Thank you for your interest in MarketSound(tm) Webcast and welcome to
the world's fastest squawkbox. This email contains the web addresses
that you will need and professional trading techniques using
MarketSound(tm). We hope that by listening to the market you get a
whole new perspective on what is happening.
CONTENTS
Introduction
What Will I Hear?
DayTrading Methods Using MarketSound(tm)
INTRODUCTION
MarketSound(tm) webcast software allows you to hear commentary and all
trading activity on three of the CME's products: E-Mini S&P 500(r),
E-Mini Nasdaq Index(r), as well as the Fortune e-50(tm) contract. It
turns your PC into a virtual trading floor, giving you a feel for the
market as if you were standing in the futures pit.
Supported on Windows 95, 98, ME, NT 4.0, and 2000.
After downloading and installing Webcast you will need to go to the
www.cme.com/fe50 page to listen to MarketSound. At the website,
simply choose your contract and click 'Start Audio'. Once it is
running, you can minimize the browser window.
If you were unable to successfully download the application or have
other questions please review the Frequently Asked Questions at
www.marketsound.com/support/webcast/faq.html If you want to listen to other global products (bonds, commodities etc.)
using your own data feed, then you require MarketSound(tm) Pro.
Further information is available from www.marketsound.com/products/pro.htm WHAT WILL I HEAR?
You will hear 3 elements in the broadcast:
1. Market Commentary: Stay connected to the market
MarketSound's Commentator broadcasts price and trade activity as it
occurs. The price you see on screen as 152125 is actually 1521¼.
For speed prices are abbreviated, so you may hear 'twenty one and a
quarter' or 'one and a quarter'. The 'bid' is the price buyers wish to
pay, for example '21¼ bid'. If the size of the bid is significant you
will hear it appended after the price: '21¼ bid, 75 times'.
The 'offer' or 'Ask' is the price sellers wish to receive. Offer quotes
are always preceded by the word 'at', as in 'at 22'. Whenever you hear
'at' you know you are hearing information on the seller's price. If the
size of the offer is significant you will hear it appended after the
price, for example, 'at 22, 100 times'.
2. The Virtual Pit(tm): Know what the big traders are doing and what the
herd is doing
The shouts of 'buy'em!' and 'sold!' you hear in the background of the
Commentator are the actual trades occurring in the market to which you
are listening. If any trader buys the current offer you hear 'buy'em!'.
If a trader sells the current bid you hear 'sold!'. The larger the
trade, the louder the voice. For example, if the current market in the
E-mini Nasdaq 100 is 60 bid, 61 offer, and you hear a loud 'sold! you
know that a trader just sold the '60s in large size. Similarly, if you
hear a dozen low volume 'buy'ems' you know that many small buyers just
paid '61. Or, if a bullish economic statistic was just released you may
hear dozens of loud 'buy'ems' as traders aggressively buy the market
higher. This would be your clue to buy the offer in a stock or
correlated stock index. The Virtual Pit(tm) gives you a clue to what the
big traders are doing, and what the herd is doing.
3. The Crowd: The roar lets you know opportunity, or danger, exists
You will also hear the background noise of the crowd. When the market
gets busy, the crowd gets loud. It lets you know when you need to pay
close attention to the market.
FREE TRAINING TOOL!
Unfamiliar with SquawkBox terminology? Download our free QuoteTrainer
Software! The trading game that makes audio price quotes an intuitive
and natural part of your trading. Download MarketSound™ QuoteTrainer
now at marketsound.com TRADING METHODS USING MARKETSOUND(tm)
Futures and Options Traders: Listen to live activity in the CME's index
contracts. Hear the market and feel the flow of trading activity. Use
MarketSound to enhance your futures and options trading.
Stock Daytraders: Listen to live market activity of the major index
futures in order to more effectively trade individual stocks.
DayTrading Methods Using MarketSound(tm)
1. Tips and Hints - Basics of Listening
2. Chart Points - Support and Resistance Levels
3. Emotional Market Reversals
4. Large Bid or Offer Orders
5. Stop Order Locations
6. Market Reversal Opportunities
7. Limit Up - Limit Down
1. Tips and Hints - Basics of Listening
Up Trends: Listen for bidders marching their bids higher. The
Commentator will report and you will hear occasional flurries of
progressively higher bids: '22 bid, 23 bid, 24 bid'. In the Virtual
Pit(tm) you will hear barrages of 'buy'em, buy'em, BUY'em, buy'em' as
pro-active buyers lift the offers.
