Derivatives- say what?

[Bobbyoutback]

Originally Posted by Nesti

Because we're not China. Any national shorting China would go to the firing squad...rightly so too.

The West wrongly admires those who play survival of the fittest monetarily. The weak or ignorant are cannon fodder.

I wanna see Wall Street become down-town Mogadishu.

Like your fighting spirit Mate
Got to ask about survival of the fittest , where do you stop giving to the unfit ?

I'm trading live the Dow at the moment , as I type its chopping up & down , my real money is on the line , hope I survive these new hunting grounds .

Regards Bobby.

[Bobbyoutback]

In the short time from my last post the Dow dropped over 30 points & almost Got me , I had to keep dropping my stop levels.

This trading game is cruel on the nerves .

Bobby

[Nesti (Mark)]

Originally Posted by Bobbyoutback

In the short time from my last post the Dow dropped over 30 points & almost Got me , I had to keep dropping my stop levels.

This trading game is cruel on the nerves .

Bobby

I have to ask the question...what's the difference between paying on-line gambling and playing on-line stocks?

I'm sure the former is rigged and that latter is manipulated.

Geez, I don't even play Lotto. LOL

[Bobbyoutback]

Originally Posted by Nesti

I have to ask the question...what's the difference between paying on-line gambling and playing on-line stocks?

I'm sure the former is rigged and that latter is manipulated.

Geez, I don't even play Lotto. LOL

Your answer is I'm trading index CFDs Nesti , how is trading these derivatives manipulated as you alluded to ?

Cheers Bobby .

[spearo (Frank)]

DJDD,
good reference
I read the blog and it all makes more sense to me now
surprising that these things are allowed really
frank

[DJDD]

first, i know very little about the world of shares/trading/CFD's, etc. I have shares in Toll and Asciano, about 50 of each, just to get my toes wet...

second, don't want to offend anyone

right, that's out of the way.
I do not understand what value "day trading", short term trading, etc. adds to a company or the economy as a whole. I have to agree with Nesti- it does seem little different to online gambling. In fact, the term "trading game" says it all...

although, willing to be educated on this.

[DJDD]

Originally Posted by spearo

DJDD,
good reference
I read the blog and it all makes more sense to me now
surprising that these things are allowed really
frank

what got me interested is that the guy on the radio made it sound like all of this derivative trading really helped everyone, including the little person.
then I heard another guy in an interview the next day say that financiers, bankers, etc. had learnt from recent events. of course they did...

[Starkler (Geoff)]

Originally Posted by DJDD

I do not understand what value "day trading", short term trading, etc. adds to a company or the economy as a whole. I have to agree with Nesti- it does seem little different to online gambling. In fact, the term "trading game" says it all...

although, willing to be educated on this.

It doesnt value add anything except keep brokers and the ASX in business.
Buying shares adds zilch to the economy or even the companies whose shares you're buying unless they are newly issued shares. Trading shares already existing is akin to dealing in 2nd hand goods.

[Starkler (Geoff)]

Originally Posted by Bobbyoutback

I had to keep dropping my stop levels.

Big mistake! Pretty much any time I have moved a stop loss back I have just lost more money when it got hit. If you're going to move it in real time to avoid having it hit then you are ignoring the reason for having it in the first place. A losing trade is a losing trade and needs to be cut loose.

[Bobbyoutback]

Originally Posted by Starkler

Big mistake! Pretty much any time I have moved a stop loss back I have just lost more money when it got hit. If you're going to move it in real time to avoid having it hit then you are ignoring the reason for having it in the first place. A losing trade is a losing trade and needs to be cut loose.

Yes all the trading books in my library say the same , guess its hard to take the loss when emotions say fight for it .
I did take the hit today on 4 contracts that I rolled overnight Ouch "

Went back in again long , have set trailing stops nice & wide .
Should have been scalping but to lazy to concentrate .

Cheers Bobby.

[Allan_L (Allan)]

I don't want to offend anyone, either.

FUTURES:
OK your growing wheat.
You are short of funds.
You know (hope) you will be richer when you can sell the crop.
But that is months away.

So you agree with a buyer to sell him a certain amount (not all) of your crop for a "good price" to be delivered at a date 6 months hence. The price incoporates the expected price at that time and a discount for the present value of that money now (interest rate) and an inticement.

All is good.
you get the money now for the crop.
The buyer has a guarantee of supply.
All is good.

Except if the Buyer is someone who does not really want x,000 bushells of wheat, then or ever. (Read : A Bank or other trader )

Then he has to find a REAL buyer.
Until he does, he is playing the risk that the price will move in his favour.

