The 3Dimensional Trading Breakthrough

The 3 Dimensional Trading Breakthrough
The futures contracts are one-dimensional instruments in and of themselves. That
is, you can either be “long” or “short” the market on a one-to-one basis and be
either correct or incorrect in your speculation. For centuries, this has been the
challenge of speculators, hedgers, and users alike. Our challenge for this book is
to minimize this risk while maximizing gains. More to come...
The Stock
The stock holdings that we have grown up with have been the most popular
investment instrument since its introduction over two centuries ago. You don’t
need me, or anyone else, to tell you that you must “buy low, sell high” to make
money with stocks. Stocks are generally a small ownership in an individual
company.
Unlike futures contracts – which can be “sold short” as easily as “bought long,”
– most folks only understand they can buy stocks as an investment with the intent
to make money over the longer term. However, they are also assuming the risks
associated with the business management and ownership. It is not a common
practice “shorting” stocks (as we practice it in the futures markets) – as the ability
to borrow shares for shorting varies from stock to stock, and from day to day.
Since we are comparing futures contracts with stock ownership, let me add that
higher margin is required from the stock trader for similar gains to those in the
futures markets. This is why many traders are converting their time and effort
(and risk funds!) into trading the commodity futures markets. Also, since the
underlying asset of the stock is the company itself, no one knows better the
financial soundness, future plans, business outlook, etc. than those who directly
run the company. Although “insider trading,” which we are alluding to, is a highly
illegal practice and carefully scrutinized by the federal government, it still takes
place (and always will in one form or another.) If you contrast this with commodity
markets, you will know that it is darn near impossible, and highly unlikely, that any
one individual or small group of people can direct the market in their favor - there
is simply too much corn, cattle, sugar, petroleum, etc. in the world for any one
person, entity, or small group to control (although it has been tried!).
It has only been the past decade that stock traders could take advantage of electronic
trading through the use of the modern day Internet. This gave brokerage firms the
ability to get traders in/out of the market at a very deep discount rate. Granted,
the risk of error is “transferred” from the broker (representing the brokerage firm)
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