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Nicholas Pishvanov wrote:
>
> This is a story about the failure of an inexperienced commodity futures
> trader. Perhaps it is not really a failure. It may be that the subject
> recognized his limitations, and decided to stop trading. With more study
> and reflection he may pick up the pieces, change his strategy and come back
> as a successful trader. Some time ago, The Washington Post carried a
> story about a carpenter in Long Island who decided to lock himself up in a
> room with his computer and get rich. I wondered how he did, and a
> follow-up story in the Aug 24 WashPost "Putting Futures in the Past"
> describes the outcome.
> I believe the outcome of his trading would have been far more successful
> had he been exposed to the commentary, advice and shared experience of our
> RealTrader's group. A side-issue is the problem of blindly relying on a
> "cookbook trading system sold by a commodity investment advisor".
> The moral of the story: Some of our more experienced traders are very
> generous with some very good advice. New or inexperienced traders, take heed.
> Nick Pishvanov
>
NW: What I found both interesting and disgusting about this article
is that is the the usual media propaganda that the Wall St. establisment
wants the public to believe. Why doesn't the SEC issue warnings about
the volatility and risks of owning stocks? I have seen many stocks
lose half or more of their value in one day. Why doesn't the SEC warn
investors about gambling with stocks on margin? Why doen't the SEC warn
investos that 90% of all IPO innvetments are losers after the first 3
months? No one forces futures traders to be highly margined just as no
one does this to stock traders. So why is the media alway painting such
a bleak picture, i.e. "gambling" in futures? Statistically studies have
shown that overall commodities tend to be less volatile than most
stocks. So, most of the assumptions apparent in the article below are
wrong. With all due respect to Nick, this article is full of the usual
media propaganda crap which is highly slanted against commmodities. I
wonder if there ever really was such a carpeter or this was a fictional
story made up to brain wash the masses. Whatever the case, it is
financial journalism at its very worse.
Disgustedly,
Norman
> An original copy of the story can be downloade from The Washington Post at:
> http://search.washingtonpost.com/wp-srv/WPlate/1997-08/24/058l-082497-idx.html
>
> ....................copied:.............
>
> Putting Futures in the Past
>
> Carpenter's Commodities Stint Shows How
> Amateurs Can Get Hammered
>
> By Brett D. Fromson
>
> Sunday, August 24, 1997; Page H02
> The Washington Post
>
> WATER MILL, N.Y.—In 1993, James Ewing, a carpenter living in
> the Hamptons, where many wealthy Wall Streeters go to relax,
> hit upon a scheme to get rich too.
>
> Ewing, 49, bet $30,000 of his hard-earned savings in the
> commodity futures markets -- notoriously difficult places for
> amateurs to make a buck.
>
> "I'd always dreamed about being able to support myself from
> home. So I got into a get-rich-quick mentality," said Ewing, who
> has found it harder to work as a carpenter because of increasing
> physical weakness stemming from childhood polio. "It's that
> greed, that sense of wanting to get rich quick."
>
> In the subsequent three years, he said, he lost half his stake in
> an enormously painful process that caused him many sleepless
> nights.
>
> "So I quit last year," he said. "I couldn't take it anymore. I didn't
> have the stomach for it."
>
> In an age of buoyant financial markets and mass enthusiasm for
> their wealth-creating power, Ewing's attempt to support himself
> through speculation is understandable. But his unpleasant
> experience is a cautionary tale for anyone thinking about
> speculating in the commodity futures markets.
>
> These exchanges, in Chicago and New York City, are used
> mainly by professional speculators or by farmers and companies
> that want to hedge price fluctuations in commodities they produce
> or consume.
>
> Study after study has confirmed that amateurs lose money on
> commodity futures contracts, bets that commit them to buy or
> sell a commodity such as pork bellies or copper at a set price
> within a certain time period. Investors can lose money on the bets
> and get hammered on brokerage commission as well.
>
> The federal Commodity Futures Trading Commission, which
> oversees the U.S. commodity markets, is sufficiently concerned
> about the perils for individuals that it has prepared a publication
> for the uninitiated, "Futures and Options: What You Should Know
> Before You Trade."
>
> What makes the game so risky for amateurs is that commodity
> prices whip around as wildly as tornadoes. Prices are pushed and
> pulled by unpredictable forces, such as a drought in the wheat
> fields of the Midwest or an unexpected labor strike in the copper
> mines of Peru.
>
> In addition, commodity bets are made with borrowed money -- "on
> margin," as they say in the financial markets. Putting up $1 for
> every $10 to $20 you bet is not unusual. You could buy, for
> example, a $15,000 wheat contract for about $800 to $1,600.
>
> For every 1-cent move in the price of wheat, the value of the
> contract could vary by $50. So if wheat prices rise by 10 cents,
> you would make $500. Conversely, if the price falls 10 cents, you
> would be out $500.
>
> As in Ewing's case, the amateur typically puts money into a
> margin account with a broker who holds it as collateral in case
> the bet is a loser and the customer can't come up with the money
> to cover the loss.
>
> Ewing became accustomed to "margin calls" -- requests from a
> broker for more money. For example, he lost money betting that
> lumber prices would fall. They rose. Then he lost money on silver,
> betting the price would rise. It just kept falling. He also lost a fair
> amount on pork bellies.
>
> "I lost money on everything more than once," he said.
>
> Like many players, he was relying on a "cookbook" trading
> system sold by a commodity investment adviser. Ewing used a
> program that based trade recommendations on "seasonal
> fluctuations," how commodity prices have moved during certain
> times of the year.
>
> It didn't work for him. "The method required me to make a lot of
> personal trading decisions. I didn't have the stomach for that. I
> don't trust myself to make subjective judgments," he said. "And I
> was getting eaten alive by brokerage commissions."
>
> Looking back on the unsuccessful episode, Ewing recalled the
> addictive appeal of commodity speculation.
>
> "When I stopped, at first I missed it. I had a feeling of withdrawal.
> . . . I couldn't wait to get up in the morning and turn the computer
> screen on to see what the markets were doing, even though it
> would then be a nightmare."
>
> What caused him to quit?
>
> "Basically, I ran out of the desire to gamble. I hated accepting the
> losses. It was such a dreadful experience. So I got to the point of
> not being willing to put more money on the table," Ewing said.
>
> After the initial withdrawal symptoms, he was glad to have quit.
> "In time, I felt so relieved," he said. "I was feeling good not to have
> the constant pressure of losing money and getting margin calls
> from my broker asking me to send more."
>
> A few months ago, Ewing considered trying again. A friend
> suggested that they try a new trading system devised by a
> commodities trader. Ewing said he felt momentarily confident that
> he had learned from his mistakes and could beat the market with
> a new, better system.
>
> Ewing and his friend spent two days "back-testing" the system,
> to see how it would have worked under previous market
> conditions. But in the end, Ewing decided he didn't have the
> mental toughness to play the game.
>
> "Looking back on the whole period, I come away with a heavy,
> unpleasant feeling about the whole process. Occasionally, I
> watch commodity futures markets and I remember the emotional
> state I was in, obsessed but not tough enough to handle the
> pressure. . . . It can be fascinating, but I don't want to do it
> again."
>
> @CAPTION: James Ewing in 1993, at the start of his three-year
> commodities adventure.
>
> © Copyright 1997 The Washington Post Company
>
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