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"The Commodity Futures Trading Knowledge Network"

Copyright© 1993-2012 by Webtrading.com
Issue 06

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Elliott Wave Theory - Owen Cramer

In Elliott Wave Theory, the largest waves within a price move are often referred to as impulse waves. These would be either wave 3 in a 1-2-3-4-5 sequence, or wave c in an a-b-c sequence, in both cases these waves or movements are usually the most powerful in the direction of the trend.

The following is a discussion on this pattern and a vehicle to use when a trend has started and you want to get into a market.

The first step in identifying an impulse pattern buy signal is a four day low. This means that the intraday low of the latest trading day must be lower than each of the intraday lows of the previous days. It may be lower than more than three, but it must be at least lower than most recent three.

The second requirement after a four day low is that an up-close must be achieved. There may be more than one up-close in a row. Also, the up-close may be achieved on the same day as the four day low.

The final pattern set up after one or more up-closes is a down-close which does not make an intraday low, lower than the original four day low. There may be more than one down-close in a row.

Sell entry signals are the reverse of buy entry signals. The preconditions for a sell entry are a four day high followed by a down-close followed by an up-close, without a violation of the original four day high.

This indicator or vehicle can be used to initiate long and short positions, but it is recommended that you use it in conjunction with an overbought or oversold oscillator. You can also use it with a moving average. Through optimization you may find that you can dramatically increase the reliability of this indicator in a particular market.


My Trading Software and my Portable Computer Trading Station Setup - William J. Armstrong

First, I will report about my trading experience with my Swing Catcher System. Since June 10, 1993, when I took my first position in the market based upon a signal from Swing Catcher, thru mid-October, I have made 13 trades, 11 of which have been winners.

They are actual trades generated by the system, not paper trades, and 11 trades went as the system predicted. I have been trading commodities for 18 months and this is by far my best record.

I recommend Swing Catcher for the following reasons: 1. First and foremost, it works. 2. Support is excellent; the monthly update of parameters is essential. 3. The system reviews the main commodities and ranks them on profitability. 4. The system gives targets (I have given a lot of open profit back to the market). 5. The system is easy-to-use, the manual is complete and you don't have to watch the market all day. 6. Finally, and perhaps this should have been first on the list, Dave Green is honest, truly cares about his trades and works hard to provide good value.

One of the criteria I looked at in selecting a trading system was portability, because I like to travel. I have set up a portable trade station that fits into my computer case. I have a Toshiba laptop T4500C with a Hayes 2400 baud pocket, external modem.

As an accessory, Toshiba offers a Fax/Modem chip to put into the laptop. CSI can not assure accurate data transmission with a combination Fax/modem. This may change soon, in which case the external mode will not be necessary.

As Trendx/CSI Portfolio users know, in the QuickTrieve Program under User Constants, you set the telephone number to be dialed by the modem. In my travels from one hotel to another, you modify the telephone number to be dialed to comply with the hotel dialing-out procedures, usually a 8 or 9 to get an outside line.

One problem that presented itself early in this process was the fact that there is usually a 4 to 6 second delay before the dial tone comes on after you dial 8 or 9, at which time the first 3 or 4 digits of the CSI telephone number are lost and the connection fails. CSI has allowed for this by use of commas, each comma equals a 2 second pause in dialing.

For example, if your hotel requires a 9 to get an outside line and there is a 4 second delay, you program the following in the user constraints: 9,,,1-407-392-0572.

You can determine the delay by dialing 9 yourself and counting the seconds for the tone. I usually add a comma for good measure.

I spent 2 weeks this summer trading from the beach using my portable trade station.


O stands for Orange Juice in October - Robert D. Edwards

I started trading February 28, 1980. On my broker's advice I put on position trades of going long Oats, and some other grains and watched as every day I lost money. In a couple of weeks I took my losses in the grains (actually sold Oats on the low of the year--how embarrassing).

I have never been a position trader since. I am a short-term, 1-3 day trader. After some initial success, I was so excited I quit law school at the University of Illinois, two weeks before the end of the 1980 spring semester. I had to quit because I couldn't stop studying commodities long enough to get ready for finals.

