Making a living while cruising

[Delfin]

Occasionally in the past I have referenced commodity spread trading based on historical trends identified through Moore Research. *Without completely recovering old ground, spread trading is, in my opinion, a very low risk investment strategy because if done right, it covers multiple commodity categories, which results in a lower overall risk beta for the portfolio when compared to equities, bonds, or whatever. *Attached are the hypotehical 2011 results of following a single 1 x 1 spread for every suggested trade provided by Moore Research, which would require around $50,000 to handle maximum margin requirements. *MR provides an entry and exit date, a stop loss amount and of course, the long and short legs of the commodity. I can verify these results, and have found them consistently obtainable for many years, sometimes slightly better, sometimes slightly worse. *For 2011, the maximum draw down of equity was $10,000 and peak profit was $74,000 with an annual return for the 200 or so trades totaling $69,000. *This would be reduced by around $1,000 in commissions if an electronic trading platform like Interactive Brokers were used.

I don't have any interest in Moore, and only offer this to fellow retiring boaters who may still wish to generate investment income. *Buyer beware.

Images include:

1. The total returns by commodity category. *Within each category there would be multiple spreads involved, for example long April hogs while simulatenously short June live cattle.

2. The total returns for 2011 by month.

3. A snippet of the current spread trades currently active, showing the legs, the entry point, the exit point, and the current equity in the trade.

4. The hypothetical returns for the last 30 days, showing winning trades and the loss amount of these that reached the stop loss point.

 

[Forkliftt]

Carl, what is Forex and Rates?

 

[Delfin]

Forkliftt wrote:
Carl, what is Forex and Rates?

Forex are currencies, like the Aussie $, Swiss Franc, and Rates are interest rates like Treasury 5 and 10 year notes and 30 year bonds. *

Spread investing is based on the idea that you can't predict markets, but that the pricing of some commodities will move in relationship to each other in more predictable ways. *For example, whether energy as a category is going up, or going down, Unleaded Gas will usually go up more, or down less relative to Heating Oil going into the summer driving season. So a natural and rational spread is long Unleaded for delivery in June and short June Heating Oil at the same time. *Profit is generated if Gas goes up faster, or down slower than the corresponding short leg of heating oil.

What Moore Research does is run statistical analysis against commodity spreads like that which display some ratonal underpinning in the real world, then based on historical trends over the last 15 years, calculate entry and exit points for a spread contract with the greatest likelihood of success. *

What is important to their methodology is that they are not betting that the fly will walk up or down the wall. *They are noting rational market behavior driven by real world realities - old crop soy beans vs. new crop wheat as sources of protein, etc. then recommending a spread that takes advantage of that market behavior.

 

[7tiger7]

Forex is abbreviation for "foreign exchange", usually also abbreviated as "FX"

 

[Ocean Breeze NL]

Hey Carl, I played the FOREX but I tell ya, ya gotta have a method on how ya trade or you will taken to the cleaners. One must take one's emotions and place it outside when sitting in front of the computer, ya gotta stick to the method & not play by guess or by golly. Ya gotta know when the best times to trade and how long to stay plus have the software to see the players as well as what is stacked. If it becomes a hit and miss, you will be taken by the brokers every time.*

I have made $10's of $1000 in less than a half hour or so by sticking to a strategy and lost the same in the matter of minutes when I didn't place stops on the trade or let my greed take over, or played the wait and see game with exposed money.

It is like going to a poker table with sharks.. not for the faint of heart. I been there and wore the T-shirt.

Maybe someday I'll get back at it again but for now I don't have the time required to play the game with the big boys.

PS: I played only the FOREX Currencies spreads and not the Commodity side of things. All $US, $EUR, $YEN, $CAN etc....

Elwin*


-- Edited by Ocean Breeze NL on Wednesday 7th of March 2012 10:21:58 PM

 

[Delfin]

Ocean Breeze NL wrote:
Hey Carl, I played the FOREX but I tell ya, ya gotta have a method on how ya trade or you will taken to the cleaners. One must take one's emotions and place it outside when sitting in front of the computer, ya gotta stick to the method & not play by guess or by golly. Ya gotta know when the best times to trade and how long to stay plus have the software to see the players as well as what is stacked. If it becomes a hit and miss, you will be taken by the brokers every time.*

I have made $10's of $1000 in less than a half hour or so by sticking to a strategy and lost the same in the matter of minutes when I didn't place stops on the trade or let my greed take over, or played the wait and see game with exposed money.

It is like going to a poker table with sharks.. not for the faint of heart. I been there and wore the T-shirt.

Maybe someday I'll get back at it again but for now I don't have the time required to play the game with the big boys.

