<s> TechnicalAnalysis of theCurrency MarketClassic Techniquesfor Profiting fromMarket SwingsandTrader Sentiment
BORIS SCHLOSSBERG
John Wiley & Sons, Inc.
TechnicalAnalysis of theCurrency Market
Founded in 1807, John Wiley & Sons is the oldest independent publishingcompany in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketingprint and electronic products and services for our customers’ professionaland personal knowledge and understanding.The Wiley Trading series features books by traders who have survivedthe market’s ever changing temperament and have prospered—some byreinventing systems, others by getting back to basics. Whether a novicetrader, professional, or somewhere in-between, these books will providethe advice and strategies needed to prosper today and well into the future.For a list of available titles, visit our web site at www.WileyFinance.com.
TechnicalAnalysis of theCurrency MarketClassic Techniquesfor Profiting fromMarket SwingsandTrader Sentiment
BORIS SCHLOSSBERG
John Wiley & Sons, Inc.
Copyright © 2006 by Boris Schlossberg. All rights reserved.Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.No part of this publication may be reproduced, stored in a retrieval system, or transmittedin any form or by any means, electronic, mechanical, photocopying, recording, scanning,or otherwise, except as permitted under Section 107 or 108 of the 1976 United StatesCopyright Act, without either the prior written permission of the Publisher, or authorizationthrough payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc.,222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the webat www.copyright.com. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,(201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.Limit of Liability/Disclaimer of Warranty: While the publisher and author have used theirbest efforts in preparing this book, they make no representations or warranties with respectto the accuracy or completeness of the contents of this book and specifically disclaim anyimplied warranties of merchantability or fitness for a particular purpose. No warranty maybe created or extended by sales representatives or written sales materials. The advice andstrategies contained herein may not be suitable for your situation. You should consult with aprofessional where appropriate. Neither the publisher nor author shall be liable for any lossof profit or any other commercial damages, including but not limited to special, incidental,consequential, or other damages.For general information on our other products and services or for technical support,please contact our Customer Care Department within the United States at (800) 762-2974,outside the United States at (317) 572-3993 or fax (317) 572-4002.Wiley also publishes its books in a variety of electronic formats. Some content that appearsin print may not be available in electronic books. For more information about Wileyproducts, visit our web site at www.wiley.com.Library of Congress Cataloging-in-Publication Data:Schlossberg, Boris.Technical analysis of the currency market : classic techniques for profitingfrom market swings and trader sentiment / Boris Schlossberg.p. cm.—(Wiley trading series)ISBN-13: 978-0-471-74593-8 (cloth)ISBN-10: 0-471-74593-6 (cloth)1. Foreign exchange futures. 2. Foreign exchange market. 3. Speculation.I. Title. II. Series.HG3853.S35 2006332.4'5—dc222005031905Printed in the United States of America.10
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To my partner Kathywithout whomnone of this would be possible
Contents
CHAPTER 1
FX 101
1
CHAPTER 2
Is It All Just Random?
25
CHAPTER 3
The Secret to Trading
29
CHAPTER 4
Show Me the Data!
41
CHAPTER 5
Trend Is Your Friend?
59
CHAPTER 6
Gauging Range
79
CHAPTER 7
Fibs Don’t Fib
99
CHAPTER 8
Patterns and Antipatterns:Know Your Mark
113
Know Yourself, Know Your Setup
143
CHAPTER 9
CHAPTER 10 Setups! Setups! Setups!
161
Glossary
185
Index
207
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TechnicalAnalysis of theCurrency Market
CHAPTER 1
FX 101
K
now this. Technical analysis will not make you rich. It will not turn$1,000 into $1 million in a matter of weeks. It will not allow you todesign a computer system that will automatically generate incomewhile you luxuriate on the golf courses of Florida or snorkel in the azureblue waters of Cozumel.Like every worthwhile endeavor in life, success in trading requiresdedication, persistence, and a never-ending desire to excel. Technicalanalysis is only a tool—albeit a very good one—that if used properly cangreatly sharpen and improve your trading in the currency market, but itcannot by itself make you a successful trader.This book is about the practical application of technical analysis tothe foreign exchange (FX or forex) markets. In it, I show you the key advantages as well as some of the limitations of this trading discipline. Thisbook alone cannot guarantee success, but I can assure you of one thing:Your chances of winning will increase markedly if you learn to how to usetechnical analysis to trade FX.Before turning to the business at hand, however, it’s critical to understand how the FX market works and, more importantly, how it differsfrom all other financial markets that you may have traded.
