Or is it "General" - good points, good comments. I may "steal" some of them for the magazine (they love this stuff). Thanks...
BTW : For those looking forward to develop their "personal game-plan" , there's a nice downloadable example ( available as 2.5MB download in *pdf format or as word document) It covers all important aspects of a sound trading plan. http://groups.yahoo.com/group/Trading_Plan_Wozzat files are to be found here http://groups.yahoo.com/group/Trading_Plan_Wozzat/files/ It's from Yogi, a fellow australian trader. You may need to subscribe to his yahoo group ( it's free - no obligations and no spam involved ) in order to get the files.
Every month in Stocks and Commodities. You can check out past stuff by going to: http://www.stocktrading.com/articles.html Let me know what you think!
Well I think it's a really wrong assumption that a trader with no method will have results guided by pure luck, ie. 50/50. This assumption seems to ignore the emotional aspect of trading. In my opinion, without having a plan the trader would definitely lose in the long-term because his emotions would play tricks on him and his chances would become much lower than 50/50. Having no method would lead to having all the harmful emotions like lack of confidence, "emotional rollercoasters", etc.
Don, I recall having read some of your columns when I was a subscriber to S&C in 1999 / 2000. You make some very good points in your articles and answers in the Q&A series of S&C. I admit, that I don't have the years of experience you have in trading stocks. I do this ( trading stocks ) only since 4 years on a parttime bases. I'm a pro in precious metals and non-ferrous metals markets. We don't do the kind of fast paced intradaytrading as you and your traders at Bright do and we do have different aspects to consider when trading in those commodities. But I can agree, whether you make 2 trades a day or 100, whether you trade stocks or commodities, you need to know your market inside out. Trading success is not about having the latest software, satelite dishes etc. It's only about having the necessary trading skills, knowing when an opportunity occures, how to trade it and a sound understanding of what drives the markets your in. Therefore, I can support your opinion ( or philosophy ) to focus your trading on only a few markets and learn what makes them moving. We do most of our trades based on a 15 year old Reuters monochrome quote system and by telephone ( of course, when I would have to do 200 stock-trades a day, this would not be feasable ). Although we could use Reuters 3000 all day long with all the research capabilities, pro-information, TA stuff etc. you can dream of, we just need to have a look at a few key figures in certain markets in order to determine where we are heading to and follow the tickers to see it happen. Our philosophy is to buy weakness and sell strength as long as it's there. Contrary to most common stockmarket strategies which favour buying high and sell even higher. The rest is a mix of intuition coming from years of experience, internal money-management guidelines and our "game-plan" based on the most recent info we get from the industry, LME, LBM, comex, other market participants who we know since many years etc. pp. But, we are not traders in those markets just for the sake of making trading profits. Like most other industrial players in commodities, we also have an industrial background and need the markets to balance / hedge our own production, metals purchases and metals restitutions to our customers. Therefore, risk control is a big issue when trading with billions worth of precious metals belonging to customers. So we prefer to be in a market neutral position with most of our own and customer assets. Which requires, that we re-balance our positions on almost a daily bases due to price fluctuations. But for future production, we need to find opportunities for certain contingents of our assets in order to profit from price moves which may occur only in 6 - 18 months out from today by positioning ourselves accordingly today. Which is not always as easy as it sounds. Whoever had a look at i.e. Palladium for the last 2 years knows what I'm talking about. I.e. We sold Pd production short by begin of the year many months out and still enjoying to cover for prices some 50 - 60 or 70% lower. Not the kind of daytrading you are used to, but certainly very profitable, given the fact, that we have to deal with millions of troz per year. I wonder sometimes, how some private commodity-traders ( speculators ) can survive in those industry-driven markets. Especially when considering the high leverage in certain commodities. I wouldn't put a single dime of my private money in those markets. Forgive me, I went a bit to far away from our subject here. But when reading your comments , I had always the impression, that your trading philosophy is, to keep things as simple as possible and focus on the few, really important things.
