Winners	Losers	Open
3	13	0
ADZ3 / ADH4	KWU3
HGH4	LCV3
BPH4	CDH4
	JYH4
	SIH4
	ADH4
	SIH4
	JYH4
	CK4
	HUJ4
	RRK4
	JYM4
	SIK4

Current Batting Average: .188. Below the Mendoza line!

The point? You can be extremely profitable, even if less than 50% of your trades are profitable, as long as you are disciplined and have good position sizing and risk management.

Mother of all Rules: Protect your capital!

Drawdown	Percent Gain to Breakeven
5%	5.3%
10%	11.1%
15%	17.6%
20%	25.0%
25%	33.3%
30%	42.9%
40%	66.7%
50%	100%
60%	150%
70%	233%
80%	400%
90%	1000%

1. Futures database

2. Returns information

3. Report on buy/sell signals generated

4. Position management report

5. Scenario report for current positions

One thing that has come to light since producing this reporting is that changing volatility can really affect the reward/risk characteristics early in a trade, when there is less slack.

1. My stops may be too tight.

2. My attempts at diversification might have sucked.

3. Consider using constant volatility at the beginning of a trade.

4. Slippage, slippage, slippage. 

I added to the position at 7.225 and will continue to add to the position at 7.45 and exit at 7.00.

I got stopped out at 7.01 today.

I added twice to my RRK4 position today, once at 10.12 and once at 10.38 market on close. I am concerned with the potential that volatility has increased. For now, it's business as usual. I will add to the position at 10.71 and exit the position at 10.05. If I buy twice today, I will sell off the position at the point where I would have added to my position for a second time. That would be the short term indicator of volatility increasing too much for me to stay in the position.

My worries were confirmed, as I was stopped out at 10.05, shortly after the market opened this morning.

One thing that MAY be happening here is the end of the USD bear market. I had always envisioned this to end by way of the Treasury market falling (yields rise). As yields would rise, the USD would get stronger. Japan, especially, would sell their treasury positions, exacerbating the effect. It may be that a stronger USD has the ironic effect of trashing the bond market, rather than the reverse.

I added to my position, shorting more JYM4 at 90.28. I will continue to add to my position at 89.60 and will exit the position at 90.96. 

I added to my position at 89.67. I moved up my add point to reflect a decrease in volatility. I also added a buffer of 5 ticks to reflect slippage. I won't do that anymore. I may add a tick or two, but 5 is too large. I will add to my short position at 89.06 and exit it at 90.33. What is interesting that the EUR showed a lot of strength after non farm payrolls came in very weak. Meanwhile, the Yen rose a miniscule amount before depreciating.

So Snow is complaining about the Japanese intervening in the FX market? True, intervention is a stupid thing. However, Snow has no credibility on this position, talking down the dollar (as he did in his criticism, irony of ironies). Additionally, since the rationale behind the Japanese intervention or the US talking down the dollar is trade, it is even more ironic. Snow has paid lip service to the idea of free trade and is very much a protectionist as the Bush administration has been.

Fuck, did I ever killed screwed on my stop. Spot JPY went from 111.15 to 110.24 and back up to 111.15 or so in the space of several minutes. Similarly, JYM4 went from 90.20 to 91.00 in several minutes. Just enough to stop me out with terrible slippage. 

I got stopped out at 111.50. Again, it took forever to get the notification in a fast market. The fill was okay, but not great.

I added to my corn position twice. Once at 300, after adjusting to volatility, on E-CBOT. I then added to the position a few minutes ago, buying at 305 1/2. I will continue to add to the position at 311 and exit the position at 300. Corn is a boring market to trade. That may not be a bad thing. The other thing with corn is that commission plays a much bigger part in whether your position is profitable.

