emotions, impact, 133–135equalizer, effect, 80–81exposure, downdrafts, 110fundamental aspect, 91geopolitical nature, 157Goldman Sachs, involvement, 7historic move, 122information, obtaining, 167knowledge, 35, 54Merrill Lynch, involvement, 7mood, change, 129move, story, 168opinion, 114orders, ﬂow, 156–157outthinking, trader job, 129pricing, 134–135psyche, 120–121small investor, involvement, 69technical work, DeCore/McLaughlin
opinion, 117–118
technician, 140timing, 110
incorporation. See Portfolio
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transparency, 85–86truths, existence, 165Markowitz, Harry, 58–59Marshall Plan, rebuilding efforts,
151–152
Martino, Kristine, 165–166M&As. See Mergers and acquisitionsMcLaughlin, Vince, 15
inactivity, 43index arbitrage career, success,
27–28
opinion. See Charts; Marketsstrategy, trading, 40–41
McNulty, Jim, 180Melamed, Leoadvice, 71Anti-Defamation League honor, 80impact. See Financial futures;
Globex; International MonetaryMarket
leadership, 74Santelli, meeting, 140understanding, 80visionary, 73
Merc. See Chicago Mercantile
Exchange
Mergers and acquisitions (M&As),
45
Merrill Lynchfutures, 171involvement. See Markets
Micron Technologies, 105Microsoft dividend payment, 44Mid-Cap 400 contracts, trading. See
Standard & Poor’s
Miller, Merton, 84, 105
Multistrategy, multiadvisor managedfutures fund, concept, 67
Murrey, T.H., 100Murrey Math, 100Murrya, Troy, 22
NNasdaq
arbitrage, execution, 9averages, 62bubble, 176contract, saving, 176e-mini
success, 79version, 77futures market
examination, 89–90success, 126
index, 31
resistance, chart points (usage),
123
market, level, 79
Nasdaq 100 Trust (QQQ), product
example, 51
Nature and Trading methodology, 99New York Board of Trade, 131New York Mercantile Exchange, 131New York money banks, funding
desks, 95
New York Stock Exchange (NYSE), 47
averages, 62ﬂoor, market makers (impact), 52system, computer glitch, 43
Nikkei 225 measurement. See Japanese
stock marketNikkei contracts. See
inﬂuence, 108opinion, 106. See also Random walk
Dollar-denominated Nikkeicontracts
theory
Mistakes, importance, 17–18Modern portfolio theory (MPT), 56–57Momentum trading, 60–61Money management, 179–180Money supply ﬁgures, release, 52Monieson, Brian, 71Monthly timing, impact, 51–52
Nikkei futures pit. See Chicago
Mercantile ExchangeNikko International, creation, 67–68Nikko Securities, 37, 166
institutional asset allocation order,
execution, 38
investment vehicles, need, 67–68John Labuszewski, involvement, 1
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SECRETS OF THE TRADING PROS
Nixon, Richard, 160Nomura, 15, 38Noncorrelated asset classes, concept,
64Nonfarm payrolls
categorization, 146employment, count, 145–146
Nonperishable commodities, trading.
See Chicago Board of Trade
Non-Random Walk Down Wall Street
(Lo), 116
Non-random walk theory, 116–118Norman, Mike, 99–100NYSE. See New York Stock Exchange
OO’Callaghan, Jack, 22October 1987 crash, 12–13OEX. See Standard & Poor’s 100 indexOff-hour volume records, 112Oil embargos, 61–62Open outcry session, 54Opportunity cost, 148Options, 3–4
premium/volatility, 4–6relationship. See Spreaderstraders, 31–33Order ﬂow, 160–161Osaka exchanges, 173Out of bullets. See Arbitrage
PPanic, fear (relationship), 128–129Parkinson, Ward, 105Peter Lynch method, 13–14Peters, Ralph, 35–36, 115
information network, 162–163Pits. See Chicago Board of Trade
involvement. See Chicago Board
Options Exchange
market trading, 97psychology, 124status quo, change, 84–85
Pool operators, 66Pork bellies
market, involvement, 26pits, 115
Portfolio
above-average returns, 116diversiﬁcation. See Real portfolio
diversiﬁcationmanagers, market timing(incorporation), 109
Position traders, 29–31. See also HelmsPost-cold war effect, 122Post-IPO exchange politics, 78“Potential Role of Managed
Commodity-Financial FuturesAccounts in Portfolios of Stockand Bonds” (Lintner), 63
