ES,
True Storyâ¦
In the early 90âs I was introduced to a trader living in Westlake Village, Ca (Bob). Living in Los Angeles at the time, I drove up and met him. Our introduction had been through a mutual friend.
New to the markets (about 6 months), and yearning to learn something in addition to my âKen Robertsâ methodologies, we sat and spoke about cash commodities, his trading vehicle of choice.
His system was quite simple. He said he did not develop it and that he had in fact learned it from a man who traded Grain Futures in the 20âs.
1. Find a cash commodity trading in itâs lowest 1/3 of its 10 year historical range.
2. Initiate purchases at incremental levels from that level to the lowest level of that 1/3 range. 50% of trading Capital is used for supporting Margin and loss to that point. The other 50% of Capital used as âprotectionâ if that level should be breached.
3. Set your âbuysâ and âsellsâ at levels that would not exceed your initial Capital âplayâ (Margin and Position maintenance)
4. Levels could either be equal 20cent/20cent or âcomplexâ 20cent/40cent --- using more contracts at lower buy points or constant contracts throughout etcâ¦
5. Although Bob hated Technical Analysis even he conceded using a 9-18 crossover for initiating his play.
Although this system differs from Electricâs it has its similarities. Chiefly, as in the example of my Grain Trader âmentorâ, initiating Wheat buys at 2.8 down to 2.10 proved little risk (Is bread free at the SuperMarket yet?) and the âflowâ or the âoscillationâ trades as my friend termed, was what we are after. His only major concern was, what dollar amount would be required to maintain his positions until his âinventoryâ was sold. Electric system has no âloss carryâ because he is hedged. His only concern is Margin. And although I am not very familiar with trading currency pairs, my first exposure was yesterday while reading this thread, it appears OANDA makes such small minimum trading units available that the ârisk of ruinâ impossible. The absolute worst-case scenario, which in my opinion has zero chance of happening, might cost 20-30K margin at Electricâs 20pip level and trading unit size. But in about 2 years of trade will have that worst case scenario covered and parity reached. This is long term trading.
The question remains,â Is your EGO willing to accept this trading is possible?â and do you want to make a boring 30-50% on your money? (This is the average return Bob made over a 30 year periodâ¦many years higher and I suspect Electrics system on average to be the same.
Q. Is trading gambling?
A. My answer. Yes.
Q. Is Electricâs system trading?
A. No. Not really.
Q. What is it then?
A. Electric is a Hardware Store owner who purchases inventory, (hammers, nails, faucets, and light bulbs) setting a resale profit margin on those goods, and selling those goods to his customerâs 24hrs a day.
Q. Why doesnât everyone trade this way?
A. Bob loved this one. He was a CTA for many years. He used to say, âEveryone wants profits from day one and nobody is willing to spend 30-40% of their capital on Inventory.â
âTrade with the trendâ
âCut your losses shortâ
All Bullshit!!!!
Congrats Electric for thinking outside the box and discovering some of the real truths in trading.
Best Regards,
Dave Scott
P.S. Occasionally I find a cash commodity worth accumulating inventory in. I have not had a losing year with this âplayâ since introduced to it in 1993.
True Storyâ¦
In the early 90âs I was introduced to a trader living in Westlake Village, Ca (Bob). Living in Los Angeles at the time, I drove up and met him. Our introduction had been through a mutual friend.
New to the markets (about 6 months), and yearning to learn something in addition to my âKen Robertsâ methodologies, we sat and spoke about cash commodities, his trading vehicle of choice.
His system was quite simple. He said he did not develop it and that he had in fact learned it from a man who traded Grain Futures in the 20âs.
1. Find a cash commodity trading in itâs lowest 1/3 of its 10 year historical range.
2. Initiate purchases at incremental levels from that level to the lowest level of that 1/3 range. 50% of trading Capital is used for supporting Margin and loss to that point. The other 50% of Capital used as âprotectionâ if that level should be breached.
3. Set your âbuysâ and âsellsâ at levels that would not exceed your initial Capital âplayâ (Margin and Position maintenance)
4. Levels could either be equal 20cent/20cent or âcomplexâ 20cent/40cent --- using more contracts at lower buy points or constant contracts throughout etcâ¦
5. Although Bob hated Technical Analysis even he conceded using a 9-18 crossover for initiating his play.
Although this system differs from Electricâs it has its similarities. Chiefly, as in the example of my Grain Trader âmentorâ, initiating Wheat buys at 2.8 down to 2.10 proved little risk (Is bread free at the SuperMarket yet?) and the âflowâ or the âoscillationâ trades as my friend termed, was what we are after. His only major concern was, what dollar amount would be required to maintain his positions until his âinventoryâ was sold. Electric system has no âloss carryâ because he is hedged. His only concern is Margin. And although I am not very familiar with trading currency pairs, my first exposure was yesterday while reading this thread, it appears OANDA makes such small minimum trading units available that the ârisk of ruinâ impossible. The absolute worst-case scenario, which in my opinion has zero chance of happening, might cost 20-30K margin at Electricâs 20pip level and trading unit size. But in about 2 years of trade will have that worst case scenario covered and parity reached. This is long term trading.
The question remains,â Is your EGO willing to accept this trading is possible?â and do you want to make a boring 30-50% on your money? (This is the average return Bob made over a 30 year periodâ¦many years higher and I suspect Electrics system on average to be the same.
Q. Is trading gambling?
A. My answer. Yes.
Q. Is Electricâs system trading?
A. No. Not really.
Q. What is it then?
A. Electric is a Hardware Store owner who purchases inventory, (hammers, nails, faucets, and light bulbs) setting a resale profit margin on those goods, and selling those goods to his customerâs 24hrs a day.
Q. Why doesnât everyone trade this way?
A. Bob loved this one. He was a CTA for many years. He used to say, âEveryone wants profits from day one and nobody is willing to spend 30-40% of their capital on Inventory.â
âTrade with the trendâ
âCut your losses shortâ
All Bullshit!!!!
Congrats Electric for thinking outside the box and discovering some of the real truths in trading.
Best Regards,
Dave Scott
P.S. Occasionally I find a cash commodity worth accumulating inventory in. I have not had a losing year with this âplayâ since introduced to it in 1993.
