Psychological Pitfalls

Here are some additional psychological pitfalls to avoid. Be wary of
depending on others for your success. Most of the people you are
likely to trust are probably not effective traders. For instance:
brokers, gurus, advisors, friends. There are exceptions, but not
many. Depend on others only for clerical help or to support your
own decision-making process.
You may acquire trading methods or systems from others or from
books, but be sure to test them carefully yourself before trading.
Good systems that you can buy come with computer software that
allows comprehensive historical testing.
Don't blame others for your failures. This is an easy trap to fall into.
No matter what happens, you put yourself into the situation.
Therefore, you are responsible for the ultimate result. Until you
accept responsibility for everything, you will not be able to change
your incorrect behaviors.
Stay long-term oriented. Don't adjust your approach based solely on
short-term performance. Through luck, any horrible system can look
great, even for relatively long periods of time. Conversely, the best
systems have frequent losing periods. If you judge a system by

short-term performance, you are likely to reject the best systems
that exist.
Most traders have such an ego investment in their trading that they
cannot handle losses. Several losses in a row are devastating. This
causes them to evaluate trading methods and systems based on
very-short-term performance. Don't start trading a system based on
only a few trades, and don't lose confidence in one after only a few
losses. Evaluate performance based on many trades and multi-year
results.
Don't underestimate the psychological difficulty of successful
trading. Robert Rotella describes the trauma in The Elements of
Successful Trading: "Trading is one of the most stressful endeavors
imaginable. Taking losses day after day with a strategy that, just a
short while ago was working well, can be a terrible experience.
Trading performance can be consistently volatile with good and bad
times highly magnified. The market can batter your psyche and
gnaw at your soul. These bad experiences will never end as long as
you trade. The more successful you are as a trader, the more
money you will lose."
Keep trading in correct perspective and as part of a balanced life.
Trading is emotionally intensive no matter whether you are doing
well or going in the tank. It is easy to let the emotions of the moment
lead you into strategic and tactical blunders.
Don't become too elated during successful periods. One of the
biggest mistakes traders make is to increase their trading after an
especially successful period. This is the worst thing you can do
because good periods are invariably followed by awful periods. If
you increase your trading just before the awful periods, you will lose
money twice as fast as you made it.
Knowing how to increase trading in a growing account is perhaps
the most difficult problem for successful traders. Be cautious in
adding to your trading. The best times to add are after losses or
equity drawdowns.
Don't become too depressed during drawdowns. Trading is a lot like
golf. All golfers, regardless of their ability, have cycles of good play
and poor play. When a golfer is playing well, he assumes he has
found some secret in his swing and will never play poorly again.
When he is hitting the ball sideways, he despairs that he will never
come out of his slump.

Trading is much the same. When you are making money, you are
thinking about how wonderful trading is and how to expand your
trading to achieve immense wealth. When you are losing, you often
think about giving up trading completely. With a little practice, you
can control both emotional extremes. You'll probably never control
them completely, but at least don't let elation and despair cause you
to make unwarranted changes in your approach.
Other common themes of good traders are self-understanding,
balance and self-control. If you can master yourself, you can master
the futures markets.

Elements of a Successful Trading Plan--Manage Risk

The final cardinal principle of trading overlays all the rest. It is
Manage Risk. This is as crucial as the others because it is by
managing risk that you limit losses and preserve your capital.
The most important element of managing risk is keeping losses
small, which is already part of your trading plan. Never give in to
fear or hope when it comes to keeping losses small. Preventing
large individual losses is one of the easiest things a trader can do to
maximize his chance of long-term success.
Another element of risk is the market you trade. Some markets are
more volatile and more risky than others. Some markets are
comparatively tame. If you have a small account, don't trade big-
money, wild-swinging contracts like the S&P 500 stock index. Don't
be above using the smaller-sized Mid-America contracts to keep
risk in proportion to your capital. Don't feel you have to trade any

market that might make a move. Emphasize risk control over
achieving big profits.
The biggest risks to commodity traders come from surprise events
that move the markets too quickly to exit at their pre-determined
give-up point. While you can never eliminate these risks entirely,
you can guard against them by advance planning. Pay attention to
the risk of surprise events such as crop reports, freezes, floods,
currency interventions and wars. Most of the time there is some
manifestation of the potential. Don't overtrade in markets where
these kinds of events are possible.
Trade in correct proportion to your capital. Have realistic
expectations. Don't overtrade your account. One of the most
pernicious roadblocks to success is greed. Commodity trading is
attractive precisely because it is possible to make big money in a
short period of time. Paradoxically, the more you try to fulfill that
expectation, the less likely you are to achieve anything.
The pervasive hype that permeates the industry leads people to
believe that they can achieve spectacular returns if only they try
hard enough. However, risk is always commensurate with reward.
The bigger the return you pursue, the bigger the risk you must take.
Even assuming you are using a method that gives you a statistical
edge, which almost nobody is, you must still suffer through
agonizing equity drawdowns on your way to eventual success.
It is better to shoot for smaller returns to begin with until you get the
hang of staying with your system through the tough periods that
everyone encounters. Professional money managers are generally
satisfied with consistent annual returns of twenty percent. If talented
professionals should be satisfied with that, what should you be
satisfied with? Surprisingly, disciplined individuals can do better. It is
realistic for a good mechanical system diversified in the best
markets to expect annual returns in the twenty-five to fifty percent
range.
One last thing about creating a trading plan. Don't be enticed into
trading options as a less risky alternative to futures. While the dollar
risk of buying puts and calls may appear lower and more certain, the
probability of long-term success is remote.
Experienced professional traders, such as Larry Williams, agree:
"Options are a very difficult game because you have to do two
things: You have to beat the market and beat the clock. Perhaps
some sophisticated people can trade options. I've been trading

stocks and commodities successfully for over thirty years, but I don't
trade options because it's too tough."
The best way to trade options is to sell them to small speculators.
That's what options professionals do. However, selling options has
more risk and is more difficult than trading futures. Unless you are
well-capitalized and committed to a full-time career as a
professional options player, stick to futures.
Although the commodity markets appear complex from the outside,
making money trading is quite simple. You use an historically
proven plan that trades with the trend, cuts losses short and lets
profits run. You trade your system in a carefully-selected group of
markets. You start with sufficient capital and pay close attention to
managing risk. Richard Dennis made his $200 million following
precisely this kind of trading approach.

