Commodity trade (1)

[SSI]

first off, anyone ask questions anytime you wish.. i begin charting the markets last friday but was a very active trader in the late 90's....... im trying to refresh my memory here, as well as teach anyone that wants to learn.....

Sugar #11........... trades on the NYBOT (new york board of trade),,,, hours from 8:00 am to 11:00 am cst weekdays.........

1pt = $11.20

overnight margin: $1190

since ive only been hand charting again since last friday, i only will use 3 days of info.....

Trade 1.

1. short 1 march sugar (SBH) at 11.05, stoploss at 11.42

listen now,,,,, trade was entered today on the short side, due to chart reading... fridays and mondays low's both came out on the open.. we entered short a contract at 11.05 on a limit order........ 10.98 was the open.......

1/5: Highs 11.41
Lows 11.00

1/8: highs 11.32
lows 11.09

so we entered short at 11.05 and placed a stoploss over fridays high of 11.41......... this gave us a 37pt risk or $415...... our profit target is open but i always trade with at least a 2:1 --- risk to reward setup........ but normally we let the market take us out....

market traded as low as 10.83 today but settled at 11.10....... so we are down 5pts in the trade.... or $56......

for tomorrow, we will lower our stoploss to 11.33, which is just over mondays high of 11.32..... this reduces our risk to 28pts or $314....

if the market trades to 11.33, we will automatically be taken out by our stoploss that we will have placed in the market....... and our loss will be $314....... a small loss that we can live with....

however, we want the market to continue to drop...... we will keep our eye on the low today of 10.83..... if it is taken out, we will again lower our stoploss, thus reducing our risk again..

we simply keep repeating this pattern, until the market eventually takes us out....... hopefully at a nice profit......

this type of trading, will produce a lot of losses but they will be small and our wins will be much bigger............. and ultimately that is the only way to win at "trading".......

 

[CapNCash]

so you only have a limit on the loss side, but no limit on the gain side? when do you take profits?

 

[SSI]

if you want to follow along and learn, here is what you can do..

get a peice of paper out...........

write fridays: open, highs, lows and last trade...... fill in the numbers..

1/5: open (11.25), high (11.41), low (11.00), last (11.09)

1/8: open (11.20), high (11.32), low (11.09), last (11.16)

1/9: open (10.98), high (11.15), low (10.83), last (11.10)

now that is your first assignment and the beginning of your hand charting.. we must go inside our markets and this is the key.....

Trade 1 (now looks like this)

1. short 1 mar sugar (SBH) 11.05, stoploss 11.32, profit targer (open)

now can you understand from the numbers listed above, why my trade now looks like this.........

ill repeat, we will have many losers but boy the winners will be nice.....

you could have realistically did this trade with as little as $1500 in a trading account.....

 

[SSI]

capncash, good question....

you limit your losses with stoploss orders placed in the market....... you never want to trade with unlimited risk......

you also can place profit targets in the market and at times, ill do on a day with a very big move..... sugar has a range of about 50pts max in a day but that is for a later lesson.....

normally we will leave the profit end open and simply ride our winning trades..

from experience i can tell you, the ultimate mistake is getting out of winning trades....... you must ride your winner and let the market take you out.......... and it will....... always be in control of your trade, know your next move ahead of time, just as im trying to outline......

 

[SSI]

i wont to repeat, if your interested in this....... begin to hand chart, in the manner that i showed you above.........

place the name of the commodity at the top of the page........ place the date to the left,,,,,,,, then fill in Opening, High, Low, Last and begin to fill the numbers in daily..

i really believe in doing this by hand....... it gets you in touch with your market..... you will begin to know the highs, the lows, and you will be able to see, where the market turned and on what day it turned,,,, you will see the places to put stops in the market......

im preaching to myself mostly.........

remember, we will be taking many small losses,,,,,,, in order to catch those big moves............... catching the big move is crucial, if you really want to make it --- in this business.........

hope we develop some commodity traders around here.......

1. short 1 SBH7 (thats march sugar for those that dont know) from 1105, stoploss order for wednesday placed at 1133........... max risk on trade, now only $314..... provided we dont gap open higher tomorrow.......

there are only 2 moves that will be made tomorrow........

number 1, we are stopped out at 1133 with a loss of $314..

number 2, todays low of 1083 comes out and we move stop to 1116, which is just over todays high...... and we will move that stop, the moment that 1083 comes out, no exceptions.......

if neither of these occur, we sit tight with our posistion...

we have taken a stand here and that is a "short posistion" has been put on.. now we simply see if we are right or wrong........... if proven correct, we will ride this wave as low as it wants to go........

 

[TheFalls]

Is it costing you money everytime you move your stoploss?

