Long Term Secrets To Short-Term Trading

"
Would you like yet another story that proves you 
should not be an emotional trader? Well here it goes; 
you'll find it interesting. 
"
Last weekend 1 decided to place a buy stop in May Copper at 77.80, first thing Monday morning. Shortly 
after Copper opened I called my broker (unfortunately my regular broker does not come in until around 
8A.m.) and asked, "What's Copper called this morning?" He replied, "I don't follow Copper, I really don't 
know, I'd have to look it up . . ." (Oh brother, never mind) 
"
OK," I said, "what's the last price" and was told it was trading at 77.00 down from 77.90, this told 
me price had already gone above my stop so 1 thought I'd wait for a pullback. 

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206 
Afraid to Buy, Afraid to Sell 
I called back later, price was at 77.30. Again, I did nothing. Why you ask? 1 really don't know, except 
1 thought I'd "watch the market" to see what it would do. The funny thing is 1 now know if it went higher 1 
would have waited for a pullback, if it went lower 1 would have been afraid to buy. Up or down would 
score me out, and that's just what happened! What would 1 have "seen" anyway, handwriting from God?" 
"Later in the day 1 called back, Copper was now at 80.30. "Damn . . . OK, buy one at the market." 
Now 1 knew that Copper was really hot, and 1 was violating everything you had taught us that weekend. 
But something, almost a mysterious force, "pushed" me into the trade. 1 bought pretty much at the high of 
the day, because 1 was so upset 1 had not gotten in earlier. 
"The very next day Copper began a pullback, fortunately, it eventually went higher, but the cost would 
be $500. Dumb, dumb, and dumb. Haven't 1 learned anything yet? Yeah, 1 have, it's simply this, "Plan your 
trades and don't deviate, don't let emotions push you over the cliff at just the wrong time." 
It's just Like Fishing 
1t kind of reminded me of fishing, how I'll toss a worm in and wiggle it just a little, no bite, then a little 
more, still no bites, then just a little twitch and ... BLAM! I've hooked a nice fish. The market seems to hook 
me just like 1 catch fish with those little wiggles until 1 just can't resist and 1 fall for it, hook line and 
sinker. 
"Trouble is this is not catch and release, it's bite and lose, no more "forced feeding frenzies" for me!" 
The next time old man greed taps you on the shoulder or you hear its emotional call luring you to the bait ... 
don't bite! 
In fact when in "the old days" when 1 did very short-term trading off a quote machine, one of my best 
rules was to cancel any entry into a trade if there have been 18 rally bars. It didn't seem to matter if they 
were 5-minute bars, 30 minutes or hourly, but on a consistent basis 1 would say that 18 bars, worm twitches 
it you will, is about all the human mind can take before it snaps, and is then snapped in the pocketbook. 

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207 
May 1998
Volume 35, Issue 5 
The Worst Dog I Ever Had, Cost the Most 
It was the snippiest, most belligerent untrainable mutt you could imagine and it cost the most because 
it had been bred for a couple of hundred years to be the perfect dog. Instead it was a disaster. 
Commodity trading systems are a lot like that damned dog. The more you tweak and refine them, the 
more you optimize and try to improve the breed of trades the system kicks out the worse the dog performs. 
So far this year my personal trading sucks. I've been up as much as 30 
percent, down the same amount and sit today with about a 10 percent gain 
for the year, not much considering the risk and effort for all this. 
Naturally, I had to ask myself why. 
The answer came pretty quick. Last year was a great year, the account I traded went from $50,000 to 
over $1,000,000. And guess what ... that wasn't good enough for me so I kept breeding the system, 
tweaking it, thinking I was fixing it. Some fix! The peak of perfection in commodity trading is not 
attainable, yet we strive, and in my case, overstrive for it. 
What works is to keep it simple, understanding perfection or anything close to it does not exist in this 
business. In short, forget the glitzy impossible, the show dogs, find a mongrel and take good care of it. 
More on What Works 
Well, well, Commodity Traders Consumers Reports just came out and gives us an immense insight into 
how to make money in trading commodities. Let me explain. This service, started by Bruce Babcock and 
now aptly run by Courtney Smith (a for-real guy who actually trades, by the way) monitors 26 of the most 
popular market letters' REAL PERFORMANCE. It is a tedious task, to say the least, in the last 12 months 
they have had to follow each of the 3,590 trades we services had cranked out! 
Here's some observations I've made about the services that make money; to begin the services with the 
greatest number of trades have been consistent losers. Guess, that old saw about over-trading is correct. By 
the same token, services that don't trade often seem to be consistent winners. But, the most consistent 
winnings have been picked up by services have about 200-300 trades in any given 12-month time period. 
Services with more trades than that perform poorly. Currently the best performing services are Futures 
Factors, up $92,761 on 252 trades in the last 12 months, Taurus up $94,307 on 355 trades in the last 12

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208 
months and Commodity Timing, up $119,716 on 290 trades in the last three months. The service with the 
most trades, 655, was down close to $50,000. 
We can also break the newsletters into trading approaches. Generally speaking they are Seasonal, 
Trend following, Chartists and Gann/Elliot/Arcane, and here are the differences. 
Here the performance figures are immensely more revealing. I went back the last three years and found 
that the poorest performers in 1995, 1996, and 1997 have consistently been the Gann/Elliott/Arcane group 
who, as a group, has averaged a loss of close to 100 percent a year. This from the crowd that claims all can be 
known, that you really can buy bottoms and sell exact tops. 
Here's another interesting point, the most expensive service has lost money on balance the last three years 
(they charge $5,000 a year) while the cheapest service, $45 a year, is a net winner! 
The seasonal letters did well a few years ago but in the last 12-18 months have not fared so well. The 
long-term trend followers led by Commodity Research Bureau and Commodity Trend Service have shown 
consistent profits. In the last three years no service has been in the top 5 performers each year. But, the 
following have been in the top performing group 2 of the last three, Commodity Trend Service, Commodity 
Timing, and Futures Factors. Hope all this helps you place performance, and the performers into some sort of 
viable and working understanding of this business. 
June 7998
Volume 35, Issue 6