Commodity Trading Blunders II, PART two - My Early Days As A Novice Trader
After I suppose back on the first futures trading misconceptions I had, I wonder how I created cash at all. I got off easy. I suppose it absolutely was only because I hate to lose money. Of course, I still worry an excessive amount of when the market goes against me. I cannot suspend in there losing for long. However, it may be a blessing. This has kept me in the futures contracts and options game for a while without a major loss. That is the reason why today I prefer futures day-trading or buying long term choices for overnight positions. I wish to be ready to control my risk as closely as possible.
I presently use a time cycle technique for market timing that I call, "The TimeLine." I use it for all position trading. Details can be found on my website. I will write a commentary on the subject within the future. The TimeLine additionally works well for writing so much out-of-the-cash commodity futures options.
For long-term position trading, buying options on futures can work well only if you can purchase them cheaply and manner out in time. It's abundant more tough to shop for them at a affordable value once "the cat is out of the bag." This can be when the futures contract market dashes and the choice premiums have expanded greatly. In future articles I speak a lot of regarding the dangers of buying choices as a result of of their inherent premium erosion. Explore for them.
Let's move forward to 1982-3. I had already said sensible-bye to Max, my Merrill commodity broker and opened an account with one among the primary commodity discount companies in Chicago. I suppose I used to be paying concerning $thirty round turn, and fees. Not unhealthy at the time. I used to be barely making a living off futures contract trading, but I hoped to urge better. I moved to Colorado after shopping for an Airstream travel trailer in CT and set to travel round the country whereas I traded. It absolutely was great. I roller skated in the dead of night meeting the young, pretty Denver women. Throughout the day I studied my charts and put in an occasional trade.
At the time I thought of myself as a grip futures trader, holding trades for about per week or therefore on average. It absolutely was difficult on behalf of me to carry overnight positions, however I found I may, solely because my analysis was decent. Anyway, I remember a time that upset me. I was invariably therefore careful with my orders and had a disciplined method. I continuously took futures trades that lined up perfectly or allow them to go. I had to. My life was over if I blew the commodity account out. I didn't wish to own to travel back to "work" again.
In 1982 Bonds and T-Bill future contracts were crashing. Interest rates were near all-time highs for the century, never seen since. In the fray I shorted two futures contracts of June T-Bills. For the following week the profit grew to about $1500. I decided to urge out and known as the desk at nighttime from the phone booth in the campsite trailer park. I talked with a newbie desk clerk. He sounded unsure of himself. I told him to buy 2 June T-Bill futures contracts at the market tomorrow to close. He then gave me an order number. I repeated my full order to be sure this novice had it right. He read it back and gave me a different variety this time. I didn't assume much of it and said good-bye.
Well, you guessed it! I referred to as back every day later to check the account balance. The clerk told me I used to be LONG two June T-Bill future contracts and also the account was $1500 less than it should have been! It turned out the newbie had entered a double order and I ended being long two.
The market had continued down wiping out my previous gain. I liquidated them immediately. That is rule variety one - forever correct mistakes immediately. I spent the next day arguing with their management and taking note of tapes of myself. However it did no good. I ended up eating the full $1500. What a let down.
I did it to myself and learned a valuable lesson. Here's a case where I drained a lot of than a year of discount commission savings because the "broker" did not know me or my habits. This error would have not occurred with a full service broker like Max. Be extra careful with your orders!
Half Three of Three - Next!
There's substantial risk of loss trading futures and choices and might not be appropriate for all varieties of investors. Only risk capital should be used.
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aaron adish has been writing articles online for nearly 2 years now. Not only does this author specialize in Investing, you can also check out latest website about
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