TWO TRILLION REASONS TO TRADEThe FX market is the biggest financial market in the world. By the timeyou read this book its volume will have reached more than $2 trillion1
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TECHNICAL ANALYSIS OF THE CURRENCY MARKET
per day in notional turnover. That’s right—you didn’t misread the numbers. The FX market trades 2 trillion with a T, not 2 billion with a B, dollars per day. Consider that the New York Stock Exchange (NYSE)—thebiggest stock market in the world—processes only $60 billion worth oftransactions on its busiest trading days of the year, and you can appreciate the scope and the size of the FX enterprise (see Figure 1.1).Currency trading dwarfs all other markets in size, but it is a quiet giantof the finance field. Most financial media treat FX as an exotic afterthought rather than as the marquee financial market in the world. I am always amazed to flip open the finance section of the Wall Street Journaland see a tiny two-inch-square story buried deep on page C5 summarizingthe day’s action in the FX markets, while the front page of the finance section is entirely devoted to stocks and bonds.Guess what? Though few investors realize this fact, the currency market has far more impact on the value of your overall investment portfoliothan the quotidian events at Dell, General Motors (GM), or Wal-Mart. In aglobal economy, every major corporation is a multinational enterprise bynecessity, and the direction of currencies can often affect these companies’ profit margins more than any other input factor. Why do you thinkthe FX market is so large? Because all of these multibillion-dollar corporations are its main customers.
FIGURE 1.1 FX—A Growing Market
FX 101
3
MARKET RULESThe only rule in the FX market is that there are no rules. Want to short withimpunity to mercilessly drive down the value of the currency? Go rightahead. No artificial uptick sale rules will ever stop you. Your next-doorneighbor’s cousin overheard on the golf course that the Federal Reservewill announce a surprise rate hike next week? Feel free to empty out yourbank account and load up on the trade. No one will come after you if youare proven right. In the FX market there is no such thing as insider trading.In fact, key European economic data such as German unemployment figures are often leaked to the press before their official release dates.Suppose you are an institutional trader and a customer calls you tosell “one yard” ($1 billion worth) of euros in exchange for dollars rightaway. Suppose further that instead of executing the customer’s order first,you decided to sell some EUR/USD from your firm’s proprietary account,secure in the knowledge that the size of the customer’s order will push themarket lower by at least 15 points. Try that kind of front-running on thefloor of the New York Stock Exchange or in the pits of the Chicago Mercantile Exchange (CME) and you’ll wind up fined, unemployed, and possibly even jailed. In FX? No problem. You want to front-run customer orderflow? Feel free to give it a try, but be warned you won’t have those customers for long as they take their business to the hundreds of other market makers willing to provide fairer and more accurate execution.While there is no global oversight for the FX market, there is very efficient self-regulation. Because key members both compete and depend onone another at the same time, any type of overt cheating is quickly eliminated as it poses tremendous structural danger to the market as a whole.You could say that in the case of FX “honor among thieves” works betterthan the iron fist of the regulators at ensuring that the market performssmoothly and efficiently.Having said all that, I must note that FX is not the Wild West of finance,and in fact major money centers of the world do have regulatory agenciesthat oversee FX operations within their own jurisdictions. In the UnitedStates the FX market is overseen by the National Futures Association(NFA) and the Commodity Futures Trading Commission (CFTC). In theUnited Kingdom it is the Financial Service Authority (FSA) and in Japan itis the Ministry of Finance (MOF) that sets guidelines and regulations.All of these regulators impose strict capital requirement rules for theirmember firms and audit their books on an annual or biannual basis. If thefirm is regulated in the United States, you can see its net monthly capitalstatements (the amount of capital each firm possesses in excess of theminimum set by the regulators) at http://www.cftc.gov/tm/tmfcm.htm. You
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TECHNICAL ANALYSIS OF THE CURRENCY MARKET
can also visit this webpage and see what, if any, complaints or regulatoryactions have been lodged against the firm in the past.For U.S.-based retail traders, doing business with a non-NFA memberfirm is like playing Russian roulette with your account. Not only will younot have any idea about the financial health of the dealer you trade with,but also you will have no real recourse if the company absconds with yourmoney. However, any firm that is a member of the NFA must submit tobinding arbitration in case of a dispute. So if you have an operational or atrade problem with the firm, there is a well-established legal procedure toadjudicate your grievances. Know this, however: While you have very important protection by dealing with an NFA-licensed firm, it, in turn, has noobligation to deal with you. That’s right: If an FX dealer does not like theway you trade or the way you communicate with its dealing room or simply doesn’t like your personality, it can ask you to wind up all your positions and close out your account. This, by the way, is true whether you area small retail account from Toledo or a large hedge fund account from theCaribbean. In the FX market no one is obligated to do business with anyone else. In theory, Goldman Sachs could stop trading with Morgan Stanley, and Citibank could refuse to deal with Deutsche Bank. In practice,however, this almost never happens, but just as restaurants reserve theright to not serve certain patrons, dealers can refuse your business. Thehuge benefit of FX, of course, is that you can always find a dealer that maybe more accommodative to your trading taste and style; just make surethat the firm is a member of the NFA.