Down Trends: Listen for sellers marching their offer prices lower. The
Commentator will report and you will hear occasional progressions of
lower offers: 'At 24, At 23, At22'. In the Virtual Pit(tm) you will hear
sequences of 'sold, sold, sold.... ' as pro-active sellers hit bids.
Pace of Change: Listen for how fast the market is moving up or down. The
faster the acceleration of price change, the closer the market is
nearing a climax and reversal. Listen for clues in the Virtual Pit(tm).
In an uptrend if you hear occasional buying ( only a few 'buy'em's'),
followed by more insistent buying which culminates in a sharp price
increase along with a panic of many 'buy'em's' in the Virtual Pit(tm),
you are probably witnessing a price climax. A fast and swift reversal
usually follows.
Bid-Offer Spread: Listen for how tight or wide is the bid/offer spread.
A wide spread, for example 5 to 10 points in the E-mini Nasdaq 100 will
indicate either volatile market conditions, or lack of trading
participants. For example during lunchtime or before a long weekend,
traders may pull the orders causing a widening of the bid/offer spread.
This is a good time to look at charts, read market reports, look at the
newspaper, etc. Nevertheless, you can still be connected to the market
through your ears. The Commentator will tell you any major changes and
you will hear when the bid/offer spread tightens and activity in the
Virtual Pit(tm) picks up.
2. Chart Points - Support and Resistance Levels
Look at an intraday or daily chart of the major stock index futures
E-Mini S&P 500, E-Mini Nasdaq 100, or the Fortune e-50. Identify major
support and resistance points. These levels may be recent highs or lows,
yesterday's high or low, trend line support or resistance, a major
psychological number (e.g. 1,500) a recent double bottom (top), pivot
points, etc. The important thing is to identify the price levels.
As the futures market approaches these identified levels, listen to
MarketSound. Listen for action in the Virtual Pit(tm) and/or price
reporting from the Commentator that shows the support (resistance) level
is being 'broken' or taken out. As soon as the market is offered (bid)
at or through the key price level, there is a good probability of
continued price action in the same direction. On the other hand, if the
market 'fails' to move through this key level then listen for price
reversal activity.
Remember that you do not need to look at the last price information on
your trading screen since MarketSound(tm) will be broadcasting this to
you. This allows you to focus on watching and trading your target
stocks, futures or options. No time is wasted watching the key benchmark
stock index futures. You will have a valuable lead on other daytraders.
When you hear a major support or resistance level being 'taken out' this
is a potential opportunity to execute trades in the stock market. You
may want to buy certain stocks when the futures market is moving higher,
or you may want to fade (sell) weak stocks as they attempt to rally with
the stock index futures. In any event, MarketSound(tm) will provide you
an edge in executing your trades around important support and resistance
levels.
3. Emotional Market Reversals
Excellent trading opportunities appear when there is a fast and dramatic
reversal in the market. Due to the liquidity of the major stock index
futures, these reversals first occur in the futures markets, allowing
for individual stock trading opportunities.
There are two main ways to listen for an emotional market reversal. The
first is a reversal in the direction of trading in the Virtual Pit(tm)
along with a large increase in volume from the Crowd. Something has just
changed, and futures traders are aggressively trying to 'close out'
positions or get aboard the new direction. The volume and emotion is
obvious. For example, the market has been drifting higher for the past
hour. All of a sudden the Virtual Pit(tm) turns sellers, and the Crowd
roars to life. You hear a litany of 'sold, SOLD, sold, SOLD' from the
Virtual Pit(tm) as traders actively sell the best bid prices (e.g. 'hit
the bid'). Furthermore, the increased activity of the market causes the
Crowd to explode with activity.
In an instant of MarketSound's audio broadcast you have been tipped
on a new stock market trend. This is an opportunity to exit positions
or enter orders for the new market direction.
The second way to identify turning points is to listen for large orders.
For example, the futures market has been trending lower for the past 30
minutes, and all of a sudden there is a LARGE bid order at current
prices. The market may have run into a wall of buyers, and quickly
reverses as short sellers start to buy-in their positions. In this
example, listen for the Virtual Pit (tm) to explode with buy-side
activity. Listen for a barrage of 'buy'em, buy'em, BUY'EM, buy'em' as
trapped shorts may be forced to cover and new buyers enter the market.
This process can lead to an emotional trend reversal. Listen carefully.
The clues to determining the timing of emotional reversals can be found
in listening to the Virtual Pit(tm).
