All successful futures trading involves a three-part formula:
- A high-probability risk/reward strategy
- Money management
- Decisive trade “adjustments”
Schad Commodity provides all three of these elements in its proprietary trading techniques for trend-following the major agricultural futures markets.
The only way for us to achieve success in the markets is we first have to be in the market. Second, since the margin requirements seem to update too often, we need to prioritize which markets we are trading so we are not spreading our margin accounts (with an optimum 25%-30% margin vs. equity ratio) too thin – ultimately increasing our “staying power.” With these two items in mind, we have customized a prioritized approach for our long-running agriculture newsletter publication.
LET’S TALK STRATEGY
The Schad Commodity style of trading is commonly referred to as trend-following swing-trading. This regimental strategy follows the trend for each of the markets traded, and trades are usually only placed in the direction the market is trending. Our service doesn’t “buck” the trend. If the gold market is in an up-trend, then “buying long” is the appropriate choice for this strategy. If sugar or wheat is trending down, then “selling short” is in order.
As elementary as this may sound, many traders don’t get this right. They want to trade every zigzag or wiggle-waggle the market makes. That is exactly how amateur traders get stung. Get hurt too many times in this business, and you’re out of the game.
Once in a trade, you can expect each trade to last an average of four days. Some trades can last as short as a day to as long as a month (like gold did late summer of ’09) depending on the strength, or weakness, of the trend.
MONEY MANAGEMENT
Schad Commodity hand-picks specific commodity markets to ensure portfolio diversification, and include a disciplined form of money-management by providing among the highest rated profit factor (Wins vs. Losses) markets traded, with markets that demand some of the lowest initial margin required by your broker. If you’re already paying low commission for futures trading, and/or like your current broker relationship, that’s fine. But we know commissions and fees are to the trader/investor just as weather is to a foot soldier.
COMMITMENT TO EXCELLENCE
Before the very last market has closed for the day’s trading session, Schad Commodity is already preparing its trading plan for the next day. The plan is written and posted on the service fulfillment website for all to see well before the first traded market opens.
Once the market opens, all decision making is long over and orders are placed within seconds above or below the market depending if we are currently in a trade, or looking to initiate a trade. There is no hesitation. Once trades are initiated, protective stop losses (which are also predetermined as previously discussed) are placed. After exiting a trade, there is usually no re-entering that same day.
There is no “guessing” involved, or picking-and-choosing which signals to take – take them all with the trend. The trading program will have losing trades…so why guess how the market may behave tomorrow, or pick-and-choose based on emotion allowing yourself to be more wrong more often with the chance of eventually the strategy becoming impotent? Nobody can predict the future, nor can pickers-and-choosers ever become consistently successful – or professional – at trading.
TRADITION OF TRADING EXCELLENCE
Accounts must be properly funded to have the very best chance for success in the marketplace. ALL professional traders ebb and flow with making money in the markets via winning trades, and then giving back with losing trades (see “Performance“).
The only way an trader can make money in the marketplace is to be on the right side of the trend…or learn to cut losses short. The niche is to identify these trends once they emerge, and ride them like a surfer takes to a wave until the very end of the trend. It is at the very end-of-the-trend that a completely new trend develops, but still looks like a pullback within the original trend.
That is when mostly ALL trend traders get caught blindsided and are most likely to give money back to the market. It’s inevitable. The only way the investor can prepare for the worst is to be properly funded so if starting the trading program at the absolute worst time, that investor should have the best chance in surviving the drawdown period that occurred following the trading program’s peak in equity.
Schad Commodity has researched and ranked ALL of the markets we trade in chronological order in an effort to participate in as many markets as possible with varying account increments best suited for you. For increments positioned with smaller amounts, once account balances grow different markets should be added in the effort of ultimately being completely diversified with all 13 markets.
This allows us to stop adapting to current volatility and margin requirements, and to be confident that the smaller account increments are still getting the most optimal opportunity for their capital. This is why there are prioritized recommendations.
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