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I was researching some information on commodity forward delivery contracts when I came across a document detailing the traditional hand signals. These signals, still in use today for active trading pits, were codified to facilitate communication and rapid dissemination of information. Considering how long it would take for someone to type some of the information listed below, even with the use of shortcut keystrokes, I wonder if these signals still maintain a slight competitive edge in terms of speed and reaction compared to electronic screen trading. Not to mention the old skills of “smelling the trade” that can only really be applied over in the pit.

» 1.) Speed and efficiency
Hand signals enable fast communication over what can be long distances (as much as 30 or 40 yards) between the pits and order desks and within the pits themselves.
» 2.) Practicality
Hand signals are more practical than voice communication because of the number of persons on the floor and the general noise level.
» 3.) Confidentiality
Hand signals make it easier for customers to remain anonymous, because large orders do not sit on a desk, subject to accidental disclosure.

The Simple Buy And Sell:

Buy and Sell - Palms Out or In

Price or how to count up to ten with one hand:

The first two are easy, but after five remember to tip the hand horizontally, oh and don’t sneeze or feel the urge to itch…
One and Two

3 4 5 6 7 8 9 and fist

Quantity, or when you really, really shouldn’t scratch that ear & nose:

You might notice that the higher numerals are up to the forehead and lower order quantities down to the chin. This should give one rapid motion from top to bottom and also save up on errors – there’s a physical cost, higher arms, behind ordering more.

Forehead and Chin

Expiration Months or how Chicago‘s weather is used to signal around the world:

January, get my scarf around the neck because it’s darn cold. February, give me an F. March, wiggle your fingers along as if they were ‘march’ing. April, wiggle the fingers as though it were raining. May, it gets windy so hold on to your jacket. June, these contracts are denoted by the letter M. July, rhymes with eye so that’s where you’ll point to. August, wiping the sweat away. September, the contract code is U. October, the contract is V. November contracts are X. And December, get ready to buy the Christmas tree and have a lucky end of year.

Cold in January, Rainy in April and Christmas in December

For the spread traders out there: there are also combined months signals that link up the periods covered by merging the handsigns.

Expiration Cycles or when the wedding ring becomes key:

Expiration Cycles

Market Signals:

Market Signals

Options Signals:

a Put and a Call

Background Links:
Appendix to CME Handbook: The Art Of Hand Signals
Hand Signals in Pictures
CME and CBOT
NYMEX
LME’s Ring – still the world’s most concentrated sources of liquidity and price discovery for non-ferrous metals and steel contracts

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