CFTC Leaders Jump Ship: Time for Some Real Change

DSC_2006Once again there are a handful of open positions at the Commodities Futures Trading Commission (CFTC). First Jill Sommers, then Gary Gensler and now Bart Chilton are leaving. This agency’s mandate is to regulate commodity futures and options markets in the United States. Unfortunately, it is being run by people who have never traded commodities, run a clearinghouse for commodities or sat on an exchange board.

There is something inherently wrong with this thought process. It would be like me sitting on the medical practices board. Although I am sure that all the people on the CFTC have IRAs and other brokerage accounts, that doesn’t make them experts, just like having health issues doesn’t put me in a position to regulate doctors.

What does this mean when people with so little trading experience run an agency? Simply a replay of the past. Clearinghouses and financial services firms such as Refco, MGF and PFG have collapsed as a result of faulty oversight by the very agency pledged to oversee them. It will happen again.

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Trading Tip #11 You Want to be a Trader? Do Not Paper Trade

Trading Tip #11 You Want to be a Trader?  Do Not Paper Trade.

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There seems to be many programs for paper trading.  As Seen On TV “Backtest your strategies.” Almost every on-line trading system has this.  Very few strategies work all the time.  I address various Trading Styles in Trading Tip #9.  Unless you are in a college trading competition, I think paper trading is pointless.

There are many who might not agree with me.  Let’s take the past few trading days as an example. On 2/27/2013 the market was up over 200 points .  If you were paper trading, you would feel a sense of pride and, I am sure, at some point you would have said to yourself “I would have nailed it today.”  Now let’s back track to 2/25/2013 just a few days before when  when the market got slammed.  A paper trader would not feel like their guts were being ripped out. The feeling of trying to find the right place to sell.  The fear, hoping that it would not bounce back in their face. The over-whelming feeling of “when is this market going to stop going down?” Continue reading

Trading Tip #10 – Having a Bad Streak? Try This …

Trading Tip #10 – Having a Bad Streak?  Try This …

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All traders go through a bad streak now and then.  The key is to keep them small and manageable.  I started most days in the pit flat.  My thought process was there is enough to trade during the day.  Staying up all night when there was no electronic system and waiting for a call from London was just throwing the dice.  Once NYMEX electronic trading system was on at night, I still felt that coming in to trade after a good night sleep was more important than what I could make staying up all night. Continue reading

Trading Tip #9 – Trading Styles: Do Not Have Just One

Trading Tip #9 – Trading Styles: Do Not Have Just One

David On Trading Floor

In the late 1980’s, my venture into the trading world began in the Gold pit on COMEX.  The first day was the Friday before Memorial Day weekend.  I walked in and noticed that being in the pit with a badge on was very different from stepping into it as a clerk to give your broker his position. With my heart beating out of my chest, I made my first trade. I bought one contract (100 oz.) and sold it a dime higher.  I made $10.  After commission, it was about $8.  I realized that, during the broker training practice sessions, everyone was a hero.  Once you had real money on the line, trading was decidedly different. Continue reading

Trading Tip #8 – Recovering After Getting Your Butt Kicked.

Trading Tip #8 – Recovering After Getting Your Butt Kicked.

Kick-Butt-swift-kickingThe day after getting your butt kicked can be one of the most important trading days of your career. I am not talking about the normal, or slightly above normal, butt kicking. I am talking about one of those days that you just got hammered for whatever reason. Maybe you were stubborn, thinking “the market has to come back.” Maybe you added to a bad position and it just kept going against you. Maybe you said, “I Hope” and she wasn’t around to hear you scream her name. Or maybe, like me, you got caught on the wrong side of a world news event driven market, and the market gapped against you. Continue reading

Trading Tip #2 – Test and test often

Trading tip’s Rule #2 - Test and test often –

This goes for  the all types of traders, from the smallest to the largest. Once a position is established long or short, it’s best to test and test often. Let’s go with the long position for this example. Looking at the recent move in Facebook, let’s say that Trader one is a short-term day trader who likes to be flat by the end of the day, so he/she buys 500 Facebook shares at $27.75.  The stock moves to $28.  I would suggest testing the market by selling just 100 shares at $28.

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Trading Rule #1 – Leave your ego at the door.

IMG_0272As President of Sterling Commodities, part of our risk management for the Clearinghouse was to go over all of the traders accounts every night.  We needed to watch and analyze their trading patterns so that we could tell when it was time to talk to a trader and tell them to pull back or even take a few days off to regroup.  We were able to tell when traders were about to move to the next level of trading – both in size of positions and risk tolerance – and then give them guidance.  We helped them move to the next level. Continue reading