And several hours later, I exit my corn position. Oh yeah, complain about corn being a boring market, and it gets exciting very quickly. It takes over a week to move 12 cents, and then it takes an hour to move 12 cents back the other way. So far, I haven't received the fill on my stop, which is worrisome. It's troubling, because corn is several cents past my stop. We shall see if I need to inquire about getting a new broker. Nope! I got filled at my stop, which is a great fill. They could be better about notifying their customers, but if I get fills like that, I can live with late notifications.

Sure enough, the position itself showed a small gross profit, which was eliminated by commission.

On further review, I realize that I did make a mistake realizing a buy signal. In calculating the days breakout, I forgot about weekends. Silly. As it stands right now, spot is touching on where a buy signal would be generated anyway, so it is likely no big deal. And the futures have generated a big signal (since the future moves to the spot price as the contract moves to expiration). I can live with this error, because entry is probably among the least important aspects of trading.

I added to my JYH4 position, selling at 92.23. I will add to my position at 91.69 and exit it at 92.77. I find it somewhat humorous that I keep thinking as a long. Not in the same manner as if I was traded JPY like I mentioned above, but in the manner that I have been predominantly trading long positions since inception. I've been sizing my position for my buy orders as if I was adding to my position, rather than exiting it. I've caught my errors before they've cost me money, so I can  presently consider it humorous.

I added to the Yen position at 91.68, and then was stopped out early this morning at 92.37. From a purely strategic perspective, I would have thought the Bank of Japan would have tried to really punish the Yen longs. Apparently not.

I added to my SIH4 position yesterday evening, buying at 6.87. I will add to my position at 7.08 and exit at 6.66 (PRAISE SATAN!!!). Interestingly, silver's volatility has decreased. 

Fuck Satan! I just got stopped out. Overall, an unprofitable trade, but good trading. Disciplined entry, risk management and exit. This is turning out to be one hell of a day. 

I added to my long BPH4 position, buying at 186.74. I will add to the position at 188.34 and sell at 185.14.

I again added to my long BPH4 position, buying at 188.36 (highs of the day!). I will add to my position at 189.96 and sell off the position at 186.76. Thanks to the Undertaker for his comments driving FX markets today!

I added to my long BPH4 position, but did so prematurely. The Pound jumped on news earlier today. Based on the action of the past few days, I suspected a move to my buy stop was likely, so I changed my entry point. Not a good idea in retrospect. I bought at 189.12. I will add to my position at 191.56 and sell at 186.76. Lesson learned: do not alter your entry points. Again, you cannot predict the future.

I changed my entry points for strictly risk management purposes. The first benefit to creating better measurement is it begets better management. Revising my position management report led to an exposure of unwanted risk. I am now adding to my position at 190.76 and selling at 187.47.

I added to my BPH4 position overnight, buying at 190.76. I will add to my position at 192.48 and exit the position at 1.8730. One thing I find somewhat curious is that the release of US inflation information will be delayed this week, because of problems converting from one formula to another. I am less concerned than I was, since I sold off my copper position (somewhat related to inflation), but I still find it quite striking. I wonder if this happened before and if so, when.

Correlation is a bitch! While it is doubtful that the BPH4 reaches its stops, what was painfully obvious is that copper, silver and the Pound were highly correlated. And I would suggest that their covariation increased the greater the movement. I don't have a workable solution - yet. Correlation estimates, as noted, vary, and I purport that they tend toward stronger correlation in extreme market movements. Second, position sizing can get screwed up by trading to it. The solution offered by the Turtles is simple, but it is a dirty fix. Also, the measurements of correlation will be inaccurate because price information corresponds to specific contracts. Those contracts trade at specific times. If COMEX copper closes at 1PM ET, but the IMM British Pound closes at 2PM ET, comparing the two is like comparing apples to oranges. Moreover, there is a difference between interday and intraday correlation. For example, the Pound and copper were down severely today. However, copper went up dramatically overnight, while the Pound went up slightly. At 8PM ET, copper tanked dramatically, while at the same time, the Pound was rising slightly. I don't have any solutions here, only questions.

