This list gives you an idea of what other people have asked. It may not cover some things that may be on your mind. Don’t hesitate to fire me off an e-mail. Direct it to: “CASH” McCall

1. How much money do I need to invest in bonds?

2. I noticed that a tick in bonds is in 32nds. What does that mean in dollars and cents?

3. I would like to watch the market, possibly charts, too. How can I do this?

4. How about brokers, commissions, etc.?

5. I want to trade, but I can’t follow the 2% risk management rule.

6. When you label your system, you state The Vortex System and Equity Reserve. What is the Equity Reserve?

7. What is the Vortex?

8. How about drawdowns trading the Vortex System?

9. How did you come on the Vortex technique?

10. Do you use any special indicators?

11. Do you manage accounts?

12. I’ve read this, and I see your big profits. How about losses?

13. I’ve been told the futures market is too volatile. What do you think?

14. Can you give me an idea on how my order takes place in the market?

15. What makes your bond trades different from the other services that are available?

How much money do I need to invest in bonds? The initial margin for trading one bond contract for the first day is $2,500; however, on the second day, the maintenance margin falls to $2,000. Margin rates will vary with all futures, depending on volatility, which the exchange determines, and then sets the appropriate margin for trading.

I noticed that a tick in bonds is in 32nds. What does that mean in dollars and cents? OK, there are 32/32nds in 1 point. The value of each tick is $31.25. Therefore, the value of 16 ticks is $500, and the value of a full point move is $1,000. This, of course, is per contract. With 1 contract, you control $100,000 of bonds; with 10 contracts you control 1 million dollars of bonds, and your profit or loss on a 1-point move would be $10,000.

I would like to watch the market, possibly charts, too. How can I do this? It depends on how close you want to get to the market. The cheapest and easiest way is to just turn on CNBC, and watch the white ticker on the bottom of the screen. You will find, on the hour and every 10 minutes during the hour, they will show all the commodities markets. All you need to do is look for US, and then the month we’re trading (i.e., March=H, June=M, etc.), then you look for USH or USM. You will find it is very easy once you do it a few times. And you can do it almost anywhere. Approximately 5 minutes to the hour, CNBC will also carry the highs and lows along with the last. This they do all day long. Also, you can look the markets up in The Wall Street Journal under the Commodity section; but it is always a day late.

If you want to watch real time, then go to www.cbot.com and sign up. It is only $10 per month, and a tremendous value. You get all the Chicago Board of Trade, which gives you all the financials. You can also see 10-minute delayed charts here, which can give you more definition on price action. Another good service for delayed charts is www.tradesignals.com. The price is $20 per month. If you’re looking for full-on real time price, with all the “goodies”, I recommend either Future Source or Commodity Quote Graphics, better known as CQG. They will each cost somewhere between $500 to $1,000 per month. If you want CQG – email me. “CASH” McCall

How about brokers, commissions, etc.? The smaller the account, the higher the commissions are going to be. They will be anywhere from $25 to $100. In Europe, some brokerages charge as much as $250. Try to negotiate to no more than 2-ticks, or $62.50, which also includes all fees. Many people think that commissions are the keys to profit in trading; however, they are not. The trading style and the risk management are the keys. Yes, lower commissions will guarantee larger profits, but they will not insure that you will make profits.

I want to trade, but I can’t follow the 2% risk management rule. OK, remember the whole key is strategizing; and, in your case, you are going to have to begin the trade with the same recommended stops everyone else is using, even though they will be above the 2% rule. However, if the trade isn’t profitable on the close, you have to exit. Therefore, you are going to have to monitor the market, or have your broker do it and take you out of the position if the market is not trading unchanged to higher on the close at the end of the day. (2 PM Chicago time)

When you label your system, you state The Vortex System and Equity Reserve. What is the Equity Reserve? Good Question. The Equity Reserve is something we will not be doing here. It is something we do with our conservative managed accounts, where they do not have a problem parking their money for a period of time, say 5 years. Take a $5 million account. We place $4 million into a high return, bank guaranteed CD, yielding 9%. This will return the principal and 3% interest at the end of 5 years. That allows us to trade $1 million, and trade as usual. Our goal on the $1 million is to make significantly high returns that will bring a profit to the whole account of around 35%, without any risk or loss on principal, and even a return of 3% on invested equity.

What is the Vortex? The Vortex analysis takes into account Monthly, Weekly, Daily, even Hourly-and-less analysis of the focused market. The Vortex comes in where there is a confluence of data that produce energy points and indicate a resulting pivot. Line charts, done by hand, along with action/reaction phenomena and proprietary computer studies arrive at this point.

How about drawdowns trading the Vortex System? Generally speaking, the best risk/reward ratio comes from trading the shorter timeframe, with short-term targets, and does look much better on what is called the Sharpe Ratio, which is currently used in the industry to gauge trading success. However, the longer-term bond trades will generally yield much larger profits, but the draw downs can be much bigger and, with this position trade, you must be more patient and better capitalized. If you have the capitalization, I recommend you divide your capital into the short- and long-term trades. This will keep you from getting bored with sitting and watching, and keep you active in the market.

