December Cocoa

[Matt Bowen]

There was a a nice Decision Point setup in Cocoa with a potential trade setup of 11 to 1 and the Volume seems to support this setup. As you can see from the charts below in the Red Arrows price was continuing to fall and the Volume dried up...

We triggered this morning at 1860 (on the open), so let's see if anyone gets behind us on this trade... some institution support on the long side would be nice

As you can see from the position size we are risking $310. to make $3350. on a $20,000. account...which means I'm risking 1 and a half (1.5%) on the trade... this is really all trading is... it's a about taking a small risk (that makes sense based on the account size) for an even better reward.

So, what happens if the trade gets stopped out? Who cares...I lose $300 bucks... Go on to the next trade. Trading is like dating, do you think every girl you go up to is going to want to go out with you? NO, so why is this any different??? Being a projectionist in this business will rob you of all your money and then some (if you get a margin call). Seriously, this is why we talk about money management so much... it's the foundation of a successful trader or ANY business person for that matter.

Be SMART use risk management and who cares how many trades work. See, most people don't think like this...they try to be "JACK OF ALL TRADES and they end up MASTER OF NONE". They end up like "Lucky Lou" down here with a tool box full of indicators and then they try and slice an dice their way to 80% or even 90% winning trades... which is nothing short of complete insanity. In fact, most traders who are trying to be right on 80% or 90% of their trades end up looking like this guy.

http://www.johnforceracestation.com/pics/2868.jpg

Matt

[Matt Bowen]

The December Cocoa filled...so we are long. However, yesterday's gap will more than likely be tested before we close the upper gap between 2035 and 1990. I'll be very surprised if we fill this upper gap first. So, hold on, this one may take a few weeks...unless we get stopped out first. Bottom line we are risking very little to make a lot... this trade carries a 11 to 1 RR ( you only need 1 out of 10 of these to work to collect $$$$.

[Matt Bowen]

What's interesting is Dec Cotton (front month) had a Decision Point setup, but no reversal bar.

Now you are going to see why I look at deferred months (and not just the front month).... take a look at March Cotton, we have a Blue reversal bar.

Next, check the open interest numbers and see if we have enough players.

As you can see March 2008 is already over October 2007, so green light, now we just need to sit back... get triggered and let the market either give us a profit take a small loss.

[Matt Bowen]

We got stopped out of the December Cocoa... so we will eat a 1-R loss :)

That's trading... 5 out of 10 trades just do not work, so you can't get all worked up about losses. What you can do is limit the loss to so that all losing trades are as close to a 1 R-multiple as possible. If you are not sure what R-multiples are then read this: http://www.iitm.com/sm-risk-and-r-multiples.htm

Bottom line: The Cocoa trade is completed... NEXT!!!

Man, the commodities are getting SLAMMED today, the only complex that is up is Interest Rates... Check out Soybeans... OUCH, that gap had to hurt :eek:

[Steve Griffiths]

Hi Guys

You have to remember that this Cocoa trade was not a standard MTPredictor trade set-up so carried a higehr risk than normal...

Steve

[Steve Griffiths]

Nice to see the OJ TS3 sell working out beautifully :)

Steve

[Matt Bowen]

Hi Steve,

Yup... I moved the stop down to the ATR at 133.15 (this locks in $1000 bucks per contract) and will certainly pay for the stop loss in Cocoa. At this point I could care less what happens to Orange Juice.

I hope others reading this can see or understand why I say "I could care less". The best part of any trade is once you are able to get the trade to risk free. You actually do TWO VERY IMPORTANT things for your trading:

When you to move the stop to breakeven (move the stop to the entry) you do two things:

1.) You eliminate all Judgmental Heuristics ( In other words, you eliminate all the pseudo psychological and short cut games that traders play inside their own head).

And

2.) There is unbelievable freedom in knowing that you have ZERO risk in a trade. Again, this frees up all the pent-up emotions during trading.

This is why managing the trade is FAR MORE IMPORTANT than finding setups that work 90% of the time. Any half way decent trader knows looking for a system or a stetup that works 90% time (or even 80% for that matter), is nothing but a complete waste of time. If you have been trading for at least 6 months and placed a minimum of 50 real trade (I'm not talking about paper trades) then you know exactly what I'm talking about. Whenever somebody calls me up and the first question out of their mouth is: "what is the winning percentage of MTPredictor?" I'm half tempted to just hang-up the phone...you don't need to per-qualify that customer. Why? because that question is coming from the caller's EGO, it says nothing about the profitablity of the system.

All the best,

Matt