Make Money While Cruising - List

[sparrowhawk1]

Originally Posted by boden36

Ameranth is an interesting case study which has implications for decision making.
He was trading spreads, but they were so narrow (1 month) and based on such a specific set of circumstances that his behaviour is better described as gambling.
Some time ago the book Deep Survival was recommended on this forum. It is an interesting read and relevant to cruising sailors.
The author details numerous case studies in which an initial decision was taken to proceed and then a kind of tunnel vision ensued which blinded the participants to changes in the world around them. Instead of aborting the expedition they clung doggedly to their original goals and disaster ensued.
This professional trader at Amaranth ended up with an enormous position in natural gas and kept adding to it. It was only a matter of time before he crashed and burned.
Amaranth is more a story of poor decision making than a commentary on spread trading.

Regards,
Richard.

Yup as a sailor I've always had a problem with the divers "mantra" plan the dive and dive the plan

[Certeza]

Originally Posted by boden36

Ameranth is an interesting case study which has implications for decision making.
He was trading spreads, but they were so narrow (1 month) and based on such a specific set of circumstances that his behaviour is better described as gambling.
Some time ago the book Deep Survival was recommended on this forum. It is an interesting read and relevant to cruising sailors.
The author details numerous case studies in which an initial decision was taken to proceed and then a kind of tunnel vision ensued which blinded the participants to changes in the world around them. Instead of aborting the expedition they clung doggedly to their original goals and disaster ensued.
This professional trader at Amaranth ended up with an enormous position in natural gas and kept adding to it. It was only a matter of time before he crashed and burned.
Amaranth is more a story of poor decision making than a commentary on spread trading.

Regards,
Richard.

Absolutely, there was horrible decision making at amaranth. Every losing strategy is an example of poor decision making. Some more extreme than others.

The point remains that simply trading the spreads will not prevent excessive losses. Everything still boils down to risk adjusted returns (more precisely positive expectancy ratios). Spreads don't inherently posses better risk adjusted returns than the outrights. It all depends on the method and good decisions.

For me, every day the existing trades are run through the analysis programs to quantify existing conditions, and any possible trades to better the situation are identified. I'm just suggesting that a beginner won't have access to this type of analysis, and most won't really have a way to properly determine whether adding to or reducing the position is most appropriate.

At any time before, during, and after a trade the trader should be able to identify the expectancy, expectancy ratio, and turnover frequency. If they can't provide that information, then they are really just gambling. How many average joe traders do you think can provide that info?

[Delfin]

Originally Posted by boden36

I am sure Certeza is correct in saying that many forms of market trading are financially dangerous.
However, I have been trading seasonal commodity spreads for four years now.
Results as follows:
Year 1. Profit $67000
Year 2. Profit $20000
Year 3. Profit $67000
Year 4. (First half) $90000
It really is not rocket science, but you need significant capital that you can afford to lose.
I also feel insecure away from a reliable internet connection which may make it difficult for remote area cruisers.

Regards,
Richard.

Richard, glad to see you are still doing well. As you say, it is not rocket science, although there will be plenty of experts who will say otherwise, and fewer still who will investigate it themselves.

[Delfin]

Originally Posted by Certeza

According to my sources on the floor at the exchange, they were spreads. Specifically the 2007 March/April spread. This seasonal spread typically widens in Aug and Sep of the prior year as hurricanes threaten nat gas supply in the gulf. In fact, he had traded this same spread big the year before and when Katrina and Rita hit, Amaranth fund gained $1 billion, and Hunter started to become well known. But in 2006, there were no real damaging storms and seasonal inventories began to rise. During Jul, Aug, and Sep as the spread was contracting, Hunter was adding to the position at what looked to be even better prices. As soon as the spread widened again like it does every year, they would make a ton of money.

Unfortunately for the Amaranth investors, by the third week in Sep there had been no serious storms and the futures went into free fall, collapsing the spread. By this point they were facing margin calls and had a position that was getting away from them so quickly that there was no way out of it in an orderly fashion. The rest is history.

