Let's Talk Trading (tm) with Ken Roberts
from April 12, 2005
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As we begin this evenings session, let me state the reason I conduct these
monthly chats: to provide you the opportunity to ask questions and pick the
brain of a successful, long-time, real-money trader. Its not the highest and
best use of our limited time here together for me to define basic terms and
explain introductory principles taught in your Course materials. Thats what my
Course Counselors are here for... Now is the time for you to use me to help
you apply the basics youre learning and to prepare you for what to expect
once youre out in the market itself (either paper trading or with real money).
And if we have some fun along those lines, so much better. Alright...
Ive got a Davidoff Robusto fired up, heres our platter of assorted Girl Scout cookies (we support our community!), the coffees poured, so lets talk commodities!
NOTE!!! When commenting on one of my Courses, please identify WHICH ONE. Also, when relating trading experiences and/or results, please give details: Futures contracts, options, options AND futures, etc. This helps others follow along and learn from your experience too.
Tim asks:
Hello Ken! Tim from Sarasota checking in. Is overall volatility of each market important to you when looking to trade? If so, what is the best way to determine this
at 6:10:20 PM
Use TOVI, Tim! Yes, volatility is important, but I have no way of determining what it is. To us mere mortals, we know volatility as a "fast market" (as brokers and commentators call it), but TOVI actually factors any market's current volatility into its formula for analyzing each market. Thanks!
GPcavemanfan asks:
In both TWMPMMM manuals you say that nobody cares more about my money than me. If that's true shouldn't I be cautious about using TOVI? Thanks for everything,
at 6:11:43 PM
No! GPcavemanfan. TOVI doesn't take your money and manage it! It's a tool YOU use to manage your own funds.
Amrit Bakare asks:
Ken, I am a new subscriber, but a veteran commodities trader. Do you send out an urgent email when you see something happening in the commodities in the middle of the week, for members to act on?
Second question: What commodity do you see as the next big bull market for this year
at 6:16:46 PM
Hello Amrit! First Answer: Yes, I just began sending out "It Just Happened . . ." emails on individual WGB Trading Strategy trades a week or so ago. These I handpick and send out sparingly. We DO have a new "Premium Alert Service" coming along soon, however, that pinpoints and alerts you the very moment we spot one of the WGB Trading Strategies hit any particular market. Stay tuned for that . . . .
Second Answer: If I knew the answer to that question, Amrit, I'd be richer than Bill Gates and Warren Buffet combined! (But I surely hope it's Coffee . . . .)
Thanks!
Warren Potter asks:
I joined your company about 10 years ago and had some early success but then made a trade that I felt cocky on and did not have a stop loss in place and lost a lot of money. I quit for quite a while but am back at it and have been back with you for approximately 6 months. I have always traded futures contracts and have noticed that you tend to lean toward the options more now. Do you find this more profitable and do you ever day trade?
at 6:21:26 PM
Hello Warren, and welcome back home!
Options didn't even exist when I began trading in 1983! And now, some 22 years later, the option markets keep growing exponentially. This is terrific because, to me, options are "the great equalizer." That is, an option allows you to wait out what could be huge setbacks in any market (the kind that "bit" you when you had no stop-loss in place!). Plus, you know your exact risk going in! Options can be even MORE profitable than futures contracts because of volatility!
Thank Goodness for options!
Thanks.
Tom G in Ensenada, MX asks:
Hello Ken. I've a bunch of questions for you tonight. Some of them may be best suited for one of your wonderful course counselors, so promise me that you will only answer the ones that may be of interest to all. The first: Do you ever average down? That is, do you ever add options after the prices have dropped?
at 6:24:06 PM
Hello Tom! Okay, I'll just answer those that will appeal to all this evening! Glad you're using my top-notch team of Course Counselors too! (They're the best, aren't they?!)
Yes, I DO average down in futures and options. In fact, I LOVE doing this because it's so contrarian!
chiropractic1 asks:
Hey Ken. Its great to be back after being away for a few years. I love the US Charts On line but was glad to see that you still have the paper charts too (something about marking those up!). Do you still use 50% retracing and levels in your trading?
at 6:27:43 PM
It's almost as if your question was a plant here this evening, chiropractic1!
Since 11:45 this morning, the crew and I have been across the street at the Ken Roberts Meeting Hall filming a 3-camera shoot of my latest and greatest 50% Retracement Rule video (DVD). Stay tuned for their release date!
Yes, I agree: I actually began today's shoot with singing praises of those paper charts --- NOTHING beats them (AND, you know, they smell just like money . . . .)
Trade on! Break a leg!
