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Trading By The Bool< - Part Vi CHAPTER 4 A Year Of Trading
In my personal day to day trading, I accumulate data and trade a representative group of markets. Naturally 1 dont trade them all at one time, although I have to admit at times I have come close.
The markets I monitor are: Bean Oil, British Pound, Corn, Canadian Dollar, Cocoa, Copper, Crude Oil, Deutschemark, Eurodollars, Gold, Heating Oil, Japanese Yen, Live Cattle, Live Hogs, Stiver, Soybeans, Soybean Meal, Swiss Frank, Treasury Bonds, Coffee, Unleaded Gas, Wheat, S&P 500, NYFE, and World Sugar #11.
Some of the currencies. Crude Oil, S&P (or NYFE), and Gold 1 trade on the one and five minute charts as well.
If I were to show the trades I made during-thyear with one chart per trade as I did for Part IV of the manual, you wouldneed a porter to carry them all. Instead, what Ive done is to select a basket tif-stX" markets, representative of the various futures groups. Ill be showing you what the weekly oscillator segment looked like for each market traded at the pertinent time for each trade. "Weekly oscillator segment" refers to the way the weekly oscillator was pointing on the day that was pertinent to the trade.
Ill be showing the daily charts for each market in which ! made a trade and have labeled each trade that I made. For the sake of clarity, there is more than one daily chart for each market traded, because i have widened them out so that they show only four and one-half months of trading, but are more easily read.
t traded the markets according to their individual personalities. Now what do I mean by that?
Markets have personalities. Although on the surface of it they all look about the same, upon closer examination they are quite different from one another in the way they trend, the duration of their trends, the way they form bottoms and tops, and the way they break out of congestion.
To continue with my analogy of the markets to waves, you may recall that 1 stated earlier that if the waves at one beach were not to a surfers liking, the surfer might try those at another beach. Why? Because at each beach the slope of the underlying shore upon which the waves roll and break may be quite different, causing their breaking action to also be different. The underlying shore may aiso differ considerably in its composition. Some beaches are quite muddy - sand over a mud base; others are very sandy - sand ove a deep sand base; still others are sandy over an underlying rocky base. All of these factors make a difference in how the waves behave.
Sonne of the best surfing beaches in the world are found in Hawaii. There the waves are huge as they break upon a wonderfully gradual incline. Because of this they roll for hundreds of feet, giving a truly long ride. This is analogous to being able to ride the long term trend. The waves are huge and they travel far.
In California, the incline of the shore is steep and the waves, by comparison with Hawaii, are small. The ride is excellent but relatively short. This is analogous to trading the short term trend.
Every trading method will differ in the way it works with the various markets. A great Bond trading systern may be just horrible when trading Corn. A system that makei big bucks trading Bellies may not work with anything else at all. This is why you see specialty systems. Youve seen the ads, "Make money trading the Meats," "Use my system to make a fortune trading the Metals," etc.
There is a lot of mythology that has arisen from the personality differences of markets, so Id better give some examples of what I mean. By the way - none of what I have to say concerning market personalities is always true, but understanding how to trade using these personality differences will greatly affect loss-protective and profit-protective stop placement, exit timing, and your sense of urgency.
Here are some that Ive noticed. Cocoa tends to make rounded, saucer bottoms, so I give it time to make those bottoms. There is less urgency about getting in, and I cai keep my stop far back.
Sugar is a market where the pit jockeys love to go fishing for stops. When I trade sugar, 1 place my stops where they are least likely to find them.
Stock indexes - give them room. They can trend wonderfully and long, especially intraday. High margins keep most traders out. This is a daytraders market, typically if you dont have big bucks.
Bonds - ! use tight stops and trade for points on the Bonds. To trade the Bonds by the Book, you either have to be well capitalized and able to keep your stops far back -giving the Bonds lots of room, or you have to jump in for a quickie, and use a profit stop. Try to pick up 5, 10, or maybe 15 ticks and then bail out. The quickies are one and two day trades. The Bonds can trade sideways in huge trading ranges for months on end. The Bonds will make large daily moves and wipe out severa! days worth of tight stops.
Coffee - the same as the Bonds. Trade in and out quickly, unless you are well capitalized. Good fills on one or two contracts. Dont try four.
Cotton - treachery underlies this market. Bad fills, stop fishing, thin trading. I sta\ away. Ditto for lumber.
Currencies - long trending, when they finally do trend. Extremely choppy and dangerous when moving sideways. Lots of gaps due to overseas trading.
Wheat - lots of trading ranges that are large in size from top to bottom. Short explosive trends. Get in and out quickly when the Wheat trends. Trade the Wheat with great care. Just when you think you have a profit. Wheat will move counter-trend and take out 3-4 days worth of highs or lows and your $500 dollar profit will be a $200 dollar loss.
Soybeans - explosive, fickle, emotional. Subject to wild gyrations just when you think they are making a market turn. The Beans have a hard time making a bottom or a top. Excellent long term trends. Stay away during weather markets unless you really know what you are doing.
Corn - good long, very slow trends. Also very prolonged sideways moves. Corn likes to drift. It wil! slowly drift up, or slowly drift down. Seasonally and in weather markets, it can explode.
Orange Juice - thin market but trends wonderfully and long. Ive had good fills when trading. Explosive and emotional in weather markets.
Silver - stair steps down for long periods. Explodes up for very short periods. Full of spikes. Moves sideways a great deal.
Gold - lots of trading ranges, short term explosive trends, good long term trends.
Oil complex - sharp narrow bottoms, broad choppy tops. Excellent trends.
Copper - a fooler. Trends nicely, but watch out where you place your stops. Makes large magnitude trading days. Knocks out two or three days worth of highs or lows or both.
Cattle - lots of broad trading ranges, lots of ledges, short explosive trends.
The above is how I see these markets. They love to make a liar out of me. Naturally my personality descriptions are colored by more recent history. I tend to forget their personalities of years ago,
I will surely incur someones wrath on each of my opinions. I apologize if anyone is offended. Hey, consider the source.
One last thing, since I actually trade the markets from continuous charts, I have used those to illustrate these trades. When ! look at all of the trades I made, i realize why my brokers love me so much.
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