Andrew Abraham

andy-0101 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.

Contact Details

If you are interested in contacting for speaking engagements. Please email me at Andrabr9@gmail.com or call 954 903 0638.

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Risk Warning

Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.

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Oil Stock Rebound?

As we all know most oil stocks have been clobbered….actually so have Biotech stocks and even the index….The oil stocks are seeing some life for the first time in a long time. They seem to be breaking out…however today crude is trading down.

Looking at these on a retracement trade -trend following
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Jesse Liverpool Milestone Trades- Trend Following

Jesse Livermore had a saying about milestone marks in the stock market. TSLA..NFLX are around these milestones and they might be turning over. They ran up on the highest volume and now knocking at the door of the 50 day moving average. This is an example of a retracement trade in Trend following…

What do you think?
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Overbought time on the Stock Market & QQQ

We are at the point that a clear direction of the stock market might be at hand. We are slightly below the 200 day moving average and 61.8% Fibonacci retracement…

Today should be an interesting day!!!

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What You Must Do To Survive In Trend Following

I want to share with my readers Traders Unplugged. Every aspiring and even successful trader needs to work on themselves and learning is constant. In this episode of Traders Unplugged is Tushar Chande. I remember using his indicators almost more than 20 years ago…

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Tushar Chande has stated
“You have to be an optimist in this business to survive, you have to bring an original point of view, why you want to do it in a certain way and you need to be able to explain to people in a way that makes sense to them why you are doing what you are doing”

Tushar Chande, is the Co-Founder and Head of Research at Rho Asset Management. Tushar is also the author of a number of books on the topic of how to design rule based trading systems as well as having been actively trading these systems for more than 20 years.

Click here to hear the interview with Tushar Chande.

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Time to Worry – Stock Market Complacency?

The good news is that the stock indices have taken out the 50 day moving averages, yet we are still below the 200 day moving average. The VIX is retreating like a wounded solider, however economically and fundamentally many charts do not look well. This stock market will be soon having another birthday. 7 Years and one of the longer bull markets. However in the following charts things do not seem to be looking all that healthy….I received this email this morning with all types of economic charts….you decide and let me know…

credit to Melissinos Trading

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Consecutive Losses and Draw downs in Trend Following

Most traders and those new to trend following have no idea that trend following is simply playing probabilities…They expect to have trades work from the onset. However when they have consecutive loses or losing streak most amateur traders either give up or try a different trading strategy. They bop from strategy to strategy and lose more money. If you know to expect consecutive losses then you will be more likely to handle those losses.

As Ed Seykota has stated the only way to avoid draw downs or losses is not trade. When one tries to avoid losses he complicates his methodology ( if he has one). The way to accept loses is to take into consideration low risk per trade. This way makes losses more palatable or accepting.

Put into greater context, in trend following most trades only work 35% of the time or slightly better. However as they say ( Jerry Parker famous turtle trend follower) ” One trade can pay for them all”

Accept your losses in trend following…

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Is Trend Following this Market Worth It?

The SPY fell below it’s line of demarcation as I call it….the 50day moving average after regaining it last Thursday. The DOW also lost it’s 50day moving average today. This moving average is the most important thing on the chart right now and the fact that the SPY couldn’t hold it and the QQQ never even overcame it is concerning. The final determining factor in the success or failure of any rally is how quality stocks act, can you make any money. Right now the answer is no. A very small number of stocks are producing single digit gains but most are either going nowhere or rolling over.

Is Trend Following this Market Worth the Risks?

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Using Long Term Moving Averages to Determine Trend $QQQ $GDX

Trend following all depends on your time frame. In order to avoid all the noise out there, I strongly suggest to look at weekly moving averages to get an idea where we are at the moment in the dominant trend. In this video regarding trend following you can get some ideas in order to help you become a better trend follower by looking at the long term via weekly charts and weekly moving averages.

What the weekly are showing at the moment ( however they can change very simply as well) that Gold is starting or potentially starting an up trend and the Nasdaq is starting a down trend.

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2008 Stock Market Again?

I received this chart from a friend this morning….There is an overlay of 2008 stock market chart and today’s stock market action….

What do you think from a trend following perspective?
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Bible of Trend Following

I just shared this piece from David Druz….Trend following is extremely challenging….Psychology is the key…

The Bible of Trend Following

I’ve been trading for investors for over 30 years. My first fund, Tactical Commodity Fund started in mid-1981. Tactical’s current program began in 1993 as an offshoot of that first fund but with lower leverage and some evolutionary changes. I’ve learned a lot over the years. I’ve seen a lot of markets, a lot of bull moves, a lot of bear moves. And I can tell you I wish I had read this book 30 years ago. I would have made more money, especially near the beginning. Do yourself a favor. Read it. Now.

My trading-for-investors career began not long after gold peaked around 870 and a bit over a year before the S&P bottomed near 100. I subsequently watched gold drop more than 70% over 19 years and then rally over 700% in the next 12. I watched the stock market rally for over 17 years with just one big, brief pullback along the way only to witness two retracements greater than 50% in the next 10 years.

I’ve seen almost too numerous to remember booms and busts in the commodity, currency and interest rate markets. I’ve seen things happen that everyone said never would and watched as things didn’t happen that everyone said were inevitable. I’ve traded and held positions in these markets nearly every single day since mid-1981.

