While it might seem like high-tech fun to the casual observer, trading is a lonely ordeal. Not only does the professional trader need to have extreme discipline, experience, and an attitude that doesn't dwell on the money but sees trading as a game; he or she must also spend at least six hours a day in isolation with only the sound of whirring computers punctuated by the occasional audible signal. However, thanks to the development of the online trader's chatroom, trading in seclusion may no longer be a necessary ingredient for success. Here we look at how the trader's online chatroom not only connects traders but also can help their efficiency and profitability.
Hotcomm technology allows those who are sitting at computer screens and hooked up to a broadband connection to communicate with other traders and share ideas, indicators, strategies, and observations on an ongoing basis. They can even alert fellow traders of trade signals that have fired.
Participants can also share their favorite charts as well as data and research gleaned from their favorite sources. Conversations between those in the virtual room can be typed or spoken over a microphone. It allows all to pool their senses and resources so that, in effect, the combined effort of many becomes greater than the sum of the parts. It is the ideal tool for training and ongoing education.
The brainchild of 1st Works Corporation, a Boston company formed in 2000, HotComm is a real-time multimedia desktop platform for secure communication and content delivery among groups of users. Other services include interactive messaging, voice-over Internet protocol (VOIP), full motion video and content delivery, group navigation, shared applications, and remote control on demand.
Trading in Numbers
Trading rooms are virtual online meeting places that allow both presenters and guests from around the world to interface online and exchange ideas and information. As of September 2004, HotComm programs were in use by over 6,000 customers in more than 60 countries accessing a total of more than 100 rooms every day. Some of the larger rooms hold as many as 700 users daily, according to Director Kevin Driscoll of 1st Works Corp.
Driscoll, having been with Hotcomm since its inception, says that while the Hotcomm application is not limited to traders, it was specifically designed with the needs of the trader in mind.
"Initially we did not really have a target market, but traders adopted us since the application was able to achieve all or at least most of the functions that they required. Their input has helped shape the products that we offer today. Our applications have since evolved into a series of programs with functionality that also appeal to a wide variety of corporations and distance learning institutions, the latter as exemplified by The Technical University of Denmark."
Connecting with Experts
Woodie's CCI Club, the most popular Hotcomm trader chatroom, is a great example of what the power of the Internet and technology has done for the business of trading. Founded by Ken Wood, or "Woodie" to those who regularly populate his trade room, the chatroom is occupied 24 hours a day by traders from around the world trading every market from the Hang Seng Exchange in Hong Kong to the Chicago Board of Trade (CBOT).
Figure 1 – HotComm chatroom window of Woodies CCI Club. There were 629 traders in the room when the author checked in. Chart provided by Hotcomm.com
Even if the markets they trade are vastly different, all who occupy the CCI Club share a common trait: they all use Donald Lambert's Commodity Channel Index with a twist. The twist consists of a unique way of reading the CCI that Wood has developed. Using terms like "ghosts," "shamus," "zero line rejects," and "trendline breaks," traders enter and exit trades seemingly like magic--at least to those not familiar with Wood's techniques. The rate at which his room has grown is clear proof of this technique's success.
Figure 2 – Woodie's CCI indicator on a three-minute chart of the S&P 500 emini (ES). Chart provided by Tradestation.com
A trader and regular CCI Club attendee uses Woodie's CCI signals to trade a variety of commodities, taking CCI signals using one contract. According to Wood, the account accumulated $100,000 in profits 17 weeks after initiation. It was set up to show what was possible using the CCI as an indicator to trade commodities.
By giving daily online commentary and regular free online seminars, some of which have been sponsored by the Chicago Board of Trade, Ken Wood is a model pioneer of the possibilities of chatrooms, helping thousands of other traders learn to survive this uncompromising business. (All he asks in return is that those who learn something support his favorite charity, the Make-A-Wish Foundation.)
Another long-time and very successful example of how chatrooms provide an educational resource to traders is Nexgen Software Systems (of which this author has been a regular attendee). In a series of Hotcomm chatrooms, owners John and Melinda Novak have helped educate 50 to 80 traders per day on the benefits of using automated Fibonacci levels and other indicators. (For more on the Novak's Fibonacci-based trading techniques, please see "High-Tech Fibonacci" and "Trading Fib Confluence – As Easy as ABC.")
Figure 3 – Our three-minute S&P 500 emini chart using Nexgen confluence zones (red and blue horizontal lines) and ABC indicator. Lower window is a MACD indicator modified by Nexgen. Chart provided by Tradestation.com Indicators by Nexgen Software Systems.
Novak is the regular moderator and educator handling questions about everything from software to the intricacies of interpreting various Fibonacci or ABC signals. The Nexgen rooms have demonstrated that traders using the online chatroom can find not only others wishing to learn, but also experienced traders who have insight into particular techniques and who enjoy having a number of eyes and ears on the market. They also help provide valuable views into where prices may be headed.
Traders Reaching Out
When a greater number of traders and investors join the markets, volatility increases across all equity and commodity classes. Where there is increased volatility, there is increased risk but also greater opportunity for profit. In an environment of ever-increasing competition and complexity, it becomes crucial that traders have the tools necessary to not only survive, but thrive in the trading game. One brain and a pair of eyes and ears are fine, but there is little doubt that there is strength in numbers. This extends from the initial learning phase right through to the expert professional level.
Chatrooms allow users to learn from experts located anywhere in the world, without leaving the comfort and convenience of their own trading rooms. These virtual meeting rooms also allow professionals in all aspects of the trading game to share ideas, charts, research, and market reconnaissance in the blink of an eye.
This new way of trading can help increase efficiency and profitability, and if you are not a committed hermit, you'll find it's a whole lot more fun to boot!
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