How to Obtain the "Trading House Advantage"

Most of my trading is based on repetitive price patterns. My goal is to locate trades which will offer me a slight advantage over the markets. In other words, I want to "tilt the odds" in my favor on each trade that I initiate. I have developed two trading methods based on the principle of repetitive price patterns. One method is based on long-term price patterns and the other method is based on short-term price patterns. Below each method is briefly explained.

This method generates about 8 -10 trades per month. On average, each trade is held 4 to 5 weeks. The reason this method has produced consistent profits for the past 36-mos is because it's extremely diversified. It trades many markets (currencies, energy, financial, grains, meats, metals and soft). Whenever I'm losing money in one sector, there usually is another sector that will "pick up the slack." About two months out of each year, all of the sectors are making money at the same time. Obviously, that's when I accumulate most of my yearly profits. Unfortunately, I'll also experience a 2-months when each sector is losing money simultaneously.

It's no "big secret, that a large number of commodities will move in a very predictable pattern during certain times of the year. However, I'm convinced that most traders are not completely aware of these trading patterns. For instance, most traders (particularly novice traders) probably think that grain prices rise during the summer (June thru August). However, this is simply not the case most of the time.

If you go back over the past 15- years and examine price patterns for Corn, you will find that corn prices will have a definite bias to the downside over 70% of the time throughout the summer months. Therefore, l always look to short the Grains from June thru August because the "odds" are on my side. This is the underlying basis of my entire trading method.

This is just one example. I have dozens of other trading patterns that I use each year throughout all of the commodity complexes. The "secret" to success of this trading method is the fact that all my trades have a greater than 50% chance of making money. Once again, the "odds" are on my side.

My short-term trading method is based on the belief that most markets will "gap open" in the direction of the previous day's closing trend. To profit from the gap opening, I must find a simple way to determine the market's current trend and establish a position before the market closes. My goal is to liquidate the trade during the next day's opening range; hopefully with a good profit.

Of the two trading methods, I like the short-term method better because the equity curve is much smoother than the long-term method. However, the long-term method has a greater profit potential and is much less time-consuming to trade.