Commodity Trading Blunders III, PART 2 - My Early Days As A Novice Trader
- Date: 2007-02-22 - Word Count: 689
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Have you ever been a hobby newbie and been awed by the top people you first meet? Then after a while you realize they really aren't as smart as you first thought. Later you surpass them and finally realize they hindered your learning rather than helped it. Watch for this pattern in any endeavor you enter. With a little luck and investigation, you just might run into a great mentor right from the start!
Back to the story. I had just shorted two British Pound futures contracts at about 234 and was holding a loss. The next morning I woke up to a call from Max. The first thing he said was, "Smile, you bastard!" I asked why. Max yelled, "The Pound is down the limit and you're up over $6,000!" I began jumping up and down!
I looked at my long-term Gann charts that had an objective of at least 144, a Gann number being 12 squared. It was fantasy, but I believed it at the time. Over the next few days the futures market bounced around and I panicked out for a gain of about $5,000. Soon after, the BP futures market tanked to new lows and never stopped until it finally hit 101 a year later. This would have been a gain of something like $180,000 if I held on and kept rolling it. But there was no way I had the mental make-up to do it at the time. My analysis was pretty good, but my trader's psychology was lacking. I have often wondered, what if I had added more positions to that trade all the way down?
Many times we know where the market is going, but don't make much on the move. Why? It's the trading triangle. We need good analysis, good money management and good psychological / execution skills to be a winner. If one part is missing, then the whole tripod falls apart. Rarely is there a the commodity futures trader who consistently stays on top of all three.
The British Pound experience is when I coined the phrase, "If I had only stayed with my original position!" Over the years I have repeated that many times. And I'm sure many of you have too. When we see a big set up take place on a major scale, and everything comes together, why do we need to get cute and try to trade in and out attempting to outsmart the market again? Or why do we take a small profit and start looking for another futures trade that usually turns out to have less potential?
I think the answer is ego. We need to prove to ourselves that we can do it. Plus we get bored with sitting on our hands. We need some action. The commodity futures market rewards those who can sit on their hands and patiently wait for the move to run its course. The market will do everything it can to get you out of a winner. Actually it's your own mind doing it, not the market.
As a fitting epitaph, I looked Max up in the commodity broker registry and found that he had bounced around to several different firms after Merrill. I even ran across a commodity futures broker who said he knew Max in 1989. I owned a commodity money management firm at the time. I got Max's number and gave him a call. He sounded like the same old Max I remembered. He told me he had "lots of computerized systems," and to send some clients his way. I told him he was instrumental in my decision to get into commodities professionally and thanked him for his mentoring.
It was a great moment to talk again with my commodity guide from the novice days. I said good-bye and we have never chatted since. I saw on the registry that he retired in 2005. I guess he got a final "sell signal" and decided to call it quits. God bless Max.
Good Trading!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Back to the story. I had just shorted two British Pound futures contracts at about 234 and was holding a loss. The next morning I woke up to a call from Max. The first thing he said was, "Smile, you bastard!" I asked why. Max yelled, "The Pound is down the limit and you're up over $6,000!" I began jumping up and down!
I looked at my long-term Gann charts that had an objective of at least 144, a Gann number being 12 squared. It was fantasy, but I believed it at the time. Over the next few days the futures market bounced around and I panicked out for a gain of about $5,000. Soon after, the BP futures market tanked to new lows and never stopped until it finally hit 101 a year later. This would have been a gain of something like $180,000 if I held on and kept rolling it. But there was no way I had the mental make-up to do it at the time. My analysis was pretty good, but my trader's psychology was lacking. I have often wondered, what if I had added more positions to that trade all the way down?
Many times we know where the market is going, but don't make much on the move. Why? It's the trading triangle. We need good analysis, good money management and good psychological / execution skills to be a winner. If one part is missing, then the whole tripod falls apart. Rarely is there a the commodity futures trader who consistently stays on top of all three.
The British Pound experience is when I coined the phrase, "If I had only stayed with my original position!" Over the years I have repeated that many times. And I'm sure many of you have too. When we see a big set up take place on a major scale, and everything comes together, why do we need to get cute and try to trade in and out attempting to outsmart the market again? Or why do we take a small profit and start looking for another futures trade that usually turns out to have less potential?
I think the answer is ego. We need to prove to ourselves that we can do it. Plus we get bored with sitting on our hands. We need some action. The commodity futures market rewards those who can sit on their hands and patiently wait for the move to run its course. The market will do everything it can to get you out of a winner. Actually it's your own mind doing it, not the market.
As a fitting epitaph, I looked Max up in the commodity broker registry and found that he had bounced around to several different firms after Merrill. I even ran across a commodity futures broker who said he knew Max in 1989. I owned a commodity money management firm at the time. I got Max's number and gave him a call. He sounded like the same old Max I remembered. He told me he had "lots of computerized systems," and to send some clients his way. I told him he was instrumental in my decision to get into commodities professionally and thanked him for his mentoring.
It was a great moment to talk again with my commodity guide from the novice days. I said good-bye and we have never chatted since. I saw on the registry that he retired in 2005. I guess he got a final "sell signal" and decided to call it quits. God bless Max.
Good Trading!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Related Tags: money, finance, stocks, trading, investing, forex, stock trading, futures, mutual funds, commodity trading, commodities, commodity advice, commodity broker, commodity futures contracts
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