Tough 2 weeks, but out of the hospital

Hi everyone, it's been a tough 2 weeks but I am so pleased to report that I am out of pain and back home and feeling almost normal again. I had a severe attack of pancreatitis due to gall stones. It hit me like brick 2 weeks ago and dropped me to the floor...ouch. Within a few days I was in surgery to remove the gall bladder and get rid of those stones. The whole ordeal shaved off about 8 or 9 pounds from me and left me really weak. Fortunately I had a great doctor and team over at Providence Portland hospital. I received fantastic care and I can't praise their work enough.

Thank you to all my friends who sent cards and good wishes. I'm still a bit tired, but I'm almost normal again. I just can't wait until I get back out and resume my jogging, but the doctor said to wait 3-4 weeks.

Thanks again everyone and good trading to you!

The best trading system in the world

The Best Trading System In The World: That's what I was told when I first came through the doors at Woodies CCI Club. Of course everyone says they have the best trading system in the world but mostly those are people who are selling it too. Funny for obvious reasons. No, Woodies system wasn't being sold per se, just how you needed to use it and what broker you needed to trade it with is all. Which is fine with me I guess, promotion is promotion and business is business and if you can market your brokerage in the guise of a free trading system, then that's their prerogative. That's not what I wanted to mention however. I was going to talk about the Best Trading System In The World (spoken with stadium-sized echo).

When I started trading WCCI a couple years ago one of the big things that was taught was keeping statistics about the markets you trade. How far they move in your favor based upon your patterns, how much on average they move against you before it's a winning trade. This is in fact a wise thing. It's never a bad idea to keep your finger on the pulse of the market, the ones that you trade, to always know how its heart is beating. Combined with money management (that's code for making sure your losses are smaller than your wins), statistics will give you some idea of what to expect and give you an edge, and in trading you don't need much of an edge as long as your wins are bigger than your losses. The problem with the WCCI system is it teaches you to keep your losses bigger than your wins, always. 15 tic stop loss and 10 tic targets on the ER, 25 tic stops and 10 tic target on the YM and so on. No matter how long you trade that way, even if you can win 75% of the time, you're equity curve is going to be heading south. Yet people still trade it believing that the "runner" contract will be the holy grail and make up all the difference when you hit the big 100 tic run occasionally.

As a bit of a math head I'm here to tell you that I have traded it that way, I have written programs to crunch the numbers and I have analyzed it from every angle. The reality is, the big runners AT BEST will get you back close to break even at the end of the month because all along you've been taking larger losses then your wins over and over and over. But here is the true story, the most interesting bit of information:

When I was trading in WCCI, once or twice a month we'd do a little game to demonstrate how effective money management in trading can really help you. He called it the Coin Flip. It was a trading method based on a complete random flip of the coin, but employed money management. At the flip of a coin, we would go long or short into the market (usually the Russell), and not exit our trade until we got stopped out or reached our target. No runners, all in/all out. Our stop was 10 tics, our targets were 20 tics or sometimes more. Once we were out of the market, we'd flip the coin again and re-enter long or short based upon heads or tails. We'd be in the market all the time and then evaluate how well we did by simply keeping our losses to half the size of our wins. We rarely had a losing day, seriously.

Since those days I've written a simulator that does the same thing with various markets. Just a random flip of the coin to enter the market, keep your losses to half of your wins and keep trading. Here's the reality, the Coin Flip system hands down beats WCCI as a trading system, consistently out-winning all the fancy signals with the Sidewinder, Chop Zone Indicator and so on. It's funny because when we would do the Coin Flip in the room and always do well, people would comment "why don't we just trade the coin flip with money management?" and our leader would usually laugh or growl about how absurd that would be, that this is just a demonstration. It demonstrated something all right, that no matter how good your system supposedly is, if you have it in your system to take 15-25 tic losses and only take 10 tic targets, you are going to LOSE in the long run. If you have a crappy or mediocre system and take losses that are half the size of your targets, you are going to do fair to well. These days WCCI doesn't perform the coin flip in the room anymore...I wonder why? Because it clearly shows that it does better in the market than all the fancy WCCI panels and code and surely it became clear that it was embarrassing as a comparison to His own system. It was a good demonstration though and at least got people to think in the most simplest of ways.

So, if you want the secret to the Best Trading System In the World, just look no farther than the coin flip with a 2:1 or 3:1 money management ratio. You can't get any simpler than that and if you don't believe me, paper trade it for a week and you'll soon see the reality.

