My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following.
Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.
Dealing with Losses in Commodity Trading
For any of those contemplating investing in the commodity markets, they need to be very aware that losses are part of the game. As Ed Seykota has taught so many commodity and forex traders… losses are like breathing. They can not be avoided. If you are not having losses..either you are not trading.. or you are risking way too little. There is no way around it!
The Fact of life is when you are trend following, you will have losses… If you think you are going to prevent them, don’t even think about trading the commodity markets. You can not make money if you are not prepared to lose.
What is most important to realize that even the percentage of winners does not even matter. Losses must be kept to a minimum and profits…lets say… let them run as much as they want without any limitation. This is the key…not percentages of winners. Let your profits run…
Many equivalent commodity trading to poker. What is ironic in Poker is that one who wins the most number of times is not the one who wins the most amount of money. One of the biggest single reasons beginning commodity traders have poor performance is they seek to be rewarded that they were right. They do not let their profits run. They take short profits. Professionals don’t care and know that eventually a big winner is coming. Their goal is to make themselves available for that trade. Lots of small losses do not matter.
The goal of any successful commodity trading advisor is to achieve risk adjusted returns. The key is to be constantly aware of how much risk must be placed in order to generate returns. Realize that anything can happen. Think of what can go wrong. Put your stops in the market immediately. Keep to your plan. Make sure you have the discipline to follow your plan. The commodity and forex markets are full of risks, even risks you never thought of. This is the reason you need to have a well thought out plan…and most importantly the discipline and patience to let the plan work.
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Andrew Abraham
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money
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