I have never made big bucks trading and although in recent years I am starting to make some headway, I still am an overall net loser in commodities. However, I attribute the lessons I learned in commodities to helping me make an excellent return on my mutual fund accounts. It also taught me how to take calculated risks and to believe in myself. This allowed me to start and run a very successful business. I feel commodities has rewarded me several times over.

Still, I would still like to be able to make some real money in commodities as well. I have gotten to the place where I can tread water for months and stay in there without making or losing hardly anything, although I am trading every day. I'm told this is good. If you are around to trade tomorrow, you are in a position to hit that home run. In the last few years I tread water until I hit the home run. Then I forget everything I know--the rules and methods go out the window and I remain reckless until I give it all back. Hey, I am playing on their money, I must tell myself. When the profits are all gone I get serious again and start working methodically and get back on course.

I'm expert at working out of messes. But handling a winning trade drives me crazy. To get rid of the anxiety I try and take my profits quick, way too quick.

Well, I do my own independent research and anyone who doesn't will never, I repeat, never be successful. As a true entrepreneur, I am my own person. I trade solely on my own advice. Oh, I gather information from sources, but I never take anything at face value. I do my own research. If my research agrees, then I will go for it.

I assume fundamental information is already factored in and am more likely to trade opposite what the news would tell me to do. I am a 820 technician.

I enjoy having a system like Swing Catcher because I like to bounce off the trades this system gives me, against my own research. Like any trend-following system, Swing Catcher does great in a trending market and poorly in a choppy, trend-less market. I do best trading in a choppy market because I never let my profits run anyway, remember.

In a choppy, sideways market, the intelligent thing, is to do the opposite of what the trend-following system signals tell you to do. I would venture to say there are more choppy and sideways markets than there are trending markets.

Within a trading range, I will go long at the bottom of the range and then reverse and go short at the top of the range, and I do it quite effectively because I place double reverse stops to go with the trend if there is a breakout up or down.

Still you need to find those trending markets because they will let you hit the home run. Most successful traders have only 40%, 30% or lower winning trades, but the occasional home run puts them way ahead. You have to get that occasional home run. I will therefore, give you some insight on a possible home run I see and will be trading in my own account. Again, this is my own independent research and I am not giving advice. If you are asking, I am telling you not to take this trade. But watch and see how it works out, just for fun--going long orange juice in October 1993.

Long November 93 Orange Juice - I am a seasonal and cycles man, a pattern trader, a technician. I start by looking at the long-term monthly charts and then go to the weekly charts and finally to the daily charts. Beginning in 1967, you will see Orange Juice started out low in the beginning of the year and then rallied until December.

Don't take my word for it, get a long-term monthly chart out and look it up right now as you read this. You will see that March was the low of the year and then going up in April/May, we went sideways until the big move up at the beginning of October. Bingo!

In 1993 we hit a major 15 year low in Orange Juice in February and went up until the beginning of July and then went sideways. Then at the end of September, OJ has broken out to new highs, closing on 9/29/92 above the old 131.00 high in the November contract. I am going with the breakout and see the first objective on November OJ of about 145 with a possible ultimate target of 170 to 200 by May 1994. For confirmation of this pattern I studied all the years from 1967 to present and picked out the years you had either a Nov or Dec low of the previous year or a major low in the first quarter of that year. This is what I consider the seasonal upward trending year. However, when you start out at a high in January and fall most of the year, then you are in a contra-seasonal trend and you should not go long in October because the trend is solidly down. Still, it is amazing that in many of these down years, orange juice would have an upward correction in October. Now for the years in which there is a seasonal upward move (like 1993), the results are as follows:

1967 - As mentioned before, going long October 1st would have caught a big move. By staying long until mid-December, one could have made a move from 38 on the October contract to almost 64 on the January contract.

