TRADETHINK ARTICLES : One For the Record Books

November 26, 2008

One For the Record Books

By Chris Morse

We have seen some great moves it the commodities markets in 2008. What amazing agility the markets have had. The range of prices have been on such a grand scale to compare perhaps only to some moves last seen in the 1970's commodities boom.

Unfortunately for many people the moves in the markets have come at a high cost. Like the 1970's we have seen unemployment skyrocket. And least we forget the major panic we had when the price of crude oil was in striking distance of $150 a barrel and many were calling for $200 or $300 a barrel prices. I personally was paying almost $100 to fill up my gas tank in my car (holds 22 gallons at $4.50 per for Super). The last two times I filled up my tank the total price paid was under $40. What a relief for gas to be under $2.00 a gallon again (I live in Houston, the price of gas may be slightly higher/lower where you live).

What a change a few months can make. I am one of the fortunate ones though. I make my living in the commodities markets. My trading system (TradeThink) was able to ride crude oil up to over $130 from an entry at $115.50 And when crude came down my systems signaled to go short at $113 on September 1, 2008 (we are still short with the last price at 50.50 on Monday afternoon). Those two moves alone made a combined $77 or $77,000 per Brent Crude Oil contract. There were four losing trades in between the trend change from long to short for -$1350 each (yes there are losing trades). However the $77,000 combined winners more than made up for the combined $5,400 losers with a net of $71,600 per contract.

When gold was making a move to over $1000 an ounce while people were fleeing to safety as the dollar was having it's demise, again my trading system TradeThink was long the gold from $848.90 - $994.30. That's over a $14,000 move, per contract. When gold came down from 891.90 on August 5, 2008 to 818.20 on September 17, 2008 the move was for $73 or $7,300 per Gold contract. And, in the spirit of full disclosure my trading system did have five smaller losers between the uptrend and the downtrend (this is why you must have discipline). However the losers tally were a bit less at $6,720 combined. The system still netted over $14K per contract with winners and losers for the period. And there are people that trade several contracts. Imagine if you had been in a few contracts during these moves. Of coarse there is risk and you can and will lose money at times. However there is also the reward.

Yes, I have been very fortunate with these wild market moves this year. Capturing these trades comes at a high cost though. The cost is flexibility and open-mindedness. The flexibility to be willing to go either long or short a market. The open-mindedness to trade and follow different market sectors that you may not yet be familiar with. Sectors like; metals, fuels, grains, meats, softs, currencies and bonds. I pity the day trader who is only open to trading some E-mini contracts or perhaps they are attracted to only FOREX with all of its marketing gimmicks. Even worse the trader/investor may only dabble in the stock market or follow a CTA recommended by some broker. Don't get me wrong, I know there are good brokers in this industry (I have the fortune of working with several).

What a shame it is for traders that really want to succeed in this game of trading, that there is just so much BS out there or the "smoke and mirrors" marketing to make a buck at a traders potential financial demise. Marketing such as 90% accurate, what on earth is this? How about the green light/red light stuff, yeah right!

Just because you may not have had the experience in the past to separate the wheat from the chaff of so called trading indicators don't let it spoil you away from still trying to succeed in trading. There is a way to have a chance at success. All you have to do to begin is be open-minded. Stop the insanity of believing that it is only possible to make large sums of fast money trading FOREX or the latest E-mini index system with inadequate trading capital. It takes money to make money.

"Diversification is the only free lunch on Wall St." as Edwin Lefevre wrote of the famous trader Jesse Livermore in "Reminiscences of a Stock Operator" (if you have not read this book, I highly recommend you pick it up). If a trader is willing to look at multiple markets simultaneously with a solid trading strategy for market selection, entries and exits and along with proper risk management and discipline the trader at least has the foundation and makings for a sincere chance at success.

About the Author

Chris Morse is the Developer of the TradeThink trading system. He has been involved in the development of trading strategies for nearly ten years. Mr. Morse developed a very robust system which is now in private use at one of the largest FCM's and has earned sizable returns for the last 3 years. Mr. Morse now focuses his time exclusively on developing and managing his systems.

Disclosure: Commodity trading has large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell commodity interests.

Notice: Returns are hypothetical. Hypothetical or simulated performance returns have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since trades have not actually been executed, the results may have under or over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight, no representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. INVESTMENTS IN FUTURES INVOLVES HIGH RISKS AND YOU CAN LOSE A LOT OF MONEY.

FUTURES TRADING HAS LARGE RISKS. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES MARKETS. DON'T TRADE WITH MONEY YOU CAN'T AFFORD TO LOSE. YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN THE FUTURES INDUSTRY. IN SO DOING, YOU SHOULD BE AWARE THAT TRADING FUTURES AND OPTIONS ON FUTURES CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE VALUE OF YOUR ACCOUNT. THIS IS NEITHER A SOLICITATION NOR AN OFFER TO BUY OR SELL FUTURES INTERESTS.

USERS OF THE SOFTWARE ARE SOLELY RESPONSIBLE FOR THE OPERATION OF THE SOFTWARE. TRADE POSTINGS TO THIS WEBSITE ARE EITHER ONLY EXAMPLES OF HOW THE SOFTWARE WORKS OR THE RESULTS OF OPERATION OF THE SOFTWARE AFTER THE MARKET CLOSES. THIS IS PROVIDED TO LICENSEES OF THE SOFTWARE ONLY TO HELP VALIDATE THEIR OPERATION OF THE SOFTWARE. TRADE THINK DOES NOT MANAGE ANY MONEY OR PROVIDE TRADE OR INVESTMENT RECOMMENDATIONS. PROSPECTIVE TRADE THINK CUSTOMERS ARE ADVISED TO MAKE DECISIONS BASED UPON THEIR SPECIFIC CIRCUMSTANCES AND NOT MERELY ON THE INFORMATION CONTAINED ON THIS WEBSITE. THIS BRIEF RISK DISCLOSURE STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THE FUTURES INDUSTRY, WHICH SHOULD BE CONDUCTED INDEPENDENTLY BY YOU WITH THE EXPERTS OF YOUR CHOICE.

ALL TRADING INVOLVES HIGH RISK. THERE HAVE BEEN NO PROMISES, GUARANTEES OR WARRANTIES SUGGESTING THAT ANY TRADING BY TRADE THINK USERS WILL RESULT IN A PROFIT OR WILL NOT RESULT IN A LOSS.

ALL RETURNS PRESENTED ON THIS SITE ARE HYPOTHETICAL. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

TRADE THINK AND ITS CURRENT EMPLOYEES HAVE HAD LITTLE OR NO RECENT EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CUSTOMERS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE HYPOTHETICAL PERFORMANCE RESULTS, CUSTOMERS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE HYPOTHETICAL PERFORMANCE RESULTS.