March 2003
Not too long ago, the sight of gregarious traders wearing colorful jackets and shouting across the pits was the norm in trading. But not anymore; that scene is virtually changing in front of our eyes, with open outcry being replaced by electronic trading. Most European exchanges have already made the change, while in the US, the transition has been markedly slower. Open outcry is still the standard form of trading in the Chicago exchanges, although steps have been taken to integrate open outcry with electronic, screen-based trading. The Chicago Board of Trade (CBOT) has announced an alliance with Euronext-Liffe to better integrate their pits with electronic trading. The Chicago Mercantile Exchange (CME) is also trying to improve its electronic trading system. The advantages of electronic trading are numerous, not the least of which is that recently introduced products such as single-stock futures, exchange-traded funds, and mini-indexes can all be traded electronically.
Electronic, screen-based trading offers many benefits for retail traders. It gives those traders the opportunity to trade products that have long been reserved for floor traders. It allows them to trade cross-markets, gives them more control over personal finances, and lets them trade remotely. In short, electronic trading means that the number of trading choices and trading products will continue to increase, and traders will find themselves spending more time analyzing the markets.
This issue’s feature article discusses a strategy for trading the QQQ, one of the most actively traded exchange-traded funds (Etfs) on the American Stock Exchange (AMEX). Author Misha Sarkovich discusses how you can trade the "cubes" by analyzing the price history and taking advantage of repetitive patterns. In this case, he specifically discusses gaps, since they tend to occur frequently on Qqq price charts. That article begins on page 24. But instead of gaps, perhaps you are interested in other patterns, such as symmetrical triangles. In Thomas Bulkowski’s article starting on page 34, you’ll see how the application of a scoring system for symmetrical triangles helps predict price performance.
The accessibility of charting tools via the Internet has made it easier for retail traders to participate in the markets. Plenty of other factors have contributed to the explosion of electronic trading, such as lower commissions, advances in technology, and new order-handling rules. But as Oliver Velez of Pristine Capital Holdings says in his interview (beginning on page 80), the electronic trading industry is still in its infancy. There may come a time, not so far in the future, when all new computers will come bundled with direct-access platforms. We still have a long way to go, but think of all the possibilities that lie ahead!
Jayanthi Gopalakrishnan,
Editor
Originally published in the March 2003 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2003, Technical Analysis, Inc.