source: https://www.quora.com/Why-are-commod...ent-strategies
I am giving everyone some free invaluable knowledge here. Most people, and especially people who profess to know what they are talking about, don’t! They spout verbage but they either don’t trade or they don’t trade successfully. Big hat, no cattle I call it! I find most self proclaimed experts spout a bunch of technical jargon and this and that, but as I said, big hat, no cattle.
Now I am not selling anything so I don’t care if you read this or not. In fact, its better for me if you don’t, because if you trade, you will lose and I will win. The only way the market can exist is if half the money is lost because only half the money can be gained. This is a zero sum game. If I make a million dollars, the market requires a million dollars in losses to pay me.
First off, if you are commodity trader, you are not an investor, you are a speculator. You are speculating on the future direction of the commodity price. You take that risk in return for the possibility of making a profit. You are not investing in anything. You are not producing it for delivery or accepting it as a delivery. You are merely trying to determine the future price of a commodity. Speculators provide a valuable service because they add liquidity to the market. Liquidity is the ease of selling assets etc. into cash with little affect on the market price. Liquidity adds ease and efficiciency to the market. Its a lubricant. It helps move the physical commodity from seller to buyer.
Trend following - the markets are chaotic. They are non-linear dynamic systems. Market prices are highly random with a trend component. Within chaotic systems is the concept of a fractal, “self similar”. Just like the branches of a tree that get smaller and smaller but look like the original tree as a whole. Therefore a system can be random in the short term, but deterministic in the long term. Your lung is another example. So is the coastline view at 10,000 feet. As you slowly get closer, the coastline looks the same! Ice crystals, nautilus shells.
However, short term patterns and repetitive short term cycles with predictive value, do not exist. There is no “secret,” there is no predictive ability, its random, like a roulette wheel. That is why you cannot make any significant money in the long term from day trading. There is not enough time for these patterns or fractals to appear. You cannot see the pattern of self similar until it emerges over a longer term!
BUT!
Traders can exploit the longer-term trend component of market price action to obtain a statistical edge. This is precisely what trend-following systems do. This is why a good trend-following system in a number of commodities tend to make money year after year while day-traders invariably lose in the long term. The deterministic element in intraday data is barely measurable. It is highly unlikely short term traders can profit in the long term. That’s why I don’t do it!!!!!!!
To be a successful speculator, you have to put yourself in the same position as the house in casino gambling. On every bet, the house has a statistical edge. The house might lose in the short term, but the more gamblers bet, the more the house will eventually win.
If you trade with an approach that has a statistical edge and you follow it rigorously, like a casino, you cannot lose in the long term. It is the market’s price trend component that gives you the statistical edge. To increase your edge, some markets have a higher historical trend component. These are the ones you want to trade!
All successful systems employ some method of identifying trend.
Like all things in trading, simplicity is the best route. When I see all this complicated stuff on the internet, I think its to impress you or to sell some system. The traders I know, and know of, that are successful, do not employ overly technical complicated systems. If you employ too much technology and trading indicators you will never make a trade because some of them will even contradict each other. You will be too confused to do anything!
Most traders operate with no idea if their methodology has a statistical edge. They assume if its from a book, or came from a famous guru, a fancy website with all sorts of bells and whistles, or cost a lot of money, it must be good. They have a highly subjective system with no way to test them. Don’t be surprised if you lose your money!
There, you got 20 years of trading advice for free!
I challenge you to prove me wrong!
I am giving everyone some free invaluable knowledge here. Most people, and especially people who profess to know what they are talking about, don’t! They spout verbage but they either don’t trade or they don’t trade successfully. Big hat, no cattle I call it! I find most self proclaimed experts spout a bunch of technical jargon and this and that, but as I said, big hat, no cattle.
Now I am not selling anything so I don’t care if you read this or not. In fact, its better for me if you don’t, because if you trade, you will lose and I will win. The only way the market can exist is if half the money is lost because only half the money can be gained. This is a zero sum game. If I make a million dollars, the market requires a million dollars in losses to pay me.
First off, if you are commodity trader, you are not an investor, you are a speculator. You are speculating on the future direction of the commodity price. You take that risk in return for the possibility of making a profit. You are not investing in anything. You are not producing it for delivery or accepting it as a delivery. You are merely trying to determine the future price of a commodity. Speculators provide a valuable service because they add liquidity to the market. Liquidity is the ease of selling assets etc. into cash with little affect on the market price. Liquidity adds ease and efficiciency to the market. Its a lubricant. It helps move the physical commodity from seller to buyer.
Trend following - the markets are chaotic. They are non-linear dynamic systems. Market prices are highly random with a trend component. Within chaotic systems is the concept of a fractal, “self similar”. Just like the branches of a tree that get smaller and smaller but look like the original tree as a whole. Therefore a system can be random in the short term, but deterministic in the long term. Your lung is another example. So is the coastline view at 10,000 feet. As you slowly get closer, the coastline looks the same! Ice crystals, nautilus shells.
However, short term patterns and repetitive short term cycles with predictive value, do not exist. There is no “secret,” there is no predictive ability, its random, like a roulette wheel. That is why you cannot make any significant money in the long term from day trading. There is not enough time for these patterns or fractals to appear. You cannot see the pattern of self similar until it emerges over a longer term!
BUT!
Traders can exploit the longer-term trend component of market price action to obtain a statistical edge. This is precisely what trend-following systems do. This is why a good trend-following system in a number of commodities tend to make money year after year while day-traders invariably lose in the long term. The deterministic element in intraday data is barely measurable. It is highly unlikely short term traders can profit in the long term. That’s why I don’t do it!!!!!!!
To be a successful speculator, you have to put yourself in the same position as the house in casino gambling. On every bet, the house has a statistical edge. The house might lose in the short term, but the more gamblers bet, the more the house will eventually win.
If you trade with an approach that has a statistical edge and you follow it rigorously, like a casino, you cannot lose in the long term. It is the market’s price trend component that gives you the statistical edge. To increase your edge, some markets have a higher historical trend component. These are the ones you want to trade!
All successful systems employ some method of identifying trend.
Like all things in trading, simplicity is the best route. When I see all this complicated stuff on the internet, I think its to impress you or to sell some system. The traders I know, and know of, that are successful, do not employ overly technical complicated systems. If you employ too much technology and trading indicators you will never make a trade because some of them will even contradict each other. You will be too confused to do anything!
Most traders operate with no idea if their methodology has a statistical edge. They assume if its from a book, or came from a famous guru, a fancy website with all sorts of bells and whistles, or cost a lot of money, it must be good. They have a highly subjective system with no way to test them. Don’t be surprised if you lose your money!
There, you got 20 years of trading advice for free!
I challenge you to prove me wrong!
Steps to profitability: Collect data, money management, stay bored
I bet you can too