Some benefits to our high gas prices

As I feel the pinch at the pump as everybody, I've wondered over the last year what benefits, if any, could come from higher gas prices. For years I always thought that the technology surrounding our standard combustion engine vehicles was stagnant. More effort was being put into marketing vehicles with iPod adapters than new fuel efficiencies it seemed. But since high gas prices are here and is creating an enormous ripple effect through our economy, all of a sudden, car manufacturers can't come out with new technologies fast enough. You have Honda now introducing a test vehicle in southern California that is a hydrogen fuel-cell vehicle with zero emissions and runs on hydrogen which is the most plentiful fuel source in the universe.

At some point in the future, gasoline will be extinct. Will vehicles disappear too? No, vehicle manufacturers will miraculously roll out vehicles that work just as well if not better on many other sources of fuel. Of course they could have been rolling them out years ago but the need just wasn't there as it is today. Personally, I'm delighted to see the new alternative fuel based vehicles being pressured to emerge and as long as gas prices remain high and going higher, there's no doubt we'll see more of these vehicles appear with greater frequency. Necessity is the mother of invention and works well in lighting a fire under the butts of those that need a kick start. I just hope, that the manufacturers make these vehicles affordable enough to be feasible to switch over. Right now hybrid vehicles are the rage for people to buy, but they still don't make financial sense until gas prices reach $10/gallon. The average person is not making a hybrid pay for itself just yet by in large. But as we make our way to $10 gas, I'm sure the auto makers will give us even more creative options for pushing the wheels faster than ever.

Here's an interesting link I found about converting your car to burn water & gasoline...click here.

Auto Trading Systems

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When you have found the right trading system for you, then use TradeLogger to help ensure you have only absolute minimal drawdowns.

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Housing marketing continues to slide southward

Well, a matter that is definitely on the forefront of most people's minds is the housing market. Along with part time trading of futures and running my 3D animation business, my wife and I have been involved in flipping homes the past few years. Fortunately we sold our last property just before the credit crunch hit and we have been on the sidelines just watching the market for signs of an upturn. We'll continue to watch.

Making this the best year of my life

As I mentioned earlier, after 2 years I have put my day trading activities on the back burner, or at least 2nd priority. I still keep an eye on the markets and put on some short to medium term option trades, but I don't devote my full 8 hours a day to trading. I look forward to being able to do that again in the future though and I have every intention of doing so.

In the meantime, I am very busy with my revived 3D animation company. We bought RenderFriend server farm for other 3D animators to use on a lease basis. What I'm focusing on right now is the lessons learned from a book I just finished reading called "The Best Year Of Your Life" by Debbie Ford. It's actually my wife's book but I picked it up and started reading it too. There are no new life lessons to be learned here, but sometimes it's nice reading someone else's perspective on things we already understand. It gives us a a different slant on things sometimes. Making this year the best year of my life doesn't equate to finances necessarily, it's the steps involved in moving forward, being better, becoming better by taking an active role in the things that you do, not a passive role. Of course it's so much easier to take the passive role and let life happen to you. I've certainly done that.

But in rebuilding my company, the important thing is to take an active role DOING something every day. Make the day count. Put out the effort by making a new contact, enhancing your advertising, even take time out 3 to 4 times a week to exercise. I need to do that because what good is any future success if I can't enjoy it in a worn out body that I haven't taken care of? Taking active steps on your list to do something every day that moves you closer to your goal is what makes the difference. So, I'm keeping very busy with these things, even when I don't feel like doing them... I always feel better afterwards.

How are YOU making money trading the markets?

OK, time to open up the forum for discussion about how you are trading the markets these days. We all know there is no such thing as a holy grail indicator that works all the time, it's a matter of finding your own suite of indicators and refining how you like to interpret them.

What are your favorite markets to trade these days? Futures, options, forex, stocks? What are the timeframes do you like to look at when trading? 5-minute chart, tick chart, hour or day? And best of all, what are the indicators you like to use, whether it be CCI, whether it be stochastics, MACD or any combination.

For me I have been looking closely at a variety of stochastic settings along with some moving averages for medium term stock trading. Holding for 1-3 weeks. I also utilize options in my retirement portfolio use the ThinkOrSwim tools to help screen through various option possibilities.