I got stopped out today on the BPH4 position. I moved my stops up after discovering that my getting stopped out at the old levels would have resulted in a loss. The new reporting is paying dividends, even though this may suggest an error in the report, by suggesting too wide a stop after the market moved this far in my advantage. The other thing to consider is that my premature purchase of BPH4 at 189.12 ahead of the place I should have added my position screwed up my risk management. I suspect it's a little from column A and a little from column B. The good thing is it provides further incentive to stay disciplined in all aspects of trading.

Overall, was this good trading? Let's just say it was inconsistent trading. On the bad side, I prematurely added to the position and entered an incorrect stop - a problem that was certainly serious. But on the positive side, the errors were quickly realized. And in the case of the stop, the error was addressed - even though it resulted in the position being stopped out. And the reporting will get better in the future, which will positively benefit all future trades.

I added to my long HGH4 position, buying at 118.20. I will add to my position at 120.05 and sell at 114.40. I expanded my sell stop after the first addition to the trade.

What a tremendous day! I added twice to my long HGH4, after a spectacular day for longs. From high to low, copper moved over 4 cents today, an incredibly strong move upwards. On average the range is less than half of that, and usually the difference in prices day over day isn't remotely close to that. I added to my position at 120.05 and once again at 121.60. I will sell my position at 120.15, and add at 121.70.

While correlation between copper and the Pound was a concern of mine (it still is, as correlations vary), it sure worked out well today. For a trend trader such as myself, I am betting on the existence of leptokurtosis - fat tails. I haven't tested it empirically, but I would not be surprised that correlations increase (or decrease for negatively correlated assets) when there are major moves in the market. My only response so far is to decrease the amount of capital I risk in every trade.

Speaking of correlation, the HGH4 and BPH4 contracts were quite correlated today. While the contracts were not strongly correlated thru most of the past week, that changed in one fell swoop today. That is an example of what I am talking about above. They were very strong, and you could create a rationale for it (for example, a lower USD means a higher copper price simply because it is denominated in USD). In fact, I was wondering why the hell copper wasn't moving as the GBP was as I left for lunch. To my surprise, as I checked my positions over lunch, I had added to my position once and soon thereafter a second time. After the fact, what is somewhat surprising (or puzzling), is that while the GBP (and other currencies) reacted immediately to Greenspan's comments, it took copper a few minutes to seemingly digest it. It took the Pound 8 minutes from the start of Greenspan's speech to move a full cent, from 86.99 to 88.03. At 11:18 ET - a full ten minutes after the GBP moved dramatically - HGH4 was at 118.67. It made its move to 119.00 at 11:30 ET. By 12:00 ET, HGH4 was at 120.97, almost 2 cents higher. Why the delay? Is this something that repeats itself? Can you trade off such information?

Something that sort of bothers me is that I am the idiot who bought at the top of the market for both the BPH4 and the HGH4. I added to my positions with stops, hence the lack of timing acumen. I don't time transactions well if I was to do it by hand, but you can't get any worse than buying at the highs. Well, I guess you can. You could buy at the highs of something that is going down and keep adding on your way down. Did I want to add at those levels, roughly? Yes. I'm only talking about a few ticks per contract, but those ticks add up. I got the big picture correct, but the details could be improved in certain ways.

I added to my HGH4 position, buying at 125.10. I will continue to buy at 126.90 and sell the position at 121.50. Like with the Pound, I was aiming to enter the market based on what I thought it was going to do. My limit order was not filled, so I canceled it. In this case, it would have actually worked. It doesn't mean it was a good idea to do so. The one justification you could use was that again HGH4 seemed to lag the effect of a weakening dollar. When the Pound exploded upwards, copper was at 124.40 for an extended period. You might be able to trade off of this effect, but until I have empirical proof, I won't. This would be a good project for a grad student.