4. Large Bid or Offer Orders
Large orders may appear at any time, but usually are placed near key
support and resistance levels. When you first hear the Commentator
report a large bid or offer, you need to listen for the extent of the
market's reaction. Do you begin hearing active trading in the Virtual
Pit(tm)? How high does the market bounce after running into a large bid
order? How quickly? MarketSound(tm) provides valuable information clues
as to what is happening in the market and possible ways to react to
unfolding trade opportunities.
In many cases, the market typically 'checks' to see if the order is
'real' by trading back down to the same level where the bid appeared. If
the order is gone or cancels, then the market will probably trade lower.
If there is still a real buy order, and traders are caught short, then
watch for the market to trade higher. On the other hand, if the order
actually trades (Someone sells the large bid) you will hear a loud voice
yell 'SOLD' from the Virtual Pit(tm). Now look out below: Prices are
probably headed lower. Moreover, this Large trade location has now
become a pivot point, acting as a key support or resistance level.
5. Stop Order Locations
Buy Stop Orders are typically placed above key resistance levels and
sell stops are placed below key support levels. In addition, there will
usually be Stop Orders placed above or below important 'big figure'
price levels (e.g. 4,000 in the E-mini Nasdaq 100 contract or 1,500 in
the E-mini S&P 500 contract). When Stop Orders are triggered in an
electronic market there may be a very abrupt price movement in the
direction of the stop orders.
For example, Buy Stop Orders placed above 4,001 in the E-mini Nasdaq 100
contract would be triggered as soon as the market traded 4,001. These
Stop Orders become 'market buy orders' causing an immediate jump in
price if there is a lack of available sell orders. Prices quickly shoot
higher. How is the market trading? In an electronic market, like the
E-mini index contracts, the most effective way to answer this question
is by listening to the Virtual Pit(tm). It is difficult to follow 'fast'
market activity with only your eyes. But you can listen effectively.
You must now assess how the stop orders are being filled. Normally, this
is very difficult because prices move too quickly. However, with the
Virtual Pit(tm) you can hear the trading activity; your ears 'pick-up'
the information that your eyes fail to see. (This is one of the secrets
of successful floor trading - floor traders are immersed in their market
and can hear all the trading activity around them, allowing them to
react more quickly and effectively.) Back to our example, there are
several possible outcomes to the activated buy stops at 4,001. If you
can determine the outcome during its formation you may have some
excellent trading opportunities. Hearing allows you to decipher the
market. Below are some of the possibilities:
A quick and explosive upward price movement with very little trading
until a large sell order caps the market's rise. Further trading action
will determine if this is a false break-out or the beginning of a major
upside move. In this case, you would not hear much buying activity in
the Virtual Pit(tm). However, you would hear the Crowd's volume increase
reflecting the volatile conditions. (Another audio cue that opportunity
exists.) Traders are chasing the market higher without being able to buy
anything. There are few, if any offers on the way up. You do not hear a
progression of 'buy'em', 'buy'em', etc. as you would expect in a rising
market. There is unsatisfied buying demand. Until you hear buyers
lifting offers you can expect the market to move higher. Only after the
appearance of a large sell order at much higher prices does upward
action stop. Does this large offer trade? (Do you hear a large
'BUY'EM'?) Or do more sellers appear offering the price down? By
listening to the Virtual Pit(tm) and Commentator you will be able to
answer these questions.
Here is another possible outcome of the stop orders. There is an
immediate moderate upward price move BUT this time you hear lots of
buying action in the Virtual Pit(tm) (Buy'em, buy'em, BUY'EM, BUY'em,
etc.) All of the buy stop orders are being readily satisfied at
moderately higher price levels. Resting sell orders or new sell orders
entering the market counter the instantaneous buying demand. Has all the
buying dried up? The key is to listen how quickly sellers offer the
market down. Do you hear the Commentator broadcast something equivalent
to 'at 15, at 14, at 13, etc.' as the sell orders compete to lower the
offer price. More aggressive sellers may start hitting the bid as the
Virtual Pit(tm) broadcasts 'sold, sold, sold.' In this scenario you've
heard a false upside breakout due to triggered stops. This may be a good
opportunity to sell long positions or sell short.
6. Market Reversal Opportunities
The stock market is known for large one-way moves. Trading and waiting
for these one directional moves can be very profitable. However, it is
difficult to determine when a large move is imminent. You need to stay
connected to the market to maintain a feel for its flow and state. On
most trading days it is typical for the stock index futures to
experience many reversal moves for each large one-way move. Therefore,
learning how to trade the reversal moves will give you more trading
opportunities. It will also prepare you for catching the larger moves.
The less involved you are, the harder it is to catch those major moves.
MarketSound(tm) dramatically improves your ability to trade these
reversal moves.
