Profit Taking Concepts
Past Performance is not indicative of future performance. This statement is so true. As a trend follower in the commodity markets it has been extremely tough. Actually one of my toughest since 1994. Many naysayers have stated that trend following is dead. The actual traders know that one must be diversified, have a trading plan, be consistent, be persistent and know that failure is not an option. In the last several years, I have seen more professional traders quit than at any other period of time. From John Henry to unknown commodity trading advisors to traders. One of the main reasons has been the lack of trends. Another major reason has been trading too large and taking on too much risk. It is not just new traders, it has been traders that have PHDs in mathematics and science. I had this discussion with my wife regarding PHDs. No matter how smart they are…if they do not control risk, they too will fail.
Trading is hard. It is really never easy. Trading commodities is even harder and do not suggest that for the people I look to mentor and teach. The leverage and volatility can be great.
Out of nowhere coffee took off. As I always say, no one ever rings a bell. I entered this trade as I have with so many other trades that have not worked over the last several years. The key is to be consistent and follow the plan. Trading is like marriage. It is never easy and you have to work on it. Be committed, be faithful and be patient.
As much as coffee has moved tremendously, now it is commonly quoted in the news. This is every trend followers sign that potentially the run might be over. As the title stated, selling into profit…I thought to lock in some profits by selling calls at a high strike price within 38 days. If coffee gets to that point, that is a phenomenal move that I will remember as one remembers Netflix or Tesla stock. You have to let your profits run as a trend follower..however the idea of selling options with a short duration of time at a high strike price can potentially give you a chance to sell into profit. I would not suggest this concept to new traders. It has taken me years to come to this point and anything can truly happen. Coffee can gap down or come crashing down. We are dealing in complete uncertainty. The only way to attempt to combat uncertainty is to accept the inherent risks of losing money before putting trades on. I say to myself before every trade, ” How much is this trade going to cost me to see if it will work”? With that even thought or said…anything can happen. Most cases to the negative than the positive.
There are only four probabilities when we trend follow:
Big Losses – in which attempt to mitigate…however anything can & will happen such as gaps and limit moves
Small losses- these happen frequently
Small profits – these also happen frequently
Big profits- these are rare …
Good luck with your trading. Realize the only way to potentially succeed is have a complete trading plan. Even with that you will experience countless trades that do not work and long periods of draw downs.
Accept the uncertainty…
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (“FOREX”) IS SUBSTANTIAL.