Is trading Gambling or not .."What say You" Vote here.

ES,

True Story…

In the early 90’s I was introduced to a trader living in Westlake Village, Ca (Bob). Living in Los Angeles at the time, I drove up and met him. Our introduction had been through a mutual friend.
New to the markets (about 6 months), and yearning to learn something in addition to my “Ken Roberts” methodologies, we sat and spoke about cash commodities, his trading vehicle of choice.
His system was quite simple. He said he did not develop it and that he had in fact learned it from a man who traded Grain Futures in the 20’s.



1. Find a cash commodity trading in it’s lowest 1/3 of its 10 year historical range.
2. Initiate purchases at incremental levels from that level to the lowest level of that 1/3 range. 50% of trading Capital is used for supporting Margin and loss to that point. The other 50% of Capital used as “protection” if that level should be breached.
3. Set your “buys” and “sells” at levels that would not exceed your initial Capital “play” (Margin and Position maintenance)
4. Levels could either be equal 20cent/20cent or “complex” 20cent/40cent --- using more contracts at lower buy points or constant contracts throughout etc…
5. Although Bob hated Technical Analysis even he conceded using a 9-18 crossover for initiating his play.


Although this system differs from Electric’s it has its similarities. Chiefly, as in the example of my Grain Trader “mentor”, initiating Wheat buys at 2.8 down to 2.10 proved little risk (Is bread free at the SuperMarket yet?) and the “flow” or the “oscillation” trades as my friend termed, was what we are after. His only major concern was, what dollar amount would be required to maintain his positions until his “inventory” was sold. Electric system has no “loss carry” because he is hedged. His only concern is Margin. And although I am not very familiar with trading currency pairs, my first exposure was yesterday while reading this thread, it appears OANDA makes such small minimum trading units available that the “risk of ruin” impossible. The absolute worst-case scenario, which in my opinion has zero chance of happening, might cost 20-30K margin at Electric’s 20pip level and trading unit size. But in about 2 years of trade will have that worst case scenario covered and parity reached. This is long term trading.

The question remains,” Is your EGO willing to accept this trading is possible?” and do you want to make a boring 30-50% on your money? (This is the average return Bob made over a 30 year period…many years higher and I suspect Electrics system on average to be the same.

Q. Is trading gambling?
A. My answer. Yes.

Q. Is Electric’s system trading?
A. No. Not really.

Q. What is it then?
A. Electric is a Hardware Store owner who purchases inventory, (hammers, nails, faucets, and light bulbs) setting a resale profit margin on those goods, and selling those goods to his customer’s 24hrs a day.

Q. Why doesn’t everyone trade this way?
A. Bob loved this one. He was a CTA for many years. He used to say, “Everyone wants profits from day one and nobody is willing to spend 30-40% of their capital on Inventory.”


“Trade with the trend”
“Cut your losses short”

All Bullshit!!!!

Congrats Electric for thinking outside the box and discovering some of the real truths in trading.


Best Regards,
Dave Scott


P.S. Occasionally I find a cash commodity worth accumulating inventory in. I have not had a losing year with this “play” since introduced to it in 1993.

 

I grew up in Thousand Oaks California WD. I just moved from Simi Valley in December of last year to Denver, CO.(Wifey returned to a private University to expand, I told here the way she is picking up trading she should trade, she said she hates it).

I just added some more stuff to the spread sheet to incrementally space the trades at a uniform PIP size directly related to their 1Y range.. for system #2

See the Journal for the new spreadsheet. We are going to learn how to maximize yield WD...

This is exciting...

Michael B.

 

A 30-50% a year? I wonder why everyone doesn't put this trade on, especially with cash fx markets being far deeper than the grain pits. You really shouldn't be telling people about this, once those big institutions figure this stuff out they might start cutting into your returns . . .

 

Illiquid,

I am getting a lot a critisicsm, publically and privatly....

I am not worried...

If I told you there were other systems and methods to use that take money out of the market calculating in a rational non gambling way would you belive it?

WD demonstrated yet another way. Is he or his friend scared?

I am showing just two examples. A carry and a Volatility way...

Could you imagine the other ways....

I have enough ways, and the enjoyment I get from this, far exceeds what any money can give me. Helping people and being a peacemaker is where its at...I am 47 years old and I do not know how much longer I will live. I am not sick yet or anything like that, I just want to thank the Lord Jesus Christ for letting me be a part of your lives. If one person is helped then my work is worth it.

Thank you for reading, posting, pondering, listening and sharing.