Look at your charts and note any important (and recent) highs or lows.
Wait for the market to trade through these levels. If there is no real
trade flow (e.g. you don't hear very much activity in the Virtual
Pit(tm) ) and professionals are simply 'searching' to set off stop
orders then the market will usually reverse. As soon as you hear the
market bid (offer) back at the recent low (high) then you have a good
chance of participating in a small market reversal. At the same time,
listen for pro-active buying (selling) in the Virtual Pit(tm). For
example if yesterday's recent low was 1,492.00 in the E-mini S&P 500 and
the market trades down through this level. It tries to trade lower but
there is no follow through selling, but nevertheless records a new low
to 1,491.25. Then the market starts moving higher. As soon as you hear
the market go 1,492.00 bid the reversal move may be in motion. Listen
for proactive buyers lifting the offer - you will hear 'buy'em, buy'em,
buy'em, etc. in the Virtual Pit(tm).
This example reveals a new short-term uptrend. Trade this market from
the long side. You must now continue to listen for clues that the
uptrend is healthy. Are buyers still lifting offers? Or, are sellers
beginning to dominate. The Virtual Pit will reveal the motivations of
buyers and sellers. If the market starts moving lower - your major pivot
point is 1,492.00. If the Commentator announces 'at 92' look out below,
the buying may have dried up and a retest of the recent low is in the
cards.
7. Limit Up - Limit Down
Occasionally the stock market experiences excessive one-way price
volatility, which in turn causes the stock index futures to go 'limit
up' or 'limit down'. Futures exchanges impose limits in order to help
reduce excessive volatility. In the E-Mini S&P 500 and E-Mini Nasdaq 100
futures there are several different price and time limits depending on
the time of day or whether the contract is in its final month. These
price and time limits change from time to time and you should check at
the exchange website for updates.
There are at least two major things to consider when the market is limit
up or limit down:
a) The extent of the 'gap' opening after the current time-in-force limit
expires.
b) Limit up or limit down price reversals
Gap Openings - As soon as the current time-in-force price limit expires,
the market will gap higher (if limit up) or lower (if limit down). There
is now a gap on the intraday price chart. Markets usually 'fill' gaps on
the price chart. Therefore, listen for a market reversal suggesting that
the market will proceed to fill the gap and trade back to the previous
price limit level. For example, if prices gapped higher after being
limit up, listen for up-to-down reversal activity. You may hear the
Virtual Pit(tm) turn from buy activity to sell activity or you may hear
the Commentator announce a large sell order and then begin to hear the
price offered lower. If the price goes below the gap opening price level
there is a good chance that prices will trade back down to the previous
'limit up' price, and fill the gap on the charts. Depending on size of
the price gap this could be an excellent trading opportunity.
Limit Reversals - A limit down reversal is when the market is limit
offer for several minutes, and then slowly the limit offer price begins
to trade. You will hear 'buy'em, buy'em, buy'em' in the Virtual Pit(tm).
The Commentator will also report the trade to you. Next, the market is
'bid for' at limit down. The Commentator will tell you the new bid. In
effect the market has gone from all sellers to all buyers. Expect the
beginning of a short covering rally.
The same applies to a limit up reversal: when the market is limit bid
for several minutes and then prior to the time-in-force price limit
expiring, the turns sellers, being offered at the limit up price. There
is a good chance of a swift downward movement in the market as traders
liquidate long positions. In either case, the market turn can be very
fast. In these limit situations listen attentively to the Virtual
Pit(tm), Crowd and Commentator for potential reversals; volatile markets
are fast and emotional and can reverse quickly.
Brad Fishman
CEO
MarketSound Corporation
www.marketsound.com DISCLAIMER: The information provided herein is not intended for
distribution to, or use by, any person or entity in any jurisdiction or
country where such distribution or use would be contrary to law or
regulation or which would subject MarketSound Corporation or its
affiliates to any registration requirement within such jurisdiction or
country. Neither the information, nor any opinion contained herein
constitutes a solicitation or offer by MarketSound Corporation or its
affiliates to buy or sell any securities, futures, options or other
financial instruments or provide any investment advice or service.
S&P 500 and Nasdaq 100 Index are registered trademarks that are the
property of their respective owners, and are used herein under license.
Fortune e-50 is a trademark of Time inc. Used under license.
Chicago Mercantile Exchange and CME are registered trademarks and the
property of the Chicago Mercantile Exchange.
MarketSound and Virtual Pit are registered trademarks and the property
of MarketSound Corporation.
Copyright(c) 2000 MarketSound Corporation
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