1968 - September was the break-out up month but ended with a major correction allowing October to be a major up month from $63.50 to $74.00. However, November was a killer down month followed by another big up move in December. This started a high January 1969 that began a counter-seasonal 1969. Again, even in a counter-seasonal year which had nearly all down months, Oct. was an upper. Then 1970 was another down year which should be ignored because it is counter-seasonal.

1971 - After going up Jan. through May, there was a correction with a strong up move in Sept. and yes an October straight up move which ended in a November new high. This was followed by a counter-seasonal 1972 with a major low in Oct. followed by a good rally into November.

1973 - Another perfect seasonal move up with a July and Aug. correction allowing a Sept. rally, a strong October upward break-out and November high. 1974 & 1975 - In both of these years September was the big break-out month so October was a correction month. However, buying the October low allowed a nice rally into Nov.

1976 - Being a contra-seasonal down year, this year was ignored.

1977 - This year was a strong up trend for the whole year. With a high in Sept., there was a correction in October with a new high in November.

1978 - A sideways topping year saw a major correction and low in September, allowing a major rally in October. 1979 and 1980 were down years and ignored. In 1981 a strong January rally made this a basically down year and a contra-seasonal year that should be ignored. The same goes for 1982.

1983 - The classic year. From a Feb. low, a big rally followed with a Sept. breakout and correction, leaving a strong Oct. rally into Nov., another correction and then a big rally carrying into May 1984.

This made 1984 and 1985 contra-seasonal years to be ignored.

1986 - A classic year again. With a Sept. break-out and minor correction, October was a solid up mover carrying into December. 1993 closely resembles 1986.

1987 - Another excellent upward year but Sept. was the break-out month and after an October rally, November was the big up month.

1988 - At already high prices, this was a topping year with July and August rallies. Still, after a Sept. correction down, October was a good month to buy.

1989 - It was another contra-seasonal year with Sept. a major downer. The markets bottomed at the beginning of December 1989 for an explosive rally into January 1990.

1990 - This made 1990 a counter-seasonal year and October was a big downer. Still, the last week of Sept. and the first week of October on the weekly charts was a small upward correction before a big drop.

1991 - A classic pattern with October the big break-out month, after a rally the last couple weeks of Sept.

1992 - A contra-seasonal year brings us up-to-date.

1993 - In late September, we are breaking out to the upside in preparation for a big October explosion. Could this be a repeat of 1986? I think it might!

Of the twelve upwardly moving years that followed the seasonal patten, October was the month to go long every single time.

With the 15 year low early this year and the nice rally we have seen since, this looks like a classic year. Right on time, the market is now breaking out on really strong volume this week. Lets watch and see how far it will go.

I would be curious if any other readers can divine an upcoming seasonal trade which can be backed up by historical data. I always try to check out the seasonal tendencies on both a monthly and weekly basis prior to initiating trades. Although there may be over a dozen other filters which I might employ, this is the starting point.

If I was writing a book on technical analysis, seasonals would be covered in chapter one because it helps one get an overview of the market and establishes the framework of a trade.

On a very short-term basis, there are many other technical factors which were used for timing of the entry point. However, that is another article. Suffice it to say that everything looks good so far. With any luck, I might be able to make this an intermediate term trade of a week or more. Who knows? Wouldn't it be great if OJ locks limit up for several days in the near future! With this market, that's always a distinct possibility.


Money Management Questions & Guidelines - Daniel M. Frieders

I am using Trading Recipes System Testing & Money Management Software by RW Systems, which I purchased last Spring.

I've not been able to come up with a formula of my own which showed any kind of a consistent profit. However, I feel it was still a good investment as I understand money management, which should be the first concern of any trader.

Here's my point, if I have a $10,000 account and Swing Catcher System signals a buy in corn and a buy in silver, should I buy one corn and one silver? Or, should I buy a number of each based on a percentage of my margin account? i.e.: The margin value of all open positions will not equal 50% of margin account and at the point that the 50% mark is reached no new positions will be taken.

Good money-management guidelines are as important in increasing an account size as they are in protecting it. So therefore, I use 4 to 7% of account size to determine the number of contracts when taking a position. Whereas, if I only take one contract each time the system says take a trade, my account size will take forever to amount to anything.

