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I have read Wiest's book, and totally agree with his conclusions. In a
nutshell his premise is that physical commodities such as grains, cattle,
etc always rebound from price lows simply because the laws of supply and
demand dictate that shortages will develop at lower prices,with the
shortages ultimately leading to higher prices. He also makes the
observation that the cost of holding on to a futures contract is limited to
the cost of rolling it over at contract expiration. Of course additional
margin must be posted if the market continues to move down while the trader
is buying,but this too is considered a trading expense that will be recouped
when the market recovers. With these observations in mind, he advocates a
scale down buying program as a market approaches historic lows. For example
buying a unit of contracts every 5 cents down as a grain approaches it's
previous long term low. Profits are taken on each unit after the market
advances 5 cents past the purchase price. He also points out that often
profits on some units are taken before the market bottoms out ( due to
counter trend rallies) so the expense of posting extra margin is avoided or
minimized.
There is no doubt that Wiest's strategy works, he has been trading a futures
fund for many years ( as long as I can remember ) and it has consistently
returned a profit. I suspect it has not received a lot of publicity because
the returns, while very consistent, are not the spectacular "home run"
returns that make for good press. If memory serves, the returns are in the
neighborhood of 25% per year.
Again another low tech strategy that consistently makes money. I'm not sure
that I have the emotional constitution to make scale down purchases in a
declining market though. If you think you do, I would recommend the book
,as there is no arguing that his approach makes money, it is public record.
All the Best!
Bill Shumake
-----Original Message-----
From: Michael Ferguson <Michael.WL7BDN@xxxxxxxxxxxxxxxx>
To: bshumake <bshumake@xxxxxxxxxxxx>; RealTraders Discussion Group
<realtraders@xxxxxxxxxxxxxx>
Date: Sunday, February 15, 1998 3:19 PM
Subject: Re: channel breakout
>Bill and Traders,
> This leads me to ask what you think of the scale trading system in Robert
>Wiest's "You Can't Lose Trading Commodities". I don't have the book yet,
>but I am ordering it. You can find a description of the book and trade
>potential at http://www.elder.com/bookpages/WIEST_YO.html. Any tie-ins or
>experience with this?
>
>Michael
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