One of the most powerful figures in the financial world – Leo Melamed (Leo Melamed) – revolutionized the trade futures on the Chicago Mercantile Exchange. However, like his colleague’s financial genius of George Soros, Melamed first had to take an amazing journey that included slipping away from the Nazis and the Russian to get into the United States. In 1939, he and his family fled from Poland to Lithuania, but when they were there, they needed transit visas to continue the journey. “Even my philosophically minded father – told Melamed – could not explain how you can reduce a person’s life to wait in line a piece of paper, which could mean the difference between life and death.” Crossing Siberia by train, the young Melamed learned my first lesson in strategy – stay calm and focus under fire – for, to his amazement, his father fell into chess, apparently ignoring the chaos around him.
In 1950 he enrolled at the University of gab. Illinois, where he began studying at the preparatory courses – first at the medical and then at the law. After graduating from the courses, he joined the faculty of law, and, although hated intensive training, admitted: “They made me think and think for sure.” While still a law student, Melamed asked to work “messenger” in what he thought was a law firm, Merrill, Lynch, Pierce, Fenner and Bean “(Merrill, Lynch, Pierce, Fenner & Bean). In their office does not understand what he was doing, Melamed filled out the questionnaire, was briefly interviewed and got the job. Once in the operating room of the Chicago Mercantile Exchange, he recalls: “I was Alice, a member through the mirror in the world not one but hundreds of Mad Hatter.”
Pretty soon he was “in love” in the Chicago Board and persuaded his father to give him a loan of $ 3,000 to buy a place and trade for themselves. In those days it was still a lot of manipulation, and Corner did at all – from eggs to onions, so when Melamed eventually elected to the Board of Governors of Merck in 1967 and was its chairman in 1969, he has focused on reforms and improving government . Recalling this, he wrote: “… We were pioneers, we said, inspires excellence and strength of spirit, and dedicated themselves to preserve the spirit of the borders. In the “Art of futures trading,” he distinguishes between the frontier myth and everyday reality, when it comes to the skills needed for futures trading.
Art of futures trading ”
For many futures trading – a blessing.
For many – a curse.
For the majority – an enigma.
Why is there such divergence? Where such an attitude of hatred and love? Perhaps the fact that futures trading is currently one of the last undeveloped frontier areas of the business world. Areas where bold traders must rely solely upon their own skill and common sense, where it should be brave and ready to meet the enormous personal problems, where tasks require intelligence, fortitude, character and love of adventure, and where the rewards justify the risks.
Personal futures trading – one of the last remaining areas where the individual is still able to build substantial wealth, starting with a modest investment. It is no wonder that so many are trying to do this, although just as many fail. Not surprisingly, many are suffering from the failure blamed for the problem itself, not its inconsistency. Not surprisingly, the successful become obsessed with this adventure. And no wonder that so few people know about it, because, at any border area, the unknown seems intimidating, confusing and intimidating. And, like most important things, the challenge is enormous and fraught with risk. For these reasons, on the futures trade had much to myths: you should have the intuition, you must be lucky, this is only for professionals, you must be a player, in fact, for this there is no rhyme nor reason. These myths are false. Often, these myths are used as an excuse and alibi for those who for various reasons, often quite personal, failed in futures trading. Perhaps they could not concentrate or do not have sufficient analytical ability, perhaps, they lacked a balanced personality, a mature nature or business discipline. Others fail because they lack adequate capital, but capital, though important, is usually not the central main reason why people fail in trading.
Take an element of luck. Futures trading – one of the few areas where success has a minimum value. Although luck never hurts (and if need be – as in all things – can play an important role), it is usually not acting factor. Luck may be inclined in the other, and in the other direction, and is usually equated. And good luck may also have adverse effects. For example, a trader, who carries in his early trading experience, or do not learn anything, or do not learn to what should be. Ultimately, the early run of luck will lead him.
In the final analysis, success in futures trading on the ability of people to interpret and analyze the relevant facts and statistics in order to achieve a logical opinion on the interim or final price of the product. In short, it depends on the ability to correctly measure supply and demand.
If this seems simple, it is not so! This is a most difficult task. Portions of this call, following strict requirements: knowing the significant economic components that could affect the price of the product, to keep abreast of current facts and statistics to comprehend these developments and their impact on supply and demand, properly assess the importance of the various components in relation to this pricing structure – attitude, varies from year to year, sometimes from week to week, as well as the futures of futures; understand the various features of different pricing of commodity futures, to introduce a correction to all the unknown variables, finally, have the courage to apply her findings to the market.
It is this last requirement – the courage to use your opinion on the market – becomes Waterloo for the majority of futures traders. This is the moment where your individuality is facing its biggest challenge, and you know what type of trader you really are. Indeed, the psychological structure of the trader’s most important component of its success in futures trading.
Although special education and vocational training do not prevent, they are not required. Tips and inside information have little meaning. Need for an orderly thought process, business approach, well-balanced personality, willingness to learn are important factors and a working knowledge of past history. And, of course, patience. Trader has to have the patience to learn from the experience of trade, the patience to learn from past mistakes and patience for the growth of self-confidence and salesmanship. This is not simple props, and yet they are perhaps not so complex to justify a taboo or prohibition imposed by so many in this promising area.