I hope you will find this of some interest and the subject can be discussed further.

P.S. Robert (Bob) Spear, the developer of Trading Recipes, is a super guy and great to talk to.


The 'Best' Ways to Make Money - Dr. Satish Arora

It took Bob Buran 6 years to make 1/2 million dollars trading futures. I believe he then made 5 million dollars selling his Grand Combo/Trabos Trading System in 6 weeks!

Larry Williams made millions teaching people how the commodity market works and his hotline (he charges money for this service) made $27.00 per trade.

Jake Bernstein made millions selling books and hotline 900 numbers, but his track record stinks.

George Angell, Welles Wilder, Stanley Kroll, Bruce Babcock, Futures Truth, Futures Magazine, Dennis, Andrews, Lou Mendelson, Quote Services, Investment Educators, Charles Chen, etc. They all made money selling books, magazines, hotline subscriptions, etc. In my opinion, none of them have anything worth a dime.


Addendum and Follow-up to my Previously Submitted Orange Juice Article - Robert D. Edwards

The morning I sent Commodity Traders Club News my Orange Juice article, I expected November O.J. to add to its 132.30 close by spiking up on the opening. However to my surprise, it opened the morning of 9/29/93 a couple dollars lower. Each day that followed, O.J. would sell off each day on the close.

My broker kept goading me to change my "mental stop" into a physical one, so I finally placed the sell stop under the 129.50 support that had developed.

Well-placed stops are a financial necessity, especially when trading O.J., the "pork bellies" of the soft commodities.

Well I was stopped out and the market continued a little lower, showing no strength at all. A couple closes above 130.00 had previously made me want to go long. With closes now mounting below 130.00, I was wanting to go short. However, it was hard to go short O.J. when my "official" position that Dave was going to print in this newsletter said I was going long! I was quickly regretting having ever written the CTCN article. I believe that had I not written the article, I would have taken profits in my long position when it rallied briefly over 132.00 and would not have held out until the stop kicked in. I could smell a rat from the time the markets opened down on 9/29. Finally on 10/12/93, I decided to short Nov. O.J. if the contract closed below 130.00 on that date. At 1:00 p.m. that day I opened up my Commodity Trend Service charts which I got a day late due to the 10/11 holiday, and read Joe Van Nice's Market Sentiment comments on O.J.

Van Nice reported there was bearish divergences on both the daily and weekly charts and commercials had added heavily to their short positions (you can't win for long fighting against the powerful commercial interests). "Market Sentiment is reaching a bullish extreme." These comments confirmed that "gut feeing" I already had.

I immediately phoned my broker to sell November Orange Juice but my broker informed me O.J. is included in the crop report coming out after the close. SO I DIDN'T SELL!

Well, the report turned out bearish and with all those bulls trying to stampede out the door at one time, well, suffice it to say the market opened about $8.00 lower than the previous day's 129.25 close.

From the $121 area the market rallied to the day's high of 123.00, down $6.25. Selling up against that big gap looked easy, but I was paralyzed from acting. Soon thereafter, O.J. broke below 120.00 and finally hit a low of 109.25, down $20.00 for the day.

Had a person sold on a 120.00 stop, around 110.00 would have been a good place to cover and then go long with a 112.00 buy stop order. The low of the following day was 113.55, so a 113.50 stop would protect the profit on the long purchased at 112.00.

I never place stop orders to get into positions but more and more I can see how a properly placed buy stop will get me long on a short-term breakout and a sell stop will get me properly short.

When gold recently traded above $400.00, I was afraid to pick a top to go short. However, a stop placed at $399.90 on the December Gold contract would have gotten me short at near the top of the move, but only after the market had turned down.

I am trying to come up with the perfect price to place a sell stop to get me short the December T-Bond contract which upon hitting it, the market will quickly fall several more points and allow me to then place a buy stop to protect the short.