MARKET STRUCTUREAlthough in the past few years the popularity of FX has exploded amongretail traders, the market is quite different from all other financial marketsand still retains many of its old-boy network ways (see Figure 1.2).The FX market trades 24 hours a day, 5 days per week, from about 5P.M. eastern standard time on Sunday to 5 P.M. EST Friday afternoon.Trading kicks off in the sleepy capital of Wellington, New Zealand, movesover to Melbourne, Australia, and finally starts in earnest in Tokyo,Japan, which accounts for 15 percent of daily volume. At about 1 A.M.EST dealers arrive at their gunmetal desks in tall glass towers of Frankfurt, Germany, followed one hour later by colleagues in London, England,which, with more than 200 major dealing houses and fully 35 percent ofaverage daily volume, represents the heart of the FX market. Finally, at 7A.M. EST, bank dealers and hotshot hedge fund traders arrive at theirdesks on Wall Street and in Greenwich, Connecticut, and begin to deal
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FX 101
Large Money Center BanksCitibankUBSDeutsche BankBank of Tokyo
Retail FX DealersFXCMGainOanda
Macro Hedge FundsQuantumClaxtonCitadel
Global 500ToyotaCoca-ColaUnileverWal-Mart
FIGURE 1.2 FX Market Structure
from their sleek multiple-panel-monitor computers, generating 25 percent of the day’s volume.At the core of the market are the primary dealers, including largemoney center banks such as Citibank and BankAmerica and global trading powerhouses like Goldman Sachs and Morgan Stanley. Slightly on theoutside are the Fortune Global 2000 corporations—all the usual multinational names from Alcoa and Avantis to Wal-Mart and Unilever. Right behind them are the self-proclaimed masters of the universe—the huge,multibillion-dollar hedge funds (many of which are located in the downtowns of Stamford and Greenwich, Connecticut), which place massiveleveraged bets on behalf of the world’s most well-heeled investors whilecharging 2 percent of gross and 20 percent of profit for the privilege.The market basically works like this: The big money center banks likeCitibank, Bank of Tokyo, and Deutsche Bank, along with trading houseslike Goldman Sachs, Morgan Stanley, and UBS, act as primary marketmakers supplying liquidity to the market. They are linked to each otherand to the outside world through banks of phones and Reuters and EBSterminals. Although in the past most dealing was conducted by phone,now many billion-dollar trades are settled through screen-based tradingwith a click of a mouse.The multinational corporations are the primary hedgers in the marketlooking to offset their business risk—everything from import and exportcosts to such mundane matters as weekly payroll management. The hedgefunds are the large speculators looking to profit from changes in majoreconomic and political trends. Last but certainly not least are the world’s
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TECHNICAL ANALYSIS OF THE CURRENCY MARKET
central banks, which participate in the market for a variety of reasons.Some central banks come into the market just to balance their books andadjust their foreign reserves. Others, like the People’s Bank of China, willsometimes day trade billions of dollars at a clip if they think they have anedge, and will often pocket millions of dollars in profit for their reservevaults. Yet other central banks will come into the market to try to manipulate or defend their country’s currency to protect their trade advantage.How committed are they to this task? In 2003 the Bank of Japan spentmore than $300 billion in a matter of a few months to make sure that theJapanese yen remained cheap relative to the dollar so that the country’svital export sector could remain competitive on the global stage. In FX,the game is definitely played for keeps.
