OPENING POSITION 
May 1998 

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As Editor of STOCKS & COMMODITIES, I receive letters from readers, both of comment and with questions. One question I get asked frequently is -- and this should come as no surprise -- how can we become better traders? The answer isn't as difficult as it seems. Trading is a form of action, and our actions are shaped by our past experience and our vision of what we would like to attain in the future. For example, most of us attended college because, based on our experience, we came to the conclusion that continued education after high school would allow us to acquire a set of skills that would lead to more advantageous career choices -- our vision of the future. Our experience and statistics support this view.

Another set of skills we can acquire involve trading and investing successfully. Acquiring the skills to trade can be difficult, primarily because no central source such as an accredited school exists for traders. Why not? This may be because trading is inherently a technically driven concept, and academia has been very slow thus far to accept the validity of technical methods. It's easy to find experts telling you that technical analysis doesn't work, which unfortunately encourages would-be market participants to take a less-than-scientific approach to the subject.

So where does this leave you? You have to take the route of any basic researcher and start by reading the literature. Unfortunately, the quality of literature on the topic will range from obscure methodology with only anecdotal support all the way to professional-quality presentations with rules and loads of documentation, including historical performance tables. You may feel like limiting yourself to only documented techniques, and that isn't a bad idea, but there are a number of published concepts that do have merit; they just come up short on documentation.

The upshot? You have to amass a great deal of information to ascertain what's worth paying attention to and what's not. It is only after this step that you can convert ideas into procedures with any confidence, and then and only then are you in a position to verify whether you have a valid approach. Many go straight from procedures to risking their capital, and this is a big mistake. There's no way around it; you must test your procedures over a considerable amount of historical data and determine first-hand the validity of the method.

If you follow this last step carefully, by the time you finish, you should know the procedures through and through and have confidence in the techniques you want to use. At this point, you should be able to see your vision of the future.

As I write this, the STOCKS & COMMODITIES trading contest has finished and the entries analyzed. Our winner was George Decristoforo, who anticipated a decline in the Canadian dollar during January 1998, and was he ever right: The market went nearly straight down the entire month. As it turned out, Decristoforo had a little help selecting his trade from his son, Emil Van Essen, a Commodity Trading Advisor with more than 10 years' experience in the markets. We look forward to a future article from Van Essen detailing this trade. Congratulations, George! We hope you enjoy your trip to OmegaWorld in Orlando, FL.

Trade well!