After My First Year I Have Made Money & Some Comments on A.Elder/ J.Murphy/Investograph/L.Williams/ Commodex/Synergy - Lee Taylor
I have just completed my first full year trading commodities. I consider it a success, since I have more money than I started with. However, my equity curve leaves a lot to be desired. This is because I tried several advisors and systems.
It seems to be human nature to search for the Holy Grail or a commodity guru to tell you all the right moves to make. In reality, you are in a battle with your own personality flaws, which if not kept in constant check will doom your trading regardless what system or advisor you are following. Here are a few of the books and advisors I have encountered:
1. Trading for a Living by Alexander Elder - The best book on trading, if I had to pick one. The author is a psychiatrist in addition to a trader. The book delves into the mental barriers that cause trading failure. The basic technical analysis is covered, as are some trading systems. I use a variation of his triple screen and have found Elder Ray to be effective.
2. Technical Analysis of the Futures Markets by John Murphy - A lot of excellent information on analysis. I consider Dr. Elder's book more balanced, but Murphy's perspective is also valuable.
3. Investograph Plus Software and a New Look at Technical Analysis by Robert McCullough - The book is more effective if you own the software, which I do recommend. A lot of the information I have not seen in any other book. I most enjoyed trend channels, oscillator patterns and look-ahead envelopes. Investograph Plus Software has an oscillator called formula X that is detrended. It is the best I have ever used; most closely resembling slow stochastics, but doesn't get pinned into OB/OS range. I definitely suggest checking out the demo.
4. Larry Williams Commodity Timing - The monthly newsletter is extremely informative and the subscription price is reasonable. Larry is a nice person and excellent trader, but trading his nightly updates are like trading black box signals (unless you pay $1,500 for a video of his seminar, which I didn't do). I spoke with Larry and told him I had read his book "How I made $1,000,000" and made some good trades using his %R oscillator and moving average. He chuckled and said that stuff is too old. Larry did call some profitable trades, so I took one shorting sugar. That's when I realized he doesn't tell you what you're risking until the next night's update. Needless to say, the market came down just enough to stop me in and head straight up.
The stop loss point was almost 10% of my account! What's worse, Larry kept moving the stop farther away! I now recognize the range volatility concept of his trading, but you can imagine how I felt when I was in the trade. I was too busy looking for a guru, to see if I was comfortable trading the system. Know the system you're trading; know the risk before you execute the trade (you could lose more than you risk, but that is beyond your control).
5. Commodex - This advisory illustrates how technical the markets have become. Once upon a time it called 100 wins in a row. Nowadays you are whipsawed to death. The cost is prohibitive and the bottom line is that Commodex does not teach you how to trade. The records of Commodex are deceiving because it assumes exit with no slippage and ignores gaps, limit moves, etc. The stop loss is close only, which I consider suicidal.
6. Tom Bierovics Synergy Fax - Tom uses a combination of moving average, oscillators, Japanese candlesticks and chart patterns. The bottom line is that everything is spelled out to help you learn to trade better. Another interesting feature is the goal of every trade. Tom exits at 2 times the risk, which works out better than it first sounds. This exiting method works incredibly better if you trade optimal F (2% of your account risked on every trade). Tom has answered my every question and has taught me more about trading than any other person or book.
To the novice, I would recommend "Trading for a Living," Investograph Plus Software and a few months of "Synergy Fax." I also suggest that when you paper-trade a new idea or system real-time, you print the charts and give them to an associate with a full explanation of entering, exiting and risk.
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