Tom G in Ensenada, MX asks:
In helping to deterine an exit strategy do you pay more attention to the daily or weekly 50% retracement level? (I pay more attention ot the weekly.)
at 6:29:37 PM
Hey, what's all this about 50% Retracement targets this evening? Talk about putting something out there in the ethers . . . .
I look at 50% Retracement targets first from the Daily chart point of view, then the Weekly, then the Monthly (and many times, two or even all three of these are the same target). I use these as liquidation or take-profit points.
Great question, Tom. Thanks.
Jim asks:
I would like to know when a market makes a 123 formation when do you get into the market after it goes past the 2 mark. I see on May corn you did not get in the market because it didn't stay past the 2 very long please explain what are you looking for after it passes the 2 mark
at 6:32:37 PM
Since we have the benefit of TOVI's Trade Tracker now, Jim, when trading a 1-2-3 top or bottom formation, we wait for Trend Tracker to CONFIRM the direction of the trend. This helps keep us out of false 1-2-3s (which are plentiful). On this Corn trade you mention, Trend Tracker never confirmed and told us Corn was indeed in an UPtrend (so we wait . . . .).
Gmann asks:
Hey Ken, New York City here. Love your course. question: i noticed on one of your charts (can't remember which) that it had a number one bottom formation, but two number 2 and three points. can you expain this? the #1 low didn't change. thanks.
at 6:36:29 PM
Yes, Gmann, most markets make SEVERAL #2 and #3 points! That's why trading this formation is more of an art than a science. For years, Course Members have been asking me for a "template" to place on a set of charts that would identify and confirm 1-2-3 formations, and I always have to respond that such a tool just can't exist --- BUT, we now have TOVI's Trend Tracker which is the closest thing to that template as I believe we're going to get!
Good question, Gmann. How's The Donald? Say "Hello!" for me when you see him!
donbh76 asks:
Hello Ken. Knowing volatility is a big factor, which markets would you recommend for a beginner?
at 6:38:39 PM
Volatility affects EVERY market, donbh76, at one time or another. So you cannot rule out any market because it doesn't get volatile! There's no such thing! Yes, some tend to be more volatile than others (Pork Bellies vs. Oats, for example), but I recommend a beginning trader paper trade EVERY market to get a hands-on feel for this. Thanks!
worldtrader asks:
how do you find a broker who is willing to work with you, not just take your money and leave you hanging?
at 6:45:50 PM
Call, interview, question, requestion, and simply talk to him or her! And don't be afraid to leave when you know you should.
Over the years, knowing as many traders as I do, perhaps the single biggest obstacle I observe these people confronting (unsuccessfully!) is dealing with brokers. Now why is this? It's YOUR money, your time, and your business. Why on earth would anyone let a broker (or anyone, for that matter!) get in the way?
It's ALL mental --- psychological. This is why I so strongly stress my Amazing Technique for Success Course. It's the most powerful Course I've ever seen in this department! But most people don't want to listen or to hear about it! "It's not for me!" they think. But it's that very thinking process that gets them into so much trouble! That's the human dilemma.
In fact, my first ATS private online Roundtable Chat is coming up Sunday evening, May 1st, 6:pm Pacific Time, and I can't wait! What a powerful session this will be! I encourage everyone online this evening to consider enrolling so you can take part too!
Thanks, worldtrader. Great question!
Warren Potter asks:
Does the continuous streaming of information now available from many brokerages make you make more trades?
at 6:50:07 PM
Good question, Warren!
No, I don't believe all this instant information makes me trade more (I still make my plans from my good ol' set of paper price charts), but I would say I UPDATE my charts and positions more often (since prices are so readily available online).
JB asks:
Hello Ken, I missed the chat on Jim Rogers book but if you could indulge a question regarding Jim's statistic on 75% of options expiring worthless (actually causing him to sell options). Has this been your experience, i.e., profits from 25% of your option trades being your gross profits? Thanks!
at 6:54:44 PM
Numbers lie, JB. You'll often hear it quoted that "95%" or, as you quote Jim Rogers saying "75%" of options expire worthless, BUT realize that a great percentage of options are purchased by those who are hedging other trades, or even physical commodities and EXPECT (and actually HOPE) those options expire worthless!!! Don't you HOPE your auto insurance "expires worthless" (without a claim) each year?! So no, you can't extrapolate from these "facts" that only 25% of options profit. That just isn't so.
On the other hand, writing options DOES interest me tremendously, and that's why the new option writing module is soon coming to TOVI!