How did you come on the Vortex technique? After much study of the greats, traveling to both coasts and trading, I had the opportunity to meet and study with Professor Allen Andrews. It was through him that I learned much about probabilities and the physics that also envelop the market. He came from a good family in the East who used to trade cotton, when cotton was King. Further, he was a professor of physics at the University of Miami. It was a great compliment to me when he asked me to trade his account and also trade funds through my company. While Allen is now deceased, many computer programs carry the Andrews Pitchfork or Median lines in their software. This was a part of the Andrews Analysis, and helped put the complete puzzle together, which later formulated as the Vortex System.

Do you use any special indicators? I can’t help but be partial to the stochastic which, some 20-years ago, we called the %D. It is a random movement indicator, which my wife used to calculate by hand. Like all indicators, it has its strengths and weaknesses. Ralph Dystant, an old Elliot and Gann guru, taught me the process, and much more. However, his past associate, Dr. George Lane—a successful trader in his own right—gets the credit today.

Do you manage accounts? Yes, definitely. But there are two pre-requisites: one, the minimum is $250,000; and two, it has to be non-US. Remember, I live offshore and work internationally and, while the United States is the greatest country on the planet, it also has stringent rules regarding its citizens, IRS, etc. This is also true of most trading companies. Most people and companies I know just don’t want the US hassle. It is not unique; sorry, but true.

I’ve read this, and I see your big profits. How about losses? Wow! Of course, I have had many losses; however, like most winners, you tend to forget most of your losses, and have to figure that your losses are just the cost of doing business. That said, I do remember an extraordinary loss. You may remember the Russian Ruble Crises a couple of years ago. Just following this crises, a company by the name of Long Term Capital, run by John Meriweather, went “belly up”. These guys were smarter than anybody else, and they sold banks and institutions on their trading and derivative program all over, especially in Europe.

When the collapse of the world economy started, they were at the forefront. The bond market’s liquidity completely dried up, and bonds collapsed three-and-a-half points in three-and-a-half days. The maximum limit, in three days, each day. This was unprecedented, and I sustained my worst loss ever.

This was in ’98 and early ’99. During this time, Credit Suisse stock fell 60% in one month, as well as other bank stocks throughout Europe. The legendary George Soros had six of his investment directors quit, along with their leader, Stanley Drunkenmill. Julian Robertson closed his fund, the Tiger Funds closed, and many others also closed up shop. I won’t forget it, I lost millions.

Later the IMF came in and bailed out a lot of the banks, in order to gain global confidence; but the fact is that the IMF is running out of money; and, now, when Argentina can’t pay the 20-billion dollar interest payment on their IMF debt, it is a great indicator of what is happening worldwide. There just isn’t any more money, and the pros on Wall Street, like Goldman Sachs, sold out by taking their companies public, naturally, right at the top of the market. Robert Ruben quit the Treasury. They both could see the “writing on the wall”, all reasons why bonds and gold will be great for making money this year.

I’ve been told the futures market is too volatile. What do you think? Well, I love volatility, because the entire Vortex pivot points work to perfection. But, take a look at this. You might be surprised. To quantify the point, consider these market estimates of annualized price movement for each market:

America Online 55% July Soybeans 18%
Microsoft 48% March Corn 21%
JNJ 36% Cattle 10%
IBM 33% April Gold 16%

That’s right, IBM is twice as volatile as gold, and Johnson and Johnson is 3.6 times more volatile than cattle futures. The perception that futures are more volatile than stocks is due to the leverage factors created by low margin requirements. If you would like to know the market’s best estimate for how much a stock or commodity is likely to move over the next twelve months, simply check the market’s implied volatility.

Can you give me an idea on how my order takes place in the market? A thorough understanding of the order process can help reduce anxiety and, thereby, make you a more successful trader. This will help you to perceive the action as it takes place:

1. You call your retail broker.
2. Broker relays your order to the trading desk on the floor.
3. The order is transmitted into the trading “pit”.
4. The pit broker evaluates the order and fills it, if able. Market orders must be filled within three minutes, or the broker is responsible.
5. The executed order is transmitted to the trading desk on the floor.
6. The confirmation of the trade is transmitted from the trading desk on the floor to the retail broker.
7. The customer is informed his order is filled.

What makes your bond trades different from the other services that are available? One answer—The Results. We all know, in our world, you get what you pay for. Most of the companies have brokers writing newsletters to prospect for clients. These people generally are not even allowed to trade. Of course, they all want to be traders, but maybe don’t have the capitalization or the knowledge, know-how and experience. The same is true for the top advisors at Merrill Lynch. Answer me this question: If you want to learn about golf, who would you want to go around the links with? The guy down the street, who plays at the municipal golf course, or Tiger Woods? ’Nuff said, most of these services are Mickey Mouse.

When you sign on here you become an important member. I/We want to earn your respect and enjoy your participation in the trading club ad infinitum. I/We want you to make money. Figure that I am your mentor, consultant, and friend.

“CASH” McCall 

This site, the trades and classes are currently not avaible for subscription.  Also, some of the content is dated as this was originally written in 2002.  However, much in the site defines the Vortex strategy and trade plans that CASH has formalized and others have been taught and practiced to become superior traders.  Thus this information can be utilized as it presents a historical and practical basis for trading and review.  This will give a better understanding of what it takes to become a great Trader. 

Cheers, CASH


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