So, what works for you? All topics and methods are always welcome for discussion here without fear of being thumped on the head ;)

My daughter is in the "Twilight Movie"

OK, this may not totally be on topic with trading and money management and all of that, but hey, blogs can deviate right? Sure. And what dad wouldn't want to brag on his daughter when exciting stuff is happening in their lives. Well, first off, my daughter Bri is getting ready to graduate from college soon. She has applied to graduate study for a Master's degree at Portland State University and hopefully she will be accepted to get a Master's degree in Sociology. But as big as that is, the news of the month for her for sure has to be the fact that she got a part in the movie "Twilight" that they are filming near here. She has been working as an extra in the school scenes and doing lots of walk ons and stuff. This is being hyped as a pretty big movie like Harry Potter and there is already a ton of buzz about it. Anyway, she's had the time to hang with a couple of the main stars and see what it's like to sit around for hours upon hours waiting for a scene to get set. She has been filming it for the last couple of weeks and yesterday she had to show up on the set at 9:45 a.m., and didn't get a break until 1:30 a.m. the next morning. She got a few hours of sleep and then was back on the set again today and I probably won't see her until late late in the morning yet again. It's pretty fun and exciting stuff for her and she is jazzed beyond belief to have gotten the chance to be in it. Hopefully all of her scenes won't end up on the cutting room floor ;)

Is this REALLY front page news?

Everyday I peruse my morning news for issues and stories that impact my daily life. So I turn to trusted news sources such as CNN and MarketWatch. This morning I noticed that CNN had a story so important, that it HAD to be on the front page of their news site...no, I'm not talking about the war in Iraq or the recession (or possible recession), but the vitally important story about the actress Mary-Louise Parker breaking her engagement with actor Jeffrey Dean Morgan. Yes I know, I had to take a deep breath, take a shot of whiskey and sit back and ponder how my life will change with this bit of news. I know! They just got engaged earlier this year! Maybe I'm being too much of a stick in the mud, but it seems to me that front page news means something with some substance to it. Don't get me wrong, I'm all for celebrity gossip occasionally, but that's why I go to TMZ.com, not CNN front page news....sheesh.

Update on my involvement with Woodies CCI Club

Hello everyone, it's been a while since I've posted here and a lot of things changed in my life, but for the good I'm pleased to report. For the last 2 years I have been a moderator and full time trader within the Woodies CCI Club group. I have made the decision to leave that group 2 months ago after a number of revelations and truths have come to light about the system and about the leadership.

First of all, after 2 years of full time trading with WCCI, I simply could not make the system work for me. I felt bad that I just wasn't good enough, etc. But as I spoke with many many former moderators and some long time supporters who were among Woodies' inside circle, they all confided that nobody that they have ever met could actually make money with Woodies CCI system. Now, of course in the club they'll just talk about me as another loser who quit and gave up. They say that about everybody who leaves, even high leadership. But one clear fact remains, I have yet to talk to anybody in leadership or former leadership there that has ever made any money with it. Fortunately TradeLogger indeed help me mitigate many thousands of dollars of losses, but despite it, the WCCI just doesn't work, even in auto-trading. For 2 years I was blinded to this because the mantra being taught in the group is always based on the principle of "Do not doubt", "Do not ask questions" and most importantly "Do Not Think"...just react. So you are taught to keeping on trading, even though you are losing...if you question it then it's just YOUR doubts that are betraying you keeping you from being a winner. It's a very typical brainwash methodology I've seen in religion and in Amway.

Anyway, I couldn't continue to try to moderate and mentor people and contribute to providing false hope for those sincerely seeking a way. Every person that I was taught by in the club and respected have all left and have all confided in me that none of them every made any money. I also felt duped that I was promoting the Make-A-Wish charity so heavily, only to find out that no money for the last 3-4 years ever was donated. Profits from the seminars and tools that were so publicly touted as being slated for this charity never went. This information was verified by a former moderator hired by the group to write a book about WCCI to show them in a favorable light. After doing first hand investigations, he discovered that nothing was true that he had been told for many years. The group over there is really nothing more than a giant feeder site for the PFG Brokerage to sign up new accounts and start trading. Of course they make money if the trades are winners or losers so it works for them.

Anyway, I wanted to clarify that I no longer have an affiliation with them and feel tremendously bad that I may have helped to perpetuate the illusion that the system worked and that charities that were promoted as a means to entice people to buy, but in fact were not beneficiaries. I didn't know about this at the time until after I left, but I wanted to apologize to anyone that may have listened to me and lost money in the club. You can find other information from many many other former leaders there posted at: Trader's Paradise.

I do continue to use TradeLogger in my part time trading and find that I really do yield a benefit from drawdowns with it, and it will continue to always be free for all to use and benefit from.