Retail Traders: Individuals who trade retail forex will need to consider the implications of having to post as much as ten times more capital to hold trades open. This will materially alter trading strategies and significantly reduce the size of the positions that a person can initiate. Customers should speak with their respective brokerage houses, the CFTC, NFA, and their legislators to let them know how this rule will impact their trading.

Original source : http://www.fxstreet.com/education/forex-...01-19.html

Chinese Futures Contracts on the way along with Short Selling & Margin Trading

Rob McDonald — Sun, 10 Jan 2010 19:26:48 +0000

China’s ‘Big Step’ on Futures May Boost Investments (Update2)
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Tal Barak Harif and Jeff Kearns

Jan. 9 (Bloomberg) -- China took a “big step” toward opening its capital markets by approving stock index futures, paving the way for increased investment in the world’s fastest- growing major economy, according to Invesco Ltd.

The China Securities Regulatory Commission said yesterday it may take three months to complete preparations for index futures, agreements to buy or sell an index at a preset value on an agreed date. The government also approved margin trading and short selling, when investors seek to profit from declines in shares, according to a commission statement on its Web site.

“They’re taking a big step forward in developing their capital markets and allowing people to express their positive and negative views on stocks,” said Diane Garnick, a New York- based investment strategist at Invesco, which invests in China as part of its Asia Pacific business that had $26.8 billion of assets as of Sept. 30. “You’ll have more people participate in the market and thus greater efficiency.”

Increased investment in Chinese equities may help narrow the gap between prices of shares traded in both Hong Kong and the mainland, said Jeff Papp, a senior analyst at Lisle, Illinois-based Oberweis Asset Management Inc. Companies in China’s benchmark Shanghai Composite Index trade at 33.9 times 12-month trailing earnings compared with 20.9 times for the Hang Seng China Enterprise index in Hong Kong.

‘More Clarity’

“A potential long-term development is more clarity in the market now that there’s more liquidity in the market for the true valuations of the companies that are dual listed,” said Papp, whose firm oversees $800 million, including U.S. and Hong Kong-traded China shares. “So we may see a pop” in the value of Chinese equities listed in Hong Kong, he said.

China, whose economy grew 8.9 percent in the third quarter of 2009, currently bars overseas investors from trading yuan- denominated stocks and bonds on the mainland except through a so-called qualified foreign institutional investors program, which has approved 94 international firms. Foreign ownership of fund management companies is restricted to 49 percent.

Index futures may help ease fluctuations in the world’s third-largest equity market by value after the Shanghai Composite Index doubled in 2007, then slumped 65 percent in 2008 before rebounding 80 percent last year. Until now, Chinese investors could only profit from gains in equities.

‘Freedom’

“China is going to the direction of freedom for its markets and more flexibility for its investors so it’s good news,” said Eric Conrads, a hedge fund manager at Armada Capital SA, a Mexico City-based partnership with ING Investment Management, which invests in China through U.S.-listed shares and exchange-traded funds. “More liquidity in the futures leads to more investors as you have a bigger pool of tools. You can be long on the future and short on the stock.”

Allowing short-selling in China probably will spur the start of more hedge funds in Asia, said Ken Heinz, the president of Hedge Fund Research Inc. in Chicago.

Richard C. Kang, the chief investment officer at Emerging Global Advisors LLC in New York said China, whose equities have a market value of $3.2 trillion, may not be ready for the change. Short selling is when investors sell borrowed stock in the hope of profiting by buying the securities later at a lower price and returning them to the shareholder.

“The risk that I see is too much growth too quickly,” said Kang, who helps oversee $50 million in exchange-traded funds that hold shares of China Construction Bank Corp., Industrial & Commercial Bank of China and China Life Insurance Co. “If this leads to over-speculation, which is possible in a heated market, what happens is that there will be more short- term thinking in the market, and could lead to more speculators than hedgers.”

CSI 300 Index

The first stock index contracts, based on China’s CSI 300 Index, may begin trading after the Communist party’s annual congress in March, an official with knowledge of the matter said. The CSI 300, which tracks the 300 biggest stocks traded in Shanghai and Shenzhen, rose 0.3 percent on Jan. 8 to close at 3,480.13. The Shanghai Composite Index added 0.1 percent.

