Diary of a Professional Commodity Trader - Lessons from 21 Weeks of Real Trading Lessons from 21 Weeks of Real Trading

Acknowledgments xiii

Part I Foundations of Successful Trading 1

Introduction 3

The Invention of a Commodity Trader 3

Why I Wrote This Book 7

This Book's Audience 9

The Book's Road Map 14

Chapter 1 The History and Theory of Classical Charting Principles 19

My Perspective of the Principles 20

Three Limitations of the Principles 21

Summary 22

Part II Characteristics of a Successful Trading Plan 23

Chapter 2 Building a Trading Plan 25

Trader Personality and Temperament 25

Adequate Capitalization 29

Overall Risk Management 30

Points to Remember 32

Chapter 3 Identifying the Trades and the Trading Vocabulary 33

Trade Identification 35

Vocabulary of the Factor Trading Plan 35

Points to Remember 54

Chapter 4 Ideal Chart Patterns 55

Reversal H&S Pattern in Copper 56

Reversal Rising Wedge in AUD/USD 56

Continuation Wedge and Reversal Failure Top in Soybean Oil 57

Reversal Triangle Bottom in Sugar 58

Continuation and Pyramid Patterns in USD/CAD 58

Reversal Top in Silver 59

Continuation H&S Pattern in the Russell 1000 Index 60

Continuation Rectangle in Kansas City Wheat 61

Continuation Rectangle and Pyramid Triangle in Crude Oil 61

Continuation H&S Top in the Dow Utilities 63

Continuation Triangle, Reversal M Top, and Flag in the EUR/USD 63

H&S Reversal Top and Three Continuation Patterns in the GBP/JPY 65

A Reversal Symmetrical Triangle in the AUD/JPY 66

Two Continuation Patterns in GBP/CHF 67

A Triangle and Running Wedge in Sugar 67

An H&S Bottom in Apple Computer 68

A Major Continuation H&S and Symmetrical Triangle in Gold 68

A Series of Bullish Patterns in Copper 70

A Failed Ascending Triangle in the USD/CAD Crossrate 71

A 12-Week Rectangle in the Dow Jones Transport Index 72

A Rare Horn in Brent Sea Oil 72

An H&S Bottom Launches the 2009 Bull Market in the S&Ps 73

Summary 74

Points to Remember 74

Chapter 5 How the Factor Trading Plan Works 75

Trade Identification 75

Trade Entry 84

Trade Risk Management 85

Trade Order Management 86

Points to Remember 89

Chapter 6 Three Case Studies Using the Factor Trading Plan 91

A Remarkable Technical Event in the Dow Jones 92

A Year Trading Gold 94

A Year Trading Sugar 104

Points to Remember 113

Chapter 7 Characteristics of a Successful Trader 115

Intimate Knowledge of Trading Signals 116

Discipline and Patience 117

Analysis of Self and of the Trading Plan 117

It Takes a Leap of Faith 120

Points to Remember 121

Part III A Five-Month Trading Diary: Let The Journey Begin 123

Chapter 8 Month One: December 2009 127

Trading Record 129

Summary 143

Chapter 9 Month Two: January 2010 145

Identifying Trading Opportunities 146

Amending the Plan 151

Trading Record 152

Summary 170

Chapter 10 Month Three: February 2010 171

Sticking to the Plan in Choppy Markets 171

Trading Record 173

Summary 187

Chapter 11 Month Four: March 2010 189

Trading Record 190

Summary 201

Chapter 12 Month Five: April 2010 203

Relying on Classical Charting Principles 204

Trading Record 205

Outlook for the Future 210

Summary 214

Part IV The Wrap-Up 215

Chapter 13 Analysis of Trading Performance 217

How the Trading Plan Performed 221

How the Plan (and the Trader) Evolved 227

Summary: Best Practices Going Forward 228

Chapter 14 The Best Dressed List 231

A Seven-Month Double Bottom in AUD/USD 231

A 14-Month Coil and Nine-Month Descending Triangle in EUR/CHF 233

A Six-Month Wedge in EUR/USD 234

A 16-Week Horn in GBP/USD 235

A Four-Month H&S in Bottom NZD/USD 236

A Six-Month Ascending Triangle Failure in USD/CAD 237

An Eight-Month H&S Bottom in the S&Ps 238

A 14-Month Symmetrical Triangle in Sugar 239

A Seven-Month Triangle in Gold 240

A Series of Continuation Patterns in Copper 242

An H&S Bottom in Crude Oil 243

Summary 243

Postscript 245

Appendix A Factor Trading Plan Signals 249

Appendix B Quick Reference to Charts 257

Appendix C Recommended Resources 269

Author's Note 271

Index 275