The Commitment Of Traders Report Revealed
Floyd Upperman
by Jayanthi Gopalakrishnan
Floyd Upperman became interested in the futures market in the early 1990s after investing in stocks and stock options. While working in the high-tech world of semiconductors, Upperman spent his spare time and money researching the investment world. Using his knowledge of statistics and engineering background combined with his programming skills, he designed his own trading system based on repetitive patterns and conditions characteristic to individual commodities. Using fundamental information supplied by the US government with the Commitment of Traders data, he has been able to separate the open interest for each commodity into three distinct groups.STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan interviewed Floyd Upperman via telephone on September 13, 2005.
You can have the best indicators in the world, but if you're not disciplined, you're not going to be profitable.
Tell us how you got started in trading.
My background is in electrical engineering, so after I got my degree, I went to work for Intel in New Mexico. Intel gave me some stock, and I made a lot of money off it. I saw how you could keep making money in stocks, and that got me interested in trading. I started off trading technology stocks in the late 1980s, but I didn't have a lot of money then, and I found out quickly you needed a decent amount of money to trade.
Eventually, I migrated over into options, because 100 shares per option gave me more leverage. But I still found I didn't have any consistency in my trading. I made money sometimes, lost money other times, and didn't really have a system. I couldn't figure out any order in the market either; even though I knew a lot about technology and what we were doing at Intel, I didn't know why the markets did what they did.
Around that time, I moved to Irvine, CA, to make disk drives at Western Digital. There was this TV station, WKHY, that was similar to CNBC before CNBC got going. They covered a lot of information on commodities and featured people like Ira Epstein. I remember someone from a company called Anco talking about wheat, and that's how I got interested. I made $1,700 trading wheat options.
Why wheat?
I grew up working for farmers in Ohio, so I knew about the grain markets like corn, wheat, and soybeans. I knew that farmers grew their crops at different times of the year. I worked with some farmers who were very wealthy. They used to talk about the way they hedged their crops and how they used futures contracts. I always had that in the back of my mind, and finally started trading in commodities, since I could get the leverage and I didn't need as much money. I knew there was some order to that.
I also had experience working with data at Intel and Western Digital; I was a good programmer, so that's what I was doing for Western Digital--analyzing data. There were several steps involved in making chips. We had all this data from every step where operators would measure the oxide thicknesses, and put it into databases. I looked through the data to find things that pointed to problems, and wrote programs to figure out what those problems were and what the data was telling us, like why there might be poor yields in those chips.
What did you do then?
I took that data experience and loaded market data into some of the programs I had created. I was looking for trends, and in a different way from what others were doing. I had access to some powerful software, different from TradeStation and other popular programs. I found that, yes, there were patterns, but I couldn't figure out why some things happened the way they did. I couldn't find anything that would tell me whether a pattern was going to be good. That's when I stumbled upon the Commitments of Traders (COT) data, which I had read about in one of Larry Williams' books years ago.
...Continued in the November issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the November 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2005, Technical Analysis, Inc.
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