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greene@xxxxxxxxxxxxxxx wrote:
Well I disagree with you (guess that's what makes a horse race
<smile>). I've found it interesting that most of my work for the last
20 years has been in bonds. I use some aids (like charts) - but I
don't have a system - and have never been able to distill what I do
into a system. And I do ok (with a great deal of confidence). I've
only been trading the Select Funds for about 4 years - and - since I
don't have any feel for them - I've written mechanical systems - which
to me are like training wheels - to make for my deficiencies in terms
of market understanding. The Select systems work ok - but they're not
as good as my bond work. My goal is to one day have the ability and
confidence to trade the Select funds as well as I work with bonds -
without a mechanical system. Robyn
Robyn:
What I found most important in your latest post was your confidence in
what you *do* know and what you are able to trade profitably. Although
I began trading in 1980, I did research for a very wealthy
professional trader while I was in college during the late 1970's.
This man had made many 10's of millions trading stocks and investing
in real estate [And remember, this man made a huge fortune trading
stocks in the 60's and 70's, when the stock market was not in the
strong cyclical uptrend we have all lived with since 1980 or so...].
When he first hired me, he was interested in putting the methodology
that he personally used to 'predict' the direction of interest rates
into a computer program because he felt he would be able to catch the
top of interest rates when the Fed finally quit raising rates in the
1970's. And yes, if you know anything about the computer world in the
mid-1970's, I was punching cards and running them down in a basement
at the University of Chicago. [Ok, I admit it. For a brief two or
three years, I was a computer geek, or at least some people on campus
thought I was...but I left it all behind for trading.]
The short version of this story is that a man with untold wealth, who
knew nothing about trading commodity futures, was certain he would be
able to take his skills and translate them into more money. We worked
on translating his methodology [ a distillation of something that
resembles the weekly change of the Raw Commodity Index, as well as
some arcane inputs of his view of Fed policy and a few other
ingredients I forget, thankfully...] and finally got it all ready to
run. He was obsessed with getting this 'model' up and running, certain
he would miss the big move that was sure to come. We ran the model on
a Friday night, since in those days it took hours to run anything
complicated, and he was at my apartment door at about 6 A.M. the next
day waiting for the results.
He had a friend with him, a commodity trader that was also quite
wealthy and I sat down with them and told them the results of the
model's run from the previous night. They listened and then asked me
to show them the results on paper, which I did. It was clear they
didn't like the outcome from the model. The model told them the trend
in rates had not changed. But they clearly wanted it to tell them the
change had begun.
And so on Monday, after throwing the work they paid for into the
trash, they marched to the Merc and placed a rather large amount of
money into a new account. And they proceeded to buy T-Bill futures.
And as the weeks went by, they would add some here, and add some there
[And apparently, they were having to add more margin money into the
account.]. And so eventually, their resources came to an end and they
had to liquidate the position. I won't go into the details, but the
amount, even by today's standards, was a very large loss.
This man was a brilliant trader in his own arena. And he went back to
his own area of expertise and made back his money. But he kept coming
back to commodities and futures for years, always with the same
results. The last time I saw him, the new Merc building had been open
for 6 months or so and I asked him if he had seen the new trading
floor. And he told me he vowed never to go there, since he would be
unable to go there and not trade...
Knowing yourself, knowing your strengths and your weaknesses, and
staying within your capabilities are the best tools you can arm
yourself with.
Tim Morge
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