Currency Corner: Trading in the pits

This article is taken from the YourTradingEdge magazine (SEP/OCT 2009 issue)

The author, Wayne McDonell is the Chief Currency Coach of FX Bootcamp. He is a member of the US National Futures Association and registered as a Commodities Trading Advisor. His latest book ‘The FX Bootcamp Guide to Strategic and Tactical Forex Trading’ is available from Wiley Publishing.

  • Wayne McDonell provides analysis of the currency market: how professionals use weekly pivot points.

"A few weeks ago, I was lucky enough to be invited onto the trading floor of the Chicago Board of Trade. Here, I had the good fortune to wander through the trading pits, witnessing the glorious trading activities for commodities such as soy bean meal. Exciting, eh?

Because I am a currency trader, I spent most of my time in the trading pits for the S&P 500 and for treasuries, where the 10-year T-note and 30-year bond are traded. Now that is exciting! These two pits are right next to each other, but they are essentially a world apart in the way they trade.

The treasury pits were a lot different from what I had envisioned.

They seemed more like a coffee shop, with patrons sipping lattes while Twittering or Facebooking, than a place where traders were exchanging billions of dollars. All traders sat quietly in front of computers. Most were watching order flow data on their trading stations and placing orders. They were not making eye contact with each other. It was as quiet as a funeral parlour and as calm as a yoga class. Not what I had expected.

The S&P 500 was just what you would expect. It was a huge ring with a crowd of screaming traders flashing hand signs back and forth. At times, there was a real frenzy of buying and selling. It was interesting that none of the traders had computer screens. They were not allowed, as they are in some other trading pits.

Therefore, as an offer hit the pits to “Sell 200 contracts”, was it a good time to offer to buy – or should you wait for a better price? How could you tell, without a range of moving averages and oscillators? The answer: pivot points.

Both equity and treasury traders were using pivot points. I’m sure the commodity traders who were trading corn, wheat, cattle and soy beans were using pivot points too. So, are you using pivot points?"

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