|
PureBytes Links
Trading Reference Links
|
<x-html><!DOCTYPE HTML PUBLIC "-//W3C//DTD W3 HTML//EN">
<HTML>
<HEAD>
<META content=text/html;charset=iso-8859-1 http-equiv=Content-Type>
<META content='"MSHTML 4.72.3110.7"' name=GENERATOR>
</HEAD>
<BODY bgColor=#ffffff>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2>RTs:</FONT></FONT><FONT
size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT face="" size=2>Here is some food for thought for those interested in
long term trading. I am not advocating this approach, nor am I
representing that the ideas presented are complete. Nonetheless, they
might be a catalyst for finding something useful in your own trading if you like
the long term approach, as I do.</FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face="" size=2><STRONG><U>The Methodology:</U></STRONG></FONT></DIV>
<DIV><STRONG><U><FONT face="" size=2></U></STRONG></FONT> </DIV>
<DIV><STRONG><U><FONT face="" size=2></U></STRONG><FONT
color=#000000> 1</FONT><FONT color=#000000>.
Trends are defined as a percentage of a price move from a recent high or
low.</FONT></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2> 2.
The system trades each market three to five times a year, automatically
reversing if the trend moves in the other direction.</FONT></FONT><FONT
size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2> 3.
Position size is determined by risking 2% to 6% of equity on each
trade.</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2> 4.
The system adjusts position size during rollovers using a measure of recent
volatility.</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2> 5.
The system is backtested 10 to 12 years and the parameter values (i.e., the
percentage of the price move and the lookback period for
the </FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT
size=2> recent high
or low referenced in 1 above) are adjusted annually.</FONT></FONT><FONT
size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2> 6.
Markets traded at the end of 1996 include:</FONT></FONT><FONT
size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT
size=2>
Currencies: British Pound,
D-mark, Japanese yen, Swiss franc</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT
size=2>
Index:
S&P; Financial times stock 100 index</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT
size=2>
Interest Rates: T-bonds, Eurodollars, 10 year notes,
5-year notes; German bund, Long gilt, Italian bond, Short sterling, French
notional</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT
size=2>
Energy:
Crude Oil</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT face="" size=2><FONT color=#000000><STRONG><U>Methodology
</U></STRONG></FONT><U><STRONG>Results / Money under
Management / Maximum Drawdown:</STRONG></U></FONT></DIV>
<DIV><STRONG><U><FONT face="" size=2></U></STRONG></FONT> </DIV>
<DIV><FONT face="" size=2>1993: 60% $177
million 5%</FONT></DIV>
<DIV><FONT face="" size=2>1994: -19% $176
million 35%</FONT></DIV>
<DIV><FONT face="" size=2>1995: 98% $342
million 6%</FONT></DIV>
<DIV><FONT face="" size=2><FONT color=#000000>1996:
58% $566 million 17%</FONT></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2>1997: 44% $857 million
12%</FONT></DIV>
<DIV><FONT face="" size=2>1998: -13%* $583 million
17%</FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face="" size=2>*through 6/98</FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face=""
size=2><STRONG><U>Source</U></STRONG><U><STRONG>:</STRONG></U></FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2>The information under items 1 - 5 of
"The Methodology" was taken from an article in <EM>Futures</EM>
magazine entitled "Managed Money: Top Traders of 1995"
(<EM>Futures,</EM> March 1996, pages 68 - 69). The information under item
6 was taken from a 1996 CTA Disclosure Document. The information under
"Methodology Results" was taken from an industry reporting
service.</FONT></FONT><FONT size=2></FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT face="" size=2><STRONG><U>The Long Term
Trader:</U></STRONG></FONT></DIV>
<DIV><STRONG><U><FONT face="" size=2></U></STRONG><U></U></FONT> </DIV>
<DIV><U><FONT face="" size=2></U>Bill Dunn of Dunn Capital Management and his
World Monetary Assets program. (I have no<STRONG>
</STRONG>affiliation.) Bill has a doctorate in theoretical physics from
Northwestern.</FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face="" size=2>I don't often contribute to RealTraders but I