Elements of a Successful Trading Plan--The Markets You Trade

Another trading plan consideration is the markets you trade. There
are about forty futures markets with sufficient liquidity to allow
prudent speculation. However, it is important to select a good
universe of markets that are appropriate for your account size, risk
level and trading style.
It also important that your market universe be diversified. There are
always a number of big market moves every year, but no one knows
in advance where they will be. If you trade a diversified portfolio,
there is a greater chance that you will catch some of the truly big
moves that make for successful trading.
Another consideration in choosing a market to trade is its historical
propensity to have more big trending moves. Since the trend is your
edge in trading, you can maximize your edge by selecting the most
trendy markets. The following are some of the best trending markets
in various trading sectors.
The currencies are the best trending sector. The currencies to trade
are the Swiss Franc, the German Mark, the Japanese Yen and the
British Pound.
Interest rate futures are also good trending markets. T-Bonds
represent long-term interest rates and Eurodollars are for short-term
interest rates.
In the energy complex, Crude Oil, Heating Oil and Natural Gas are
good trading vehicles.

In the food sector, Coffee, Orange Juice and Sugar are
recommended.
In metals, you can trade Gold, Silver and Copper.
In agriculturals, Corn, Oats, Soybeans and Cotton are the best.
Now you have the outline of an overall plan to trade commodities.
The key to success is to test whatever strategy you intend to apply
before you trade with it. Remember that the conventional wisdom
that you read in books is mostly ineffective. When applied
consistently, most trading methods don't work.
You can't test your plan unless it is specific. The rules must be
precise and objective. Having a thoroughly tested plan is crucial to
maintaining the confidence necessary to keep trading the plan
through the inevitable losing periods that every good system and
every good trader must endure.
The reliability of non-computerized testing is highly suspect. Using
computer software that tests a particular approach or a variety of
approaches is preferred. You must learn the correct way to test and
evaluate trading approaches.

Elements of a Successful Trading Plan--Let Profits Run

The next part of the plan involves a more pleasant alternative: when
to exit a trade that is profitable. The cardinal principle involved is Let
Profits Run. In other words, stay with your profitable trades as long
as possible because the trend is likely to continue and make your
profits even larger.
Again, this is easy to understand but not so easy to do when real
money is involved. The difficulty is that although your profit may
become much larger if you stay with a trade, it may also decrease
and even disappear. Human nature is such that it values a sure
profit much more highly than the probability of a much higher profit.
Thus, traders are inclined to take their profits too soon. This can be
fatal to long-term success because big profits are necessary to
overcome the inevitable collection of small losses.
There is a good way to let profits run while still guarding against the
possibility that prices will turn around and take away much of your

accumulated profits before the trend actually reverses. It is called a
trailing stop. You include in your plan a method for moving an exit
point along some distance behind your trade. As long as the trend
keeps moving in your favor, you stay in the trade. If the market
reverses direction by the amount of your trailing stop, you exit the
trade at that point. You would also offset your trade and reverse
position if the trend reversed.
One way to set a trailing stop is to protect a certain percentage of
the accumulated profit. That will always insure that you keep some
profit on a good trade.

Elements of a Successful Trading Plan--Cut Losses Short

If you are following market trends rather than trying to anticipate
them, the next important part of the plan is how to exit trades that
don't work out. Here is where the second cardinal principle comes
in. It is Cut Losses Short.
This is another sensible-sounding concept that is much easier to
acknowledge than actually to execute when real money is on the
line. No one wants to exit a trade with a loss. They don't want to
lose money. More importantly, they don't want to admit they were
wrong. You can always think of many reasons to hold on to a losing
trade. You can hope that the market will suddenly turn around and
give you a profit instead of a loss.
This is another example where successful traders have learned to
do the hard thing. If there is one thing consistent in the stories of
how good traders turned themselves around from being bad traders,
it is their attitude about losses. Professional traders accept that
losses are part of the game. Since the markets are mostly random,
the best trading methods will always have numerous losses.
Professionals do not equate losses with being wrong.
It is precisely because correct trading methods invariably generate
many losses that it is important to keep the individual losses small in
relation to the overall size of the account. In order to keep trading,
you must preserve your capital. If you can keep trading in the
direction of the trend, the big profits will come. However, if you take
too many large losses, your capital will be wiped out before you can
enjoy the big profitable trades.
The laws of probability insure that regardless of your approach, you
will inevitably suffer some long strings of consecutive losses. If you

are risking too high a percentage of your account on each trade,
before long one of these unavoidable losing streaks will blow you
away. Keeping losses to about one percent of your account size is
optimal. With smaller accounts, the percentage will have to be
larger. Five percent on one trade is probably the highest prudent
level of risk.
Because of the randomness in commodity price action, you must
allow the market a certain amount of leeway before giving up on a
trade. In general, you must be willing to risk between $500 and
$1,000 to trade most markets. For smaller accounts, the Mid
America Exchange offers trading with smaller sized contracts that
allow you to trade with lower risk.
While there are more sophisticated ways to decide when to exit a
losing trade, getting out after a loss of a predetermined dollar
amount is as good a way as any. The important thing is to respect
your plan. You can place a stop-loss order with your broker that
instructs him in advance to exit a trade if the market hits your loss
limit. You should always do this to guard against inattention or
changing your mind at the crucial moment.

Elements of a Successful Trading Plan--Trade With The Trend

Trading with the trend is hard to do because a logical give-up exit
point will be farther away, potentially causing a larger loss if you are
wrong. This is a good example of why so few traders are successful.
They can't bring themselves to trade in a psychologically difficult
way.
You can define the concept of trend only in relation to a particular
time frame. When you determine the trend, it must be, for example,
the two-week trend or the six-month trend or the hourly trend. So an
important part of a trading plan is deciding what time frame to use
for making these decisions.
Do you want to be a long-term trader, also called a position trader?
They hold positions for weeks or months. Do you want to be a short-
term trader who holds positions only for a few days? There are even
very short-term traders called day traders. They watch the markets
during the day and always enter and exit their positions on the same
day.
While it is perhaps easier psychologically to keep the time frame
short, the best results come from longer-term trading. The longer
you hold a trade, the greater your profit can be.
Day trading has great attraction because you can start each day
fresh and sleep comfortably every night with no open positions.
However, it is the most difficult kind of trading there is. Here's how
legendary trader Larry Williams describes it: "Day trading is so
stressful. You're going to end up frying your brain. All the day
traders I talk with are losing money. Besides, it's really hard to come
up with profitable day trading systems."
For the greatest chance of success, your time frame to measure
trends should be at least four weeks. Thus, you should only enter
trades in the direction of the price trend for the last four weeks or
more. A good example of a trend-following entry rule would be to
buy whenever today's closing price is higher than the closing price

of 25 market days ago, and sell whenever today's closing price is
lower than the closing price of 25 market days ago.
When you trade in the direction of this long a trend, you are truly
following the markets rather than predicting them. Most
unsuccessful traders spend their entire careers looking for better
ways to predict the markets.

