People who are currently trading or want to begin need to ask many questions. No one person has all the answers. However, it is wise to learn from those who have "been there" - especially in what can be such a treacherous arena like futures trading. This is a Question and Answer interview that was done with Glen on this subject. If, at the end, your questions still have not adequately been answered, I encourage you to contact us.
Q. When did you start trading?
A. Technically, I have been involved in the markets for 40 years. My first hands-on exposure was as a teenager in the late 1960s and early 1970s. But even before that, I watched my father market his annual production of wheat.
I recall my first market question came as a preschooler. I was riding with my father who was taking a truckload of wheat to town. I asked my father why he was selling wheat at that time - around Thanksgiving. He told me wheat was usually higher priced in November than during the summer harvest.
By the time I entered high school, like many raised on a farm, I was active in production - including a business partnership with my father producing hogs. My father didn't care for marketing, so he gave me the responsibility to track the hog market. Around that time, I read an article about the "hog cycle." It made sense to me - after all, when prices were high, we had few hogs and when prices were low, we had too many.
My interest grew through my college years and beyond as I viewed the marketplace from varied vantage points. Since that time I have been a producer/hedger, trader, broker, analyst, author and speaker. Having seen the business from so many different viewpoints has been extremely valuable - as it allows me to put myself in other people's shoes.
I started teaching about markets in the early 1980s. My first newsletter had its start in 1985. In 1987, Oster communications - the parent company for Futures Magazine and Professional Farmers of America - recruited me to become the editor of Commodity Close-Up and chief technical advisor to the Pro Farmer staff. Commodity Close-Up later changed its name to Trends in Futures. I wrote this newsletter for Futures Magazine for over 10 years - ending my stay at the helm in December 1997. Since early1998, I've published my own newsletter, View On Futures.
Q. Would you call yourself a technician or a fundamentalist?
A. No. (Those who are around me long know I become a stickler for asking the "right question.") But that aside, my answer is "Neither." At least, not if you define a technician as one who strictly follows a system to trade and a fundamentalist as one who bases their trading decisions on statistical facts and news about the market (supply, demand, political announcements, etc.). Both have value and can be used (and useful) if you wish to apply them. But neither describes what I am - nor do they encompass everything that makes markets tick.
I am a student of market behavior. I believe the markets behave like living organisms. They live and breathe on a short-term basis. Longer-term, they operate (generally) within a broad range of repeating behaviors. These patterns may be hundreds (even thousands) of years old.
Again, I consider myself a "student of market behavior" and hope my friends will too.
Q. What is your approach to trading?
A. I am an opportunist. Ideally, I am very much interested in long-term moves and long-term profits. So you could call me a position trader. However, if the marketplace is stagnant or producing mostly short-term trends, then I have to take what is offered. Trying to force my long-term desires onto a short-term marketplace is rarely profitable. Fortunately, there are usually enough long-term opportunities to capitalize on. (And coming out of the 1998-2001 commodity base, there are likely to be many more such moves upcoming.)
At the same time, a position may last less than a day or just a week or two. Holding for a month or two is common. And there have been cases when positions have been held for a year or more (sometimes including rolling from one contract month to another).
Ultimately, I look for and trade markets that are likely to trend enough to yield a high probability of success and/or offer a good return for the risk.
Q. What is the "secret" to trading success?
A. This can be answered in two ways (or more). The "secret" is that there is no secret. On the other hand, if there is a "secret," it is not one that is tangible. Instead, it is in developing and owning the mindset of being a trader.
The successful traders I know may suggest there is a small portion of "being in the right place at the right time," but traders who rely on luck (or believe their results are tied to luck) soon find they are out of capital. Success comes from preparation - learning and applying the craft. There is little else that can replace hard work, diligence, self-knowledge, patience, market knowledge and an ability to adapt. These are qualities of all the "Masters" I know. One more thingÉ a sense of humor can be invaluable! Most are very serious - but many don't take trading too seriously. It shouldn't be a life-and-death struggle.
Q. What is more important, a "killer" trading system or proper money-management?
A. My answer comes from my beliefs - which have changed over the years. Management is far more important than the "system" or "method" employed. I have come to better understand that money management and risk management (they are not one in the same) are skills that can make the difference between steak and hot dogs!
Many very good traders (like good baseball players) lose or strikeout more often than they win. Managing how much you lose can be extremely profitable. That's why I contend it is valuable to embrace and use protective stops (or other forms of risk control) consistently.
