Long Term Secrets To Short-Term Trading

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Forever," that voice in my head screamed. While I don't know much about the market, or trading, I do know 
there are no losers ... only quitters. Professional people all have "off nights." Did that stop Joe Montana? I 
remember he had an off season just before elevating himself to the status of the greatest quarterback to ever 
play the game. Nor did similar poor performances end the careers of other greats. 
Clearly, I'm not a "great," but I can sure learn from them. That's what I decided. 
So, the morning after my screw up, there I was, at 5:10 A.M., placing an order to buy the S&P. The show 
would go on. Both trades won, not much, but they were my biggest wins of 1993. 
October 1997
Volume 34, Issue 10 
Broken Noses, Cauliflower Ears, and Bad Trades 
Like boxing, trading is not only risky it is also a very difficult and dangerous business. 
AS 1 WRITE THIS ... I'm angry. The last few days I haven't been able to find subscribers a winning trade 
for love nor money and my own trading, which was ablaze with glory and domination a few days ago, has lost 
quite a bit of its luster. 
I'm angry about the markets. I'm angry with myself and I'm angry about this business where people 
advertise seemingly unlimited and easy wealth to be made trading commodities. So I reflect on my limited 
days as a boxer; I got beat up and quite a bit, yet still enjoyed the sport. Why? And how does this relate to 
trading. Why do I always turn to sports to find parallel or analogy to trading? 
Fights, like the markets are not fixed. Guys really do get hit in the ring. They bleed, their eyes puff up and 
stay that way for days, and their facial cuts take weeks for the transformation to a scar. The differences 
between a true champion fighter and the wannabes is the champs climb back, continue fighting and after a 
loss still work at their craft (yes, it is a craft, no more brutal than trading) they stay in condition, they rethink 
strategy ... but above all they continue. It is anger that propels them. When younger my anger was abated with 
drinking until I learned well channeled anger is a powerful force, so I now focus anger, using it to help push 
myself. 
When I ask fighters how they can continue, I'm told, "This is what I love, this is really all I know, and 
getting beat up is just the nature of the game." The ones that cannot accept the bloody noses and cauliflower

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ears never make it to the top. I have yet to see a champion without a marked up face, even Ali, up close, 
shows plenty of damage. 
Champions, just like traders get beat up. That's par for the course, the sooner you accept and 
constructively channel your anger behind the losses the sooner you will also rise to champion status. 
May 1995
Volume 32, Issue 5 
Learning How To Lose Money 
Ha, bet you thought you didn't need help in learning how to drop your hardearned dollars trading. My bet 
is that you have no idea how to lose; hence, you lose. 
ANYONE CAN WIN ... It takes no great feat to win in commodity trading, all you have to do is get in 
and out at the right places. Winning is a glorious feeling, hence something you can pretty well control, handle, 
or take care of in your own fashion. The world loves a winner, and a winner loves the world. Life is easy then 
... all green lights and blue skies. 
But losing, man that's another story. Life's a bitch when you're down 30 percent to 40 percent of your 
money ... even tougher when you are down 80 percent to 90 percent. I know: I've been there, only all too 
often. I took some nasty trips in my younger days I hope never to see the likes of again, However, they did 
teach me a few things I'd like to pass on to you. 
Profits pretty well take care of themselves, losses don't. This means YOU must take care of the losses. 
Indeed, this is more a business of damage control than it is price exploitation. Control the losses, and you are 
probably going to come out a winner. 
So, how do you control loss? There is only one correct answer. Are you ready? Do you really want to 
hear it? And will you follow it? (I doubt if you honestly answer "yes" to all of the above.) 
The answer is not always use a stop. Always. 
Before you continue reading, grab a dictionary. Check out what "always" means. It does not mean some 
of the time. Believe me, those "some of the times" you leave off stops will be the time losses wipe you out. 
At a younger age I traded with no stops, believed in my fiscal immortality, and ended up going deficit. 
Several times I had to sign notes to brokerage firms. That's a bitter reality. It's not fun and games being 
hounded by brokerage firms' lawyers. (Ah, the 60s ... what a glorious time period.) 
The only question left is where should one place his or her stops. There are two answers. (1) With your 
broker, not as "desk" stop. And again, that's always. (2) Since the purpose of a stop is damage control, it