The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, rose 0.6 percent to 399.39 in New York and posted a 5.2 percent gain for the week, the biggest 5- day advance in two months.

Rules for the index futures will deter participation by retail investors, said Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan Chase & Co.

Mock Trading

Investors will be required to put up 10 percent of a contract’s value to buy, sell or short CSI 300-based futures as collateral, according to rules published on China Financial Futures Exchange’s Web site in 2007. The bourse has been conducting mock trading in the securities since October 2006.

The value of the futures contracts will be points of the CSI 300 multiplied by 300 yuan, according to the trading rules the exchange set.

Investors will need to spend 105,000 yuan ($15,379) to buy a single futures contract when the CSI 300 is at the 3,500 level, establishing a “cost barrier to retail participation,” Ulrich wrote in a note distributed after the announcement.

“These initiatives will provide tools for institutional investors to hedge risks and should reduce market volatility in the long-term,” she said.

Citic Securities Co., China Merchants Bank Co., Ping An Insurance Group Co., Industrial Bank Co. and Shanghai Pudong Development Bank Co. are the most-heavily weighted stocks on the CSI 300.

“This is a positive development for the evolution of the markets becoming more up-to-speed in terms of how markets need to operate,” Oberweis Asset Management’s Papp said. “More sophistication would be a good thing in the long term.”

For Related News and Information: News on China’s markets: TNI CHINA EXC Shanghai Composite Index rankings: SHCOMP MRR Top news on stock markets: TOP STK China markets snapshot: CBQ CH

Last Updated: January 8, 2010 17:44 EST

http://www.bloomberg.com/apps/news?pid=2...bklE&pos=3

International Symbol Format

Rob McDonald — Tue, 05 Jan 2010 11:47:27 +0000

I always forget where this link is so I'm putting it here for reference. I use it mainly for my eSignal codes, but very useful.

http://www.quote.com/search.action

Bank Negara clamping down on FX in Malaysia

Rob McDonald — Tue, 05 Jan 2010 08:27:39 +0000

The latest move after shutting down the recent FX seminar in KL

Bank Negara to block illegal currency trading

PETALING JAYA: Bank Negara is coming down hard against companies or individuals – domestic and foreign – that organise investment or training programmes on illegal foreign currency trading.

The central bank advised the public not to participate in such schemes, adding the people were usually enticed by such marketing gimmicks which promised quick returns and gains.

It is an offence under the Exchange Control Act to buy or sell foreign currency or do any act involving or related to buying or selling of foreign currency with any person other than an authorised dealer, according to Bank Negara.

“It is also an offence for a person to aid or abet another person to buy or sell foreign currency with any person, unless the person is an authorised dealer,” the central bank’s corporate communications department said in a statement yesterday.

Among the methods used by the illegal investment operators to attract investors are free training, seminars or workshops before inviting them to set up an online foreign currency trading account with a principal company which purportedly has a valid licence to trade foreign currency overseas.

Such schemes also provided access to the principal company’s website and trading facilities to facilitate online foreign currency trading.

Others recruit fresh graduates to market and sell the schemes and encourage them to get their family and friends to trade foreign currency.

There are also schemes that require investors to deposit a sum of money into a bank account before allowing them to start trading and subsequently, requesting for a top-up on their initial investment (margin call) to avoid losing their capital.

There is a list of authorised dealers and financial institutions permitted by the Controller of Foreign Exchange to buy or sell foreign currency on Bank Negara’s website http://www.bnm.gov.my.