Elwin*

Elwin, if you'd asked me about trading Forex I would have advised against it. *Too risky. *In fact, I generally don't even trade currency spreads due to the volitility. *However, spreads in other categories is a very different animal than single leg trades of any commodity. *You have to look into the reasons, but IMHO spread trading presents less risk than buying the S&P.

 

[Ocean Breeze NL]

Ya I agree Carl, spreads are better way to play the markets.

I never got into options but a friend did very well with that too but only when he had options against the stock he held.*

All very intriguing to say the least.

Elwin*

 

[Delfin]

Ocean Breeze NL wrote:
Ya I agree Carl, spreads are better way to play the markets.

I never got into options but a friend did very well with that too but only when he had options against the stock he held.*

All very intriguing to say the least.

Elwin*

*If I had a dollar for every dollar I have lost on options, well, I would have more dollars. *Don't like them much because they are one way bets on some market. *I guess there is a strategy trading spread options, but just thinking about that makes my head hurt.

 

[FF]

Gamboling can work for some ,

but the only folks I have met in 50 years of cruising that have some income ,have been folks that cut hair.

 

[Keith]

Be, or take a nurse with you. They can always work, anywhere. Or a marine mechanic or refrigeration.

 

[Larry M]

Keith wrote:
Be, or take a nurse with you. They can always work, anywhere. Or a marine mechanic or refrigeration.

Be an outboard motor mechanic.* We have a friend that cruises and is a mechanic.* He has on-board a*metal lathe, a welder plus a tig welder and*a regular machine shop.* 75% of his work is keeping outboards running.* He loves those 4 stokes.* The down side is he has*to stay in an area to get the word out and some countries make it hard for foreigners to work domestically.* If you work via the internet you eliminate both of those problems.

*


-- Edited by Larry M on Friday 9th of March 2012 08:56:22 AM

 

[Forkliftt]

Larry M wrote:

Keith wrote:
Be, or take a nurse with you. They can always work, anywhere. Or a marine mechanic or refrigeration.

Be an outboard motor mechanic.* We have a friend that cruises and is a mechanic.* He has on-board a*metal lathe, a welder plus a tig welder and*a regular machine shop.* 75% of his work is keeping outboards running.* He loves those 4 stokes.* The down side is he has*to stay in an area to get the word out and some countries make it hard for foreigners to work domesticity.* If you work via the internet you eliminate both of those problems.

*



That's what I thought Carl was talking about before I read the post:smile:Insead of "service vans" I could have a "service dink" Ha Ha! Stock the common wear items/ filters in the front cabin "shop/ parts room" for Detroits, Lehmans, 3208's, Perkins and others. Stock a macerator pump, head build kits and spare electrical sockets and bulbs. Learn about watermakers and how to repair them. Open up commercial accounts at Defender, WM, Jamestown Distributors and others. I suspect I would be more successful at this than "options", but I still want to learn about them. Cause the guy paying me $75 an hour cash probably knows all about options. And he is the one enjoying the cocktail in the afternoon while I am in his bilge replacing his fuel filter!!

 

[Forkliftt]

I think it's great that you share it with us. How about a recommended resource/ book for investing this way. Sort of I'm the "101" for beginners? You could PM if you want. Knowing the forum at times- anything you offer would be "wrong"!

 

[Delfin]

The Moore Research website provides some pretty good information.* I've spoken with these guys a couple of times, and they are really, really laid back. All they do is trade their own account and publish their computer driven research for a subscription of $50.00/month.* The "Free Links" on the left hand nav side of the home page has tutorials in it that explain a great deal.* Check out the "Tennis and Golf" link in that sectiion.* As near as I can tell, Moore spends his money building his own private golf and tennis court where he lives in Oregon.

I also have a written tutorial I did up for friends and family I can send you if you forward me your email address at carlf@previser.com.* I don't think I can attach things to a PM, so I'll send it to your regular email address.

The only book on spread investing I know of is Moore's "Encyclopedia of Commodity and Financial Spreads". That has a lot of information on the historic/rational reasons why the prices of different combinations of commodities will move at variance one with another, which is how you make money.* I think you can find the book on Moore's site, or Amazon (expensive.)

Or, if you just want to hand someone the money and have them execute on your behalf, Moore could probably make a recommendation of a broker who tracks their investing strategies on behalf of clients.* I have never used one, but know of one myself down in California.* If you want his name, let me know and I'll look it up.* From memory, a broker will charge about $25.00 per spread to do it for you, compared to about $11.00 to do it yourself.

*

 

[Forkliftt]

Sweet. I would prefer to learn this myself. I'm fixing to fire off you an email for the info you mentioned. Thanks!