Elements of a Successful Trading Plan--Getting Started

The first element of any trading plan is the amount of capital you
intend to invest. This is up to you, but you should understand that
there is a direct relationship between the amount of capital you
commit and your probability of success. The more you invest, the
greater is the likelihood that you will make money.
What is the minimum advisable amount to start with? Most
professionals agree that it takes a minimum of $10,000. If you try to
trade with anything less, what happens to you will be luck. You won't
have the capital necessary to apply proper risk management
principles.
An important thing to keep in mind when deciding how much to
commit initially to commodity trading is that the amount you invest
must be "risk capital." Risk capital is defined as money you can
afford to lose without affecting your standard of living. It should also
be money that you feel comfortable risking. Think of your commodity
account as an investment in a business. Many businesses fail.
That's life. Make sure you won't be so afraid of losing money that it
will affect your ability to make correct trading decisions.
The next part of your trading plan involves how you will make your
actual buying and selling decisions. Under what conditions will you
enter trades? When will you exit your trades? What markets will you
trade?
There are four cardinal principles which should be part of every
trading strategy. They are: 1) Trade with the trend, 2) Cut losses
short, 3) Let profits run, and 4) Manage risk. These building blocks
are so basic and important that I have written a whole book about

them. You should make sure your strategy includes each of these
requirements for success.

Learning To Trade Correctly

One way to learn how to trade correctly is to find a successful trader
and have him or her teach you exactly how they do it. However,
even if you could find such a person and even if they would be
willing to spend the time with you, it would not necessarily make you
a successful trader. You might not have the capital necessary to
trade the way they do. You would definitely not have the years of
experience they had developing their successful approach. You
might not have the personality profile necessary to execute their
style of trading.
Another way to learn is by trial and error. This is the method of
choice for most people although they probably don't realize it. The
trouble with trial and error in futures trading is that you don't always
take a loss when you trade incorrectly and you don't always make a
profit when you trade correctly. Some of the best methods generate
losses more than half the time. You can take many losses in row
applying a very effective system. On the other hand, if you are
lucky, you can makes tons of money trading quite stupidly.
Psychologists call this random reinforcement, and it makes good
trading impossible to learn through trial and error.
The most obvious and practical way to learn how to trade correctly
is to read books. Find the best books by the most respected authors
and the best traders and learn from them. While this may work in
other areas of life, it is more problematic in commodity trading.
One of the few real secrets in commodity trading is that most of
what you read in books about how to trade does not work in the real
world. Even books by respected authors are full of trading methods
that lose money when put to the test. You may find this shocking,
but almost no commodity authors demonstrate the effectiveness of
the methods they advocate. The best you can hope for are some
well-chosen examples or a few cursory tests.
Learning to trade is a combination of being exposed to ideas plus
practical experience watching the markets on a day-to-day basis.
This is not something that can happen in only a few weeks. On the
other hand, you can become a great trader even with only average
intelligence. Professional trader and money manager Russell Sands
describes the makeup of a successful trader: "Intelligence alone
does not make a great trader. Success is equal parts of intellect,

applied psychology, practice, discipline, bankroll, self-understanding
and emotional control."
Furthermore, to be successful you don't have to invent some
complex approach that only a nuclear physicist could understand. In
fact, successful trading plans tend to be simple. They follow the
general principles of correct trading in a more or less unique way.

Separating the Winners and Losers

A very high percentage of those who try commodity trading
eventually lose money. The ratio of losers could be as high as
ninety-five percent. However, this does not necessarily mean that
your chance of failure is that high. If, before you begin, you identify
correctly the reasons most people lose, you can improve your odds
significantly.
There is a small percentage of full-time professionals and highly
skilled part-time traders who have learned how to trade correctly
and generate consistent profits year after year. It is not impossible
to determine what separates these people from the crowd.
Because trading well is not easy, you must approach the task very
seriously. This is not something to treat as a hobby. Perhaps, first
and foremost, this is what separates professionals from amateurs.
Professionals look at their trading as a business. There are
substantial profits to be made, and they will not just fall into your lap.

Another crucial difference between successful and unsuccessful
traders is that the successful ones have a plan and they follow it.
Considering the amount of money involved and the potential risks, it
is remarkable how few traders actually have any kind of plan for
their trading. They go from trade to trade applying various ideas
they have learned without any consistency and without any testing.
They make decisions based on hot tips, something they read,
today's news. They are acting from emotion rather than using a
proven methodology. While they may not want to admit it, they are
really gambling in the futures markets rather than trading
intelligently.
Trading by emotion in an unstructured way certainly adds fun and
entertainment to the enterprise. Taking positions on instinct is
exciting, especially when they work out . . . as they often do. But in
the end, this kind of trading will lose money.
Good trading is boring because you've thought out your strategy
and tactics in advance. You trade according to a carefully tested
system or method, not from what moves you emotionally that day.
Two psychological traits that separate winners from losers are
patience and discipline. It is not enough to have a carefully tested
trading plan. You must also be able to follow it religiously. This is
not as easy as you may think.
Every experienced trader knows how great the temptation is to stray
from the plan. There is always what seems to be a good reason.
The true professional can resist this temptation and stick to his plan.
He has the patience to wait for his method to signal a trade and not
take trades he may be emotionally attracted to that are outside his
plan. He has the discipline to follow his plan and take all the trades
that it signals even when there appear to be strong reasons to make
an exception.
This may sound easy, but when real money is on the line--your
money--nothing is more difficult. The kind of trading that really works
is emotionally demanding.
It is hard work to create a winning trading plan. It is hard
psychologically to follow the plan after you create it. This is why so
many people fail. Perhaps you have what it takes to be an
exception.

The Truth About the Commodity Markets

In order to be a successful trader, you must understand the true
realities of the markets. You must learn how the professionals make
money and what is possible. Most traders come into commodity
trading, lose a substantial portion of their capital and then leave
trading without ever having a correct perception of what good
trading is all about.
For many years college professors have argued that the markets
are both random and highly efficient. If this were true, it would be
impossible to gain an edge on other investors by having superior
knowledge or a superior approach.
Professional traders, who make their living trading rather than
studying the markets from afar, have always laughed at these ivory
tower theories. A good example is George Soros, who has made
billions of dollars from trading and is perhaps the greatest trader of
all time. Here is how he responds to these ivory tower academics:
"The [random walk] theory is manifestly false--I have disproved it by
consistently outperforming the averages over a period of twelve
years. Institutions may be well advised to invest in index funds
rather than making specific investment decisions, but the reason is
to be found in their substandard performance, not in the
impossibility of outperforming the averages."
Mathematicians have conclusively shown the financial markets to be
what are called non-linear, dynamic systems. Chaos theory is the
mathematics of analyzing such non-linear, dynamic systems. The
commodity markets are chaotic systems. Such systems can
produce random-looking results that are not truly random. Chaos
research has proved that the markets are not efficient, and they are
not forecastable. Commodity market price movement is highly
random with a small trend component.
Most beginning traders assume that the way to make money is to
learn how to predict where market prices are going next. As chaos
theory suggests, the truth is that the markets are not predictable
except in the most general way.