your comparison of success in trading and success in life is an interesting one.. first of all, success in trading means being disciplined by following the rules of a trading system that when adhered to produces a profit.. success in life is obviously much more broad.. its conducting your life in such a way that you have a loving family, are respected by those around you, provide for the needs and wants of those you love, are responsible, have integrity, are faithful to your religious convictions, contribute something to the world, etc.. ive travelled to many countries that have huge numbers of disadvantaged people.. in fact, ive spent time in Mozambique, the poorest county in the world.. in Mozambique i met a man whose name is Simon Mudiwa.. he grew up in a poor border town near Mutare, Zimbabwe.. as most africans, he was raised by his mother.. when he was about 16, there was a civil war in Mozambique.. guerillas were attempting to overthrow the government there.. Simon joined up and became a guerilla soldier.. it was a brutal war.. in tribal countries of Southern Africa, there is no distinction made between civilian and military.. its all about what tribe you are from.. so often times the guerillas would return home and find their villages destroyed, people gutted.. or the bodies missing, just the heads left on the table in the hut.. as you can imagine, Simon became a very cold and calloused man.. he learned that to succeed, you just take what you want.. and never to let people stand in his way.. Simon became quite a soldier, and was eventually promoted to be a bodyguard to the president of Zimbabwe.. in that country, power and respect are everything.. and no one has more power than the witchdoctors.. so Simon set out to become a practitioner of magic.. he went to a hill, and beat a drum for several days, trying to make the spirits possess him.. he told me that this had been unsuccessful and he became very depressed.. one night he was outside and a stranger approached him to talk about Christianity.. he said he listened for a minute, and then told the man that he would check it out, but if the man was lying, Simon promised to kill him.. so, after some time, Simon became a Christian and began to apply Christian values to his life.. he left his job as a soldier, and went back to live in the village with his mother.. a local missionary heard about his story and asked him to come to the US as part of a multicultural group that would travel around and share in schools and churches about their respective countries.. in the US, he met the love of his life, a young lady also part of the group from Kenya.. after the trip, they became engaged.. Simon was invited to the US to help with an american missionary group that wanted to travel there.. so Simon came back to the states.. when he arrived in the US, he received a call that his fiance had been in an automobile accident.. she was paralyzed from the waist down.. now, in Africa it is unheard of for a man to marry a cripple.. a man needs a beautiful and hard working wife to be respected.. but Simon is so faithful.. he never wavered.. he went home and they were married.. about 2 years later, his wife became pregnant.. about 7 months into the pregnancy there was a problem, so Simon took his paralyzed wife to the local hospital.. they refused to admit her at first, and then when she was finally admitted, they neglected her and she lost the baby.. so here is Simon.. he grew up in absolute poverty by anyones standards.. he grew up without his father.. he was subjected to the mental anguish of the atrocities of a brutal war.. his fiance was paralyzed just before they were married.. his first son was killed at the hands of negligent doctors.. "things/events/situations" were clearly not on his side.. but lets evaluate his success based on his decisions.. he and his wife have a wonderful, loving relationship.. they also now have a 2 year old little boy.. Simon is respected by everyone who knows him.. he is the most faithful person i have ever met.. he now oversees operations in Kenya for a US para-church organization.. and one last important thing, Simon is a very happy man.. there is no bitterness, no self pity.. on the contrary, he is very grateful for all of the blessings in his life.. i could tell you many other stories of people i know who have overcome incredible obstacles and disadvantages to find success in their lives.. and we all know of those who have had every advantage only to lose everything to drugs, alcohol, suicide, etc.. in the end, its not what happens to you in life that matters.. its how you decide to handle it that counts.. trading is exactly the same.. -qwik
It would be an interesting experiment to gather a bunch of newbie traders and let them trade in real-time. For every trade that they make you take the opposite trade, so if they do worse than 50/50 and lose more than they win, you win by doing the exact opposite. Of course as these traders gain experience you'll have to get a new set of guinea pigs.
Privateer, I think producers enjoy a huge advantage in that they have fixed costs to produce the product and also have a much larger bankroll to withstand minor swings in the commodities. Life is always good for producers with skyrocketting prices, even if you don't sell anywhere close to the highs, because your costs are mostly fixed (unless the cause of the skyrocketting prices is due to something that has made production more expensive). Look at Coffee a few years ago, look at energy this past year. All the energy companies made a killing no matter where they sold. But in bear/stagnant markets a lot of producers don't do nearly as well. Again, follow the energy stocks the past decade and see how many had record profits and how many had huge losses direclty related to energy markets. I know metals have a unique production cycle that has different characteristics compared to softs/energies. How well your company did 1990-1992 when all the metals except copper were basically stagnant and at their lows?