Again, copper seems to lag the FX markets. Over the holiday Monday, GBP traded, albeit lightly. Still, it made gains, which picked up later in the day. By the time night copper opened on Access, copper was basically unchanged. It rose dramatically throughout the night. In the morning, I added to my position at 128.10. I had intended to add to my position at 127.25, but when I woke up, it was at 127.50. I tried to get in with a limit order at 127.40, but the market moved away to where I eventually got in at 128.10. I don't execute trades very well. Any suggestions are welcome. Further, if anyone has ideas how to avoid this rather dramatic slippage, I would appreciate it. It's not so bad when you are adding to a position. I could envision a nightmarish situation should this happen when exiting a position. I will add to my copper position at 130.60 and exit the position at 124.00.

A few hours go by, and I add to my copper posiiton at 130.65. I will continue to add to this remarkable market at 132.80 and exit the position at 126.20. This remarkable market is becoming more volatile, however. Should the volatility continue to increase, I will exit my position on that basis.

It has been an interesting night and morning. Over the night, I added twice to my copper position, once at 133.20. My entry points were adjusted to the increased volatility, but I still added yet again at 135.85 early this morning on Access. As copper opened on COMEX, it simply fell out of bed. My exit point was 130.60, but I sold at 131.20.

This has been a very interesting trade. I think I did a very good job of remaining disciplined in a very volatile market. It was so volatile that brokers only started accepting market orders instead of limit orders on copper this morning. I was actually thinking of exiting instead of adding to my position overnight, except that metals can be prone to shortages. And with shortages can come these dramatic swings. I think that further refinement of my trading can come with learning how to deal better with increased volatility. I was going to exit on Friday if it had continued upwards, but that is moot now.

The one problem I will have with this trade is that I exited my position prior to my stops being reached. My stops are where they are for a reason: the volatility of the commodity in question. Exiting it early is once again, trying to predict the future. YOU DO NOT KNOW THE FUTURE, EVEN A FUTURE PREDICTED TO OCCUR TEN MINUTES AWAY.

In further retrospect, I am not sure I did do the wrong thing here. I think the case could be made that in markets with noticeable increases in volatility, that stops should be tightened. Ignoring a stop to exit a position early is probably not a good idea, but the effect of exiting a position early in this case was probably not a bad thing. 

I added to the ADH4 position at 7677 as soon as I woke this morning on Globex, some time around 5:30AM. I was still groggy because the sell stops were made on ADZ4. Note to self: wake the fuck up before you trade. I will add to the position at 7727 and exit it at 7577. The AUD got as high as 7746 today, which is less than 70 ticks away from a true entry signal. I'm still not sure whether it was good to enter prior to actually getting it.

I added to the ADH4 position at 7727 as soon as I woke this morning. I've been having decent luck with limit orders on Globex. I forgot to cancel my buy stop for the day session, so I got filled at 7736 on another position. Note to self: wake the fuck up before you trade. No repeated errors. Wash your face with cold water before waking up. This may be a fortunate error if the AUD continues to rise. I sleep with my laptop in order to check the market several times during the night. A friend said this was "sad." Trading is very satisfying, and if it takes long hours, so be it. Being great requires extra commitment.

I once again added  to the ADH4 position at 7760 today.  The AUD once again moved to 7812, a tick short of a buy signal. It is testing new highs and will soon pass thru. If not, stops have been raised to 7627. 

It was an "inconsiderable period" before I sold off this position. To summarize my mistakes and lessons learned:

1. Do not enter a position unless you get a buy signal. You may think that prices are going to go somewhere, but you cannot predict the future. This is something you must maintain 100% discipline on. Oddly enough, the AUD moved to 7812 twice, but never to 7813.

2. Tighter money management was needed on this trade. I reduced the volatility requirements at the start, thus buying more contracts than I should have. You let your feelings interrupt with reality. To my credit, this was fixed later on.

