Finding your own unique commodity trading edge is a worthwhile goal. In the masses, struggling to push on your head over the sea of expenses you are lost without one. Trading advantages do exist for short periods of time. Advantages are more permanent. You require many. Here is the way to find yours.

First let's talk about a fantastic market for day trading. We'll talk about finding a trading edge.

The SP 500 Index futures contract market may be the very best futures around for day-trading. It is liquid and the swings are often large enough every day to make it rewarding. The digital e-mini futures market (the mini SP 500) is lightning fast for executions that rival or even exceed the floor-trader benefit. But it would be better if someday they would earn a large”e-maxi” equal to the e-mini to keep the commissions and costs reduced.

After all, five e-minis are equal to a present pit-maxi. However, the price skids and delay of pit executions can quickly add into a stage occasionally. This makes paying the additional commissions of five worth it in the end. After all, there is a skid $250 for a maxi while the additional commissions for five e-minis are a fraction of that.

Price skids in digital e-mini futures contracts happen occasionally, but are rare and simply due to heavy buying or selling, compared to illiquid”air pockets” which can occur in the pit occasionally. The day has come at which you see guns doing 500 to 1,500 e-mini lots electronically. It is a gorgeous thing.

A look at a simple bar chart of the SP 500 futures contract can seem like Jaws V into the person without a method. What's needed are custom indiors and recognized patterns to provide this market information. On any time period, from monthly to bars that are one-minute, the futures price action is able to look treacherous and arbitrary.

But if it was a simple, trending market all the time, everyone would be rich... or better said, '' there would be no market because everyone would be trend after -- doing the same thing, therefore an impossible situation. There has to be occasional chopping, extreme dullness and volatility to keep everyone on their feet. We think we have found a”platform” (border ) and then the futures market varies.

I think change is the most important concept for a commodity futures trader to accept. As hard as we may function to discover and discover the perfect trading system, the market will alter to ensure it is useless occasionally. It will go through its own changes and come and the method will do the job. It has to be this way or else everyone would use the trading system or procedure as time passes.

Why is it when we have a look at the latest high-priced commodity futures trading”system” performance listings, every year there are different ones on top, and the previous winners are often in the bottom? Because stiff optimization doesn't work, this is. Well, not for long. It is”optimized mush” as a futures trader calls it.

The perfect trading system could be one which continuously changed in sync with the futures market. It is not hard to design a fantastic trend following procedure or one which cleans home during a choppy market. However there's been a computer software designed that can anticipate WHEN to toggle off and on the various techniques to coincide with the shing market. It is like trying to forecast the tick - down or up? And what happens if the market does a half tendency and half dip? Or, suppose it goes quiet and then has enormous spikes cleaning out the stops in a classic”search and destroy” session?

The bottom line is highly optimized commodity futures trading systems are doomed to failure, or break-even results in best. It doesn't matter how elaborate your software is, using neural nets, fuzzy logic or some of those tech optimisation techniques ; they're doomed to be a clean. A wash! That is what happens when the majority is ordinary. The spreads and commissions simply take their”rake” just like the casino.

The unpleasant reality: You need a UNIQUE edge of any kind to pull you over the average commodity trading crowd. And if you don't understand what your edge is, then you don't have one. Consider this, because it's important. I will cover some techniques which you can research in greater detail in future articles.

When talking about trading, I cringe when I hear the term, system. It reeks of pc optimisation - no flexibility, mush. There is A term trading procedure. A commodity trading procedure is something which is stiff and contains. We will need to understand when to bend the rules. This brings a method from the class that is poor into one which has a border - a edge.

The very best commodity futures option traders on the planet are usually discretionary types verses rigorous rule based optimization systems individuals. There are exceptions. For a 100% instinctive, method trader is a tough row to hoe, agreed, but allows dynamic change to market conditions in a heartbeat.

Thus, where do we loe our trading edge? Is it in publiion the software, mentor, webinar, or maybe right here? Mostly, the edge is in you, although it could be found pieces here, pieces there. It is the reality, although sounds mystical. You have to devote the time to come up with your own uncommon edge that the majority don't have. And yours will alter over time.