enjoy the forum.</FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face="" size=2>Best wishes for a healthy, happy and successful New
Year.</FONT></DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT face="" size=2>Jeff Stewart</FONT></DIV>
<DIV><FONT face="" size=2>Atlanta, Georgia</FONT></DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><FONT color=#000000><FONT size=2></FONT></FONT><FONT
size=2></FONT> </DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><STRONG><U><FONT face="" size=2></U></STRONG></FONT> </DIV>
<DIV><FONT face="" size=2></FONT> </DIV>
<DIV><STRONG><U><FONT face="" size=2></U></STRONG></FONT> </DIV>
<DIV><FONT size=3></FONT> </DIV>
<DIV> </DIV></BODY></HTML>
</x-html>From ???@??? Wed Dec 30 06:46:48 1998
Received: from list.listserver.com (198.68.191.15)
by mail05.rapidsite.net (RS ver 1.0.2) with SMTP id 8927
for <neal@xxxxxxxxxxxxx>; Wed, 30 Dec 1998 00:11:11 -0500 (EST)
Received: from localhost (localhost [127.0.0.1])
by accessone.com (8.8.5/8.8.5/PIH) with SMTP id VAA01253;
Tue, 29 Dec 1998 21:03:31 -0800 (PST)
Received: from imo15.mx.aol.com (imo15.mx.aol.com [198.81.17.5])
by accessone.com (8.8.5/8.8.5/PIH) with ESMTP id VAA01057
for <realtraders@xxxxxxxxxxxxxx>; Tue, 29 Dec 1998 21:01:21 -0800 (PST)
Received: from I4Lothian@xxxxxxx
by imo15.mx.aol.com (IMOv18.1) id KJYFa02637
for <realtraders@xxxxxxxxxxxxxx>; Wed, 30 Dec 1998 00:00:48 -0500 (EST)
Message-Id: <dbefd0e2.3689b380@xxxxxxx>
Date: Wed, 30 Dec 1998 00:00:48 EST
Reply-To: I4Lothian@xxxxxxx
Sender: owner-realtraders@xxxxxxxxxxxxxx
From: I4Lothian@xxxxxxx
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Rice Market Rally
Mime-Version: 1.0
Content-type: text/plain; charset=US-ASCII
Content-transfer-encoding: 7bit
X-Mailer: AOL 4.0 for Windows 95 sub 236
X-Listprocessor-Version: 8.1 -- ListProcessor(tm) by CREN
X-Loop-Detect: 1
X-UIDL: ef841112b09be17031348da19d5535b6
The Rice market, the only primary futures market on the MidAmerica Commodity
Exchange, made a brisk move up today.
>From some very reliable floor sources I gleaned the following:1) Yesterday
there was a big spread trade in the Jan/March; 2) Small retail buying
triggered
stops today; 3) Two fund related firms aggressively bought the higher market;
4)
it was most likely commercials who were selling the market.
Rice has been in a big downtrend, like the other grain and legume markets.
The big spread trade, rolling shorts from Jan to March, may have encouraged
the
retail buying. This buying was probably short-covering. The fund buying
smacked of turtle related buying. The market crossed through the 10-day
average of the highs, which might be a stop-out level for a long-term short
trade for turtle-oriented traders (my opinion).
I was anticipating that we might get some short-covering in the grain markets
before the end of the year. In the old days, some traders wanting to short a
bearish, but oversold market, would buy up the weak market in the complex or
category to spark some buying interest and volume. I remember a famous fund
trader who would always come and buy up the platinum market to bring a strong
bid and rally to the gold market so he could sell the gold market. The buying
in the Rice market makes me a little suspicious because of this history.
We will see if tomorrow brings additional volume and buying in the rice
market.
If we do get this kind of follow-through, I would expect some buying to
emerge
in the other CBOT grain room pits as well. There are enough shorts, and
enough traders off this week, that it could be interesting if this occurred.
Lion or Lamb, which will it be?
One technical model I use says that we want to see the highs of yesterday hold
and the highs of the first hour of trading hold. If they do, then maybe a
retracement will occur in Rice and the other markets will stay in the trends.
However, I will be watching if these levels are taken out. Because of the
holiday, I would be reluctant to take my retracement system short signal.
With the holiday weekend coming, I would expect some traders being interested
in squaring positions ahead of the weekend and ahead of the year-end. Thus, I
expect any buying we do get to be short-covering and thus the legs of any
upmove would be in question. If trading this potential move, I would be
looking to take the bird in the hand by the end of the day.
These comments are not meant as a specific recommendation to buy or sell any
commodity futures contract. They are just some observations and opinions I
have shared with some clients and associates this week.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
|