In his book, Methods of a Wall Street Master, famous trader Vic
Sperandeo, whose nickname is "Trader Vic," warns: "Many people
make the mistake of thinking that market behavior is truly
predictable. Nonsense. Trading in the markets is an odds game,
and the object is always keep the odds in your favor."
Luckily, as Trader Vic suggests, successful trading does not require
effective prediction mechanisms. Good trading involves following
trends in a time frame where you can be profitable.
The trend is your edge. If you follow trends with proper risk
management methods and good market selection, you will make
money in the long run. Good market selection refers to trading in
good trending markets generally rather than selecting a particular
situation likely to result in an immediate trend.
There are three related hurdles for traders. The first is finding a
trading method that actually has a statistical edge. Second is
following it with consistency. Third is consistently following the
method long enough for the edge to manifest itself on the bottom
line.
This statistical edge is what separates speculating from gambling. In
fact, effective trading is actually like the gambling casino rather than
the gambling customer. Professional trader Peter Brandt explains
successful trading in just this way: "A successful commodity trading
program must be based on the simple premise that no one really
knows what the markets are going to do. We can guess, but we
don't know. The best a commodity trader can hope for is an
approach which provides a slight edge. Like a gambling casino, the
trader must earn his profits by exploiting that edge over an extended
series of trades. But on any given trade, like an individual casino
bet, the edge is pretty meaningless."
Unsuccessful and frustrated commodity traders want to believe
there is an order to the markets. They think prices move in
systematic ways that are highly disguised. They hope they can
somehow acquire the "secret" to the price system that will give them
an advantage. They think successful trading will result from highly
effective methods of predicting future price direction. These deluded
souls have been falling for crackpot methods and systems since the
markets started trading.
Prolific futures trading author Jake Bernstein describes how these
desperate traders are victimized: "Futures trading is ultimately very
simple. Any attempt to make trading complex is a smokescreen. Yet

for self-serving reasons an army of greed-motivated promoters try to
make things complicated. Too many market professionals consider
it their mission in life to obfuscate. Why? Because in so doing they
give the appearance that their efforts are scholarly and important.
They create a need for more information, and then they fill it!"
Books on how to trade commodities are famous for showing a few
well-chosen examples where a described prediction method
previously worked. They never show what would have happened if
you had applied the method religiously for many years in numerous
markets. Those who have tested these methods have found that in
the long run almost all of them don't work. Be wary of any trading
method unless you see a detailed demonstration showing that it has
worked for at least five to ten years in a variety of different markets
using exactly the same rules.
The job of the person who wants to trade commodities rationally and
prudently is to ignore the promises of those promoting pie-in-the-sky
prediction mechanisms and concentrate on finding and
implementing a proven, integrated methodology that follows market
trends.

Making A Trade

Assuming the trader has consulted his price charts, applied his
trading plan's decision-making criteria and decided to make a trade,
how does this actually take place? He will have a trading account
open with a broker. Believing, for example, that the price of Silver
will be going up in the near future, he calls his broker's trading desk,
and the following conversation might occur.

"XYZ Discount Brokerage.
"This is Bruce Babcock. For account number 22656,
buy one December Silver at the market."
"Buying one December Silver at the market. Please hold."
The broker may enter the order into a computer or she may call the
exchange floor directly. In either case, the order goes to the
exchange trading floor in New York City. Once at the broker's desk
on the edge of the trading floor, a runner may take the order to the
trading pit to be filled or a clerk may transmit it to the pit by hand
signals. In the trading pit, a floor broker executes the order with his
fellow floor traders by a combination of shouting and hand signals.
The process is then reversed as the trade price is communicated
back to the customer.
"Hello. You bought one December Silver at 550."
"I would like to enter my stop order. Good 'til cancelled,
sell one December Silver at 540 stop."
“For account number 22656, selling one December Silver
at 540 stop. Good 'til cancelled."
"Thank you."
The second sell order was an instruction to the broker to
automatically offset the trade if Silver declined in price by $500. This
was a prudent step to limit the loss in case price did not go up as
the trader expected. Placing the order with the broker means that
the trader will not have to monitor the market constantly to be sure
the loss does not get too big if price goes down instead of up. The
trader is not guaranteed to limit his loss to exactly $500, but he will
usually be able offset his position fairly close to the requested price.
The trader can offset his position any time before the Silver contract
expires in December. To the extent Silver's price is more than $5.50
an ounce when he offsets, the trader will profit by $50 for each cent.
To the extent Silver's price is less than $5.50 when he offsets, the
trader will lose $50 for each cent.
To do the same trade with less dollar risk, the trader could have
instructed the broker to place the orders at the Mid America
Exchange, where the Silver futures contract is only one-fifth the size
of the regular New York contract. That would have yielded profits
and losses of $10 for each cent rather than $50.

The Trading Process

Here are some typical steps in the process of making a commodity
trade including the trader's decision-making process and the
procedures involved in actually placing the trade.
In order to make decisions about when to trade commodity futures,
you must have a source of price data. Many daily newspapers carry
some commodity prices in their financial sections. The Wall Street
Journal has comprehensive commodity price listings. Investor's
Business Daily has both price tables and numerous price charts
All experienced commodity traders prefer to look at price activity on
a chart rather than trying to interpret tables of numbers. In financial
analysis, charts are indispensable for quickly grasping the essence
of historical and recent price action.
The typical commodity chart depicts daily price action as a thin
vertical bar which indicates the day's high and low by the top and
bottom of the bar. The opening and closing prices are shown as tiny
dots attached to the left and right side of the bar. A typical daily
price chart can show up to six months of price action this way.
It is easy to change the bar's time frame from days to weeks or
months and thus show from two to twenty years of historical price
action in the same format. For short-term trading you can change
the bar's time frame to hours or even minutes.
Looking at such bar charts enables a trader to see the recent trend
of prices--whether up, down or sideways--in whatever time frame he
chooses. Following the current trend of prices is a cornerstone of
successful trading.
There are a number of ways to obtain the price charts a trader
needs to analyze the markets. You can make your own using graph
paper. This sounds rather primitive, but some experts recommend it
as a good way to put yourself in close touch with price activity and
monitor risk.