PPI. See Producer Price IndexPre-IPO exchange politics, 78Price ﬂuctuations, MBA knowledge,
107–108
Price movements
impact, 64randomness, 107
Price pressures, tracking, 147Pricing instability, 134Producer Price Index (PPI), economic
report, 147–148
Productivity
economic report, 149growth, importance, 149
Professionals, information (location
process), 156–158
Proﬁtability, key, 158“Proof that Properly Anticipated
Prices Fluctuate Randomly”(Samuelson), 106Proprietary trading houses (prop
shops), 78Prosperity, creation, 122Purchasing power parity, 97
maintenance, 98
Pit-traded product, migration, 81Plantery, Mark, 22Point-and-ﬁgure charts, 90
QQQQ. See Nasdaq 100 TrustQuant jocks, 28
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quote boards, 30screen, usage, 141
RRacom Prize, 92–93Random events
basis. See Random walk theoryimpact. See Trends
Random walk, existence, 144Random Walk Down Wall Street, A
(Malkiel), 106
Random walk theory, 105. See also
Non-random walk theory
concept, 107domination, 108introduction, 109Merton opinion, 106–107random events, basis, 113technology, relationship,
109–110
Random walkers, opinions
(importance), 113–115
Randomentalists, 108Randomness, 115impact, 112–113
Reagan, Ronald (tax lowering), 152Real portfolio diversiﬁcation, 61–63Reinglass, Aaron, 101Relative strength index (RSI), 101Reminiscences of a Stock Operator(Lef `evre, Edwin), 94Residential units, construction, 148Resistance levels, usage, 102Retail houses, problems, 79Retail investors, 114Retail sales
economic report, 146–147growth, deceleration, 147
Reward, understanding, 175–178Reward/risk enhancement overlaystrategy, pursuit, 65
Risk
arbitrage, 45compensation, 109understanding, 174–175
197
Risk management, 173–174
absence, 173impact, 171
Risk-adjusted returns, 109
production, 58
Risk/reward concept, 110Risk-to-reward ratio, 63
shift, 58usage, 176
Rollover conditions. See Standard &
Poor’s 500 futuresRSI. See Relative strength indexRubik’s Cube puzzle, analogy, 145Rule 80-A, impact, 84Runner, experience. See Chicago
Board of Trade; ChicagoMercantile Exchange
Russell 2000
contracts, trading, 7e-mini version, 77futures, 46, 180markets, 125measurement. See Small-cap stocksweakness, 50
Russell arbitrage, execution, 9Russell Index, examination, 52–54Russell stocks, supplier
representation, 53
SSalad oil, trading, 162Samuelson, Paul, 106Sandner, Jack, 78Sandor, Richard, 140Santelli, Rick, 138, 158interview, 138–145
Sanwa Bank, 139Sarbanes-Oxley Act, passage, 129Scalpers, 21
long-term positions, holding, 157quality, 25
Scarnavac, John, 20, 124Scholes, Myron, 3
formula, creation, 5–6
Segal, Joe, 26Sell program, 41
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SECRETS OF THE TRADING PROS
September 11 (9/11)
Spreaders. See Intramarket spreader
disaster recovery sites, relocation,
132emotions, 133events, 134. See also ChicagoMercantile Exchangeimpact, 95–96, 129–131. See also
Capital markets; Markets; Stockmarket
media, interaction, 132–133
Sereleas, George, 124–126S.G. Warburg, Swiss Bancorp
(merger), 38Shearson Lehman, 138–139Shepard, Bill, 75genius, 76
Short-term Treasuries, run assurance,
111
Sigma, 180. See also Six SigmaSilver market, Hunt brothers (impact),
160–161Silverman, David, 74Simex. See Singapore InternationalMonetary Exchange
Simon, Paul, 80, 105Singapore International Monetary
Exchange (Simex), 173
Six Sigma, 180–181Six-Day War, 115Sliter, Donald, 24–25, 178
trader, ability, 25
Small-cap stocks (impact), Russell2000 measurement, 52Small-cap universe, representation,
53Soros, George, 48Soya Beana, 36Soybeans
Fisher examination, 97–98market, creation, 35
S&P. See Standard & Poor’sS&P500. See Standard & Poor’s
500
SPDR. See Standard & Poor’s
Depositary ReceiptsSports, trading (relationship), 21–23
options, relationship, 27–29personality, search, 27–28
Spreading, 26–27Spreads, legging, 42SPX. See Standard & Poor’s 500 IndexSquawk Box, 44Standard & Poor’s 100 index (OEX), 27
options, 31pit, involvement. See Chicago Board
