c10 JWBT016-Busby October 9, 2008 11:3 Printer: TBD
CHAPTER 10 Money Never Sleeps
M
ore than two decades ago, I worked for a brokerage house where
the bull was all but idolized. Being a team player and a good em-
ployee, I followed the “bullish” philosophy, but found myself losing
money far too often. Going long is simply not always the right thing to do
to make money. I knew that I needed a product that allowed me to be prof-
itable in both up and down markets. Traders who limit their trading to only
long positions are very limited in their ability to adapt and trade when eco-
nomic hard times come and the bears rule. I was considering this problem
and looking for a solution when the Chicago Mercantile Exchange (CME)
announced that they were introducing a new product, the S&P 500 index
futures.
I knew that I needed to trade the S&P, and I immediately did so. Ini-
tially, the contract offered was a big contract that traded for $500 per point.
A few years later, the contract split, and today it trades for $250 per point.
A short time after being introduced, the product line was again expanded
with the debut of the E-mini. The E-mini is valued at $50 per point. The
lower point value makes this product more appealing to a wider audience
of traders. Today, the S&P futures are one of the most frequently traded
futures contracts, with over a million contracts traded on the average busi-
ness day. The volume of activity makes this a great place for day traders
to make money. With so many buyers and sellers, it generally only takes
a click of the mouse to buy or sell. Also, there is sufficient price move-
ment during the course of the average day to allow for plenty of profits to
be made. At the time of this writing, the average true range (ATR) of the
E-mini S&P is 20 points, representing a monetary value of $1000 per