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One of the Reasons Commodity Traders Fail

InvestorEducation / Learn to Trade Oct 05, 2009 - 04:01 AM GMT

By: Andrew_Abraham

InvestorEducation

There are many reasons commodity traders or even stock market investors fail.

Read this email that was sent to me. This is an example of one of the main reasons for failure.


Remember the charts condense all the economic, political and emotional expectations. And yes, every stock market movement is geared solely by expectations, not the real thing……….

And that’s what they are telling now:

We are currently at a stock market peak and the down hill is just around the corner.

The rally since March 2009 is coming to a halt.

Put your helmet and check your safety brakes, for we have now a bumpy road way DOWN!!!!!!!!!!!!!!!! Those who sell short will now rule…………

The fat lady is singing now, so you realize that the aria (the recent rally) is over………

You have been warned.

Listen with your Brain

Sincerely
XXXXXX (name withheld)

What is he doing? He is predicting! How many of you receive or send emails like this? I get them and ignore them…

I have learned that virtually all markets…regardless if they are Stocks… Forex… Commodities all trend at some point. This is the only way to make money in my book…The Commodity markets, forex markets and stock markets act the same today as they have 100 years ago.

Nothing ever changes. I can show you a chart of any commodity…a forex spread… or any stock… this chart will look the same. Because I understand the greater concept…I know that for long periods nothing happens…I know that I have to lose in order to win. As Ed Seykota has said..losses and profits are like breathing and exhaling…As I have repeatedly stated.. only four things can happen in trading..small losses..small profits…large ( rare ) profits and large draw downs ( which I attempt to avoid with immediate placed stops). Do you think this guy who wrote the email thinks in this fashion… He knows what the market is going to do… That is great news..because no one does…and more so…anything can happen. The stock market can go to 15,000 as easily as it can go to 5,000 and I do not care. Smart money follows the trends.

The real story is that really nothing happens probably 70-80% of the time…During these periods it is VERY hard to profit. Once in a while there are periods that are trends. With trends profits become a potential. This is the whole idea of trend following. Any long time trend following commodity trading advisor knows that predictions are worthless. This is what separates losing traders to long time trend followers. The problem is fundamental analysis or even technical analysis is predictive. Trend following is reactive. The fact is there are trend following commodity trading advisors who have been around for decades that have grinded out double digit returns on average for decades. The next reality is most want to be commodity traders fail because they look to predict and have no plan Commodity trading is not easy by any means. Enduring multiple small losses is the price to pay for long term success in commodity trading.

How we trade is by utilizing systematic methods. We trade a wide basket of commodities, forex, interest rates and indices. Since I work with a group of colleagues we reinforce our discipline and strengthen each other. A trading system is worthless if not followed with the utmost of discipline. The trading system is not a scary complicated black box. It is rather a set up rules based on money management, risk management with entry and exit signals. The only things that can hold up in the real world are simple ideas. I and my colleagues have seen virtually everything that can wrong in the markets. We have seen all the mistakes. If we can help you…Please send me an email to contact you. I have been trading since 1994 personally and have compounded my way to wealth by systematic commodity trading as well as investing in other commodity trading advisers and hedge fund managers.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

TraderJoe
05 Oct 09, 08:13
Flawed thinking

Everytime you put a trade on you are making a prediction on the outcome being in your favour.


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