Since I tend to take profits too soon, a buy (sell) stop order when I am long (short) will help me add a position when I am starting to be successful on a trade. I can then day-trade that second order and leave the original order on to help allow my profits to run. I would appreciate hearing from other readers about their use or misuse of stop orders.


Essex TradeFAX Free Trial - Robert Edwards

I received a free 3-day trial to Essex Trading Co. TradeFAX ph. (708) 416-3530 for voice or ph. (708) 416-3558 for FAX.

Has anyone out there had any experience with Essex's programs or FAX service. The results of those 3 days of trading in the agricultural markets were very impressive.

All orders to open positions are placed by use of buy or sell stops. I have since started hypothetically placing stops in several markets and am finding it may improve my trading.


Superstar Trader John Henry Credits Psychology for His Financial Success - reprinted with permission of The Wall Street Journal

Even by the wild-and-wooly standards of commodity futures trading, John W. Henry stands out as unusual.

He attended five California colleges in the early 1970s without ever graduating. He devised a card-counting system for playing blackjack and dabbled in parapsychology. And he eventually applied the ideas of such thinkers as Carl Jung and J. Krishnamurti to choosing his own commodity trading strategy.

None of this has stopped Mr. Henry from becoming a superstar trader. Last year, Mr. Henry's biggest investment fund soared 62%. And thanks to his hefty share of investors' profits, Mr. Henry earned more than $50 million in 1991-a sum that Financial World magazine says ranked him as the sixth highest-paid person on Wall Street.

The only certainty, he believes, is that trends tend to repeat themselves. And so do people's reactions to them - a notion he developed from the Indian philosopher J. Krishnamurti and the author William D. Gann.

As Mr. Henry puts it, "Man is mechanical in certain scenarios." For example, he says, people who get slapped "tend to get upset." Mr. Henry is a trend-follower, making his money by leaping on market moves already in progress, with huge, leveraged bets on everything from soybeans to currencies.

But for all his eccentricities, the 42-year-old Mr. Henry is all too typical of many big-time traders who rack up a few years of spectacular returns, get showered with money by large Wall Street securities firms, and then suffer losses that stagger investors.

This year, with more than $900 million under management, he had losses of as much as 45% by the middle of May after trends in currencies and international bonds turned suddenly and slammed his portfolios.

Although Mr. Henry has since come back strongly, rebounding 22% in June and another 26% in July, he is still down 2% to 3% for the year. And Merrill Lynch & Co., which has poured more than $150 million of its clients' money into several of Mr. Henry's futures funds, plans to cut back his role in Merrill's commodity trading pools because of the severity of his trading losses this spring.

Mr. Henry trades out of a three-story glass and stone office building nestled in a secluded, wooded glade on the Aspentuck River in Westport, a wealthy suburb an hour's drive from New York City. A round-the-clock trading staff is there to execute buy and sell orders in 70 commodity markets that spew from minicomputers programmed by Mr. Henry to spot market trends.

Although he maintains a home in nearby New Canaan, Conn., Mr. Henry lives in Boca Raton, Fla., apparently for tax purposes, where he is building a new house near the local polo club.

Threat of wearing Jester's Hat - Employees are reminded of his demanding and exacting attitude. In a window outside the trading room stands a multicolored jester's hat, which Mr. Henry brought back from Paris. "He threatened that if anyone made an error in trading, they would have to wear the hat for a day," says Kenneth Tropin, president of Mr. Henry's firm. The former top Dean Witter Reynolds Inc. futures executive was hired by Mr. Henry in 1989.

Mr. Henry says he would not have been successful in financial markets "had it not been for my studies of psychology and philosophy." He adds, "If you don't understand yourself to some degree, it's difficult to make money," crediting such self-knowledge with helping him ride out market downturns.

"What you're really pitted against in the market is your own self, how you react to what's going on in the markets," he says. Unfortunately, he says, his penchant for intellectuals "paints a picture of a money manager who's a weirdo. But at least, I was able to translate the search for what is not tangible into something tangible."