DECENTRALIZATIONThere is no central governing authority that controls trading. There isno central FX exchange. There is no single clearinghouse. Business inthe biggest market in the world is basically done on a handshake. If youtrade stocks, all of the transactions are settled though a central exchange like the NYSE or NASDAQ; if you trade futures, the CME or theChicago Board of Trade (CBOT) makes sure that your trades arecleared. It’s the same in options, where the two biggest players, theChicago Board of Trade (CBOE) and ISE (pronounced “ice” on WallStreet), stand to settle your trades. The exchanges’ main function is toguarantee that disparate groups of buyers and sellers can come together and make trades without having to worry about whether the guyon the other side is good for the money.Not so in FX. FX is known as the party-to-party market. You deal directly with your market maker and there is no third party guaranteeingthe transaction. Everybody works with everybody else on a credit basis.That essentially means that everybody must trust each other to settle up.Settlement, by the way, is two business days forward, but of course due tomodern technology every player in the market knows their true exposurein real time.Decentralization makes the FX market unique. Unlike exchangebased stock or bond markets, there is no central order book and there isno best bid or offer price. In fact, in FX there is no single price for a givencurrency at any one time. Just like in a Middle Eastern bazaar whereprices for identical Persian rugs may differ from one merchant’s stall tothe next, so too in FX prices for EUR/USD may vary depending on whichdealer’s quote you receive. This process may seem bewildering and ar-
FX 101
7
cane, but the wide array of participants actually makes the FX market themost efficient and liquid in the world. In reality, competition among market makers is so fierce that the bid/ask difference in the the EUR/USD—the most active financial instrument in the world—is often only 1 pointwide, equivalent to only 0.01 percent of the contract value.
BASIC QUOTATION CONVENTIONIn FX, currencies are quoted to four decimal points. Whereas in real lifeproducts are priced to the penny, so a pack of gum, for instance, will costyou $1.25, in FX the quotation is extended to one-hundredth of a penny.The same hypothetical pack of gum will be quoted at $1.2500 bid/$1.2503asked. A daily move of one penny is considered a large move in the FXmarket, and since each point is worth one-hundredth of a penny, thattranslates to a 100-point gain or loss depending on which side of the market you find yourself on.A point in FX is called a pip—an acronym for “percentage in point”—and is essentially equal to one basis point. Currencies are always quoted inpairs, like EUR/USD for example. The first part of the pair, in this case theeuro, is called the base currency, and the second part, in this case the dollar,is called the countercurrency. Contract size in the institutional interbankmarket is standardized at 1 million units of currency. In the retail FX market, standard contracts are 100,000 units in size. However, all retail dealersoffer mini-contracts of only 10,000 units, and many also offer even smallercontracts of 1,000 units (micro lot) or even 100 currency units (hundredlot). Because pip values are determined by the countercurrency, pairs suchas EUR/USD that have the U.S. dollar at the end of the quote are easy toprice. Since each pip is one-hundredth of 1 percent, it is worth $10 on a100,000-unit contract, $1 on a 10,000-unit mini-contract, 1 dime on a 1,000unit contract, and 1 penny on a 100-unit contract.Pairs that have a currency other than the dollar as the countercurrency, such as USD/CHF (dollar/Swiss franc), for example, require a littlework to figure out. Essentially, you have to obtain the present marketvalue of the currency in terms of dollars and then multiply it by the contract value. Let’s say the Swiss franc is worth 0.8 U.S. dollars. Then in thecase of USD/CHF a pip value is worth $8.00 on a 100,000-unit contract, 80cents on a 10,000-unit contract, 8 cents on a 1,000-unit contract, and only0.8 pennies on a 100-unit contract (see Table 1.1).One of the greatest aspects of the FX market is that your cost of doing business will always be proportionately the same regardless of whatsize you trade. This is a huge difference from all other markets, where the
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TECHNICAL ANALYSIS OF THE CURRENCY MARKET
TABLE 1.1 Value of Pips in Pairs Where the Dollar Isthe CountercurrencyContract
Standard LotMini LotMicro LotHundred Lot
Size in Currency Units
Pip Value
100,000 units10,000 units1,000 units100 units
$10.00$ 1.00$ 0.10$ 0.01
smallest trader usually pays the highest proportionate cost. In stocks, forexample, a trader who places a 10,000-share trade of a $1 stock may becharged only $10 to buy and $10 to sell the security, making the trader’seffective cost of doing business about 0.2 percent, but the same traderplacing only a 100-share order will likely be charged the same $10 minimum both ways, making the effective cost of doing business 20 percent!Not so in FX. The cost of doing business whether you choose to trade 1million units or 100 units of currency is usually between three-hundredths and 10-hundredths of 1 percent, allowing even the smallest speculator in Peoria to go toe-to-toe against a billion-dollar trader in Londonon totally equal terms.
