Q&A
Inside The Futures World
Want to find out how the futures markets really work? DeCarley Trading senior
analyst and broker Carley Garner responds to your questions about today’s
futures markets. To submit a question, post your question at https://Message-Boards.Traders.com.
Answers will be posted there, and selected questions will appear in a future
issue of S&C. Visit Garner at www.DeCarleyTrading.com.
Her books Currency Trading In The Forex And Futures
Markets; Commodity Options; and A Trader’s
First Book On Commodities, are available from FT
Press.
TRADE, YA BUM!
I’m interested in becoming a professional trader. Can you provide any advice?
Those looking to make a career out of trading for others are facing multiple obstacles. For starters, managing money for others, especially if done on leverage, is a thankless job. When things are good, your clients will always be wondering why they aren’t better, and when things are bad...well, you get the idea. Warren Buffett once described it this way: The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, “Swing, ya bum!”
Aside from the obvious struggles mentioned, actually breaking into the industry can be a daunting task. Many assume that there are millions (billions!) of dollars just waiting to be traded by anyone who feels up to the task, but the truth is, traders must prove themselves first, and this can be challenging. For instance, showing profitable trades in a demo account is a waste of time because there aren’t any emotions involved in winning or losing Monopoly money. Accordingly, it won’t get anybody’s attention.
On the other hand, a track record in a live but moderately funded account probably won’t get anybody knocking on your door any time soon either. To attract investment dollars, it typically requires a prolonged track record with a significant amount of funds under management.
As you can see, you might be the best trader on the planet, but if you can’t find a way to get the capital needed to prove it, you will struggle to find a place in the business. In other words, it is difficult to raise money for a program traded by someone without a tried and true track record. Unfortunately, finding yourself in a position to build such a trading history requires the experience that you have yet to develop.
PREPARING FOR THE STRESS
Is there a way to prepare for the stresses that come with trading futures, options, and forex?
Trading on leverage is stressful and tends to take an emotional and even physical toll on those involved. Unfortunately, I don’t know of any preparation, action, or even substance that is capable of eliminating the impact of the strain once it has reared its ugly head. Nonetheless, it isn’t a coincidence that downtown Chicago is littered with brewpubs; some find it is the only way to ease the anxiety of a tough trading day.
Nothing burns off anxiety like a good run after the close of trade!The best way to manage stress is to take measures to avoid it by concentrating on a trading strategy that conforms to your personality. If you are a high-strung and risk-averse individual, trading outright futures without using option hedges is probably a bad idea. Doing so could engender undue mental strain and trigger poor trading decisions. On the other hand, if you are patient and can be satisfied with the prospects of low returns in exchange for low risk, you might want to consider an option spread trading strategy.
It is nearly impossible to avoid all stressful situations, and despite risk management techniques, there will be times of intense duress. In my experience, the best way to combat the physical tension of a desk job and emotional turmoil of trading is consistent exercise. Nothing burns off anxiety like a good run after the close of trade!
FINDING YOUR FUNDAMENTALS
Where can commodity traders find clear and concise fundamental analysis on the markets?
Although I’m not necessarily an advocate of trading solely on fundamental information, I believe it is important for traders to be aware of the latest supply and demand stats, upcoming and past news events, and the overall feeling of the moment. In my opinion, the most affordable and comprehensive newsletter available to commodity traders is The Hightower Report (www.futures-research.com/). Some brokerages such as ours pay a bulk subscription fee to enable us to provide the research to active clients without any cost to the client.
One of my favorite free sources of trading information is www.barchart.com. The site offers analyst commentary on several markets and from various viewpoints. Some of it is good, some of it is bad, but at least it gives traders an idea of what others are thinking. More important, Barchart provides free access to charts displaying the CFTC’s Commitments of Traders report (https://barchart.com/futures/cot.php) and the ability to scan the commodity markets for overheated or discounted price action on what is referred to as a high/low page (https://barchart.com/commodityfutures/All?type=hilo&cat=ytd¬e=1).