Another source of charts is the printed chart service. There are
about half a dozen of these. They typically mail a booklet of
numerous charts covering all the tradeable markets after the
markets close on Friday. There is space on the charts to update
them daily during the following week until next chart book arrives.
These printed chart books normally have a number of indicators
plotted along with the price action and contain a wealth of additional
information.
For computer owners there are many software programs that create
fancy charts on the computer screen. You can input the price data
manually or, via telephone modem, download comprehensive data
after the markets close for the day. Those with larger budgets can
install a small satellite dish and watch price changes in all the
markets nearly instantaneously as they occur. The software creates
charts dynamically on the computer screen as each trade takes
place on the exchanges. You can put many different charts on the
screen and thus watch numerous markets all around the world in
real time. The cost can range from a few hundred to $1,000 a month
depending on the software and the number of exchanges you
subscribe to.
It is easy to believe that computers can make a big difference in
trading success. Vendors of expensive software will tell you that
since other traders, who are your competition, have expensive
computer setups, you need one too. This isn't really true.
Those who can't trade profitably without a computer probably won't
be helped too much by using a computer. It may actually be
detrimental by causing an increase in trading frequency. While a
computer will not make a bad trader into good one, they are fun to
use, and they do make a trader's life easier.
There are two primary analytic methods for deciding when to take a
futures position: fundamental analysis and technical analysis.
Fundamental analysis involves using economic data relating to
supply and demand to forecast likely future price action. Technical
analysis involves analyzing past price action of the market itself to
forecast the likely future price action.
While there are differences of opinion about the relative merits of
the two approaches, almost all successful traders emphasize
technical analysis. There are a number of reasons for this. First and
foremost is the difficulty of obtaining accurate fundamental data.
While various governments and private companies publish statistics
concerning crop sizes and demand levels, these numbers are gross

estimates at best. With the current global marketplace, even if you
could obtain accurate current information, it would still be impossible
to predict future supply and demand with enough accuracy to make
commodity trading decisions.
Technical analysts argue that since the most knowledgeable
commercial participants are actively trading in the markets, the
current price trend is the most accurate assessment of future supply
and demand. If someone is correct that for fundamental reasons,
prices will likely move up strongly in the future, the commercial
participants who have the greatest knowledge and influence on the
markets should certainly be moving the price upward right now. If
price instead is moving down, a lot of very knowledgeable people
must think price in the future will likely be down, not up.
For this reason, almost all successful speculators learn to follow
price action and not try futilely to predict turning points in advance.
They seek to trade in tune with the large participants who move the
markets.
In his classic book, Technical Analysis of the Futures Markets,
famous analyst John Murphy summarizes the rationale for technical
analysis: "The technician believes that anything that can possibly
affect the market price of a commodity futures contract--
fundamental, political, psychological or otherwise--is actually
reflected in the price of that commodity. It follows, therefore, that a
study of price action is all that is required. By studying price charts
and supporting technical indicators, the technician lets the market
tell him which way it is most likely to go. The chartist knows there
are reasons why markets go up and down. He just doesn't believe
that knowing what those reasons are is necessary."

The Risks of Trading

Before becoming too excited about the substantial returns possible from commodity trading, it is a good idea to take a long, sober look at the risks. Reward and risk are always related. It is unrealistic to expect to be able to earn above-average investment returns without taking above-average risks as well.

Most people are naturally risk averse. They don't like to take big risks, especially financial risks. Perhaps you can relate to the point of view of humorist Will Rogers: "I am not as concerned about the return on my money as I am about the return of my money."

Commodity trading has the reputation of being a highly risky endeavor. It is true that a high percentage of traders eventually lose money. Many people have lost substantial sums. There is a famous old line about the best way to make a small fortune trading commodities . . . start with a big one.

However, commodity trading's reputation as a highly risky activity is somewhat undeserved. Think of yourself walking into a gambling casino in Las Vegas or Atlantic City. You decide to play roulette. The table has a $5 minimum bet and a $5,000 limit, which happens to be your total bankroll. If you place a $5,000 bet on red, you should not be surprised if you immediately lost your $5,000. On the other hand, if you made only $5 bets, you could play for a long time and probably not lose very much at all.

Commodity trading is the same in the sense that the individual is the one who decides how he wants to operate. He can make large bets or small ones. One can trade commodities carefully and risk as little as $100 or $200 on a trade. You could trade a long time this way and only lose a few thousand dollars. However, most people are not that patient. The unfortunates who lose big are those who can't control themselves. They take big risks in an attempt to get rich quick. Another way to lose big is blindly to turn your money over to others to trade such as brokers or money managers.

One of my favorite quotes about trading comes from trading psychology expert Mark Douglas. As he points out, most of us are not as willing to take financial risks as we think: "Most people like to think of themselves as risk takers, but what they really want is a guaranteed outcome with some momentary suspense to make them feel as if the outcome had been in doubt. The momentary suspense

adds the thrill factor necessary to keep our lives from getting too boring."

Anyone who is going to try speculation should be fully aware of and be comfortable with the risks involved. Managing the risks of trading is a very important part of any trader's success. Although the risks can be managed, they can never be eliminated. Remember that the high returns successful speculators can earn are available only because the speculator is being paid to take risk away from others.

When a commodity trader buys a futures contract, he will lose if the price declines. His risk is theoretically limited only by the price of the commodity going to zero. If he sells, he will lose if the price goes up. The risk is theoretically unlimited because there is no absolute ceiling on how high the price of the commodity can go.

In practice, however, the trader can offset his position when the trade is going against him to limit his loss. While a prudent trader always has a plan to limit his losses when trades don't work, it is not possible to guarantee a particular loss limit amount. As a practical matter, however, you can usually limit losses to within a few hundred dollars of an intended amount. Very often losses are within $100 of the amount you project. Only when very unusual things happen suddenly can losses balloon to thousands of dollars more than you expected.

A good example of this was what happened to many traders in stock index futures just before the Gulf War started in 1991. In The New Market Wizards by Jack Schwager, respected money manager Monroe Trout describes his ordeal: "January 9, 1991 was the day that Secretary of State James Baker met with the Iraqi ambassador in an effort to avert the Gulf War. At the time there was a reasonable degree of optimism going in to the meeting. Addressing the press after the meeting, Baker began his statement with the word 'Regrettably.' A wave of selling hit the stock and bond markets. I lost about $9,500,000, most of it in about ten seconds." Trout was holding 700 S&P futures contracts at the time.

One of the trading systems I was using during that period was a day trading system for the S&P. Although on most days that system didn't trade at all, it was unlucky enough to be in a long position that morning. I remember watching Baker's news conference and the S&P price action at the same time in my office. Even though I had a

$500 stop-loss in the market, my system lost $5,500 per contract on that day's trade because the market's liquidity evaporated so rapidly.

The S&P stock index is the most expensive market to trade, and those with accounts less than $25,000 should probably not be trading it at all. Therefore, this once in-a-decade event would have cost about twenty percent or less of a reasonably capitalized account.