For further enquiries, contact Bank Negara Malaysia at 1-300-88-5465 or send an e-mail to bnmtelelink@bnm.gov.my.

http://thestar.com.my/news/story.asp?fil...sec=nation

The link of "approved" agents. Maybe Citibank will roll out their new product here as they are on the list -
http://www.bnm.gov.my/index.php?ch=17&pg=697&ac=606

Result of Aus mining boom

admin — Thu, 29 Oct 2009 08:53:37 +0000

It's like a Dubai project in reverse lol

Update on FX Reg's in US

Rob McDonald — Thu, 15 Oct 2009 08:31:39 +0000

Retail forex regulation: Still a work in progress

http://www.futuresmag.com/Exclusives/200...gress.aspx

Futures Mag I-Trade Show - Online Virtual Expo

Rob McDonald — Thu, 15 Oct 2009 08:29:47 +0000

Next Futures Mag show announced! A great event to enjoy from the luxury of your living room:

Futures Magazine will hold its sixth "virtual trade show," which allows traders to hear valuable presentations and keynote addresses, shop for products and services covering the business of trading and pick up valuable trading ideas and tips, all without leaving home or trading desk.

Free On-line webcasts will provide detailed power point presentations with trading strategies and examples, along with live question and answer sessions with presenters. The I-Trade Show is for all traders of futures, commodities, options, forex and stocks; people who trade anything that moves.

Register before Nov. 15, 2009 and you’ll have access to audience favorite Al Brooks’ previous two I-Trade show presentations. Al is back for the December show, as is George Kleinman, to present new trading strategies and share lessons learned by real traders. A full agenda will be available soon.

http://www.futuresmag.com/micro/i-trade/...fault.aspx

Changes to Tick data at CME effecting E-mini & FX futures

Rob McDonald — Mon, 12 Oct 2009 13:45:33 +0000

Some numbers on the changes:

http://blog.marketdelta.com/?p=669

A few interesting links to follow:

http://www.traderslaboratory.com/forums/...#post77642

http://www.traderslaboratory.com/forums/...#post77243

Raghee Horner Vid

Rob McDonald — Wed, 22 Jul 2009 15:50:17 +0000

While I use a different system I like Raghees approach to trading. No nonsense, don't let it rule your life, and a good solid system to filter out rubbish trades. I think this is from one of her classroom sessions so it's a good sneak peak ;-)

http://ragheehorner.com/blog/?p=714

The International Federation of Technical Analysts, Chicago, Oct 8-10 2009

Rob McDonald — Wed, 22 Jul 2009 15:44:32 +0000

The International Federation of Technical Analysts
22nd Annual Conference - Chicago, IL (USA)
October 8th - 10th, 2009

Details here : http://www.ifta2009.com/

Good webinar by Kathy Lien on High Probability vs High Profit

Rob McDonald — Wed, 08 Jul 2009 09:59:14 +0000

This example is on FX but the rules apply to many trading instruments.

http://www.sfomag.com/TraderUniversity/m...-06-24.wmv

Interesting read on Algorithmic Trading

Rob McDonald — Wed, 08 Jul 2009 09:04:46 +0000

http://www.flextrade.com/uploads/news/151.pdf

SFO Article - Find the best teacher - good read on trading education & mentors

Rob McDonald — Wed, 08 Jul 2009 05:54:16 +0000

Link & text:

http://www.sfomag.com/CommentaryTwo/Defa...taryID=112

Find the Best Teacher

By Mike Bellafiore

May 22, 2009—New traders frequently think that learning from the most talented traders is the best way to learn. On the contrary, new traders should seek the best teacher. There is a difference.

Think about it. Who are the best professional coaches? Were they preeminent players? Phil Jackson is considered the finest NBA coach yet was not a superstar player. Coach Belichick played Division III college football but is a brilliant NFL coach. If the top coaches were not the best players, then why do new traders look to the best traders for mentorship?

I posed this dilemma to the best trading teacher I know, Dr. Brett Steenbarger. He responded, "Many of the great coaches were competent players in their own right, but not all stars. They knew the game, but their passion was for teaching and developing players. They worked on their coaching game as hard as the all stars worked on their playing game. It's all about knowing what makes you tick, and what you're really good at."

The skills necessary to become a great trader are different from those required to be an effective trading coach. To be a superstar trading coach, one must be obsessed with finding better ways to teach, a great communicator, patient, demanding of others and unselfish. On the other hand, being a great trader requires superior pattern recognition and discipline.

NEVER STATISFIED

Before every new training class at SMB, I scrub our program. I identify its weaknesses, then start developing ways to eliminate them.