OR
He can make a SELL contract for the exact amount of wheat he has the previoius BUY contract for (and same period). Another Futre! But the two contracts offset. And he can take his profit (or loss) NOW. that is the margin. And the Futures Exchange monitors margins to make sure they do not get out of hand.

So futures are good for the real producer and the end purchaser.
But it is the middleman who speculates and takes the risk.

FINANCIAL FUTURES:
You want to buy a tractor. It comes from overseas. It costs $200,000US. It cannot be delivered until 6 months from now. At that time you will have to pay for it.
You dont want to risk exchange rate changes so to completely eliminate any risk, you buy a future contract for $200K US for 6 months hence.

So this future completely eliminates any exchange rate risk.

They are good in principle. But the trading (without REAL Delivery in mind) can get speculative and then you are gambling. This is where regulation may need stiffening up! Traders wanting a quick buck!
AND, not all Futures are through the Futures Exchange.

I don't really have a point. Just wanted to show that they can have a good purpose.
Maybe regulation would be improved if they should make it compulsory for ALL futures to be traded through the Futures Exchange ??
.

[Nesti (Mark)]

Originally Posted by Bobbyoutback

Your answer is I'm trading index CFDs Nesti , how is trading these derivatives manipulated as you alluded to ?

Cheers Bobby .

Because even traders admit to manipulating the market...so long as you have enough pull. You can't tell me Sachs don't play any games.

Watch Max's video clip at about the 3min mark into the program...says it all really!
http://www.youtube.com/user/MaxKeise...58/rtIEGvtwHFI

Mum and Dad investors are icing on the cake for these people who spend their entire lives bending and manipulating the play...and then dodging the SEC raindrops.

Yes, I know the ASX is far more regulated.

[Nesti (Mark)]

Originally Posted by Bobbyoutback

Your answer is I'm trading index CFDs Nesti , how is trading these derivatives manipulated as you alluded to ?

Cheers Bobby .

I've posted this one before, but not only is the market manipulated, it's getting SKIMMED to the tune of $100 Million a day!!!
http://www.youtube.com/watch?v=iDzjxV8JUzQ

Sorry, "don't want to offend", but isn't it just playing for crumbs with a loaded dice???

[Bobbyoutback]

Originally Posted by Nesti

Sorry, "don't want to offend", but isn't it just playing for crumbs with a loaded dice???

No offense taken
I've known about these practices for a long time & try to ride their plays sometimes by using the art of contradictional trading , I can't manipulate any of my trades , all I can hope to do is be on the right side when the big boys fire off their algorithm bots .

I did enjoy the videos ' thanks .

Regards Bobby.

[Tallstock (Peter)]

Bobby,
It might be interesting for those reading this thread if you explain what you do in more simple English.
How you create income for yourself (in a location like Broken Hill) from the market/derivatives whilst battling the "big boys" could help others understand the fascination of successful investing.
Peter

[Bobbyoutback]

Originally Posted by Tallstock

Bobby,
It might be interesting for those reading this thread if you explain what you do in more simple English.
How you create income for yourself (in a location like Broken Hill) from the market/derivatives whilst battling the "big boys" could help others understand the fascination of successful investing.
Peter

Hello Peter '
Firstly I'm no expert at this .

What I do is trade some stock indices from this list ,

• FTSE 100 Cash
• Wall Street Cash
• Germany 30 Cash
• Japan 225 Cash
• Hong Kong Cash HS34
• China H-Shares Cash
• US SPX500 Cash
• India 50 Cash

but mostly the Aussie 200 Cash based on the Australian XJO or the top 200 stocks on the ASX .
This trades almost 24 hours a day & some nights I,m at it till 5AM .
The standard contract is worth $25 a point with an initial margin requirement of $1250.00 or a mini contract at $5 per point & $250 margin.

Depending on the style of trading I'm using , I can go long or short & force openings to be on both at the same time .
The game is to take more points then you lose .
I have good & bad days .

What I'm trying to do is work out a methodology that will allow me to always ride the changing trends & chop , this has been a daunting challenge .
Ren'e Descartes published a book ( The Discourse on Method ) in 1637 that layed the foundations for modern thought .
Descartes ability to solve problems was unique , he imagined the problem solved and looked at the consequences of the solution , in doing so he would quickly realize whether his solution had been right or wrong .

Cheers Bobby.

[Tallstock (Peter)]

Hi Bobby,
Thanks for your information.