3. The exit was a disciplined exit. I'm not necessarily sure that it was a good thing, given how things turned out. If I can't predict the future when things are going with me, I sure as hell can't predict the future when things are going against me.

4. I think part of the reason why this trade was undisciplined was because my previous position was a very good long Aussie buck position. In the future, do not trade the same contract until a month has passed between transactions.

In terms of why I would buy silver, there are 4 reasons. Most importantly, I was signaled to silver trending up. On a fundamental basis, silver has probably been severely undervalued for years, with demand outstripping supply for years. Combine this with the fact that most silver is not directly mined, but is a complimentary revenue stream to copper mines or other metals. Also, silver is an industrial metal in an economy that is growing. It is also a financial metal in an economy that I think has a risk of not insignificant inflation.

I added to my SIH4 position, buying at 6520. I will sell at 6130 and add to my position at 6730. Silver has consolidated very nicely as of late. It was a somewhat alternative entrance, but it may pay off just yet. 

Then again, it may not. I just got stopped out of the SIH4 position. I could live with the entrance I had for this position. The problems I had with this trade is that the correlation between SIH4 and ADH4 was too positive and too high. Thus, I had more exposure than should have taken. This trade fell apart on that basis. Otherwise, the trade was done with good discipline. I entered, added and exited with good discipline. The problem with the position sizing and the correlation. 

Sure enough, a long weekend occurs and the BOJ was intervening heavily. I got stopped out, after trying to sell on Friday afternoon. Lesson learned: holidays equal shorter trading days. Know these. This was a bad trade from the beginning. The rationalization of trading was not based on any signal I was given. That being said, once the position was established, it was traded decently. I did exactly what I was supposed to. I tried to close the position early, which probably made sense, given my mental state and the lack of reasons for getting into this trade in the first place.

Still, at the end of it all, this was an excellent trade. For the most part, I traded with a high amount of discipline, and made a nice amount of money.

Previous comments: I added to the ADH4 position. The contrarian in me knows this isn't going to last forever, and the realist in me knows that it may be a painful exit. That being said, previous profits have been locked in. Slippage, as always, remains a risk. But increased returns are an excellent defense against that. continue to add to the ADH4 position. I recently added at 7687, and will continue to add to the position at 7800 and will sell the position at 7600. The volatility of the ADH4 contract has increased somewhat over the last month. The ADH4 has had a TREMENDOUS run over the past 4 months or so - as have most currencies versus the USD. At some time, this will have to end. I can't predict the future though. If the USD continues to weaken, eliminating my position would leave money on the table. Lesson learned: let your profits run. Fortunately, this lesson was learned through positive reinforcement. I received advice to sell a long time ago. I'm glad I ignored it. 

It has been quite amusing to read the press on the AUD throughout the last month. When the AUD retreated, the press quoted analysts who predicted an "overbought" Aussie buck. When the AUD advances, they quote the bulls. 

Mad cow disease was the catalyst that helped knock the AUD out of its week long slumber during December. I find this interesting from several perspectives. First, I think mad cow disease is overblown - tremendously overblown. The chances of contracting mad cow disease is remote - less than contracting hepatitis from scallions. I'm not going to stop eating beef, and my beef of preference will remain grain-fed Alberta beef. Second, the news of mad cow disease was devastating for Alberta, and should by extension have some negative effect on our occupying forces in Ottawa. Ergo, the Canadian dollar should have similarly tanked. Basically, it was just a catalyst. On a separate note, shouldn't mad cow on a consumer level simply change how cattle are rendered? The cattle industry is certainly affected by mad cow disease, as it can destroy a herd.  