We are at step one, and I hope to get to step 2 in the Journal, if we all can handle it! It's mind boggling to view the box from outside...

Michael B.

P.S. I am a believer that something real good is going to happen...real soon...it's just around the corner.

 

Now I must come clean about something.

This method is not completely mine. There are tweaks that I have made that are mine. The subaccount is one of them. I have pulled many clues and hints together from a few fellows over at the Oanda Forum, who are far more experienced and smarter than I.

I hope this fellow does not mind, but his handle is Sympatico, whom I am greatful for the many hints.

There are others there known as DGCFX AND AEKOTORIAN (or something like that) I may have these handles spelled wrong...but if your passion for trading lives, go search over at the Oanda forums for them...

Now, the final system#1 and my spreadsheet may be unique, or others may have arrived with the same stuff...its all a unique discovery for anybody. I had to bring it all together myself.

System #2 is all mine. Even though there are many traders that trade EXACTLY the same...I have been trading it for nearly a year and made my spreadsheet myself, ranking the interest bearing pairs.

Trading has been dissected, analyzed...twisted turned pivoted...so much by mathematicians traders and gamblers...it is hard to imagine that ANYTHING is unique. But now and then you come up with something...The box just gets bigger...

Michael B.

 

Actually the very deep pocketed Cash Commodity Commercial traders trade this very same way. Think about it.

Dave

 

It is important to evaluate your tools. Try to reverse engineer them to take advantage of the strengths and avoid their weaknesses.

I have been accused of being an Oanda shill...I perhaps have been too enthusiatic about them, for which I apologize.

I tell you, if you can master your tools and use every inch of them and concentrate on that, you will become enthusiatic about them.

I could not trade this system without my current tools. I am totally dependant on them.

So when the day comes when I have to change tools, well I will need to come up with something else.

I consider my Tools:

Oanda's platform and their FXmath tools
EliteTrader and other Forums
Excel Spreadsheets
Mataf.net

My next project is to free up my time. I am not ready to automate yet, but will be soon. I have my mind completely open to evaluate options in the road as they present themselves. But for now, I will concentrate on the Journal and the Hard work of Trading.

Michael B.

P.S. Wifey asked me why do you go off in so many directions. Why can't you just concentrate. You don't need to go to that live trading tomorrow...why for Gods sake? My answers, I just like traders...and there are many techniques. This one I saw yesterday was called PhiCube...Its just my style..(yesterday the Founder of the CBOE introduced this fellow from Brazil to us at the Denver Trading Group)

 

For those of you just entering this thread. I applaud you for reading the entire thing...most of the posts are mine lol...

If you have endured this thread... and have come this far, please look for the Journal to follow after voting in this thread is all I ask. If you voted earlier and have changed your mind, you can ask a moderator for help in changing your vote.

Have all of you weighed in?

Stay Tuned for ET's Gamblers Anonymous Journal.
Michael B.

 

A fellow posted this in one of the Forums back in February (I told you I have been working on this well before that).

This strategy expects the cumulative moves in one direction are more profitable than a straight line move in the other.
Better even, that cumulative linear trades in one direction will somehow be larger than exponential drawdown. in the other.

That is not the case.

By hedging you are creating the same proposition in the other direction. The only difference is the pip spread you have to pay on every trade.

If done correctly (no gaps) you will not lose money due to trading itself, but to pip spread.

The only way to do this properly is to frame it within a certain spread over a certain period of time. Since that is just as much guessing as any other trading strategy, you could end up loosing more times than winning. And... bingo.

This was a truth that had to be delt with and I thank BRDVS for posting this.

What say you EliteTraders? Do you see how a Sub account can work to alleviate this. Do you see how periodic position size adjustments and trading several systems can hedge each other if you can discover what one does, when the other one doesn't. Do you see how the incremental entries based on the natural flow of the market could be a factor improving on this?

Michael B.

 

I will tell you one other thing.

There have been people purposly trying to derail this public research.

Do not believe EVERYTHING you read in these Forums. There are real scared people trying to protect what they have, even if it they own it or not. They will purposly throw to you, what you think is a bone, to throw you offtrack and lead you down another path they have already reasearched to be a dead-end, to waste your time.

I will not do this...I hope I have proved it to you and I hope you folks feel the same. Do not be shy about your theories or discoveries. Let's prove them out and discover together. Don't worry or be scared, the doors will open for you...you will see...

On your road to self-discovery...you can alway share to find help and new ideas...and as Sulong taugt me, you must do the hard work yourself...( I think he is out sailing on his boat)