How would Descartes solve the problem of consistently generating income from derivatives such as Index CFD?
What "consequences" would he consider successful/unsuccessful?
How would he judge "right or wrong"?

Sitting in front of a computer screen (or telescope) at 5 a.m. has no attraction for me. However trading shares in the ASX Top 200 between 10 a.m. and 4 p.m. is more like a day job. Learning what the Fund Managers of Index Funds do during trends and how they create momentum gives small investors like me a chance to be successful.
Using charting software with a system that has produced consistent results gives me added confidence when seeking candidates to invest in.

A long time ago I gave up trying to "always" ride the changing trends.
I pick and choose carefully and keep my greed under control.
I have a small Margin Loan account (rarely used). I do not short.

I believe, derivatives have their place in the world financial markets. They are not going to be regulated out of existance any time soon.
Peter

[Allan_L (Allan)]

This is a true (albeit fractured) story:
I work for a company that produces a commodity. (Lets call it a wattsit)
Everyone needs wattsits, every day.
However, it only lasts for one day. It cannot be stored.
So you have to buy these as you want them.

My company has to guess how many will be needed each day.
Some days we do too many. Some days too few. Because demand fluctuates on unrelated basis.
Therefore, the price is variable day to day depending on supply and demand.

It costs us $25 to make one wattsit (on average).
We generally can sell them for about $40.

But some days the price will go to $1000.
Also, some days we only get $10.

Someone then saw a niche and created a derivative market for wattsits.

Now, we could use futures to secure our profit, as I described the other day, or we can use this new derivative. It is a ceiling. (It could just as easy be a floor).
It works like this.

I sell you a contract that says if the price of wattsits goes over $60, I will pay to you the difference between the actual price that day and the $60. For this right I charge you say $15.

Ideally, everybody wins!
I pay you the difference if the price goes over $60 for that day.
But thats OK because the middleman paid me the FULL price. I am a winner either way.

You pay the middleman the Full price, but I give you back, the amount over $60. If the market price went to $1000 you are very happy.

No speculation, only safety limits.

Again, the only problem comes with speculators who don't want to produce or use wattsits. They just want to buy the "contract" and hope that the price goes up. Because they don't consume them, the WHOLE $925 is theirs as profit in the above scenario. ({$1000 -$60} - $15)

I see that it is sort of like the original description in post 1. Buying a contract based on someone elses mortgage status.

Hope this explains more of WHY they came exist.
Not necessarily evil.
But in the wrong hands they sure can be.

BTW: The derivative market for wattsits is not currently regulated.
(At least there is a law that says we cannot manipulate the market by deliberately producing too many or too few! Lucky for YOU ! )

(Aside: I wonder if anyone can guess our commodity)

[Rod66 (Rod)]

Sounds a bit like the electricity supply market...

[Bobbyoutback]

Originally Posted by Tallstock

Hi Bobby,
Thanks for your information.

How would Descartes solve the problem of consistently generating income from derivatives such as Index CFD?
What "consequences" would he consider successful/unsuccessful?
How would he judge "right or wrong"?

Sitting in front of a computer screen (or telescope) at 5 a.m. has no attraction for me. However trading shares in the ASX Top 200 between 10 a.m. and 4 p.m. is more like a day job. Learning what the Fund Managers of Index Funds do during trends and how they create momentum gives small investors like me a chance to be successful.
Using charting software with a system that has produced consistent results gives me added confidence when seeking candidates to invest in.

A long time ago I gave up trying to "always" ride the changing trends.
I pick and choose carefully and keep my greed under control.
I have a small Margin Loan account (rarely used). I do not short.

I believe, derivatives have their place in the world financial markets. They are not going to be regulated out of existance any time soon.
Peter

Greetings Peter ,


Descartes would keep looking for the solution that tested profitable in all market conditions , If I may use this parable as an example :
When questioned about his 1000 failed experiments leading to his invention of the light bulb Thomas Edison was asked " what was it like to fail a thousand times " . He replied he hadn't failed , he had " discoved a thousand ways it didn't work .

I have no faith in charting software nor technical or fundamental analysis .
Elliot Wave Theory was one area I spend valuable time on once , in the end I discovered it illusionary .
True example : On the 11 November 2004 the SPI ( share price index futures ) neared 3866 , a technical hedge fund called a major Elliot Wave top at 3866 announcing they would stake their reputation on it having shorted 4500 contracts .
Then the phones ran hot when the Elephants came to play , the best exit offer obtained was 3920 .

Good Luck with your trading .

Cheers Bobby.