Thin, pale and wraithlike, Mr. Henry prefers reading books to dealing with people. And he says some Wall Street brokers prefer that he stay away from clients because he describes the volatile ups and downs of his trading style so frankly. Indeed, his accounts have fallen by 35% or more on at least three occasions.

In 1976, Mr. Henry was yanked into the commercial world after his father died and he began managing family farmland in Arkansas and Illinois. An early foray into hedging a soybean crop lured him into commodity trading, where he did so well that brokers in Memphis urged him to trade for other farmers as well. After studying 100 years of grain price trends, he devised a formula and began trading in 1981 from an office near his home in Newport Beach, Calif.

The fund that catapulted Mr. Henry into the top ranks of traders, Financial and Metals Portfolio, has been sold heavily by several Wall Street firms since it reported price gains of 252% in 1987, 84% in 1990 and 62% in 1991. In the two years ending in December, the fund's assets multiplied tenfold to $619.2 million, or more than two-thirds of Mr. Henry's total managed assets of $906.8 million.

However, Financial and Metals began 1987 with only $1.2 million under management. In a footnote to its annual report, Mr. Henry says that year's results were "inflated" by the timing of additions and withdrawals.

Financial and Metals scored its sizzling 1991 returns mainly by selling the dollar short (selling borrowed dollars in hopes of profiting from a price decline) and owning French, German and Japanese bonds. When the Federal Reserve lowered U.S. interest rates late in the year, the dollar fell, and foreign bonds soared - producing a 45% gain for the fund in December alone. However, those trends reversed sharply in early January, leading to the 45% decline.

Mr. Henry says this year's hugh drop wouldn't have occurred if it hadn't been preceded by the December runup. But the drop was keenly felt by newer investors as they "took it more seriously" because they hadn't experienced earlier drops in the fund, he says.

One big securities firm, he says, cut the leverage - or efforts to boost returns by using borrowed money - on his accounts in half near the bottom of the decline, thereby missing out on half of the rebound.

In addition to Merrill, Financial and Metals has also been sold to clients by several other brokerage firms, including Dean Witter Reynolds Inc., usually in commodity "pools" that divide their assets among different traders. Merrill has given Mr. Henry more money than any other trader.

Fees in such pools are steep. Individual investors must pay Mr. Henry an annual management fee of 6% of assets; institutions and pools pay 4%. Brokers who sell the pools may get 6% in one-time commissions plus another 2% annually in "production credits." On top of that, Mr. Henry gets to keep 15% of profits. And investors may also have to pay as much as 10%.

By comparison, investors in stock mutual funds pay fees totaling only about 1% annually. Mr. Tropin argues that Mr. Henry's fees are justified by the fact that he usually uses borrowing, or leverage, to control assets three to four times the amount under management.

Merrill asked Mr. Henry to come in to discuss the reasons for his big losses. Unlike other traders who may fidget, fret or consider changing their trading system, Mr. Henry calmly explained what was happening and expressed confidence that he would bounce back. He was assured of bouncing back after the springtime bloodbath.

Still, Merrill doesn't plan to use Mr. Henry in the same proportion of its commodity trading pools in the future because the latest "drawdown," or loss, was his most sever in both size and length of time, according to one Wall Street executive.

At Shearson Lehman Brothers Inc., managing director Charles Nastro says Shearson did "a lot of soul-searching" before deciding to continue using Mr. Henry as a trading adviser. He adds that Henry may be unsuitable for clients who don't "have the stomach" for big losses, or don't want to pay the high fees.

But Dean Witter, which has put more than $150 million in clients' assets into Henry-run futures funds, is standing by Mr. Henry.


My Unique Trading Methodology Programmed into CompuTrac Snap - Gerry Stonehouse

The following computer algorithm I have programmed into my CompuTrac/Snap Software. It was fairly easy to do and I believe the formula works very well in certain markets but not that good in dull, sideways or choppy markets.