The thing about seasonal spreads is that virtually everyone knows how they typically behave. So ask yourself, if everyone knows it and it is easy money, why isn't every fund out there making that easy money all day long? The reason is that most of them have risk departments that are properly defining the real risk that the spread would move outside of historical precedent. They aren't piling into that trade because there are enough people in it already that the edge is gone. The true risks already outweigh the rewards.

But the "sure thing" illusion for seasonal spreads is strong and can last for a long time. Amaranth opened their fund in 2000 and up until the blow up they had never had a losing year, even during the 911 fiasco. Their energy futures trades were averaging 30% annual returns during that time.

I'm not suggesting that futures spreads are a bad trade. My firm specializes in futures spreads, albeit not in commodities. But the risks must be completely defined. For anyone to suggest that a beginner can just start up trading futures spreads and make easy money with limited risk it suggests that he hasn't really completely identified the risks.

Also, keep one thing in mind about your 'professionals'. They might be good or they might be bad. Statistically, less than 10% of professional managers has the skills to provide better risk adjusted returns than the broader market. But those of us who are good are still held to a completely different standard than you trading your own money.

For example, if I ever lost more than 10% of my clients' money, they would all leave. Even if I had doubled their acct up to that point. In fact, if I ever approach 5% drawdown, some would leave and the rest would get nervous. Even if the market is down 20%, that is no excuse. I run an absolute return program, I can't just beat the market, I have to turn a profit every year. When the market is down, I have to be up. When the market is up, I have to be up. And when the market is sideways, I have to be up. And then they get nervous if I'm not making 'enough" money. For many of them, the minimum acceptable return is 20% a year.

So to recap, I have to never have a temporary drawdown more than a fraction of the acct size. Every year has to be positive, and really every quarter has to be positive because I don't make money unless the client makes money. And then without taking hardly any risk I still need to get >20% annual. It ain't easy.

Brian Hunter was not investing as advised by myself and others. Low risk spread trading involves multiple investments in multiple categories of commodities to reduce concentration risk, and only in spreads so that it is generally irrelevant whether the market goes up or down. Amaranth had their heads handed to them because they bet billions on a single commodity, on a single spread within that commodity and equivalently made a bet that the fly would crawl up the wall and not down. Dumb and deserving of loss.

The advice given by me and others on the advantages of spread trading, which can be done without the cost of a 'professional' adviser is offered by people with nothing to gain or lose whether anyone pays attention or not. Advice given by those making money from managing the money of others is not quite the same.

Having successfully traded spreads as recommended for over 15 years, consistently generating annual returns in excess of 50% of committed capital I have no qualms about recommending that people investigate the method themselves, while having no interest in whether they pay attention or not.

[barnaclejim]

Sitting in the Med and sometimes close to those rich yachtie powerboats with all their lites on I was thinking that if I had one of those gensets I would turn out the deck and cabin lites and the big TV things in all the cabins and grow Medical Marajuana with the power. I bet the other cruisers in the anchorage wouldnt mind the fumes and I heard
there is good money in that and a market in most ports. Just thinking outside the box.....

[Delfin]

Originally Posted by Certeza

The point remains that simply trading the spreads will not prevent excessive losses. Everything still boils down to risk adjusted returns (more precisely positive expectancy ratios). Spreads don't inherently posses better risk adjusted returns than the outrights. It all depends on the method and good decisions.

I don't question your professional acumen, nor your success for your clients, who pay you to be successful, but this statement is simply false. By definition spreads are lower risk than straight trades because they can be profitable in up or down markets while a straight trade can only be profitable in one market. Risk adjusted returns for spread trading exceed straight leg trading, which in my opinion is simple gambling, by the simple mechanism of placing a boat load of trades with seasonal basis for being profitable that are relatively short in holding period - a couple of weeks to a couple of months. At any one time, I have a couple dozen spreads active, some winning and some losing, but in the aggregate over 12 months, always absurdly profitable. If it were only me that experienced this, perhaps I would just be lucky. But everyone I know who has ever simply followed simple rules ends up with the same returns. Maybe we're all lucky.....

