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Program Trading

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Program trading attempts to arbitrage the inefficiencies between where the S&P futures are trading and where the S&P cash contracts are trading. If the futures trade too high, program traders will sell the futures and buy the S&P stocks (buy program) and vice versa if they trade too low. They profit then when spread comes back to normal levels. Moreover, program buys and program sells can cause additional natural buyings and sellings of other individual stocks.

IntradayBreakouts
Program Trading Stochastics Reversals
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The following is a description on how to use the Program Trading module in practical applications. A detailed explanation of Program Trading is beyond the scope of this tutorial, but suffice it to say that a massive amount of Research & Development has gone into this module. Don't let the simple interface and ease of use fool you, this is by design. The module's algorithm is derived from a composite of proprietary indicators and rules. If you are interested in learning more about Program Trading there are several excellent sources.

Program Trading can strike fear into the heart of even the most experienced trader. When Program Trading hits, it can take your position beyond your stop, before you have a chance to exit. It will strike without warning - that is until StormTracker's Program Trading Module came along.

Now you can not only know when Program Trading is about to hit, you can take advantage of the knowledge to close positions and open new ones in the direction of the program Trade. Here's how it works:

Every morning before the open, go to the www.stormchasertech.com website and obtain the Buy/Sell Spreads for the day. Put these values in the Lower/Upper Bound of the Program Trading Module.

When the market is in between trading programs, the signal will be zig zagging between the boundaries. The Program Trading module will signal when market conditions are conducive to a Program Trade by signaling 'Program Sell Range' or 'Program Buy Range'. At times, the selling and buying will not stick because the arbitrageurs will quickly bring it back into balance consequently resulting in no follow through on the direction it was going.

****MB Trading users need to put the symbol $INX for the cash index ****

When a Sell or Buy Program is about to hit the tape, the Module will then alert you with "Buy Program" or "Sell Program"

. You may also get a feel of the magnitude of the trading program by observing on how far the signal goes beyond the boundary and the duration in which the messages remain in this mode. The module will also alert to any failed attempts or temporarily stalled program trading.

When a Sell Program hits you should exit your long positions and look to short weak stocks.

When a Buy Program hits you should exit your short positions and look to go long strong stocks.

Many times when Sell or Buy Programs hit, they often come several at a time.

A Sell Program was alerted on Jan 21,2000 at 9:43, the first of three in a space of 20 minutes. By picking some of the weak stocks in the Strong/Weak Stocks module and riding the wave of selling, substantial profit can be made:

Two weak symbols at the time of the First Program Sell trigger were CMGI and QQQ. As the following charts show, substantial gains could be made by shorting the 2 symbols at the time of the trigger. Also note that the timing of the trigger of the Program Sell allowed ample time to enter a short position and participate in the sell-off

***NOTE*** The Program Trading Module requires Futures and Cash Index Datafeed.