It seems to work best in volatile and trending markets, such as Lumber during most of 1993 and the past several months in particular. My method relies heavily on the ADX indicator and on Welles Wilders well known Parabolic Stop. My actual computer code is as follows:

Computer Code in Print Copy


Market Wizards on Money Management - Daniel M. Frieders

The best writing I've ever seen on the subject is the chapter on Tom Basso, in the Market Wizards 2 book. No one should trade without first reading Tom's comments.


EDITOR COMMENTS

Owen Cramer's explanation of Elliott Wave theory is informative and valuable. Owen's article reminds me that though waves definitely exists in the markets, there's a major problem with correct identification.

Most traders use subjectivity and judgment to identify Elliott Waves. It's easy to look at charts using 20-20 hindsight and count the waves, but doing it correctly in actual trading is MUCH more difficult!

The submission by William Armstrong must make many of us envious that Bill was able to sit on the beach and make great money trading the markets, using his trading system and portable computer.

Notebook size computers are now extremely popular. That's because they can do most everything a large desktop can do but are usually weigh less than 9 pounds and can run on re-chargeable battery power.

Your Editor recently received his new IBM ThinkPad 350C Portable Notebook Computer, but had to be extremely patient and wait 3 entire months before IBM was able to ship it out, due to their huge order backlog. Most of this issue of CTCN was written using Word Perfect and my new ThinkPad.

The incredibly detailed research done by Robert Edwards, using Orange Juice Market, demonstrates the importance of extensive research and seasonal studies. His work closely resembles the work done by W. D. Gann. In fact, the layout and verbiage is very similar to Gann's detailed and valuable work.

Dan Frieders' questions and comments on the important subject of money management reminds me that frequently it's even more important than the technical side of trading. Many times I have heard about traders losing or making money, mostly due to poor or good money management.

In reference to Dan's question...the money management Portfolio Manager built into his system will tell him how many contracts to trade based on his account size. A good rule-of-thumb is to not risk more that 5 to 10% of account size on any one position.

We should all realize that in spite of Dr. Arora's brief and highly negative submission, some traders do in fact make excellent profits. I believe he may be wrong about Buran's sales and the time frame in which he made all that money selling his system. According to some very reliable sources, I have been told Buran appears to have made (approximately) between 1 to 2 million dollars selling Grand Combo, etc., in about a 1-1/2-yr time period.

That is less money and greater time than Dr. Arora indicates, but still astonishing sales. Likely more money in system sales, in a such a short time frame, than anyone else has ever accomplished. A published personal track record and extensive, expert and incredibly good professional marketing efforts did it.

Robert Edward's follow-up to his OJ article is most appreciated. Because Bob was incorrect in predicting Orange Juice would go up in price, he naturally was a little hesitant having his original submission published. However, it was fairly easy to persuade Bob to let it be published and for him to write an addendum. That situation should be beneficial to CTCN members.

It also teaches us that in spite of intensive and valuable market research, you still can be wrong on predicting the market direction. That's why using stop loss orders at all times are so important!

The Wall Street Journal reprint about John Henry again demonstrates huge profits can be made trading commodities but there's inherent drawdown potential.

Even one of the largest and most successful traders of all time like John Henry can have a 45% decline or drawdown in one month, but conversely can also have a 45% gain in one month.

Reference to Gerry Stonehouse's submission and his use of the ADX indicator, and Dan Frieders recommendation of Market Wizards 2 book. I have talked to some traders who like using ADX as a long-term trend indicator. I have also heard from several traders that the Market Wizards 2 book is excellent.

Information Wanted

Frank Morgan would like to hear from anyone with positive or negative experience with Cross Current by Steve Briese or Dollar Trader by Dave Fox.


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Thanks to everyone who has contributed knowledge to this issue of Commodity Traders Club News. Without you it would not be possible. P.S. - Remember, as a special reward for making just one contribution/submission per year, you'll receive an automatic 50% price reduction on your renewal. Submissions can be any length, long or short; typed, handwritten or submitted on a disk. Formal or informal. Please participate by sharing your information and knowledge with other traders. Please make a contribution about your experiences, both good & bad with systems, services, advisors, data vendors, and other trading related product.

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