[Certeza]

Originally Posted by Delfin

Brian Hunter was not investing as advised by myself and others. Low risk spread trading involves multiple investments in multiple categories of commodities to reduce concentration risk, and only in spreads so that it is generally irrelevant whether the market goes up or down. Amaranth had their heads handed to them because they bet billions on a single commodity, on a single spread within that commodity and equivalently made a bet that the fly would crawl up the wall and not down. Dumb and deserving of loss.



The advice given by me and others on the advantages of spread trading, which can be done without the cost of a 'professional' adviser is offered by people with nothing to gain or lose whether anyone pays attention or not. Advice given by those making money from managing the money of others is not quite the same.



Having successfully traded spreads as recommended for over 15 years, consistently generating annual returns in excess of 50% of committed capital I have no qualms about recommending that people investigate the method themselves, while having no interest in whether they pay attention or not.

I agree with you about amaranth.

Just to clarify to make sure the claims being made on this topic are comparing apples to apples. Are you claiming 50% return on margin or return on portfolio?

[glowprofishing]

Start a small ebay business that sells phone accessories and then pay someone on land to ship out the goods. You manage the business from sea w/ internet access.

[Certeza]

Originally Posted by Delfin

... this statement is simply false. By definition spreads are lower risk than straight trades because they can be profitable in up or down markets while a straight trade can only be profitable in one market. Risk adjusted returns for spread trading exceed straight leg trading, which in my opinion is simple gambling....

It seems that a critical part of my point is being missed. I'm not arguing against spreads. That is what I trade as well. There are many virtues of spreads for sure.

They don't INHERENTLY have better risk adjusted returns. They only become that way through proper execution method. This is a simple concept to demonstrate. What is the expectancy ratio of a spread? What is the expectancy ratio of an outright?

The question is the same as asking, "how long is a piece of string?"

Re: your gambling comment. Gambling doesn't have much to do with whether someone trades spreads, outrights, stocks, bonds, or options. It has only to do with whether they can properly identify a positive expectancy ratio prior to making the trade and execute in a manner that maintains that positive expectancy. If they can't or don't, then they are gambling. If they can, they aren't gambling. Plain and simple.

[Delfin]

Originally Posted by Certeza

It seems that a critical part of my point is being missed. I'm not arguing against spreads. That is what I trade as well. There are many virtues of spreads for sure.

They don't INHERENTLY have better risk adjusted returns. They only become that way through proper execution method. This is a simple concept to demonstrate. What is the expectancy ratio of a spread? What is the expectancy ratio of an outright?

The question is the same as asking, "how long is a piece of string?"

Re: your gambling comment. Gambling doesn't have much to do with whether someone trades spreads, outrights, stocks, bonds, or options. It has only to do with whether they can properly identify a positive expectancy ratio prior to making the trade and execute in a manner that maintains that positive expectancy. If they can't or don't, then they are gambling. If they can, they aren't gambling. Plain and simple.

Fair point on return potential. The approach I have mentioned before on other similar threads to this is a systematic entry and exit of seasonal spreads across all categories, although I admit I don't much like currencies, given what is going on in the world. Such a systematic and diverse approach lowers the risk considerably and generates consistent returns, at least for me, and as far as I know for others following the same model of a minimum of 50% return on the highest initial margin requirement for the basket of trades over the year. That is typically around $30-40k. For example, on an account I trade for one of my kids, the realized P&L is $20,261 against 50 trades (31 closed, 19 still open) for the last quarter with around $30k required for margin plus a buffer. It takes around 3 hours a week to review the recommended spreads (I use Moore Research) and set them up to auto execute on whichever day is statistically optimum. While I have never even thought about expectancy ratios, looking up how to calculate it online, last quarter had an expectancy ratio of 1.01, which I gather is ok.