 

[SSI]

absolutely not........

only cost is $25 per rt............ so essentially its $12.50 in and another $12.50 out...... because you will get out, you dont want to take delivery of all this sugar..... but kellogs does......... get it..... thats what this is all about......... the farmers selling to the merchants, such as kellogs....... we are here to stop the haggling and set the prices all in between.......

the $25rt is a great price, for full service........ my broker will babysit the trade for me...... i go over with him, what i want done and he follows thru. but remember he is simply an order taker.........

 

[TheCooler]

where do you think would be the best place to place these trades online. I have an Etrade acc but don't have the password at the moment. I think there $10 in and $10 out...

 

[SSI]

i really dont know..... ive traded with the same guy for a long time...... its not online......

be careful if your online trading.......... you will be responsible, so you must know the exact words to use.........

there are alot of different orders........... market, limit, sell stops, buy stops.. you have to know exactly what your doing.......

 

[SSI]

lets pick back up on wednesday with our first trade..

1. short 1 march sugar (sbh7) 11.05, stoploss initially at 11.42, today has been lowered to 11.33........ so our risk is around $314..... $11.20 per pt..

now pay attention, as im a technical trader, who once in a trade, has every move, mapped out........

we are watching 2 points today only, if neither is reached we do nothing.. i told you this last night..

if it hits 11.33, we are out (automatically) with a loss,,,,,,,, if we break yesterdays low of 10.83, we will immediatly our stoploss from 11.33 to 11.16....... why 11.16,,,, because its just over yesterdays high of 11.15....

get it.......... ill slow walk this thing down, until the market pushes me out..

currently we have an opening today of 10.97, and a low of 10.91, and high of 11.04....... this is great..... as we are short from 11.05 and want the market to drop......

you guys dont know it but this first trade, has brought back almost everything that i used to know, about being a technical trader ---- with a highly successful simple strategy........

all we have to do is, get the entry right..... the remaining moves are mapped out in my strategy.........

remember yesterday ended with the market at 11.10 and we were down slightly in the trade, so the lower opening was most welcome....

 

[SSI]

i will update this trade this afternoon,,, ill be out for a few hours..... market still has 50 more minutes to trade..

we are still short from 11.05, our stoploss is still at 11.33.....

market has been trading in the low 10.90's, so we have a little profit here but we are (as always) going to look for the kill...... the market will let us know, when to get it........ it will simply be a call from the broker..

acct 19842, you bought 1 march sugar.......... this will let you know that your out.....

updates later.......

 

[namathfan]

SSI, These commodity threads are great. You're getting me re-interested....

There are numerous clearing firms where you can do all your business electronically and pay less than $10 a round turn. Your stops stay in until you pull them. You can move them whenever and wherever you like. Just a thought.

These threads have now become a daily must-read. thanks.

 

[wrongturn]

SSI, thank you for sharing your experience and strategy on this. Two questions. First, how do you decide the entry price? Second, do you reset the stoploss immediately after the low reached, or only reset it after market close? Thanks.

 

[WharfRat+]

Namath, I read where you said you used to trade in Chicago. Do you like SSI's system? I'm a total noob but i'm considering delving into this stuff. I'm very appreciative that SSI is posting all this stuff.

Going to see how much I can learn in a month or two and then start with play money for a month or two and then go from there.

 

[Allworldfan3]

Very interesting. Thanks SSI for sharing.

 

[SSI]

namanth, ive had ample opportunities to trade elsewhere (cheaper) and quite frankly, if i were going to daytrade, i would have to do that........ however, ive been with the same guy (firm) for more than 10yrs..... trading heavily in the 90's, and off and on since then......

what he does for me, allows me alot of perks........... he knows, exactly how i trade and what im looking at........ you know things im talking about, intra day highs and lows, bollinger bands, double and triple tops..... we discuss alot of things over the course of a day... he also babysits my trades and to me, thats worth a lot......... when im trading multiples and need stops removed and move as i take some profits off the table, he knows ahead of time, what i want to be done......... i cant leave that kind of service for $15 rt,,,,,, only because im posistion trading.....

wrongturn, for me,,,,,, getting the entry right, is the most important part of the trade...... you get one shot to enter, its hard for me to tell you things...... trading is some what of an art form but it can very well be learned.... once im in the trade, then it becomes mechanical.....

you watch such things as new lows, you try and determine the overall trend of the market....... there are things such as reversal days, these let you know to get out or in, sooner than expected....

id bet my left (nut) april hogs go higher tomorrow..... why you ask, because today was an outside day, we broke both yesterdays lows and highs today and we closed over yesterdays high..... this is known as a reversal (not a key reversal, there is a difference)...... id be a buyer tomorrow on april hogs on any weakness in price...... good place to put a stoploss at 62.50, just under todays low of 62.52...... ill try and discuss the hog market later tonight.....

