By: Leslie Burton
Trading in commodity futures can be a very challenging plight and the risk plan may mean the difference between a long-term trading life and a short-term trading life. Of course, there are traders that simply do not believe in stops and swear that the other brokers and/or traders are gunning for their stops.
First off, a stop may be a protective stop to offset a long or short position to limit the losses if the market moves against you. You may also use a stop to enter a market as channel breakout traders may want to buy and go long if a market breaks through support or sell a market if the market breaks through support. Buy stops are placed above the current market price and Sell stops are placed below the current market price. A stop order turns into a market order when your price is elected. In a liquid market, it may be at or close to your price. If you are in an illiquid market, the stop may be elected, but your fill price may be further away from your price depending on the market activity. A “static stop” remains fixed on a position until executed. A trader must remember, if offsetting the trade manually, to cancel the stop. A “trailing stop” may be used to lock in and protect profits as well. It may be set to follow your position by a certain number of points or ticks to move the stop up or down with the market. This may be done manually or by a bracket automatically. There may be conditions such as a limit moves whereby the market may be moving too fast and may pass through your stop price without triggering in creating more of a potential loss than anticipated. The term "limit up" and /or "limit down" is the amount of points, ticks or cents that a market may move within one session. The Daily Limits are set by the exchange to control the volatility until the market returns to a more stable state. Continue reading "Stops…Damned If You Do, Destroyed If You Don't!"
The first Managed Futures Fund may have actually been established around 1948, but the investment vehicle really became en vogue as Richard Dennis and his infamous “Turtles” gained in popularity. Richard Dennis, although working his way up from a runner, really began his reputation as large trader in the 70’s. The 70’s had crop failures to contend with and inflationary conditions which Richard Dennis could use his trend-trading style to position trade. By 1983, he believed that he could teach his methodology to an average woman/man to trade successfully as he had. He had been quoted by the Wall Street Journal in 1989 saying “We are going to grow traders just like they grow turtles in Singapore” thus coining the name “Turtles”! He selected his 21 men and 2 woman to learn the trend-following system with success, increasing his notoriety and adding some new traders to the spotlight. Actually about 60% of the trades may have lost money getting stopped out while the balance of trades were held with trailing stops to garnish more from the position. Other traders sprang up into the spotlight like Paul Tudor Jones and John Henry. The methodology is proprietary to the trader and never really divulged, so the entries, stops and the targets remain exclusive in most managed products. The trading model may take years to cultivate! Futures trading is a zero-sum game where there is a loss for every gain and vice versa. The challenge for the trader was to create a percentage to his/her favor! Continue reading "The Future of Managed Futures… Past, Present and Future!"
By: Leslie Burton
In the 80's, the US T-Bond contract was the most liquid market. The bond pit at the CBOT was so crowded that you could not turn around. There was a bit of intrigue with commodities. It was deemed "not a prudent man’s investment vehicle' — it was for the aggressive investor. It was not a climate for "everyman" as the margins were often high and the moves could be severe. "Everyman" needed a liquid market with reduced margins that would allow participation in the stock market in a diverse manner. The E-mini indices allow a trader to participate in a stock weighted average of a portfolio. Continue reading "Twelve Essential Steps To a Winning E-mini Strategy!"