Few brains required, little baby-sitting, and month in and month out, year in and year out, reliably profitable. After years of working just fine, the whole approach may collapse tomorrow, but I doubt it. The reasons why hogs for delivery in August may cost less than live cattle for the same delivery are pegged to real world dynamics - cost of feed, weather, etc. Some years the traditional price movement may be broken, which is why you set a stop loss. If it doesn't work out, walk away because there are plenty more trades where that one came from. If Brian Hunter had done that, he'd still be in business.

[Certeza]

Originally Posted by Delfin

Fair point on return potential. The approach I have mentioned before on other similar threads to this is a systematic entry and exit of seasonal spreads across all categories, although I admit I don't much like currencies, given what is going on in the world. Such a systematic and diverse approach lowers the risk considerably and generates consistent returns, at least for me, and as far as I know for others following the same model of a minimum of 50% return on the highest initial margin requirement for the basket of trades over the year. That is typically around $30-40k. For example, on an account I trade for one of my kids, the realized P&L is $20,261 against 50 trades (31 closed, 19 still open) for the last quarter with around $30k required for margin plus a buffer. It takes around 3 hours a week to review the recommended spreads (I use Moore Research) and set them up to auto execute on whichever day is statistically optimum. While I have never even thought about expectancy ratios, looking up how to calculate it online, last quarter had an expectancy ratio of 1.01, which I gather is ok.

Few brains required, little baby-sitting, and month in and month out, year in and year out, reliably profitable. After years of working just fine, the whole approach may collapse tomorrow, but I doubt it. The reasons why hogs for delivery in August may cost less than live cattle for the same delivery are pegged to real world dynamics - cost of feed, weather, etc. Some years the traditional price movement may be broken, which is why you set a stop loss. If it doesn't work out, walk away because there are plenty more trades where that one came from. If Brian Hunter had done that, he'd still be in business.

I hope we aren't getting too far off topic for this thread, but I think that investment income is the ideal way for a cruiser to make money, so maybe this discussion helps with that.

Also, please note that I'm not trying to sound condescending at all. I'm happy for you that you've done well for yourself over a pretty significant time period. You certainly don't need the validation of some stranger on the internet. I'm just trying to explain a concept that isn't widely understood.

First let's consider the the idea of using return on margin (ROM) to suggest return potential. Professional analysts rarely use ROM when discussing returns. This is because ROM doesn't provide much of an idea about the actual returns of the system. Required margin can be changed at any time by either the exchanges or your broker. So for example, let's say that in your case, you are getting 50% return on a trade that has initial margin of $1,000. So you expect to make $500. Suddenly the CME decides to increase the margin requirement by 50%, so it is now $1,500. Your profit on the trade has not changed at all, still $500, but because the margin is now $1500, your ROM is only 33% instead of 50%. Did anything change in your position? Nope. No reduction of actual return, and no increase in risk. Just an arbitrary and sometimes nonsensical change in the amount of money that the exchange is making you have on deposit.

Secondly, because of the leveraged nature of futures (spreads included), and the ability for margins to fluctuate wildly, virtually nobody maintains the margin level at 100%. Doing so is typically extremely risky (which is reflected in the expectancy ratio). So because margin can arbitrarily change at any time and nobody maintains 100% margin level, using the ROM number to imply return potential is misleading. The only use for that number is in letting the trader know if it would be possible to further lever his system without running out of available cash. Not useful for reporting returns.

To put it in perspective for our discussion though, referencing my previous statement that my investors typically demand greater than 20% return on portfolio. They also expect that at any given time I'll be using less than 20% of available margin. That would indicate a minimum acceptable ROM of >100%, but again the number is mostly meaningless.

Now getting back to the concept of expectancy. First I should note that any expectancy ratio greater than 0.00 means the system has been profitable. But since you've realized profit each year, we already knew that your historic expectancy would be positive. But we can deduce a couple things from the number you reported of 1.01 that will give us some perspective for this discussion.