A great trader constantly thinks about how to become a better trader. They scour charts to find the next big trade. A great teacher thinks about better ways to instruct. And then that teacher develops these methods. Creating SMB Webinars, SMB Videos, SMB AM Meeting, SMB Trading Plays, and the rest of our training program took years of work. I spent many after-hours alone in my office saturated in grunt work that few would ever do to accomplish their teaching goals.

MOTIVATION IS KEY

A great trader may lack the incentive to create the best training program. They are making millions trading, so why bother teaching a new trader. I run a trading firm. We have a desk full of proprietary traders. If SMB builds a desk of 150 profitable traders then the personal and monetary rewards will be substantial. So I am motivated.

My partner, Steve Spencer, is an excellent trader. Almost four years ago I approached him about starting a firm. His response: “Why would I want to do that?”

Spencer immediately calculated the potential loss from mentoring. After further reflection, we both recognized that if we developed an excellent training program our sacrifices would be rewarded.

COMMUNICATION

A great teacher communicates exceptionally well. A great trader can be incoherent. When I first started trading, I approached the best trader at our firm. This English-challenged, former nationally ranked Russian chess champ, though very nice, was unintelligible. Many great traders are just the same; they can’t explain their methodology intelligibly.

A FOUNDATION

A new trader must start by learning the basics. Architecture students do not start by designing sky scrapers. New traders must focus on developing trading skills, discipline and controlling their emotions. They must develop a foundation from which they can build. They should start with straightforward trading setups. Simply, they should first learn how to trade.

The market is always changing. Setups that worked yesterday may not work tomorrow. It is paramount to develop trading skills so traders can adjust to market changes.

YOU SAY TOMATO, I SAY TOMAHTO

What if your personality is not suited for this star’s style? Also, a star trader takes positions that may result in drawdowns that you cannot withstand. Further, a superstar can watch multiple positions, whereas the developing trader cannot. Moreover, I know of numerous examples, at multiple firms, where the positions of superstar traders initially visible by firm members were taken down. These firms were suffering losses as lesser traders tried to copy the superstar.

Without fully developed trading skills, novice traders were unable to execute these advanced setups. A superstar teacher will teach you comprehensive trading skills so that you gravitate toward a style that is best for you.

LOOK INWARDS

Trading is about skill development and discipline. Developing traders who wish to make more ought to look inward. They need to become better at the setups that are working for them and learn to add size in these trades incrementally. They also need to eliminate their mental weaknesses. Contemporaneously but slowly, they should add new setups to their quivers. This is the path to improving profits.

PATIENCE

A great trader may lack the patience to properly help a developing trader. They just may not understand why a new trader cannot learn what he or she is teaching. A great trader may just explode, “Shut up already, and start making money.”

Admittedly, I would love to do this sometimes, but this is not the best way to deal with most new traders. Great teachers use solid reasoning to make their teaching points.

GETTING TOUGH

It is also the job of a mentor to challenge their students. I empathize with the new trader. Trading is difficult. But standards must be set.

In February, I was disappointed with a few traders on our desk, and I called a meeting. I growled, “Your mental preparation is unacceptable. This is your opportunity to do something great. You will not realize your potential until you improve your preparation.”

But mainly I was leading them to set a higher standard for themselves. The desk subsequently went on a trading tear.

SACRIFICE

Great teachers must be unselfish. They must sacrifice a considerable amount of their trading profits.

I talk through my trades with our newest traders in real time, which diminishes my focus. And I choose stocks that are easiest for new traders to follow. This affects my overall profits.

LEARNING FROM A SUPERSTAR

It is an excellent idea for all of us to reach out to great traders. I do. There is always something new to learn.

Remember, though, that each person trades differently, and the best teacher is passionate about taking a trader from where he or she is to becoming a superstar. Find the best teacher.

Mike Bellafiore is a co-founder of SMB Capital (smbcap.com), a proprietary trading firm in New York City. He has successfully traded his own account for more than 10 years. Bellafiore writes regularly for SMB Blog at smbtraining.com/blog, where professional traders shares stories and trading lessons.

From Twitter today - MetaStock stimulus package

Rob McDonald — Thu, 02 Jul 2009 06:51:52 +0000

http://www.equis.com/whc/p1e8c.aspx