Options Exchange
Standard & Poor’s 500 Index (SPX), 27
options, 31pit, involvement. See Chicago Board
Options ExchangeStandard & Poor’s 500 (S&P500)contracts, long position, 121e-mini, success, 79index, 47
mutual fund outperformance, 107
strength, 50
Standard & Poor’s 500 (S&P500)
futures, 22, 31purchase orders, 38
Standard & Poor’s 500 (S&P500)
futures contractelectronic trading, 81splitting, 72version, size reduction, 75Standard & Poor’s 500 (S&P500)
futures pitHelms, movement, 30liquidity providers, 128rollover conditions, 33
Standard & Poor’s Depositary Receipts
(SPDR)
ETF, 44product example, 51Standard & Poor’s (S&P)arbitrage, execution, 9contract, 33
creation, 111value, 86
Google, addition, 44JDSU, addition, 44market, involvement, 26
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MidCap 400
e-mini version, 77futures, 46
Mid-Cap 400 contract, trading, 7MidCap market, 125options pit. See Chicago Mercantile
Exchangepit activity, 120
Statistical arbitrage, 45–47usage. See Cooper NeffStatistical index arbitrage, 45Stock indexes
futures, Globex session, 112futures markets, settlement
problems, 106–107usefulness, 90–100
Technical Analysis of Stocks and
Commodities (Lo), 116
Technicians, work, 92Technology
history, 76–77relationship. See Information;Random walk theory
universality, 165–168usage, 75–76
Technology stocks (tech stocks)
breakdown, 16usage, 112
(end-of-the-month anomaly), 49
Terminal value, acceptability,
trading. See Globex
Stock market, 60closure, 130reopening, 132September 11, impact, 130
Stock prices,
inﬂation/deﬂation/economicuncertainty (impact), 64
Strategic planning committee, 75Structural analysis, 94–95
Fisher concept, 95
Structured product approach,
66
Sung, Bing, 11, 30, 178
1987 crash, impact, 12–13advice, 34asset allocation instruction, 56lessons, 54trader, ability, 100
Support levels, usage, 102Swiss Bancorp, merger. See S.G.
Warburg
Swiss franc/Deutschmark, differential,
26–27
65–66
Terrorism, impact, 142Texas hedge, 121Third-party billing, 171TPS. See Transactions per secondTraders. See Delta-neutral traders;
Options; Position traders
ability. See Athletescharacteristics, 33–34competition, inability, 101courage, 182–185discipline, 181–182edge/advantage, loss, 81–84examples, 24–26experience, 19faith, leap, 164–165greed, 177qualities, 20–21sensory overload, 182shock, 113–114
Trading. See Market trading
approach, 95art/science, contrast, 1disappointments/opportunities,
Synthetic market exposure, 49
71
TTechnical analysis, 89
charts, problems, 100–102education, importance, 102–103Fisher approach, 93–94
edge/advantage, loss, 81–84pit, psychology, 126–128relationship. See Sportsrevolution. See Futuresroom, charts (presence), 144textbook advice, 109
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SECRETS OF THE TRADING PROS
Trading Advisor Qualiﬁed Universe
Index, 62positive gain, 63Transaction costs, 64
impact, 108
Transactions per second (TPS), 77Trends, random events (impact),
110–112
TV shots
See Bloomberg TV; CNBCexecution, 20–21
UUAL crash, 121UAL earnings, 55–56Uncertainty, management, 171Unemployment
economic report, 145–146rate, measurement, 145reports, movement, 140Wall Street, anticipation, 146
Unemployment Fridays, 139University of Chicago Graduate School
of Business, 107–108
Upstairs screen trader, 34U.S. dollar
demand, impact. See Foreign
exchangedifferentials, 26–27
VVolatility. See Optionscurve, ﬂattening, 57driving. See Intraday volatilityimpact, 126increase. See Currenciestest, 113
Volatility index (VIX), creation, 13Volcker, Paul, 152
WWage inﬂation, impact, 146Wage trends, insight, 146Walking casino, reference, 17Walsh Greenwood, 15War premium, usage, 134Warburg. See S.G. WarburgWealth
effect, 123management, 179–180
Weblog (blog), impact, 168–169Weisblum, Scott, 46, 79, 125Welch, Jack, 180
YYastrow, Peter, 130Yen/British pound, differential,
26–27Y2K phenomenon, 31
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