DEALING VERSUS BROKERING: NO SCALPING ALLOWEDFor the retail trader, FX offers an almost intoxicating degree of freedom.You can trade 24 hours a day, 5 days a week (from about 5 P.M. EST Sundayto 5 P.M. EST Friday afternoon). All you need is an Internet connection andyour dealer’s trading platform. Some dealers require that you downloadtheir software, while others simply let you trade through the browser. Youcan trade with as little as $300 or as much as $30 million in capital for theexact same cost because the market charges no commissions. That’sright—traders do not pay commissions in FX, because this is a dealerbased market. Instead of using a broker who charges a commission totake the order to an exchange to be executed by a market maker, tradersin FX deal directly with the market maker and simply buy on the offer andsell at the bid. There are no additional fees—no Securities and ExchangeCommission (SEC) charges, no exchange access fees, nothing more. Oncetraders clear the difference between the bid/ask spread, every penny gainthereafter is their own.Although there are no commissions in the market, there is, of course,a cost to doing business. That cost is the bid/ask spread, and this is perhaps the most important point to absorb about the FX market. Unlike in
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stocks, futures, options, and all other exchange-traded instruments,traders are unable to buy on the bid or sell on the ask. In FX, trading isconducted directly with the market maker, so traders cannot assume therole of the market maker themselves.For traders who are used to making hundreds of tiny day trades onthe electronic exchange markets of today, this aspect of the FX marketcan be a huge adjustment because it means traders cannot effectivelyscalp the market. Scalping, the art of buying at the bid and quickly sellingat the offer or a few ticks higher, becomes almost futile mathematically.Using the absolute best example of EUR/USD, the most liquid currencypair in the world, we can see just how difficult it is. The spread in theEUR/USD is typically 2 to 3 points wide. If traders are scalping for a verymodest target of 10 points using a 1:1 reward-to-risk ratio (i.e., they arewilling to risk 10 points to make 10 points), their actual reward-to-risk ratio would be considerably worse. They would need to earn 13 points tomake a 10-point profit (10 + 3 points for the spread). Conversely, theycould not lose more than 7 points (10 – 3 points of spread).More importantly, most dealers do not like scalpers, whom they essentially view as little more than thieves trying to steal their profits fromthe spread. They reserve special dislike for traders whom they deem“pickers.” These are traders who have accounts with many different retailFX firms and may even have access to the interbank prices disseminatedthrough the EBS system. Because of the decentralized nature of the market, the price feeds of some of the retail dealers may momentarily lag themarket. Pickers essentially look for these discrepancies and try to takeadvantage of the mispricing by hitting the late feeds, which they resell fora quick profit back to the dealers as their price feeds catch up to the general market. To an outside observer this activity may appear as nothingmore than plain-vanilla arbitrage, but one person’s arbitrage is anotherperson’s theft. In a spread-based market, dealers get very cross withtraders who try to muscle in on their primary means of earning a profitand will eventually put such traders on manual execution—a processknown as dealer intervention. Traders put on dealer intervention musthave all of their trades confirmed by the dealer rather than have them instantly executed through electronic dealing. Although in practice theprocess delays execution by no more than 15 seconds, for traders who areaccustomed to harvesting profits from short-term changes in momentumthis can be a fate worse than death. They will no doubt experience subparexecution and will suffer substantial slippage costs as dealers may in effect “freeze the clock” on them.Is this fair? Most retail traders used to the bid/ask access of electronic stock, futures, and options markets will surely say no. If yourgame plan involves making up to 200 round trip trades for 1 to 5 points
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TECHNICAL ANALYSIS OF THE CURRENCY MARKET
each in a matter of five to six hours, then FX may not be the market foryou unless you are willing to change your approach. You have to make asobering comparison between the advantages of all-electronic marketsthat allow you to have the possibility of buying at the bid and selling atthe ask, but charge a commission in the process, against the FX market,which forbids bid/ask access but charges no commission fees. Beforeyou jump to conclusions, I urge you to consult your end-of-year brokerage statements. Each trader is clearly different but I know that in mycase of very active trading in the electronic futures markets my brokeroften made three times more in commissions versus what I earned incapital gains. When comparing costs of trading in this manner, the FXmarket can actually appear to be quite reasonable.