Other kinds of surprise situations that can cause unpredicted losses are freezes, floods, droughts, government currency interventions and crop reports. With attention and foresight a trader can sidestep these risky situations. The best way to control unpredictable risks is to trade conservatively so larger-than-expected losses are still only a small percentage of the total account.

Another thing to understand about risk in trading is that you cannot avoid losses by careful planning or brilliant strategy. Numerous losses are part of the process. In The Elements of Successful Trading, Robert Rotella puts it this way: "Trading is a business of making and losing money. Any trade, no matter how well thought out, has a chance of becoming a loser. Many people think the best traders don't lose any money and have only winning trades. This is absolutely not true. The best traders lose a lot of money, but they eventually make even more over time."

There is no point trading commodities if you cannot handle the psychological discomfort of making losing trades. While people tend to take losses personally as a sign of failure, good traders shrug them off. The best trading plans result in many losses. Because of the amount of randomness in market price action, such losses are inevitable.

If I haven't scared you away so far, let's take a closer look at what successful commodity trading is all about.

Commodity Trading As An Investment Vehicle

There are many inherent advantages of commodity futures as an investment vehicle over other investment alternatives such as savings accounts, stocks, bonds, options, real estate and collectibles.

The primary attraction, of course, is the potential for large profits in a short period of time. The reason that futures trading can be so profitable isleverage.

For instance, if you had a $10,000 futures trading account, you could trade one S&P 500 stock index futures contract. If you were going to buy the equivalent amount of common stocks, you would currently need about $350,000, thirty-five times as much.

Let's say you decided that the stock market was going to go up. You could invest $350,000 and buy individual stocks equivalent to the S&P index, or you could buy one S&P futures contract. Buying a futures contract is the same as betting that the S&P index will go up.

If you had made your move on the first trading day of September, 1996 and held your position for two weeks, your common stock position would have been worth about $20,000 more than when you bought it, a gain of about six percent. Not bad for only two weeks. If you had taken the futures route, however, you would have made the same $20,000, which would have been a 200 percent gain on the $10,000 margin required in your futures trading account.

That is an actual example of the tremendous returns you can earn in a short period of time trading futures. Of course, you can lose money just as fast if you trade in the wrong direction. Suppose you had thought the stock market was about to go down and you had sold a futures contract instead of buying one. If you had valiantly held it for two weeks, you would have lost $20,000. That's a good example of why you must exit your trades quickly if they start to move against you.

Another advantage of futures trading is much lower relative commissions. Your commission on that $20,000 futures trading

profit would have been only about $30 to $50. Commissions on individual stocks are typically as much as one percent for both buying and selling. That could have been $7,000 to buy and sell a basket of stocks worth $350,000.

While profits can be large in commodity trading, it is not easy to make consistently correct decisions about what and when to buy and sell.

Commodity speculation offers an important advantage over such illiquid vehicles as real estate and collectibles. The balance in your account is always available. If you maintain sufficient margin, you can even spend your current profit on a trade without closing out the position. With stocks, bonds and real estate, you can't spend your gains until you actually sell the investment.

As you will see, commodity trading is not particularly complicated. Unlike the stock market where there are over ten thousand potential stocks and mutual funds, there are only about forty viable futures markets to trade. Those markets cover the gamut of market sectors, however, so you can diversify throughout all important segments of the world economy.

In futures trading, it is as easy to sell (also referred to as going short) as it is to buy (also referred to as going long). By choosing correctly, you can make money whether prices go up or down. Therefore, trading a diversified portfolio of futures markets offers the opportunity to profit from any potential economic scenario. Regardless of whether we have inflation or deflation, boom or depression, hurricanes, droughts, famines or freezes, there is always the potential for profit trading commodities.

There are even tax advantages to making your money from futures trading. Regardless of the actual holding period, commodity profits are automatically taxed as sixty percent long-term capital gains and forty percent short-term capital gains. The current maximum capital gains rate is thirty-three percent, somewhat less than the maximum rate for ordinary income. To the extent that capital gains tax rates are reduced in the future, commodity traders will benefit. If a distinction is re-established so that taxes on long-term gains are lower than on short-term gains, commodity traders will benefit.

Significant Facts About Forex Currency Pairs

n the instance of the Euro which is the initial currency it is recognized as the base currency whereas the second currency or the dollar is regarded as the counter or quote currency. What it actually means is in case of these two forex currency pairs, if you want to purchase the currency pair, then you have to buy the Euro currency and sell US dollars at the same time.

Complete Comprehension

Hence, to have success when trading in forex currency pairs, you need to have a full and comprehensive understanding about currency pairs especially when going into a forex trade, you must know what currency you are selling or buying. For success in forex currency pairs, you should have a very complete knowledge about the major currencies such as the US Dollar, Euro, German deutshe mark and so on.

For a very long time, the US dollar has been the major currency throughout the world. It was used as a primary currency to assess other currencies that were being traded on forex and because of this all the currencies needed to be quoted in terms of the how it related to the US dollar.

Because all Forex trading deals in foreign currencies and the full extent of such trade is stupendous and ultimately amounts to well over a trillion dollars, to become a success at trading in them requires a full understanding of forex currencies pairs.

Simultaneous Transactions

As elaborated on, traders purchase and sell currencies by exchanging one type of currency to another and in the hopes of turning a profit from doing in the process. The market quotations as far as Forex is concerned, is specified as forex currency pairs which is denoted as the base currency which is then followed by the quote currency.

Amongst the most usual types of currency pairs are the GBP/USD (British pound vs. US dollar), EUR/USD (Euro vs. US dollar) USD/JPY (US dollar vs. Japanese Yen) and USD/CHF or US dollar vs. Swiss franc.

As far as forex currency pairs go, it is common to have the base currency listed first which is then followed by the quote currency or counter. Moreover, the base currency is a single energetic monetary unit, for instance 1 EUR, 1 USD or 1 GBP, and is implied and not shown necessarily.

Currency Exchange Agencies in the UK

Traditionally it was the High Street Bank that was used to transfer currency abroad. Their reputation was second to none and generation after generation used them to Transfer Money Abroad. However in our competitive world we have seen Building Societies command more of the banking market by issuing 'bank accounts'; and also Currency Brokers who originally were formed to transfer large amounts of currency in moments for the Forex Trade Market, have now engulfed the transfer of large funds by being able to beat the processing costs of High Street Banks.

Currency Brokers as do High Street Banks buy their Foreign Currency at wholesale prices. But the one redeeming factor in the brokers favour is the percentage of profit added to each deal. The banks tend to add between 3% to 4%; whereas the Currency Broker will add up to 1%.

