Lessons from the Pros


How to Make a Cash Withdrawal From the Markets

I know many of you read that title and thought maybe I was going to disclose that magical “get rich quick” secret trading strategy that everybody is looking for. Trust me, there is no such secret. The sooner a trader realizes that, the sooner they can begin trading successfully.

This article is going to focus on distinguishing between Commodity Futures symbols that are used for order entry and chart analysis.  There is definitely a difference between the two.

Think of these symbols as important as your banking ATM pin number.  When you go to your bank and insert your card in the ATM you are asked for your pin number.  If you enter the wrong pin number the transaction is cancelled until you enter the correct number.  That is because the ATM computer does not know how to route your instructions until you enter the right information.  This is exactly how entering an order on an electronic trading platform works too.  If a trader does not send in the Exchange recognized market symbol then it does not know where to route your trading order.

The confusion seems to come from the fact that Futures charting software uses one set of symbols for charting and the Exchanges require a different set in some instances.

We will use TradeStation symbols for our examples in this article, but there are many other trading platforms out there where you could encounter the same situations.

Traders coming into the Futures markets for the first time have usually been used to trading Stocks.  Whenever they would enter an order to buy or sell the symbol would be the same as the chart they had built to analyze their market.  The reason the symbol was universal trading Stocks is that there are no contract expirations to deal with. Stocks trade continuously without interruptions unless they are delisted from the Exchange, merge or are acquired by another company or perhaps they go out of business.  This makes Stock charts seamless.

The Futures markets are dealing with contracts that have a first and last trading day.  Once the contract expires a new contract month begins trading and then eventually it too expires and the cycle continuously repeats like this.  To compensate for these expirations Futures Exchanges assign different nomenclature to each Commodity Futures contract month traded.  This way everybody from the trader to the Exchange knows exactly what market is being addressed. For this reason it is imperative to have the correct symbol listed on your trading platform or the Exchange does not know how to route your order and it will be rejected.

Let’s say a trader wanted to buy a Corn Futures contract and only placed the root symbol for Corn (C) on their trading matrix.  Futures contracts have multiple contract months of the same Futures market trading during the trading day.  Corn has the following months trading at the same time each day the market is open:

  • March
  • May
  • July
  • September
  • December

Putting only the root symbol of Corn (C) on your matrix would not direct your order to the proper month of Corn you wanted to trade.  As speculators the majority of time we would prefer to trade in the contract month with the most volume.  This will provide liquidity for entering and exiting our trade without excessive slippage.  Your trading matrix is going to have to include the month you want to trade or the order will be incomplete and be rejected.  Figure 1 will show the month codes for all Futures contracts.





























Figure 1

Our trader is trying to buy the December Corn contract.  He would therefore have to use the symbol CZ to put on his matrix.  If he was trying to buy the March contract he would have to use the symbol CH.  Now we have added the month code to our symbol, but there is still something missing.  Your order will still be rejected sending it to the Exchange with just the root symbol (C) and the month code (Z).  Not only do Commodity Futures contracts trade different months, but they also trade different years.  Some Commodity Futures contracts can trade out for 4 or 5 years.  That means there are several December (Z) contracts trading during the day.  Now we need to identify the proper year we want to place our order in.

By adding the year it could look like this CZ2012.  Most charting software will not ask for all 4 digits of a year.  Typically they will only require one or two digits.  These two digits are usually the last digit or the last two digits.  For TradeStation it will look like this, CZ12.  While other platforms will ask for only one digit and it will look like this CZ2.

All Futures contracts have contract specifications listed on the Exchanges website they trade on. This is where you will find which months are traded for your selected Commodity Futures contract.  The majority of Commodity Futures contracts have different expiration months and that is why you need to visit the Exchanges website to get the correct ones.

If our trader wanted to buy December Corn they would need to enter a buy order with a price they wanted to pay and a symbol of CZ12.  This order would be routed to the proper market (Corn) on the electronic platform, proper month (December, Z) and the proper year 2012.  The order would be accepted as entered.

The symbols we use on our charting software can vary from different charting packages.  TradeStation could have the following symbols listed on each of their charts: (I will use our Corn example as our root symbol, but it could be any other Commodity Futures market)

Symbol                          Chart Type

  • @C                     Continuous adjusted chart
  • @C=110XN     Continuous un-adjusted chart
  • CZ12                  Contract specific month
  • @C.D                Continuous Regular Trading Session only
  • CZ12.D             Contract specific Regular Trading Session only

Notice how each of these symbols are different than the Exchange recognized symbol (CZ12) we discussed earlier (except the contract specific chart symbol).  If you try and send these TradeStation symbols to the Exchange your order will not be accepted.  Just like entering the wrong pin number on your ATM machine you will not be able to withdrawal any funds from the market if you place the wrong symbol on the matrix.

Another note on plotting just the Regular Trading Session symbols, (CZ12.D) not all symbols allow you to plot these.  You might have to custom configure your time templates if the symbol is not recognized.  Contact TradeStation for assistance with this matter.

“Every great story on the planet happened when someone decided not to give up, but kept going no matter what.”  Spryte Loriano

– Don Dawson

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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