c09 JWBT016-Busby September 30, 2008 14:11 Printer: TBD
108 STRATEGIES TO WIN
As a professional trader, with New York and Chicago shut down, I
needed to locate a market that was active. It was important to have the
ability to hedge positions and execute trades during this time of crisis. Af-
ter all, I am a trader and my market skills put food on the table and money
in the bank. Therefore, I began searching for a foreign stock or futures ex-
change that was operating. I looked to Asia and tried my hand at trading the
Hang Seng in Hong Kong and the Nikkei in Tokyo. My initial attempts were
not profitable. Then, when our friends across the Atlantic started trading,
I shifted to Europe and focused on the Dax. The Dax paid me, and I con-
tinued trading it and making money. Today, the Dax is one of my favorite
trading vehicles; I trade it almost every day. I also use it to gauge market
sentiment. Over the last few years, I have seen the power of the Dax. I no
longer consider taking a trade without using it as an indicator. It is one of
the Seven Sisters that were discussed in Chapter 4. The Dax futures trade
electronically and open at 1:00AMand continue to trade until 3:00PMcen-
tral time.
When you are trading a product—whether it is a futures contract, a
stock, an option, precious metals, or anything else—one of the most im-
portant steps that you need to take is to observe the product trade. I began
doing just that. Day and night, I watched the Dax, or at least my trading
software watched it for me. The RoadMapTMsoftware records prices every
30 minutes and generates a variety of charts as requested. When my eyes
were away from the computer screen, the RoadMapTMcontinued to do my
job for me. Then I studied the information. I located times during the 24-
hour day when the Dax was most active. I identified key numbers. I did
my homework and my analysis. Only then was I ready to formulate some
strategies for trading this index.
The Dax is short for Deutsche Aktien Xchange 30. The companies
listed on the Dax are some of Germany’s biggest. Germany is Europe’s
largest economy, so the health of this index says a great deal about the Ger-
man economy and the economies of other parts of Europe and the world.
The Dax futures trade in 0.50 increments and the value of each point is
25 euros. The current rate of exchange means that each point is worth
about $38 in the United States. Currently, the average daily range exceeds
well over 100 points. That wide range offers a number of profit-taking op-
portunities for me.
Because I always consider risk first, I urge you to do the same. The Dax
is one of my personal favorites. However, prices may move quickly. Those
on the wrong side of a move may be taken to the cleaners. Before trading,
do a great deal of observation. Identify key numbers and important times.
Learn about futures in general and the risk involved in them. Trade only
when you understand the risk, can afford it, and have a tested strategy.
Like our Nasdaq, the Dax is an entirely electronic exchange.