《外汇交易实战图表与交易心理》 作 者：(新加坡)许强 (美国)Gary Weiss

One of the main points that usually get overlooked is the basic idea that there are virtually no new ideas or events when it comes to trading markets in general. Sound odd? Well, consider, that even during the 1929 stock market crash, trading was remarkably similar to the crash of 1987. Shorts made money, longs got hurt, margin calls went out, new age interpretations as to valuations started appearing clearly, what changed? The answer of course is that nothing has.

Therefore, one of the greatest trading lessons that can be learned is the idea of how to distinguish the heightened discord in events, from something that is truly a changeable event.

Probably the best way to keep the perspective necessary for this type of viewpoint is to be constantly aware of a particular markets component parts, and understand that price is often made up of things that you really donU see.

One of the great stories, along these lines, has to do with when I was a silver trader (too many years ago to make me feel particularly good about things I might add) , working for one of the larger commodity houses on Wall Street in the early 1980* s. As with many markets, both then and now, the idea of trading “basis” or cash versus futures contracts was a big business. Basically, in onler to understand this dynamic, pic ture that you have a spot contract long position in anything currency, commodity, stock index, it doesn't matter. Against this position there is a simultaneous short position in the futures market, so that realistically it can be considered that the position is hedged. But the fact is this hedge has a certain degree of implied slippage associated with it This differential goes by many different names (swap, E.F.P., forward spread) but generically, it can be referred to as basis. Or the price difference between the spot position and the fbtures position， represeating the same commodity but for a forward or futures settlement date.

Although it sounds esoteric，there is a reason for understanding this relationship, and it does not uniquely have to do with my particular story.

Basis, as trading component, also moves. It actually trades on its own, meaning that the value of the difference between cash and futures prices, is itself considered its own trading commodity. One can, for example ask a dealer for a market on the spot to 1 month basis, and get a market price for the value of the swap. But not to digress，too much, the point is that the value of basis is actually constructed from multiple components. Most of the price is usually associated with the interest rates associated with the forward valuation of the currency, or commodity in question. However, there is also a subtler price component that has to do with expectations and can be generally referred to as a volatility type of measurement.

During the great silver run up in the early eighties, one month interest rates in the US were trading in the mid to low double digits (hard to believe but in fact there was a period where fed funds actually traded as high as 19 percent) . Conse quently，the basis between spot silver and the Comex futures price could be assumed to imply a positive cany cost of a similar rate. Or， more to the pointy if spot were trading at 10 dollars an ounce, than the nearest futures price, approximately 3months forward might be trading at 10.38 or 38 cents higher, which equates to an annualized carry of 15 %.

The goal of basis trading in this particular instance was to try and maximize the spread or carry differential by buying spot selling futures at lets say greater than the implied 15%，or conversely selling spot, buying futures at a rate less than the implied 15% carry. This is fairly simple to understand, when looking at the big picture of an overall trading strategy, but for someone watching only one side of the trading activity, all sorts of erroneous conclusions can be drawn. And this was the classic case.

While on my pedestal shouting orders into the pit, generally, I was a seller of futures. This, of course was due to the fact that the trader on the silver cash desk (the other side of my phone line) was long the spot, and I was covering this by selling futures, at hopefully a wide basis. But，for all the world to see, at least as far as the commodity exchange floor was concerned, I was getting shorter and shorter in what was to be the greatest rising; bull market ifl histoiy. At first，people looked at me with confusion, then concern, and finally as silver started rising upwards of 30 dollars an ounce, pity. In fact，the idea that everyone assumed I was so incredibly short silver, and eventually would have to cover, actually lead people to reason that the price of silver would have to continually go up. Here of course is the ultimate irony. By actually selling futures, I was putting on basis swaps against the cash market at rates implied in the mid to high 20% carry range，making a huge amount of money while looking for all the world to see, like quite possibly the stupidest trader on the planet.