Your ratio of 1.01 means that if you want to make $101 you must risk $100. Keep in mind that this only refers to your average risk per trade, not the max risk. An expectancy ratio of 1.01 is respectable. But for perspective, at the present time, each time I scan for new trades, the ones I end up trading usually have a ratio range of 2.0-4.0, indicating that for equal risk my trades are expected to return 2 to 4 times as much as your system. So hypothetically, we both might end up getting similar returns at the end of the year, but my program would've risked far less to get there. This is important to my clients because since I only typically use less than 20% of available margin, they have the choice to leverage a bit if they want. So if they were trading the described seasonal spread system and were ok with the risk in that system, they could theoretically leverage my system 2X and end up with the same risk, but over the course of a year the compounding returns would have them gain more than 2.5X what they would expect in that seasonal spread system.

More importantly, rather than simply taking the shotgun approach and making a whole bunch of trades to spread the risk, if you can calculate the expectancy ratio before hand you are able to only take the trades that offer both diversification and high return per risk. This way you avoid introducing sub par trades and extra trading costs into the system. Each new trade or adjustment is only made based on anticipation of increased expectancy. Because, why would anyone knowingly make a trade that lowers their long term profitability?

I am a big proponent of people managing at least a large portion of their own portfolio if they can. But if I was given a choice between a DIY strategy that required me to spend a few hours a week to run it, and a completely hands off professionally run system where I didn't have to do anything, and the latter had better return on risk. At least for a portion of my portfolio, I would hire the professional.

[Delfin]

Originally Posted by Certeza

I hope we aren't getting too far off topic for this thread, but I think that investment income is the ideal way for a cruiser to make money, so maybe this discussion helps with that.

Also, please note that I'm not trying to sound condescending at all. I'm happy for you that you've done well for yourself over a pretty significant time period. You certainly don't need the validation of some stranger on the internet. I'm just trying to explain a concept that isn't widely understood.

First let's consider the the idea of using return on margin (ROM) to suggest return potential. Professional analysts rarely use ROM when discussing returns. This is because ROM doesn't provide much of an idea about the actual returns of the system. Required margin can be changed at any time by either the exchanges or your broker. So for example, let's say that in your case, you are getting 50% return on a trade that has initial margin of $1,000. So you expect to make $500. Suddenly the CME decides to increase the margin requirement by 50%, so it is now $1,500. Your profit on the trade has not changed at all, still $500, but because the margin is now $1500, your ROM is only 33% instead of 50%. Did anything change in your position? Nope. No reduction of actual return, and no increase in risk. Just an arbitrary and sometimes nonsensical change in the amount of money that the exchange is making you have on deposit.

Secondly, because of the leveraged nature of futures (spreads included), and the ability for margins to fluctuate wildly, virtually nobody maintains the margin level at 100%. Doing so is typically extremely risky (which is reflected in the expectancy ratio). So because margin can arbitrarily change at any time and nobody maintains 100% margin level, using the ROM number to imply return potential is misleading. The only use for that number is in letting the trader know if it would be possible to further lever his system without running out of available cash. Not useful for reporting returns.

To put it in perspective for our discussion though, referencing my previous statement that my investors typically demand greater than 20% return on portfolio. They also expect that at any given time I'll be using less than 20% of available margin. That would indicate a minimum acceptable ROM of >100%, but again the number is mostly meaningless.

Now getting back to the concept of expectancy. First I should note that any expectancy ratio greater than 0.00 means the system has been profitable. But since you've realized profit each year, we already knew that your historic expectancy would be positive. But we can deduce a couple things from the number you reported of 1.01 that will give us some perspective for this discussion.

Your ratio of 1.01 means that if you want to make $101 you must risk $100. Keep in mind that this only refers to your average risk per trade, not the max risk. An expectancy ratio of 1.01 is respectable. But for perspective, at the present time, each time I scan for new trades, the ones I end up trading usually have a ratio range of 2.0-4.0, indicating that for equal risk my trades are expected to return 2 to 4 times as much as your system. So hypothetically, we both might end up getting similar returns at the end of the year, but my program would've risked far less to get there. This is important to my clients because since I only typically use less than 20% of available margin, they have the choice to leverage a bit if they want. So if they were trading the described seasonal spread system and were ok with the risk in that system, they could theoretically leverage my system 2X and end up with the same risk, but over the course of a year the compounding returns would have them gain more than 2.5X what they would expect in that seasonal spread system.