This does not mean the approach is not important. But when asked which is more important, I stick with the management answer. Yet, I resolutely believe markets provide clues to what they can and might do. History can be a great indicator of the future. As long as you don't ask it to "predict" - it can be an invaluable tool in helping to make profits consistently.
Q. Do you publish a track record?
A. No. There are strong reasons. From a practical standpoint, I do not hold myself out as a CTA (commodity trading advisor). That takes on an additional set of tasks that would distract my focus from the things I do best. Thus, I have no desire to provide individualized advice - or to manage anyone else's money - lest it cloud my thinking.
Frankly, track records tend to give seekers false expectations. No matter how much you tell them that "past performance does not guarantee future profits," they still count their chickens well ahead of egg-laying - with little chance of ever getting to the "hatching part." Track records are also easily manipulated. When and where you get filled (at what tick), what your commissions are, and what slippage occurs when getting out often can cause wide disparities in what traders can and do achieve.
In addition, track records don't equate to actual overall return. They often don't take into consideration the number of contracts traded. Nor do they account for how one might vary a commitment (heavier in one market or lighter in another, etc.) If you base a track record on only one contract traded (a common practice), you negate the profits (or losses) from a trade with multiple contracts. That's where proper money-management is so very critical.
Q. Why don't you just trade for a living?
A. I have found I trade better when I don't have to trade. In other words, when I put myself in a position to be an opportunist, I can act when well-defined opportunities present themselves. If I traded just for a living, I might find the need to act when the dentist bill presented itself!
More importantly, for me, trading and teaching about trading go hand in hand. One improves the other. And, by make-up, I am a person that desires activity. If I were not publishing a newsletter and commenting on the markets, I probably would have to find another outlet for that creative part of my character. If I didn't, I'd probably push for too much action in the marketplace - which would almost certainly be counter-productive.
Q. What books or resources do you recommend for someone getting started in trading?
A. This is a lay-up: The View On Futures newsletter (and Daily Update) as well as the TRB manual and Building a Better Trader Videos. (I believe these are good, solid products - which were either designed to be educational or regularly incorporate education. So, it is proper to have them at the top of my list.) There are many other good sources to learn from.
But if you are quite new to the business, "Starting Out in Futures Trading" by Mark Powers is a good place to begin. A great introduction for every trader should be "The Four Pillars of Trading" by Ray Kelly. Read "The Disciplined Trader" by Mark Douglas. Jack Schwager's "Market Wizards" and the "New Market Wizards" are full of insight (most of which is not appreciated by newer traders). If you want to acquaint yourself with technical trading consider "The Handbook of Technical Analysis" by Darrell Jobman - it provides a good overview to expand from. But there is a multitude of resource materials to be drawn on. Even the "bad" ones can teach you something. Money is not wasted even if what you learn is what not to do.
Q. What markets do you track?
A. Essentially, all U.S. markets that trade regularly and have even a modest level of liquidity or trading volume (this eliminates contracts that might be open as a formality for a few minutes each week). I definitely watch more markets than I report on. As well as a living organism, I also view the marketplace as being a giant jigsaw puzzle. And each market has a place in that puzzle. Thus, I believe all markets are inter-related - even if many connections are imperceptible.
Here is a list of markets I cover on a regular basis: Dow Jones Industrials, S&P 500, NASDAQ 100, Treasury Bonds, Eurodollars (T-bill proxy), the U.S. dollar index, Canadian dollar, European currency unit (Euro), Japanese Yen, Swiss Franc, British Pound, Corn, Soybeans, Soybean Oil, Soybean Meal, Wheat (Minneapolis, Kansas City and Chicago), Oats, CRB Index, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Lumber, Gold, Silver, Copper, Crude Oil, Heating Oil, Unleaded Gas, Natural Gas, Live Cattle, Lean Hogs, Feeder Cattle, Pork Bellies. Not all are covered in every issue of my newsletter or daily update. The most interesting or active markets get top billing. But even when not covered, I am watching the others on a regular basis. Also, though I rarely write on them, I include propane, lumber, platinum and foreign stock indexes on my regular checklist.
Readers please note: There is a risk of loss in futures and options trading. Please trade with capital you can afford to lose. Past performance is not necessarily indicative of future results. Nothing in this package is intended to be a recommendation to buy or sell any futures or options market. All information has been obtained from sources which are believed to be reliable, but accuracy cannot be guaranteed. Readers are solely responsible for how they use the information and for their results.