Welcome to CK Locke & Partners Research Division

Trading our mechanical strategies allows you to work or play without constantly watching the markets because entry and exit criteria can be met at pre-arranged price levels before the respective market opens. These exits include stop loss orders. We do ask you however to check your e-mail "in box" during business days before 1830 Sydney Standard Time if you can, however if you do not have an e-mail address we will attempt to contact you by phone.

Mechanical trading is unemotional. Our collective experience suggests that traders that have eliminated emotion from entry and exit levels are generally more successful than other traders. Mechanical trading encourages traders to apply the rules of good trading that we all know, but find hard to apply. Some of these rules are:

In the absence of mechanical entry criteria, trading opportunities are often not taken because confidence is lost. Typically this occurs after a series of losses. When this happens, "Murphy’s Law" often applies whereby the missed trade could have paid for the series of losses plus more if it were taken.

Stop loss orders are applied by us on your behalf at pre arranged price levels in order to manage risk. For example, if the tide turns soon after entry, your positions are exited at a pre arranged price level in order to reduce risk. However slippage can occur, slippage happens when actual prices received are better or worse than target entry and exit levels.

One of the biggest setbacks a non-mechanical trader has is deciding when to take profits. Mechanically based profit targets help to prevent the very common problem of exiting profitable trades too early. Profits should be maximised when they do occur in order to cover previous and subsequent losses.

Mechanical trading promotes consistency. Just because something hasn’t worked a few times doesn’t mean it is not good. Mechanical trading forces you to maintain consistency so that when a great trade takes place, you were there for it. Many traders start with a game plan, but lose it after the first few trades because they run out of confidence. They then look back in hindsight and find that the original plan would have been profitable if only they had stuck to it.

For example, in 1997, coffee futures made an incredible upward move in a very short space of time. Traders like you held around 200 bought option positions that cost around AUD1 300 each which was also the maximum risk. Well over $50 000 profit per position could have been realised if profits were allowed to run. Only 4 of the 200 options made a lot of money (2%). Two out of the four traders were unable to be contacted during the big move. That is, it can sometimes pay not to get too close to the market. Most positions were exited at break even because the options initially lost value. We have found that in the absence of mechanical trading strategies, traders tend to take small profits because it is instinctive to get out at the slightest change of direction. This bad habit occurs when traders are too close to the market.

Draw -downs exist with any type of trading. A draw -down is the difference between an accrued equity high in relation to a subsequent equity low. For example, if your account balance started at $20 000 and went up to $40,000 and subsequently fell to $30 000, you would have incurred a $10 000 draw -down. A draw -down could be deemed as a series of trades whereby accrued loss amounts exceed accrued profit amounts. Draw -downs can be psychologically difficult to endure. All we can do as traders is hope that any draw-down will be minor or enough money has been made previously .The difficulty with trading in general is that unlike your regular pay, you don’t know when the trading profits will come or how much they will be. Profits and losses can be cyclical in nature so the idea is to not get too excited when you are having a good run and not lose confidence during a draw -down. We believe that a good trading account should go down slowly and up sharply.

Another point to bare in mind is that the majority of individual trades are not profitable. This is normal. Our aim is that profitable trades should be large enough to cover the losers; hence the importance of letting profits run. A typical successful trading account will show small losses and big profits.

CK Locke & Partners Research and Development Division have largely developed our mechanical trading strategies. Hence, they are unique and protected. Our mechanical trading strategies are gradually expanding in order to increase market and strategy diversification. Trading opportunities are presented to you via recommendations from your adviser.

Some strategy examples are discussed below:

Intra-day trading is entering the market and then exiting the market on the same trading day. Your position is "opened" when you enter and "closed" when you exit.

By far the biggest advantage intra-day traders have is efficient money management control due to the elimination of overnight risk. The futures strategies used revolve around the opening price, volatility, price patterns, and statistically based exit stops.

This strategy has been designed to suit Australia’s Gann trading popularity. The strategies are based around Gann principles. The term "Gann" comes from WD Gann who was said to be one of the greats in trading futures markets. The techniques that are applied are derivatives of this theory, however maintaining the esoteric principles of WD Gann. The trading methodology involves cyclical trading that applies to futures and options markets.

The purpose of this application is to potentially capture the big market moves. This is done by holding positions as long as the trend remains. Big moves are usually the result of a corresponding big trend. The market itself determines how successful the respective trade will be. We believe that the whole idea of trading is to capture the big moves that may eventuate in a given timeframe. Our long-term trading recommendations are designed to avoid bottom picking or counter trend trading. Futures and bought options are used within this strategy. Written option trading opportunities are generated from the same trading signals. Around 40 futures markets are monitored for trading opportunities with the help of computer generated trading criteria. Our long-term trading recommendations feature the following principals:

• The application seeks markets that have long- term moving average crossovers. Here, trading signals are produced in order to capture directional trends as well as opportunities to trade flat markets.

• A closer time frame is then analysed. This pinpoints high and low price breakouts, percentage price penetration and price pattern set-ups.

• Initial stops are based on average daily volatility. Stops are then adjusted to the initial entry after the respective market moves favourably by the initial stop value in dollar terms. After this trailing exit stops are applied at pre-defined levels.

This strategy analyses all markets that have a high directional correlation movement within historical time periods. Exit stop levels and profit objectives are based on historical movements from the closing price on entry dates.

Our option writing recommendations are largely generated from statistical monthly patterns. This is where out-of- the money puts and/or calls are sold at different strike prices. This strategy allows room for the market to fluctuate more than what would be tolerated with "naked" futures positions.

No, CK Locke & Partners believe that you don’t need experience in order to trade our mechanically based recommendations. Until you make your first trade, you will not have trading experience. Our mechanical trading recommendations suit people who are busy. The risk traders’ face by not trading on account of being too busy is that they may miss the biggest move of the year. This is why we do our best to alert you to these trading opportunities.

• Structured trading plan.
• Diversity in tradeable markets and trading concepts.
• Become emotionally distant from the market.