LEVERAGE AND CUSTOMIZATIONIf you trade stocks, the standard leverage is 2:1. That is, you need to put up$50 of cash or marketable securities (called margin) in order to purchase$100 worth of stock. If you have more than $25,000 in your account you qualify for day trading rules and can increase your leverage to 4:1. In either caseyou will have to pay interest on the amount of money you borrow at whatever loan rate your broker charges you on your margin. During the Internetbubble era of 1998–2000 some major Wall Street wire houses made moremoney on their margin loan business than on brokering commissions. Infact, much like a Las Vegas casino that provides free drinks as long as youstay and gamble on the casino floor, these wire houses could have let theircustomers trade commission free as long as they margined their accounts.Moving on to options, the leverage increases 10:1. If you are an optionbuyer the cost of your trade is limited to the premium paid, and no interest is charged. In futures, leverage increases to 20:1; in other words, atrader needs to place only $5 to control $100 worth of futures contracts.Furthermore, as collateral the trader can put up Treasury bills and effectively receive interest while staying in the trade.In FX leverage is taken to a whole different level. Standard leveragein FX is typically 100:1, meaning that you need to put down only 1 percent of the face value of the contract. However, many dealers offer 200:1leverage, and some even extend credit on a 400:1 basis. At 400:1 leveragea trader in essence can use a quarter to control $100 worth of currency.Is that insane? Yes and no. The question of leverage is a personal preference and depends on your answer to the question of how much risk youwant to take.Some people like to drive fast, while some people like to drive slow.
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At 400:1 leverage a trader is engaging in the same activity as a driverwho flies down the interstate at 150 miles per hour. The thrill is certainlygreat and so is the speediness of the trip, but even the smallest pebble,the tiniest swerve, or a minimal slowdown ahead can result in instantdeath. Fortunately, the consequences in FX are not that drastic. The onlydeath traders can experience is that of their capital being consumed bythe market.Yet for many traders the high leverage of FX holds a special appeal.Not only can the trader control a huge position with very little money (at400:1 leverage $2,500 of margin can control $1 million worth of EUR/USD,for example) but the 24-hour nature of currency trading provides traderswith protection found in no other market.
MARGIN CALLAlmost everyone who has traded financial products on a leveraged basishas faced a margin call at least once. A margin call is simply a requestfrom your broker for more funds when the value of your collateral foryour trade declines below minimum requirements. That of course soundsso civilized, but in real life it is in fact the financial equivalent of a desperate cry for more money. If you accede to the demand and the trade continues to move against you, this dynamic begins to resemble a black hole asyour capital becomes mercilessly absorbed by the market. But if youchoose to ignore the margin call, you broker will automatically close outyour position, likely for a huge loss, in a process known as forced liquidation. One of the reasons this process is so painful is that it forces tradersto liquidate their positions not on terms of their own choosing but on theterms of their broker. Quite often margin calls take traders out of their positions right at the bottom or top of the move—thus denying them thechance to allow the trades to recover.Yet that is not the worst aspect of the margin call. In exchange-basedmarkets that are open only during set business hours, traders are alwaysin danger of suffering hugely adverse moves because of gaps in price atthe open. In fact, though few traders