It has been extremely surprising to see the machinations of politicians regarding the US economy. The US economic numbers are actually pretty good. The latest GDP numbers indicate healthy economic growth. The USD has been subjected to the twin budgetary and current account deficits IN CONJUNCTION with extremely low interest rates. The AUD has an increasing current account deficit, but a much higher discount rate, which attracts capital. I disagree with the Fed's contention that deflation was ever a problem, especially with monetary aggregates. M1 was fairly constant from 1993 to 2001 at around $1.1 trillion. From 2002,  it has increased to about $1.3 trillion. That is a severe inflation if you ask me. As with monetary policy, you will see it after the fact. M2 has decreased recently, but who cares? You saw flat M2 growth in 1995 too. You cannot argue that there is a ton of money sloshing around the system. Fiscally, cutting taxes is always important, but so is cutting spending. Increased spending is an increase in deferred taxes. What I get even less is how the US is talking down the dollar. Snow has been ubiquitous in saying there is no problem with the market sending the dollar lower. The few times he has countered this, the rise in the dollar has been limited because he has no credibility defending the dollar. Now the Fed is getting into the act. Guynn noted that the Fed will not raise interest rates any time soon. Bernanke said the possibility of a dollar crisis is low. I guess you missed the past few months. Now why have these actions been taken? I believe the Fed's actions are for the most part genuine belief that deflation was a risk, enough to increase M1 by 15% over the past two years. Perhaps there is some variable of which I am unaware, and 9/11 certainly had an effect. But the policy of the Treasury department and the creeping protectionism that has crushed the dollar has not been addressed. In fact, it has been encouraged. Why? My hypothesis is that George W Bush does not wish to see a repeat of what his father faced with a loss in the presidential election. And if you speak to George HW Bush, he blames Greenspan for increasing rates during 1992. A 30% drop in the dollar will certainly help the economy look better, and I think part of the reason is the 2004 eleciton. 

Wango contango! It has been interesting watching the backwardization vary between spot and futures this month. After rolling, the spread was in the mid seventies. I don't have any firm proof, but I get the feeling that this could be arbed, as I have seen it dip into the low fifties before returning to the mid sixties. 

Rolled from ADZ3 into ADH4 a week before last delivery day. I did so in the most stupid manner possible. I wasn't necessarily under-capitalized to undertake a position, but I traded outside my philosophy to speak. A disaster was averted, not through skill, but from luck. Basically, I bought into ADH4 without selling my position of ADZ3. I was ignoring the #1 rule of protecting your capital. Needless to say, this has been a very stressful week. I do remain long the Australian dollar, which still continues to be tremendously profitable. I will continue to add to the position at 7400 and will sell the position at 7180. Lesson learned: when rolling from one month to another, sell your position first. Your emotions may be keep you holding a loser. 

The Bush tactic of creeping protectionism is somewhat intact after repealing the steel tariffs. Subsidizing steel with non-tariff measures still reeks of it. Very questionable. An interesting tidbit came out of the last Treasury auction where the level of over-subscription fell quite dramatically. I think the currency market for the foreseeable future will most certainly be affected mostly by interest rate differentials - which will be exacerbated by rising budget and current account deficits. The slow Treasury auction this past week may indicate a scenario in the very near future where the US has to raise money in non-USD denominated debt. The only thing preventing a free fall in the USD (which you could argue has happened) is the prospects of a strengthening US economy.

1. Enter market with buy and sell stops.

2. Utilize Globex/Access extensively.

3. Separate your hedges from speculative positions.

4. When rolling a contract into a new month, eliminate the old position before establishing the new position.

5. Let your profits run.

6. Optimism is fine, but don't trade off of it.

7. You cannot predict the future.

8. You have no idea how millions of other market participants value fundamental information.

9. Holidays mean shorter trading days on business days adjacent to the holiday.

10. Do not enter a position unless you get a buy signal.

11. Use accurate, up-to-date volatility estimates to manage your risk.

12. Do not trade the same contract consecutively until a month has passed, to avoid lingering emotional attachments.

13. Correlations change, and change at the worst time. 

14. Position sizing is the most important factor in trading.

15. Do not add to a position based on what you think a commodity will do. You cannot predict the future.