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should be based, most often, on limiting risk. The best rule of thumb I have is that stops should be about $800 
to $1,200 away, except in the S&P where I use stops of $1,750 to $2,500. 
Sometimes I use what looks like a key market turning point as a stop, or perhaps an opposite signal, or 
even the end of the day. The end of the day (a time stop) may be coupled with a dollar stop. But in any event, 
NEVER FORGET that the closer your stop is the more often you will be stopped out. 
Only a genuine masochist uses tight stops. NO ONE knows absolute highs, lows and turning points. We 
can only be generally correct, which is why stops must give the market some leeway ... just not too much. 
Look, I don't like stops any better than you. I hate using them, but I us them. Always. 
March 7995
Volume 32, Issue 3 
I know what evil I'm about to do, but my irrational self is stronger than my resolution. 
-Medea 
MAYBE IT'S JUST ME AND MEDEA ... but it probably isn't. The first lesson I ever learned in 
Psychology is that if I have frequent thoughts about something (sex, money, power, catching large rainbow 
trout), my peers are probably having the same thoughts and/or dreams. 
No, don't think I've gone California Kooky on you. But I'll be the first to admit I have a constant dialogue 
with my inner selves (there are probably two of them) while trading. Some might say they hear voices ... I 
would not be one of these. But these selves, or voices, exercise a tremendous power over my trading 
decisions. Therefore, I've been spending a lot of time listening to those voices or selves, and thinking about 
them. This is what I have learned: 
First is the awesome power these selves seem to have over our judgment. just to make certain I wasn't 
going batty (yet), I talked with a few other traders I respect. They too mentioned the voices or their inner-self 
dialogue ... and how much an impact it has upon their decisions. 
Like Medea, who uttered her classic statement just before killing her children, I confess I have taken 
trades I knew would lose, and actually felt helpless to do otherwise. Some compelling drive seems to lurk in 
the soul of we mortal traders. 

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Greatest Trading Breakthrough of the Century? 
The breakthrough would be that of getting control of what can be very selfdestructive behavior from this 
part of our mind. In a minute, I'll tell you some things you can do if you, like me, are under such an influence. 
For now, though, lets look at what's going on here. 
The reason I really got turned on to all this is two weeks ago I did not take a buy signal in the Bond 
market that I sure as heck should of. Why? Real simple. One of those "voices" (me) talked me out of the 
trade. The mental chatter went something like, "Hey, Lar, you lost on the last trade, you better be careful here 
... this is pretty scary stuff ... cool your heels here ... wait for a better looking trade ... at least wait for the 
signal then get a pull back or something . . ." Meanwhile, the other voice is saying something like, "Well, 
you've got to do what you've got do." 
The striking difference is in the voice trying to protect me. In other words, that part of me that deals with 
survival has tossed up a bushel-basket full of fear. And make no mistake about it, the "voice" argued longer 
and harder than the second one. Hence, it carried the day and in the process I sidestepped what was a very 
good trade. 
In short, the inner voice based on fear will talk you out of more good trades than bad trades you will ever 
talk yourself into. 
I have focused on this problem a great deal the last few weeks. My observation are that you can get in 
touch with these sides of yourself. You can feel or hear which one is the fear, or survival-based one. That is 
the one you need to get to know. Or, if you are not such a touchy-feely person, just realize that the inner 
message aimed at talking you out of doing something is the survival "voice," and the one you need to avoid. 
By paying careful attention to these inner selves, you will be able to key off of them, as opposed to reaching 
to their negative dribble. Here's your exercise for the month: as you make your next 10 trades, write down 
what you are feeling or hearing on an emotional level. Let all the diatribe out, and really listen up so you can 
identify the two voices (I say two based only you my experience. But other traders I have interviewed to do 
this article also mention two crosscurrents going on inside their noggins). By doing this, you will be able to 
not only confront your emotions, but also catalog and codify them so you can deal with them in the future. 