For the unsuspecting client this can be all confusing. When the High Street Banks are offering 0% commission why aren't they the best option? There isn't a simple explanation other than saying that over the past 4 decades a commission payment for the transfer of currency has been the normal process. The High Street Banks play heavily on this factor; as I may say do some Currency Brokers.

But ... What we need to establish is what will our money get us when transferred? Forget the 0% commission or any other special offer ... it is the bottom line that counts. If we have £100,000 what will we get?

For those who read this article and have their reservations about using a currency broker allow me to give you a few examples:

Currency Exchange Case Study - In September 2007 Jason and Helen wanted to buy an Apline ski home in Austria. The property was valued at £295,000. They hadn't gone to the bank as they had both heard that the banks weren't always the best choice. A broker will be fully aware of what the banks charge at what rates they work with: Barclays on this day was working with an exchange rate of ¬1.35 / £1; the broker on the other hand could get ¬1.38 / £1. Using Barclays, Jason and Helen would have received ¬398,250; whereas the broker actually secured him ¬407,100 which has a difference of ¬8,850 (£6,400).

Currency Exchange Case Study - In August 2007 there was Ellie from Southampton, she was buying a property in Almeria, Spain. Her transfer was for a villa at £325,000; a superb 5 bedroom villa with sea views. Her bank had frightened her with the exchange rate, so she decided to look elsewhere; fortunately she came to a Currency Broker's website. She was offered an exchange rate of ¬1.39 / £1; we were able to offer ¬1.41 / £1. This meant had she continued with the bank Ellie would have realized ¬451,750 - however fortunately the broker service could manage ¬458,250; saving Jayne ¬6,500 (£4,600)

Currency Exchange Case Study - Paul and Debbie from Bootle in Cheshire had taken 9 months to purchase a villa in Pescara in the Abruzzo region of Italy for ¬650,000; January 2008. Sadly when a house purchase takes so long there can be fluctuations in the currency rate, and on this occasion it wasn't in Paul and Debbie's favour. So it became even more important to save on the currency exchange. Had they gone to a bank they would have paid ¬8,100 more than what they paid a Currency Broker. They successfully managed to save them £6,090.

I hope that showing these examples have helped in your understanding. Do not be afraid to get a quote from an Online Currency Broker; they can provide testimonials should you be concerned.

Each and every step of the process is done through a traditional bank; and account is setup for each transaction and such transaction history can be supplied should you need it.

Forex Charts - Novice Trading Mistakes

Using Forex charts is like being a ships captain at sea: Your charts can help you navigate successfully to port or you can hit the rocks and drown - the choice is yours.

It’s the same with forex charts 95% of users drown – Let’s look at common errors that novice traders make and how to avoid them.

1. Predicting Price

No one can predict price movement and if you do - you are simply hoping levels will hold.

Do this and you will be wiped out quickly the market wont reward you for hoping or guessing.

If you want to win, act on the reality and that means - trading with price momentum AFTER a test of the level you are looking at.

Trade with momentum on your side and you are trading a fact and your odds of success are increased dramatically.

If you don’t use momentum indicators in your forex technical analysis learn what they are quickly.

2. Indicators Chosen and Misuse Of Them

A common error is to use lagging indicators to enter trades such as moving averages – This really leads on from the above: A

Always use momentum indicators to enter trades and only use lagging indicators to determine levels of support and resistance.

Many indicators traders use are useless good examples are:

Fibonacci levels and cycles - they again involve prediction and simply help wipe out equity.

3. Trading Invalid Data

Day traders are the worst offenders here. They are picking a short time frame where volatility is random they can’t calculate the odds - so they lose.

4. Systems that are to complicated

Some people devise very clever systems and lose.

Fact is - in forex trading you get your reward for being right – NOT Being clever.

Simple systems are best - as they are more robust and have fewer elements to break.

5. Not understanding volatility

Do you know what standard deviation of price is? If you don’t learn it backwards as this will help you determine everything from stop levels to targets for your trades and help you stay in winning trades longer and get better money management.

6. Your edge

Ask yourself this question:

What is your trading edge which will see you win when 95% of traders lose?

If you don’t know what it is – then find out or do more work on your forex trading strategy!

If you don’t know what your edge is kiss goodbye to your equity.

7. Following a method

Many traders have perfectly good methods but simply don’t have the discipline to follow them – if you dont have discipline you have no method in the first place.

If you want to enjoy currency trading success don’t make the mistakes above or you will lose.

Finally, there are a lot of vendors on the net promising you untold riches from their currency trading systems, for just a few hundred dollars – its not that easy so don’t buy them.

Trading is hard, but for the forex trader prepared to put in the work, the rewards can be immense.

Do your homework, be realistic and you could soon be making big returns from forex charts and executing some great trading signals for big profits.

Forex Trading – Experiencing low Gains? Simple Tips to Get Triple Digit Gains

In forex trading the bulk of traders experience mediocre gains or lose - this applies to 95% of traders. However many traders are closer than they think to achieving bigger gains and the simple tips below can be incorporated in any forex trading strategy to increase returns – lets look at them.

1. Trade Less

One of the major problems that traders have is they equate trading a lot with getting more profits and they simply trade too much.

There is NO correlation between how often you trade and how much you are going to make - so the first point is cut your trading back to high odds trades only.

This means hitting the long term trends and turning points that yield the really big profits. The big trades only occur a few times each month in a currency so focus on these.

Forget day trading and scalping - the odds are not in your favour and you are guaranteed to lose so don’t try – Hit the big trends and milk them for all you can.

2. Risk More

If your trading a small account don’t diversify ( this is another word for diluting potential gains ) so risk more per trade.

If the odds are in your favour you need to increase your bet size.

You will hear a lot of traders saying you should risk 2% per trade! Well if you don’t risk much you won’t gain much – risk 10 – 20% per trade and more if you have a total conviction the odds are in your favour.

The enemy of successful forex trading is volatility and you need to have your stop far enough back that you are NOT clipped out by it and trail your stop slowly.

With reward goes risk and that’s a fact.

Most traders are so afraid of risk they create it, by having stops to close and losing.

They think they have a low risk but they may as well have not bothered trading in the first place!

3. Use Momentum

The biggest error traders make is trying to predict – If you do you will lose.

Why?

If you predict you are hoping a level will hold and the market is not going to reward you for hope.

You need to make sure that whenever you trade price momentum is on your side. This means missing a bit of the move – but as you can’t predict it’s the best you can do and it will still mean you can make a lot of money as:

You are trading the reality and always trading with the trend.

If you get 70% of the major trends you will make a lot of money.

Trading The Odds For Bigger Gains

If you like the action and the buzz of trading the above is not for you but if you are interested in increasing profits from your forex trading strategy then you will find the above is logical common sense.

