Commodity Trading & Trend Following

Current Trend Following Positions

Past Performance is not Indicative of Future Performance

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Successful trend followers do not trade their opinions. Actually once I realized my opinions do not mean anything nor will they make me any money, I stopped. I am always asked what do I think about this market or that market. I say I do not know! Honestly no one knows. We are dealing only with uncertainty. I joke around if you want to know what gold or the SP will do watch the so called experts on CNBC or Bloomberg. They seem to know the future!

All that is needed for successful trend following is a complete trading plan that is simple and robust that is based on strong principles of money management along with the courage to follow the plan. Courage is where most people fail. They do not want to accept that they were wrong or a trade does not work. The reality is that there will always be losses and trades that do not work. If you can not accept these facts you will never succeed as a trader. You need to accept the risk of losing money when putting on a trade. You need to make this small enough that you are not bothered by the loss as well as big enough to profit if the trade works. I risk less than 1% of my account size on any trade. Depending on the program I am consistent. I do not raise it or lower it.

This is what successful trading boils down to.

Past Performance is not Indicative of Future Performance

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Most beginners only focus on entries. Getting out is more important in my opinion. I always state, you need to know when you are getting out with a loss or a profit. You must have a complete trading plan and be consistent following it. You must have a stop loss. This prevents disasters. There are those that disagree however I have seen more traders blow up by not having a fixed stop loss that they can adhere to. If the market does not confirm your expectations..GET OUT…Follow your trading plan. You need to have the patience to let the trade work. As Jesse Livermore stated more money is made by being patient on a trade and simply letting it work.

Past Performance is not indicative of future performance

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How do you take this fact… Newedge CTA Index 20 Month Draw Down Worst on Record …a time to exit managed futures …or a time to be a contrarian? Personally as much as past performance is not indicative of future performance this statistic encourages me even more. The truth is we are only dealing in uncertainty, however when articles like this present themselves in conjunction with so called Market wizards leaving the space I am encouraged. I do not have a crystal ball and this draw down can easily continue, however human nature also continues. Trend following is not dead. Trend following worked for Richard Donchian for almost 50 years. I am sure it was never easy or a walk in the park. I am sure he always had losses and long duration’s of draw downs…however …when he least expected it…Donchian stumbled into trades that trended more than he expected. Statistically which really means nothing, it is not abnormal to have 2-3 periods of not making money in managed futures. Time will tell …however I am betting on managed futures and trend following.

Past performance is not indicative of future performance

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I have to admit, I really do not understand how the stock market is going up all over the world. I see things that make me very uncomfortable such as now interest rates starting to move. There are economic indicators which are starting to flash to the negative, however the trend is still up. Do I want to be right or try to make money? I learned along time ago to park my opinions and ego and simply listen to the market. I use simple tools to “Try” to keep me on the right side of the market. One such simple tool are moving averages. The fact is as of this post the stock market levels are all above all the moving averages I look at. So if that is the case, I need to follow what the market is doing. Maybe it is a parabolic blow off…or maybe not. Either way…If you want to trade your opinions or comfort level I doubt you will succeed in trading. It is never easy! There are always challenges and losing periods. Successful traders put in a tremendous amount of time and energy in their trading. This is not a weekend job or a hobby. I am up at 5am and work till many times 10pm. You have a choice…if you really want to succeed in trading & trend following you need to work. It is not retirement in a box…& in order to succeed you will have to take trades that surpass your comfort level or logic.

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I teach others because it reinforces my own thinking and mental fortitude. What stands out to me is that too many are searching for ways not to lose money. They are looking for better indicators…or better systems. I believe that successful traders who are consistent accept the losses that they encounter and know they are inevitable. They risk a small enough amount on any trade which does not cause them any mental anguish yet big enough to provide potential returns. There is never a way not to lose money. Some of the most successful traders over decades go through long periods in which they do not make money. They do not quit or start looking for a new system ( enhancements yes).

I really believe that in order to succeed one has to think in terms of the next 1,000 or 10,000 trades. Putting on these trades must be without any emotional baggage.

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Believe in making it happen

Be Committed to achieve trading success

Being committed is more important than a goal

You must take every trade and leave your comfort zone

Follow your trading plan exactly

Be willing to take a loss

There is nothing about being right or wrong…Trades either work or they don’t!

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These are my current positions. Got taken out of $KR yesterday. Keep the winners..Sell the losers( QUICKLY)

Past Performance not indicative of future performance

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One issue sticks out- Traders let their ego get in their way. They might do all their research or build their trading plan but simply not pull the trigger or keep to the plan. One reason…they want to be right…They do not want to admit they are wrong and lose money. Losing money is as natural as breathing in the realm of trend following. You must accept the risk of the trade before putting it on. You must put on a risk that you are comfortable losing…as well as losing in a series of trades. I risk no more than 1/2 of 1% when I am trading stocks. This might not seem much…but on rare occasions when the market rallies and the shares I have purchased rally - I can have rare exceptional returns. For example I have a trade currently on $HTZ. I am up 50%+ still risking only half of one percent of my account size on that trade. You must realize that many trades do not work and you lose money. You must admit the trade did not work and try again.

Do your own trend following. Make your own trend following plan. Do not rely on any advice from ANYONE!!!! No Bloomberg or CNBC or your broker…Do not approach trend following casually. If you do….you will surely lose money. You must work when you trend follow. You need a plan…you need to follow the plan…you need patience and you need discipline…Even with all of these there is no guarantee you will make money. Trend Following is hard work!!!

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Do not think for one second that trend following is easy. Do not think you will make millions in up markets and down markets easily. Trend following takes commitment…discipline…and patience. I work from 5am till 10pm 6 days a week. I promise you it is never easy. One of the biggest issues that traders fail is that they jump to methodology after methodology. It seems like an easy way to make money from the markets…however 90% of those who attempt to trade fail. Would you expect to be a surgeon over the weekend? If so I would hate to be your patient…

If you want to succeed in trend following…be prepared to work…and especially work on yourself..

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