Tactical was one of the first systematic, computerized fund managers. We started out on a Radio Shack TRS 80, before the first Apple. Historical data that costs pennies now took months to type in by hand. We ran Fourier transforms and proved there were in fact no repeatable hidden cycles in the markets while everyone else was still talking about them. We tested all the market lore to see what was true and what wasn’t. We tested the early mechanical systems that were touted and found most of them didn’t hold up. Indicators that people still use today we learned years ago don’t really give you a statistical advantage.

I wrote my own back testing software and tested everything I could think of. When personal computers advanced we bought the latest. For a number of years we had two Sun workstations running 24/7 doing systems testing when those were state of the art. Of course now you can do the same things much faster on a laptop. But that was then and this is now. We kept testing. We kept learning.

I read every book I could get my hands on about trading. I listened to the old traders. When I worked during summer breaks in college at a brokerage firm at the Chicago Board of Trade I kept my ears open as the old timers related their adventures, their successes, their failures. I tried to understand the psychology of the winners and how it differed from the losers. I got the idea that the psychology of the trader was as important if not more important than anything in success or failure.

I spent a lot of time learning things the hard way, a lot of trial and error, a lot of hard knocks. Trading is still a lot of hard knocks. Drawdowns can go on seemingly forever. You can have days, weeks, even months on end without much in the way of profits. It can feel like you are a punching bag or a movie double who takes all the hits. But that’s the nature of the game, of the business.

Even after you’ve learned how to do it, you still take your hits. To succeed you just need to stand up every time you get knocked down. You need to have the confidence that standing up is the right thing to do. You need to know when to stand back up and how. And just by standing up again and again and staying standing as long as you can before you get hit again, well, you can actually make more money than you lose over the long run in trend trading. It’s quite the amazing process.

Very few people succeed in this process. The learning curve is too steep and the correct psychology is too hard to implement. If you have any attachment to making money, and who doesn’t, it is very tough to trade correctly.

This brings me to the book you hold in your hands. To reiterate: I surely wish I had it 30 years ago. It would have saved me a lot of work. And I would have made more money, especially in the early years. More specifically I would have lost less money and that would have put me farther ahead today. Andy Abraham has written a gem. His writing style is enjoyable, clear and entertaining. He covers all the main ingredients needed for successful trend trading. He tells the truth.

What impresses me most about Andy’s writing is his honesty. He doesn’t sugar coat things. He doesn’t tell you it’s easy to make money. He tells you that you need patience and discipline. (By the way “Patience and Discipline” has been Tactical’s slogan since its inception.) Andy tells you drawdowns and losses are part of the business. He presents a track record of one of his own programs that he started just a few years ago that has not made new highs in 17 months. That’s exactly how it works sometimes. What is so refreshing is Andy’s honesty about it. The man has integrity.

A characteristic of those traders who have been successful over many years is honesty with respect to their trading. You need to understand your own psychology, where you are mentally strong and weak, how you deal with baser emotions, particularly fear and greed. If you lack honesty with yourself you will almost certainly fail. Andy’s honesty, more than anything, tells me he understands trading psychology and gives me confidence he is qualified to teach others what he knows. I have yet to run across a trading book that emphasizes the psychological aspect of trading better than this one.

This book is not a cookbook. It does not outline a mechanical system. It explains the psychology needed to succeed in trend trading, gives some examples of traders who have applied it and sets out the underlying principles which should be followed for success— trade the best markets, trade with the trend, bet small, use stoplosses, cut losses, ride winners, don’t overtrade, be patient, be disciplined.

As a bonus, Andy gives you the scaffolding for a particular methodology that works for him as an example of everything he sets out in the basic rules. Just as you would never think of moving into a new house that has been framed but before the roof, walls and interior are finished you cannot and should not attempt to trade Andy’s “system” without doing all the finishing carpentry. You need to do your own back testing—doable these days with off the shelf software he describes—to fill in the parameter values and to learn how his trade-the-best market portfolio ranker shuffles which market signals you take. For those who don’t have a clue where to begin Andy gives you his exact pattern to follow. Your own back testing fills in the parameter blanks.

Andy advises everyone that they must trade a style that fits their personality. I believe very strongly he is absolutely correct. You will not follow a system that does not suit you. In his wisdom Andy thus does not give you all the parameter values for the formulas in his personal trading scaffold. He wants you to do your own back testing, to find a methodology that you are comfortable with yourself and have confidence in. When all is said and done your approach may be identical to his with your own parameter values. It may be significantly different. Regardless, you cannot develop the confidence to pull the trigger after multiple losses in a row without having done the work yourself. Guaranteed.

It’s a fair bet to say that any trend following methodology likely to succeed over time will employ the general psychological and fundamental trading rules Andy outlines. The specifics of everyone’s approach will vary, but the broad principles outlined here will be present in one form or another in virtually all robustly successful trend following approaches. People say that markets have changed and new rules are needed for the new game. I’ve heard that for over 30 years. The markets do change but the underlying fundamental rules for success don’t seem to. They are all outlined here. How great.

You are lucky to have picked up this book. If you are a seasoned trader, reviewing the basic elements of winning psychology makes this book worth perusing cover to cover. We can all use reminders, yours truly always. If you are new to trading this book can save you years of trial and error and monetary losses. This book is now on my short list of recommended reading material for traders. I sincerely thank Andy for having written it. Have fun reading it. I wish you all the best in your trading.

Dave Druz
Tactical Investment Management
CTA / CPO since 1981
Haleiwa, Hawaii
April 2012

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