You will be trading the best odds trades, risking amounts that can give you big rewards and timing your entries for maximum profit to lowest risk and this over time means big profits.

Automated Trading Systems for Financial Markets and Recommendations for Their Usage

1. Introduction. Today using information and trading platforms has become a de facto requirement for successful trading in the financial markets. Their advantages as compared to conventional trading schemes include, for example, an unprecedented speed of processing and delivery of information to end users, the level of integration with data providers, and a wide array of built-in technical analysis instruments. At the same time, an investor opening an account with a brokerage firm simply cannot simultaneously manage the real-time analysis and trade in more than 4-6 financial instruments in several markets 24 hours 7 days a week. This brings about the need to employ automatic trading systems in the form of runtime environment with client and server parts and the programs to control these systems (scripts).

2. Comparative Analysis of the Problem Area. Various software components embrace the entire target sector of the market-from analytics and forecasting to complex trade and administration. The components of a trading platform provide its clients-brokers, dealers, traders, financial analysts and advisors-just the service they need at the very moment they need it, from immediate round-the-clock access to information of concern by means of mobile devices, to multi-move trading operations in the major client terminal. The software market offers a great many of information and trading platforms that differ, first of all, in the functionality of the client and server parts, and the list of services provided by the financial company once an account has been opened. However, only a relatively small number of software solutions include the components that automate trading.

2.1. MetaTrader4-based Solutions. One of the world's most widely used trade platform products is apparently MetaTrader4, developed by MetaQuotes Software Corporation for Forex market trading. The platform includes an integrated development environment (IDE) MetaEditor, intended for writing scripts in a programming language called MetaQuotes Language, or MQL4 for short. The language's syntax is based on the classic C language syntax, and the flow logic has not been significantly changed since the previous version of the platform that used MQL II as the programming language. The new automated trade framework is, undoubtedly, an evolution of the previous one. Both languages feature good functionality, with an optimum set of built-in trading and utility functions which is quite sufficient to implement the basic operations, and a facility to define custom functions to help implement non-standard ideas. From the programming point of view, MQL4 is much more convenient that its predecessor; this language is more oriented at professional programmers, while MQL II, in my opinion, will rather suit financial experts wishing to build trading programs (or trading advisors, in the MetaQuotes terminology) of their own.

2.2. Omega Research-based Solutions. In the New World, the vast majority of companies use the Omega Research platform developed by TradeStation Securities, Inc. This platform has long ago proven its worth at the worldwide market, and to date experts consider it to be the best system for technical analysis. The provided IDE called Omega Research PowerEditor is intended to create control programs in EasyLanguage (EL). The language's major advantage that strikes the eye is the easiness (hence is the name) of placing opening and closing orders. The corresponding program instructions can be written such as if we were formulating an order to our broker in the plain human language. In MQL4, for example, placing an order to open a position would involve specifying about a dozen of various parameters. In EasyLanguage, the same can be expressed in a short statement using a few words. Working with technical indicators is about that simple, too. But don't fall under an illusion: when creating these simple commands, language developers sacrificed the functionality and limited the possible ways of using a particular function, therefore effectively depriving the IDE users of the opportunity to accurately implement their own algorithms. TradeStation decided not to create extensive libraries of built-in trading and utility functions but to limit to only an essential set. As the platform advanced, the number of functions written by both in-house and third-party developers grew, and TradeStation simply included them as user-defined functions into the repository of its scripts. As a result, the functionality offered to users is not in the least scarcer than that of MetaQuotes product. PowerEditor provides a built-in dictionary that lets user search and get help on the available functions. Another handy tool worth mentioning is the strategy builder. Using the strategy builder, the user can easily create a basic algorithm for his or her trading program, and then modify and adjust it as necessary. EasyLanguage is an old-timer and pioneer in the field of creating automated trading systems for the stock market. It was the basis for the development of MQL II. EasyLanguage will be a good choice for programmers, but still a better one for financial experts more oriented at analyzing the market than trading.

2.3. ProTrader-based Solutions. Professional financial experts can choose the ProTrader2 or ProTraderFX platform as their working tool, depending on the type of the financial market-stock or Forex, respectively. The two platforms are developed and supported by PFSoft LLC. While featuring the specially developed ProTrader Language (PTL), the provided IDE named PTL Builder offers also the opportunity to create scripts in MQLII, MQL4 and EasyLanguage. For this, the text of the program is translated to a language-independent code. Therefore, at runtime it does not matter in which language the script was written. This technology does not only enable creating new scripts, but makes it possible to use freely the entire accumulated collection of scripts that many experienced traders possess. The main idea put into the new scripting language was to ensure maximum reliability and predictability of the scripts being run. The PTL language is built so as to minimize the possibility of making a mistake in the text of a user's script-the potentially dangerous points will be detected even before the script is tested or launched. Regardless of the programming language chosen, the platform works with verified managed code while running the script. This Microsoft-developed technology enables proper handling of errors that cannot be detected before the script is run. This means the program will not fail and will not perform any unwanted operations that might be due to critical errors or damage caused by another program, for which the account holder would eventually have to pay. The PTL Builder IDE will serve well both financial experts and programmers thanks to its support of different programming languages and provided tools such as tester and debugger.

3. Approaches for Creating Automated Trading Systems and Recommendations for Using Them. It hardly needs mentioning that choosing an information and trading platform should be taken with all seriousness. For those who plan to use an automated trading system in their business, below are some points I would recommend considering, based on my personal experience.

Choosing a Working Environment First of all, define the type of tasks the automated trading system is to perform. These could be:

Actual trading: opening and closing positions in selected instrument(s). Secondary support-type functions. These could include placing protective orders, creating and sending out reports of notifications. Analyzing the market with different technical analysis tools using your own algorithm. Now, after you have studied user comments on the Internet and perhaps consulted your broker, proceed to getting the feel of the products offered. I strongly encourage you not to just have a cursory look, but to test the system for a day of two, thankfully, most of the large companies will let you sign up for a demo account for testing. Pay attention to both the convenience of the IDE and the tools that go with it, and to reliability and security of the control programs created with the IDE.

4. Conclusion. In this article, I neither discuss any programming rules for creating the advisors, nor the specifics of writing scripts in a particular language. On these subjects, there are whole books written as well as a number of articles. My aim was to present several points which I think to be quite important but which have not been sufficiently covered in existing publications. So, are automated trading systems your ally or enemy? When used carefully and without hasty judgments, an automated trading system can facilitate the financial expert's work and bring in certain profits. But when used incorrectly, incompletely tested, or having settings changed frequently, the automated trading system can lose the money you entrust to it. Remember that an automated trading system is not going to do your job for you without any effort on your part. Use it to solve your existing problems and not add new ones.