wharf rat, dive into it....... read all you can, paper trade all you can, the start to trade and it will be a different world....... we all make money when paper trading......... greed and emotion come into play, when the real action starts....... i hope you carry thru and do this, it would be nice to have a few traders here to talk with........ ill pitch in, all i can.......

ken roberts has some very elementary stuff, and i guarantee you a lot of traders started with the ken roberts course...... i actually read his stuff in the early to mid 90's............. very basic and simple but actually not a bad intro to this........

now lets take a minute to look at our march sugar trade...

short 1 mar sugar (sbh07) 11.05, stoploss 11.33.....

fill in the hand chart with todays numbers.

1/10: open 11.02, high 11.14, low 10.90, last 11.12

whats happened here, is that they have really tried to sell this market off the last 2 days, but have not been successful and its rallied into the close both days, with the shorts getting out....... today was an inside day, meaning we traded within yesterdays trading range, neither the high or low came out.......

i did not like the close but there is nothing i can do..... i must sit tight, no moves will be made as of now........

trade will look like this going into tomorrow..

short 1 sbh07 (11.05) stoploss at (11.33).............

we will be watching 2 things tomorrow........ number one, we will be stopped out at 11.33 for a $314 loss, or we watch todays low of 10.90.. if that low comes out, we move our stoploss then to 11.16....... same order we had today, except we are watching 10.90 and not 10.83......

i honsestly think this market will go down but it could take us out first.. if so we take our small loss and move on...... and yes $300 is a small loss in this business........

any more questions --- about sugar......

 

[Omni]

"you guys dont know it but this first trade, has brought back almost everything that i used to know, about being a technical trader ---- with a highly successful simple strategy........"

I was just about to say myself, you make this sound very simple.

 

[SSI]

Omni, it can be as hard or as simple as you make it......... there is a lot of money floating around,,,,, just need to find a way to make it....

it can be both simple and impossible, all in the same day...... i have a strategy, technique, system if you will................ i am making it sound simple, because hardly anyone here, knows anything im talking about... im trying to talk down to that level.......

there are probably thousands of complicated strategies....... you have option trading, where you need to know the delta of the option...... i could write a book on delta and how to determine it.........

you have spread trading, both front and back months..... you can do it either way, hoping the price gap narrows or hope it widens...... you can spread trade corn and wheat or cattle and hogs (although the clearing house will still charge 2 comm)....... on true spreads they charge only 1..

a true spread is (example) buying june hogs and selling july hogs, at same time or vice versa......

this isnt simple, i have to try and make it that way, to teach......

glad im making it sound simple..........

we have barely scratched the surface..... i havent discussed:

volume
slippage

or a vast number of other things.... not to mention the underlying fundamentals in any of the markets...

do you know how big the south american soybean crop is going to be...... if we are trading it, we better get an idea.....

 

[namathfan]

Wharf rat....

SSI is providing a great service for the readers of The Rx.

Like he states the commodity markets are a mystery to the general public. Technical analysis has many many facets, he is doing a superb job at starting at the very basics.

The open, high, low and close of a particular mkt are extremely important and that is just one factor he has brought forward.

I have not traded too actively the past couple of years but he has got me excited to get back into it.

Hopefully I can help contribute to these threads.

It seems if we would all be well advised to soak up the knowledege he is willing to share.

 

[SSI]

thanks namanth fan....... im recalling from memory the last few days and have been bantering with my broker, like old times....... i am always astonished why the gamblers here, dont trade the markets during the day..

as you know, commodities can be traded much cheaper than stocks.....

best setup that ive seen in a trade is in april hogs.. good looking reversal today.......

i do not plan on trading until mid feb, earliest........ got to get back accustomed to the setups..... same patterns occur, over and over...

im coming back with patience and going to trade much more mechanically than in the past.......... my biggest probelm (in the past) was exiting trades too early..... this time around, ill let the market take me out most of the time...... nothing like free trading....

in the late 90's.......... 97,98,99,,,,,,, i traded very heavily..... i also wrote a nightly newsletter, that i sent out in mass email........ i had live quotes and did a lot of day trading......... i was going in about 100 different directions, as my store business was really taking off......... the pressure got to me, i had zero time........ i was wired out and strung out.........

i didnt mean to stay away this long......... i have no personal horrow stories to tell.... ive made a $1000 in 10 minutes before..... and probably lost the same........

this time around...... i want to be slow, deliberate, methodical.......... let the market tell me, which way it wants to go........ ill just follow along..

i never traded bonds or currencies btw.......