More importantly, rather than simply taking the shotgun approach and making a whole bunch of trades to spread the risk, if you can calculate the expectancy ratio before hand you are able to only take the trades that offer both diversification and high return per risk. This way you avoid introducing sub par trades and extra trading costs into the system. Each new trade or adjustment is only made based on anticipation of increased expectancy. Because, why would anyone knowingly make a trade that lowers their long term profitability?

I am a big proponent of people managing at least a large portion of their own portfolio if they can. But if I was given a choice between a DIY strategy that required me to spend a few hours a week to run it, and a completely hands off professionally run system where I didn't have to do anything, and the latter had better return on risk. At least for a portion of my portfolio, I would hire the professional.

Just a few responses. Margins don't "fluctuate wildly". I have seen margins go up as volatility goes up, but spread margins are always a fraction of straight trade margins for a simple reason. They are far less risky. But I have never seen them move significantly in one direction or another.

When you say "Your ratio of 1.01 means that if you want to make $101 you must risk $100" you are essentially saying that such an investment provides a 100% rate of return, since after risking $100, I now have $201. Since most of the trades last 2 weeks to 2 months, a 100% return would seem to be more than respectable to most of us.

When calculating returns, you have to calculate the return as a percentage of something. That something is usually how much money you have to invest to get the return. The maximum capital required to a complete set of seasonal spreads for 12 months per Moore's analysis is around $30 - $40k. If at the end of the year if you $80k in your account, most people will think that they doubled their money. If, as you say, you can return 2.5x that amount, then they would have put in $40k at the beginning of the year and at the end would have $140k. If so, you must be very busy.

Seasonal spread trading is not "shotgun" trading, any more than buying the S&P 500 is. It is a way to avoid concentration in one sector and also ensures that if the returns in metals is poor, it may be made up with a return in grains. By making multiple trades within each category throughout the year, the risk is further reduced. By using stop losses, the risk is further reduced. Net net, lower risk while maintaining outstanding returns.

I've used professionals before, but they never returned what I could, so don't bother anymore. No offense intended.

[Certeza]

Originally Posted by Delfin

Just a few responses. Margins don't "fluctuate wildly". I have seen margins go up as volatility goes up, but spread margins are always a fraction of straight trade margins for a simple reason. They are far less risky. But I have never seen them move significantly in one direction or another.

Depends on the futures and the spreads. You implied that you trade across a wide spectrum of futures. As an example, there was a certain category of futures about 5 months ago that from one day to the next the exchange increased spread margins by 500%. While fairly rare, things like this do happen, and a trader must have enough margin to cover the new margin requirements.

When you say "Your ratio of 1.01 means that if you want to make $101 you must risk $100" you are essentially saying that such an investment provides a 100% rate of return, since after risking $100, I now have $201. Since most of the trades last 2 weeks to 2 months, a 100% return would seem to be more than respectable to most of us.

I must not have explained the concept properly. That isn't what that ratio means. It isn't a 100% rate of return. It is 100% return on risk. IOW, 100% return on average loss. So to achieve that 100% rate of return you mentioned, your average losing trade would wipe out your entire account. For example, let's suppose that for your trades 3 out of 4 are winners. If you were trying to get that 100% return, 1 out of 4 trades would wipe you out. So yes, 100% rate of return would be amazing. But we are talking 100% return on risk, which is still respectable. Sometimes I'm forced to take trades that are less than 1.0 expectancy, but on average my trades are >2.0 which is also just very respectable. Sometimes I get trades that are around 5.0, but unfortunately those are harder to find.

