My approach to trading isn’t very complicated.
Entry: enter on a breakout, defined as: exceeding (or going below) the 60 day donchian channel (with a fudge factor).
Exit: .5*ATR (average true range) retracement from the position high(low) (or the entry point if the first day). The wider exit is 2*ATR, which I will use if/when the position manages to endure and go deep into the money.
Position Sizing: don’t risk more than 2% of the account on any given trade. Add to the position as it moves into the money by each addition .5 ATR.
Right now I’m sort of getting started after a break, so I’ll likely focus on taking profits, which means I’ll probably get out fast and clearly early.
There’s some looser “rules”, like, “Ugh! grains!”.Somehow, grains seem to move along calmly, and suddenly poof! A limit move! On the right side of the market (one time in bean oil), I’m laughing. On the wrong side of the market (one time in Wheat), I’m losing sleep and money.
The overnight markets can be quite thinly traded, and as a rule, I tend not to like entries in them (especially in volatility of the last few months).I’ve seen grain markets make big overnight moves, only to entirely give them back and then some within minutes of the pit open.
I tend not to trade: LB, CT, meats, the low volume grains like oats, and some of the larger contracts: HG, RB, HO, NG, though I’ve been known to dabble in the larger ones from time to time.
Oh, and, I hate the indices. Too much thrashing. Rarely I’ll drag myself into an index trade.
How did I get here?Books and experience.
Books:
Finley Goslin is a great futures trader and great mentor and I recommend his books and newsletter highly. I learned the ropes with “Trading Day By Day” and by reading his newsletter and emailing him with questions. He is incredibly generous with his knowledge.
The Turtles are quite famous, and I thought Curtis Faith‘s recent book, “The Way of the Turtle” was a good read.
We traders don’t like to think of ourselves as gamblers, but a key part of staying afloat in trading requires adherence to one basic principle, perhaps best described in “Fortune’s Formula“.
Experience:
Futures trading for the last 4-5 years. But this isn’t my day job. I also traded equities(ok) and options(ludicrous) for several years.
When I first started, I used to trade an account at OpenECry, which allowed reasonable, cheap access to the major pit markets.(These days, everything I trade is available electronically, so I use IB).
Here’s a little story from those pit days:a few years ago, Coffee was traded excusively in the pit (at the NYBOT). One day, my signals said buy, so I put in a limit order to buy and sent it. My limit price was right around the current price. (You couldn’t tell bid or ask with these pit issues).A minute or so later, Coffee started heading higher, a lot higher, and fast.Very soon, my order looked ridiculous, far away from the current price.I’m not one to give chase, so I let it sit.For the NYBOT, I only had real time price data, not time and sales, so I didn’t know if I should have received a fill.So I waited. 30 minutes later, I was reviewing the delayed feed of time and sales data, and decided that, I had in fact missed it by a few seconds, that I was not due the fill.”Oh well”.
At that point, an message came on the screen: “FILL: BUY 1 KC….”.The electronic age meets the pit.On chat with the broker, he sugested that maybe that pit could use some of the commodity they were trading…
