Commodity Trading Blunders II, PART 1 - My Early Days As A Novice Trader
By: Thomas Cathey | Posted: 21st February 2007
If we are able to survive any new endeavor long enough, we sometimes discover what it takes to succeed. This certainly applies to commodity futures trading. Most of us cannot learn from others' mistakes. We need to commit errors ourselves to feel the pain. This seems the only way to learn our lessons. Read more about my first novice experiences and struggle to survive.
So there I was with a computer and a willing programmer in 1980. I put my broker, Max on hold and started looking for more trading ideas. I got hold of an old Joe Granville book and tried on-balance-volume. That worked OK for a while and I could actually see the silver top distributing and also sugar giving signs of weakness after the big run up to 45 cents/lb. I even made a few good futures trades as a result. OBV is an interesting indicator at certain times, especially for signaling top distribution.
My big break took place at the UCONN library in Storrs, CT. I came across the old, original book, “How to make profits in commodities” by W.D. Gann. That started a wild learning curve climaxing in a weekend flight to Las Vegas for the first seminar by Billy Jones and a well known Gann commodity broker. Both are now deceased. It cost $2,000 in 1980 dollars. I remember sitting at dinner with the Gann commodity broker and some other seminar attendee traders.
We were all in awe of W.D. Gann, the 1X1 angles, squares of nine and the like. I asked this Gann commodity guru why doesn’t the US government use this incredible knowledge to forecast the US crops? Why do they depend on those stupid economic reports? The broker replied that I didn’t understand how the government worked and they will not try new ideas. I thought that was strange, but let it go. The broker later managed a futures account for me that slowly eroded, so I closed it.
It’s now 1981. In came my commodity futures charting craze. I went out and bought 30 pieces of 3’X 4’, 3/16” thick clear Plexiglas and taped charting Mylar on top. For the next three months I neglected my social life and made up weekly and monthly Gann commodity futures contract charts going back twenty years for the major commodities.
The O-H-L-C (open-high-low-close) price data cost me $1,000 and was printed out on computer paper. Black etching ink made the price bars on the Mylar. I used colored pencils for the Gann angles and made nice tiny triangles to mark the cycles. I bought a beautiful, white $1200 drafting board and religiously kept the charts updated. They were authentic Gann-style commodity charts and they were heavy!
I also hung twenty-two 3’X 4’ sheet metal sheets from a steel cable across my office that held a square of nine futures Gann wheel for each commodity. I was really into it! You could barely walk in that room. It used tiny magnets that stuck to the metal to mark the passage of time. That turned out to be a waste, but the futures price charts were very worthwhile. I actually started making money and had some great calls. Using time cycles, I remember calling the OJ freeze in 1981 a month before it happened. I didn't get on board, but it felt good anyway.
Part Two of Three - Next!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
About the Author
Occupation: CEO and Money Manager
Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. View his TimeLine Trading market predictions and get his complete 44+ lesson, "Thomas Commodity Trading Course." http://www.thomascapitalmanagement.com/commodity/welcome.htm Main site: http://www.ThomasCapitalManagement.com
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
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Tags: learning curve, squares, angles, awe, commodities, new endeavor, plexiglas, economic reports, commodity futures, mylar