In This Issue

Note About Risk, Volatility and Margins

30-Year US Bonds

Economic Reports and Expiration Notices

January 23rd, 2008 — Issue #412

Note About Risk, Volatility and Margins

The last few days we have witnessed volatility levels that the markets have not seen since post-Sept. 11th, 2001.

Each trader must examine how this increased volatility affects his or her trading (in our opinion the stock market has now changed its "personality" from a choppy, quiet uptrend into a more nervous and volatile trading environment).

Each trader is different and must assess and understand his mental as well as financial risk tolerance.

There are two aspects we urge you to review. The first is your money management and survival; the second is the concept of margin, in theory and in reality.

Money Management and Survival

Money Management — While it is closely related to survival, money management can also stand alone. For your own survival, you must set trade/daily/weekly loss limits. Sound money management is closely associated with knowing your risk-reward ratio (per trade and per time frame).

Survival — This is the key! Do what you need to do in order to survive this brutal market condition and give yourself the chance of being able to trade down the road with more experience and a better chance of success. Survival is probably the biggest key for beginner traders. There is a saying in this business: "live to trade another day."

Margin is an extremely important concept both in theory and practice. It can also to help you with money management and survival.

Day-Trading margins versus overnight margins

Day-trading margins apply to the amount of money one needs to have in their account for trades that are opened and closed within the same day. Many traders USUALLY, in "normal market conditions," have access to trading with day-trading margins of $400 per contract - for example for the e-minis. While this allows for more aggressive buying power, it also increases your exposure in the market that would create big losses.

However, at times like this week for example, day-trading margins could be raised, without notice, to 50% of Exchange minimum margins or 100%. This is in response to increased volatility in the global markets.

Overnight margins apply to holding an open position beyond the close at 4:15 p.m. New York time for 1 contract of the e-mini S&P 500, which is currently, as set by the Chicago Mercantile Exchange, $4500.00 to be maintained above $3600.00.

Of course if you have multiple contracts you would multiply $4500.00 by the number of contracts that you hold.

For more information on current margins, visit our live margins page.

These markets are risky and when you leave positions open at the close of the Market at 4:15 pm New York time, you leave yourself and your broker to very large risk exposure.

At 4:15 New York time you MUST be FULLY MARGINED for ALL positions you hold.

Risk Management will be monitoring all activity to ensure that clients maintain proper margins in their accounts. Further, Risk Management may liquidate any positions that do not maintain sufficient equity in their accounts according to CME Rule 930.k.

30-Year Bonds

Click the image to enlarge.

• QUALIFIED SUPPORT/RESISTANCE LEVELS
  FOR PRECISE RISK MANAGEMENT
• PIVOT POINTS
  THAT HIGHLIGHT SHIFTS IN MARKET MOMENTUM
• TECHNICAL FORECAST
  TO KEEP YOU ON THE RIGHT SIDE OF THE MARKET
• PROPRIETARY INDICATOR ANALYSIS
  EASY TO READ COLOR-CODED RESEARCH TOOL

View today's analysis

Review our Online Tutorials or attend a "Live Market" coaching session to learn to how the Price Map can improve your bottom line!

Contact JS Services to see how our research can improve your bottom line!

Sign up for your FREE Price Map Trial today!

Disclaimer:

Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

Economic Reports and Expiration Notices

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!