| George Lane completed his 47th year of | | | | in down-trends, the closing price tends to be |
| trading in December 1996 and is still going | | | | near the lower end of the range. Two lines |
| strong. After many years of trading in the | | | | are used in the Stochastic Process-the %K |
| grain pits in downtown Chicago, Lane has | | | | line and the %D line. The %D line is the more |
| shifted to screen trading during his | | | | important one and is the one that provides |
| "retirement" in a small community about 80 | | | | the major signals." |
| miles south of Chicago. | | | | |
| | | | "We had %A and %B-we went through the whole |
| However, retirement means different things to | | | | alphabet twice, working on things. Then we |
| different people, as Lane was up until 2 a.m. | | | | discovered %K and then %D and the darn thing |
| trading Italian bonds the night before he | | | | worked. So, we quit the research and went |
| spoke with this reporter. Lane said, "I was | | | | into the pit every day and started making a |
| having fun! ... it beats working for a | | | | living," Lane said. He calls himself a |
| living!" | | | | strictly technical trader. "I read the |
| | | | fundamentals, but the fundamentals are not |
| Early in his life, Lane was set on becoming a | | | | the way to trade---the technical side is so |
| physician-as his father had been. But, then | | | | much more lucrative." |
| "I was out roaming around Chicago one | | | | |
| afternoon. I wandered into a building to buy | | | | But, "it is hard work if you are going to be |
| a cigar and I heard a bunch of noise | | | | a trader- you've got to be looking at your |
| upstairs. I went up and saw these men | | | | computer five to six hours a day," Lane said. |
| standing around yelling," Lane said. "All of | | | | |
| a sudden, I was hooked and medicine dropped | | | | Currently, in his "retirement" Lane trades |
| from the picture," Lane said. | | | | "about four to 12 times per day." His time |
| | | | frame is "45 minutes to 1 1/4 hours," with |
| While initially Lane worked as a broker, he | | | | average gains of "$150, $350, $750" per |
| said "that didn't work out very well ... | | | | trade. "They all add up at the end of the |
| because as a broker you want to give | | | | day." |
| customers advice that is in their best | | | | |
| interests. Sometimes what you think goes | | | | "You can make $5,000 a day trading one-lots," |
| against what the firm thinks." | | | | Lane said. From his screen, Lane trades |
| | | | primarily off of three-minute, 15-minute and |
| In the late 1950s, Lane purchased a | | | | 30-minute charts, relying on "stochastics, |
| membership on the Chicago Open Board of Trade | | | | volume and trendlines." |
| for $25 and started trading the grains. The | | | | |
| Chicago Open Board of Trade, now known as the | | | | Recently, Lane has been trading the S&P 500 |
| MidAmerica Commodity Exchange, was originally | | | | futures contract at the Chicago Mercantile |
| founded in 1868. | | | | Exchange. He sticks to liquid markets, |
| | | | avoiding thinly traded contracts such as pork |
| At first, Lane said, "I wasn't doing very | | | | belly futures or lumber. |
| well. An old timer came over to me one day | | | | |
| after the dose and asked me how I was doing. | | | | Lane doesn't confine himself to U.S. markets, |
| Every night after trading, he and I went down | | | | however, estimating that 20% of his trading |
| to the local tavern and as long as I bought | | | | extends to foreign futures markets. "German |
| the whisky, he taught me everything he knew | | | | bonds and Italian bonds trade very actively," |
| about the markets." | | | | Lane noted. |
| | | | |
| "He introduced me to the Taylor trading | | | | However, Lane said he never trades without a |
| method, which is a three-day trading cycle" | | | | stop-loss order protecting his position. |
| Lane explained. Lane began to pick up trading | | | | "That's the secret to making money in |
| and started to see some success in the pit. | | | | commodities-control the size of your losses." |
| He eventually became the president of the | | | | |
| Investment Educators Inc. "I'd trade all day | | | | Lane recommends that beginning futures |
| and then we'd meet at night," Lane said. In | | | | traders read "John Hill's three books on |
| that capacity, he invented 64 "stochastics," | | | | charting basics-if you are a good |
| a widely used momentum indicator. | | | | chartist-the charts talk to you." |
| | | | |
| "Stochastics measures the momentum of price," | | | | "You can learn how to do it yourself," Lane |
| Lane explained. "If you visualize a rocket | | | | said. "Brokers are salesman. Never take |
| going up in the air- before it can turn down, | | | | advice from a broker. Because, then you are |
| it must slow down. Momentum always changes | | | | admitting that you don't have enough smarts |
| direction before price ... It is a very | | | | to make your own decisions." Asked what was a |
| sophisticated tool," he said. | | | | key factor in success in commodity trading, |
| | | | Lane replied "greed." |
| According to John J. Murphy's book Technical | | | | |
| Analysis of the Futures Markets, stochastics | | | | "Trading is fear and greed and if you have |
| "is based on the observation that as prices | | | | enough desire to have a successful financial |
| increase, closing prices tend to be closer to | | | | life-you can do it," He concluded. |
| the upper end of the price range. Conversely, | | | | |