When calculating returns, you have to calculate the return as a percentage of something. That something is usually how much money you have to invest to get the return. The maximum capital required to a complete set of seasonal spreads for 12 months per Moore's analysis is around $30 - $40k. If at the end of the year if you $80k in your account, most people will think that they doubled their money.

Yes, you do have to calculate a return on something. But that something IS NOT margin level. If I used return on margin to report my performance, the federal regulators would be shutting me down in a hurry. That is not acceptable practice because it is very misleading to investors. Standard practice is to report returns based on "nominal account value". Nominal account value includes the entire cash value of the account, plus any notional amount, which is cash that is not held in the trading account but is available to cover margin calls if necessary. It's a little tougher for DIY traders to accurately track this info because most don't have a set notional value. But it works like this. Let's say you had $50,000 in the trading account, and the initial margin is $35,000. Assume you made $17,500 this year (or 50% return on margin). Also assume that you have another bank account with $20,000 in it that normally you use for other purposes, but if you ever got a margin call you would use that to cover the margin call. The acceptable practice to compare your returns to professionals like me would be a $17,500 gain on a $70,000 account, or 25% annual return. That is more or less the method that I must follow to report returns to the public.

If, as you say, you can return 2.5x that amount, then they would have put in $40k at the beginning of the year and at the end would have $140k. If so, you must be very busy.

I detailed most of the answer above, but what I wanted to clarify is that since the expectancy ratio indicates a return on risk, you must know the risk in order to know the return. Just because my average trade has double the expectancy, that doesn't mean that my annual returns have been double what yours have been. Yours could be higher, but that is only mathematically possible if you took far more risk. The point is that my clients will not accept things that you allow yourself to do in you own account. I typically cannot exceed 20% margin useage, whereas your comments imply that you are typically above 75%. But according to the mathematics of expectancy, if there were no limits to the account, and the risk was the same, an expectancy of 2.0 gets double the returns of an expectancy of 1.0.

Seasonal spread trading is not "shotgun" trading, any more than buying the S&P 500 is. It is a way to avoid concentration in one sector and also ensures that if the returns in metals is poor, it may be made up with a return in grains. By making multiple trades within each category throughout the year, the risk is further reduced. By using stop losses, the risk is further reduced. Net net, lower risk while maintaining outstanding returns.

Actually I think your seasonal spread strategy is better than buying the S&P500 by a mile. With what you are doing you should have pretty low correlation and much more smooth returns that stock pickers. What I'm suggesting is that if you could utilize expectancy properly, you'd be able to achieve better diversification, reduced trading costs, and likely higher returns, all within that same technique that you are currently using.

I've used professionals before, but they never returned what I could, so don't bother anymore. No offense intended.

Totally understandable and no offense taken. I'm not a fan of the typical investment pros either. Most are just salesmen, few are actually active managers. Of those who are, it's disheartening that when I mention expectancy to a group of pros, 9 out of 10 won't have any idea what I'm talking about. That said, someone with your experience could probably significantly increase his returns by developing a full understanding of what I've been talking about. This is hardly the place for me to deliver a complete lecture on the techniques of using expectancy and quantitative finance. I'd encourage you to look into it further though (the most well known author on the topic is Van Tharp) as I think everyone here is probably sick of this finance chatter already.

Great job thus far, and best of luck into the future.

[Reinhardt]

Talk about same world different planets! I have no idea what any of the preceding posts mean, but it did make for interesting reading!!

[osirissail]

And how it relates to "Making money while cruising . . . " is beyond me. It would seem that somebody involved in this "trading" would require full time, high speed internet access. Unless you are willing to spend megabucks and have the room for a huge antenna like the mega-yachts and cruise ships have - you will most likely be like the rest of us with hit and miss access and slow internet service.

And who is sailing the boat while all this "trading" is going on? Or more properly, if your time is consumed by sitting in front of your computer doing these "trades" - what is the point in sailing to great locations which you will only get a chance to see out the porthole.

Or maybe they are talking about "trading" as a income source prior to leaving on their cruising lifestyle.