Volatility and liquidity are the two elements independent trader George Angell looks for in a market to trade. Currently, Angell exclusively trades the S&P 500 futures, putting on intraday trades only, never holding positions overnight. "Liquidity and volatility are the two things you have to have. You can't day-trade something like oats--it wouldn't work" Angell said.



Back in the early 1970s, Angell first became interested in the commodities markets. "I bought sugar and it went limit up ... then I bought copper and it went limit up, so I bought some more. Then it went limit down. I called my broker and told him to sell and he said to whom?" Angell said. "That's when I realized I had more to learn," Angell added.

In the early 1980s, Angell headed for the Chicago trading pits. He was a local trader at the MidAmerican Commodity Exchange, focusing primarily on gold. While Angell now trades for himself, off-floor, from a screen, he called trading on the floor "an invaluable experience."

"People on the floor are very short-term oriented" Angell said. "It taught me to get in, capture the trend, get your money and leave" he said.

Now, however, Angell prefers off-floor trading. "I'm alone in a room trading. When I'm on the floor there are thousands of people. It's a social event. People want to talk about their positions, they want to have coffee. You lose your concentration... you can't see the forest for the tress," Angell said.

Technology has revolutionized the capability of off-floor traders in the past 10 years, according to Angell. "The playing field has been leveled," Angell said, explaining that technology has decreased the advantage the floor trader was once seen as having over an off-floor trader. "The key beneficiary is the public trader. The public can't scalp, but they can day-trade," he explained.

Angell disregards fundamentals, relying on technicals "100%." He has developed two proprietary trading systems: LSS and Spyglass, which he utilizes in his day trading, along with "discretion and personal judgment."

"Everybody needs some sort of mechanical system. It enables you to take the difficult trades you wouldn't normally take on the seat of your pants" Angell noted.

Also, "every day I go in without an opinion ... and I let the market tell me where it wants to go ... opinions are what get you in trouble," Angell added.

While "a lot of people don't have the discipline to trade without stops," Angell said he doesn't use them. "The problem with stop trading is that you get out at the worst possible moment. Instead of stops, I use action points. That means when it hits that point I'll get out, but I'll wait for the bounce (if the market is going down)" Angell explained.

Angell has traded the bond market as well. He keys m on his two key elements of volatility and liquidity when judging markets. "Occasionally, markets die on you. For instance, in 1980 we had a big gold market. It had gone to $850 per ounce...but volatility dried up and then liquidity dried up. At that point I went to the bonds," Angell said. When the S&P 500 contract was launched at the Chicago Mercantile Exchange, Angell started trading that market. However, he noted after the stock market crash of 1987, liquidity dried up in the S&Ps, and Angell moved back to the bonds for a time.

"Big institutions are trading bonds and there are thousands to buy and sell at every tick. Nobody can play with that market. Nobody can manipulate it. That's why orange juice goes limit up all the time-because there is nobody to sell it," he said. When asked about GLOBEX trading, Angell said, "I don't pay any attention to it, because there's not enough liquidity there. On Eurodollars," Angell noted, "there is huge liquidity but not enough volatility to make money."

On the differences between markets, Angell noted that "all the markets have different characteristics and you have to know your market very well. On the floor, a guy who trades lumber isn't going to trade the S&P. And traders trade the markets differently. People are known according to how they trade. This guy is a scalper. This guy trades back months. This guy is a spreader. This guy is a position day-trader. The novice trader needs to know he's got to be a specialist."

When asked why many futures traders don't succeed, Angell pointed to three main factors. "One, a lack of discipline. Two, they are underfinanced. Three, they don't know what it's all about. They don't know about paradoxical even" Angell said. The dictionary definition of "paradox" is an apparent contradiction, which is nevertheless somehow true, Angell explained. One example of this in the markets is that "the whole game on the floor is to run the stops" he said.

"In the market, everyone thinks it's going up, but everyone won't make money," he added. Advice that Angell has for beginning traders? "Be well-enough financed with risk capital that you can afford to lose. Don't think about the money, drink about the market, and the money will take care of itself," Angell concluded.