If you want to make money, don’t marry your trades

Past success doesn't mean future profits, says John C Burford. Trust the charts and be ready to change your position at a moment's notice.

On Wednesday, I covered the S&P 500 index, which is the most traded futures stock index market in the world (in the shape of the e-mini S&P, which is one-fifth the size of the big contract). The latest COT (commitments of traders) data shows that the open interest (number of outstanding futures contracts) in the e-mini is about 2.8 million, while open interest in the big contract is only a little over 100,000.

For comparison, open interest in the e-mini Nasdaq is about 266,000 and in the e-mini Dow is a paltry 60,000 contracts. The e-mini S&P is heavily favoured by day traders and offers ample liquidity for trades of any size.

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.