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April 7994
Volume 3 7, Issue 4 
Hillary, Highs Hopes, and Heartaches 
Over the last two weeks, I've carefully reviewed-at the request of the New York Post-all the commodity 
trading activity of our First lady. What an entertaining account it is! Since much of Hillary's trading was not 
correctly covered by the media, I thought you might like to know what I unearthed. 
Hillary (by the way, she used her maiden name, Rodham, and not Clinton, on the account) had a great 
introduction to trading; on her first trades she made right at $10,000. What looks particularly irregular, 
though, is that the trades required close to $8,000 in margin. Yet she pulled it off on only a $1,000 check, 
which may not have been placed in the account until after the first profitable trade had been recorded. 
If there is a trading pattern to the account, it is one of day trades for winners, and holdovers for loser ... as well 
as a real gutsy approach. As an example, on 2/12/80 she was long 10 Wheat which she exited on 2121. The 
margin back then was about $1,000 per contract. Hillary had $3,911.20 in the account. While newspaper 
articles have largely focused on her Cattle trading, the records I was given also show numerous transactions in 
Copper, Wheat, Lumber, Sugar, and Bonds. She paid $41 for sugar commissions, $50 on everything else. So 
she paid a little high, but then look at what she got! On many occasions she had positions totaling over 
$45,000 in margin, while she actually had less than $10,000 in the account. 
Like you and me, she did have margin calls. Unlike you and me, she never had to meet them. In one case, 
March 13, 1979, she had $53,478 worth of positions-with some $26,000 in the account. There are lots of 1 
and 2 lot orders that did make money, but the vast majority of the profits come from huge positions on day 
trades, or huge positions where margin calls were never met. Here is another confounding sample of Hillary's 
trading style. In early June 1979, she carried a bewildering 45 cattle ... on a mere $3,765. 
Also a distinguishing characteristic in Hillary's trading is that the instant she made profits, she cashiered them 
out of the account. Even her famous first trade of $1,000 down on 10/11/78, with an immediate profit of 
$6,300 the next day, shows she siphoned $5,000 out of the account before any more trading transpired. I 
suppose this is a lesson we can all learn from. The long and short of it appears to me as this: Mrs. Rodham had 
a broker who did her some big-time favors. 

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February 1995
Volume 32, Issue 2 
Nervous Nellies-Heaven Bound 
If money is only made by holding on, we'd better learn how to hold on! 
There is nothing easier than making money in commodities. It's a piece of cake. All you have to do is catch a 
move and hold on until price mingles with the angels of speculation some place up in the clouds. 
You're thinking to yourself, "easier said than done," right? And very easy to do in hindsight. Yet there 
are some lessons we can learn-from hindsight-that I would like to write about this month. 
We currently have pretty nice trades going ... long the Canadian Dollar, short Copper and Cotton. IF THESE 
ARE LONG-TERM PLAYS, our objective will be to hold them until they bottom/top out, or reach an area of 
major support. That's the game plan. Piece of cake. 
Not really; following the game plan is very difficult. It's no wonder there are so few winners. So few people 
can sit tight and hold onto their positions long enough to allow time to maximize winnings. 
As an aside, but a most important one, never, ever forget that it is time that creates large winnings. The 
longer a system's time frame, the greater the potential for a large profit. It takes time for redwood trees to 
grow. Seldom do huge profits come overnight. That's why short-term traders are doomed to small profits. 
They tighten down the hatches of their frame so much that profits are never given the time to "mature" or