By way of instance, at one stage back in the late 60's and early 70's, few commodity futures traders had utilization of computers. It was discovered that a simple exponential moving average worked well for its trending markets of the era. Moving average commodity traders did since the markets were trending well. As traders caught on, the systems began to get diced. You will observe that many of the new and emerging foreign markets start out with tendencies till they grow and then begin the cycle in. It is all part of the evolutionary commodity trading sport and marketplace.

There are a few powerful, but easy, long-term trending methods out there. Just about any method will operate at one time or another. Loosest trading techniques, the broadest will last the longest, while the most optimized last the period. The famous”therefore” utilized a break-out of the 40-day moving average for many years.

They included a filter called”n.” Two winners in a row = -2n. Two winners = 2n. A winner and loser = 0n. The more losing trades in a row, the frued the masses and the more probable the following trade will be a winner. In other words, if the break-out came three times in a row with a consequent false move and a stop out, (-3n) then the fourth sign will be probable for achievement. Sometimes.

The commodity futures markets follow this general rule: They'll unveil some methods for some time, then turn into a heartbeat and take it off. A fantastic trader is always watching methods and will switch to the one currently performing. . .in a heartbeat!

It is breathtaking to watch a certain trading system working well and then see the market find a way to destroy these very same participants in a single sharp movement. A good example is when commodity option traders are writing (selling) options over an elongated time period. They are taking in premiums such as fat s. Happy. Quiet market. The proportions can be upwards of accuracy selling manner out-of-the-money futures options in a dull or choppy market. The profits are small, but constant.

Subsequently the day of reckoning arrives along with a movement way from the normal deviation spikes such as a lightning bolt. A few alternative writers are dragged by them out by their boots. When a famous money manager sold tens of thousands of out-of-the-money SP 500 places A well known example was in 1998. The market took. He lost a big chunk of his $100 million commodity fund in a few days. I remember it well because a partner and I were extended an eighty-lot of put options on the side of the trade. We left the biggest score of our lives. However, it had much to do with fortune and being there at the ideal moment. It occurs at least once to everyone. Heck would be the longest shot .

At this time I really like the SP 500 futures contract (e-mini) day-trading game. I have traded it actively for the previous twelve years. It pays to concentrate on one or two commodity futures markets and learn it well. This is the key to getting a border when day-trading. A few day-traders can spread themselves out and employ techniques to commodity markets. They are blessed by god. However, I find I need to learn all the patterns, habits, and idiosyncrasies of a market to be competitive. Just like physicians who specialize.

Could you imagine a heart surgeon trying brain surgery, or perhaps doing plastic surgery? It is the same with markets. The more you concentrate and concentrate, the better job you can perform competing against the best heads in the commodity world out there. I have some methods I will suggest in later articles to concentrate and learn your favourite futures market. This does not mean you can't hold long-term positions of commodities while day trading. You can do both, but for day trading itself, you need to concentrate on one or two markets.

As I've mentioned before, it's so important to train your mind to intuitively and subconsciously identify probably turning points as they occur. With practice, you'll discover signs. It is different for everyone. Your body will let you know when it's time to put on or take off a commodity trade. However, it requires looking and training at the ideal indiions with a trained mind. More to come in future content.


Mr. Cathey was born in 1951 in Hartford, Connecticut. He also attended Hartford Community College in 1970, majoring in plogy. He completed his AAS in Electronic Engineering Technology and transferred to the University of Hartford Technical College in 1971.

Mr. Cathey has composed countless eduional articles addressing the challenge of day trading the SP 500, swing trading and alternative writing. Most articles are found on the TCM site and online. He's also written a comprehensive commodity trading course that's currently available free to the general public.

Get FREE, his whole 44 lesson, Thomas Commodity Trading Course and weekly TimeLine newletter by seeing: http://www.thomascapitalmanagement.c...ty/welcome.htm This course is brand new and fun reading... a street-wise trading e-course. Visit the main Thomas Capital Management trading site at: http://www.ThomasCapitalManagement.com