Terms of chance or probability – the normal tools of good gamblers – for futures trading are not required and may be noticeable disadvantage. Successful professional futures traders, as a rule, not the players in the classical sense, in most cases, when the players try their skills on futures, they lose. The reasons are quite simple. Futures prices are dictated by the laws of economics, while a successful gamble consequence of the rules of chance. These two regimes are at a distance of light years apart. Terms of chances in the long term can not be successfully applied to the trade. A good bet, based on opportunities in other areas of life may be the worst choice in futures trading. Poor chance, from the standpoint of probability, may actually be a tremendous futures position. For example, in the long bear market of pure chance would be in favor of recovery, unfortunately, if the excess supply continues to dictate price cuts, those who buy the market, based on probability, will lose money.
I have often heard the statement: “I had to liquidate their long position, because the market has grown ten consecutive days. These traders used to trade rule probabilities. Although sometimes such a decision may be correct, it is far from the correct reasons. Long position may be the best position on the eleventh day than it was at first, perhaps, on the eleventh day the world finally recognizes that the trader’s instincts told him ten days earlier. Thus, the rule probabilities can not be guiding factor in making market decisions.
Successful futures traders – are good businessmen and well-managed capital. While traders risk their capital, those who thrive, followed by a conservative and disciplined business practices. Thus, capital management is essential for the proper conduct on the market. Unfortunately, this principle is somehow overlooked by the public, and the futures markets, instead, often equated to gamble in casinos.
I am often asked how much money is needed to begin trading. This is actually not so much a question of the number of required capital as a question about the type of capital. Although I would not recommend this, you can start trading futures with such small amounts as a couple thousand dollars – the minimum requirement for the margin, if the brokerage firm agreed to open your account (Rules concerning the amount of capital required to trade futures, have changed considerably after the as this essay was written in 1969. On the amount of capital required margin influenced inflation, the type of product availability and price volatility). The amount of capital available for start of trade, the trader determines the freedom of maneuver in the process of learning. With a small amount, it has little room for error. With a larger sum, he has more time to learn. More important than the amount of money, then, that this was not the money. A trader should not speculate capital necessary for daily subsistence, ie, money to pay for food and shelter, school or clothing, or any other normal life query. Capital, recommended for futures trading, “venture capital”: the money, if they are lost, should not significantly affect the living standards of the trader. Although this is a precondition excludes from futures trading are very many, it still leaves the door open for many others.
Would give a large sum of venture capital the best chance of success than a small amount? Yes, in the sense that it will provide more space for learning. However, a large amount of capital can create a false sense of security, which ultimately will hurt your ability to succeed. Depending on whether you start with a large or small pool of risk capital, you may need to adjust the size of your futures positions: a small amount you need to start trading in a very small scale, on the contrary, with a large sum, you can start with big items. In any case, should proceed at a pace that once you learn how to trade, there remains some risk capital. Do not be confused if, having become acquainted with all the dangers and having learned all the lessons, you will be without the means that could be used to make your knowledge work.
Since the required years of study and direct experience, to become completely familiar with all the principles, rules, variants and exceptions related to successful futures trading, it is impossible to discuss them in detail here. However, the following three principles are most important.
First, do not regret the time to study the product that you intend to trade, that is, various statistics and other factors affecting the equation of supply and demand, therefore, the price of the product. This requirement includes the conclusion: you can not rely solely on someone else’s opinion. For example, if you use a broker, never think of his words as gospel. Although you should listen to what he might say, because he is an expert on your side it would be foolish to rely solely on its interpretation of facts or information. In addition, it is necessary to fully understand the jargon and the reasoning broker, which again requires some personal education.
The second most important principle – not peretorgovyvat. It can not be defined in monetary terms or in the number of transactions per week, month or year. It will depend on your proximity to the market – how close you can track the movement of prices, how much time spend on the study of the product and what the purpose of your trading plan. Excessive trading expose you to unnecessary risk and danger, will cost you in unnecessary fees. Thus, you must agree that you may not participate in every movement of the market, and strive to do so you do not need. The most successful trader does not appear every day on the trading floor of the exchange, he carefully chooses the moment for trade. Futures prices have trends just as seasonal movement. Focus on them, rather than on the daily fluctuations that are best left to professionals. A successful trader, judiciously selecting their actions, must be right only in 30-40 percent of cases. For comparison, the trader is not a member of the exchange and tries to trade on a daily basis, must, in order to maintain profitability, should have a lucrative deal in 60-70 percent of cases.
The third principle states: We must follow a predetermined trading plan, a set of rules or established guidelines, which, as you feel able to work, which has stood the test of time and which will guide your decisions. There is no one special formula or a single set of trade rules. Their set. If you are not a professional trader, you need a lot of studies to determine what the rules more understandable to you and best suited to your character and your main vocation. Whatever they are, once you choose your trade rules, adhere to them. It requires discipline and to become a test of your emotional qualities. If you do not comply with reasonable rules of trade, you will be at the mercy of the whims of each market and become easy prey to short-term stress. Expanding the scope of this principle, I must warn you that you should not allow a successful speculation hit you in the head and forced to abandon your rules. On the contrary, if at first you do not have luck or you suffer defeat, not despair and do not give reasonable principles of trade.
Futures markets are financial democracy. They offer an open trading platform for investment and speculation, where everyone is entitled to their own opinion. Some of the opinions more qualified than others. How qualified will be yours, depends on you alone. This border area is still open for many Americans who have the courage and strength of mind to know what it is. This is an area where the winners get the satisfaction of knowing that they will not have anyone to thank for its success, besides their own intellect, fortitude and ability. And the rewards can certainly justify the effort and the associated risk.
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