Thanks.
fiumes asks:
Hi Ken! Joe from Jersey wants to know why you changed your style of trading from the old way when you used to have the Round Tables and you taught longer term tradind? You use to average down if a market went against you and ride the storm but now it seems that you are quicker to get in and out?
at 7:06:35 PM
I LOVE trading that way, fiumes! And now, with options, it's a lot easier, less risky, and even less costly for more people to do too. That's called LONG-TERM trading.
What I teach in the WGB Course is more SHORT-TERM strategies so people "get action" right away and can begin paper trading immediately to begin learning!
There's no conflict, fiumes! Thanks.
ready2win asks:
Hey Ken. Looking forward to the training coming up in May taking advantage of the the "Amazing Technique for Success". Thanks for the opportunity.
at 7:07:23 PM
Thank YOU, ready2win! The very first on May 1st! I can't wait . . . .
See you there!
jimf asks:
Greetings from Canada, I am new to trading and in reading the archives notice you refer people to the TOVI website. Would you please let me know if you use TOVI website, or TOVI included on your World's Greatest Business website? Thanks
at 7:08:41 PM
Both, jimf. The WGB website has one specific TOVI tool (TOVI's Trend Tracker), but the TOVI website has ALL of the powerful TOVI tools (with more and more coming soon)!
radway asks:
Hi Ken from Radway AB. When would you be holding a live course for trading. Do you still Do the courses yourself?
at 7:10:34 PM
I'll be doing more live seminars, radway (probably mostly here at the Ken Roberts Meeting Hall in Grants Pass), but in the meantime, there's always A Day With A Course Counselor available (that meets YOUR schedule) also here in Grants Pass.
Come on down!
BlindNoMore asks:
Ken - After reading or listening to Dr. Hawkins how has this information helped you trading? It seems as if the desire to get out of the rat race puts me in a position to "force trades." 9 to 5 seems out of reach on some days and right in front of me on other days. All the information is right in front of all of us (KRC, TOVI, etc.) so why don't we all find out right place?
at 7:11:33 PM
BlilndNoMore, trust me and get the ATS Course . . . .
sav asks:
hi ken:
the cooper today has drop few pt. should we still purchase the sept. contract?
at 7:13:31 PM
That's the one we purchased today, sav. (In case you don't know what sav is speaking of here, let me post yesterday's "It Just Happened . . ." email alert:
I am Andrew asks:
Good evening Ken and Crew. When I first took the TWAMPUM course, I had some serious reservations about ya all but thought anyone who raises historic trees and collects and prints "treasure books" can't be all bad. I am trading futures and options on a small scale. Having difficulty understanding the option opportunity. Today decided to re read the WGB course. I'd recommend that to anyone; boy I missed a lot the first time.. I am into the Amazing Techniques course and cannot express my gratitude enough for Dr. Paul Bruntons book - The Secret Path. Thank you and 4 star for availing it to us.
I am Andrew from sunny southern Alberta.
at 7:16:39 PM
Thank you Andrew! Words of wisdom . . . . I appreciate your kind words.
ONEWAY asks:
Matthew, Kalmath Falls,OR. Hey Ken, How long should I paper trade before I invest for real? I paper traded in the past and did well, but when I traded for real, I lost. Please help. Thanks Matthew
at 7:18:48 PM
See? What's the big difference between paper trading, doing well, and then trading for real? Your MIND, that's what's different. Sorry to harp on it, but here again, enroll in the ATS Course and transcend what's holding you back!
Okay everyone: What's my response to "How long should I paper trade before I invest for real?"
Ready now? Go: You should paper trade until you find yourself saying "I'm tired of being right and not making any money on it" a LOT . . . .
Thanks ONEWAY!
spirit asks:
Hi ken, thanks for all your help. It seems the S-1 strategy sometimes turns Strong then abruptly changes back to moderate. Should you liquidate at the new rating or hold on with your existing exit strategy? Also, do you use bee's to pollinate your apples?
at 7:23:16 PM
Hi Spirit! Yes, the S-1 Strategy has been very whippy lately (volatile markets, as several have mentioned this evening), but . . . welcome to commodities!
Liquidate at the exit strategy you planned on BEFORE you entered that trade. This is a good mental exercise too: Plan your trade and trade your plan!
Yes, as a matter of fact, we have four beehives (40,000 bees!) of Italian bees (very mild-mannered bees) and the honey they produce is exceptional! Very dark, very rich, very herbal. It's even impressing the experts!
Home Biz Joe asks:
Hey Ken...I'll try again...what are your thoughts on Crude Oil???
at 7:24:09 PM
I'm long, Home Biz Joe, and profiting big-time! (Well, actually, my profits are going down the gas tank of my new Hummer H2 . . . .)
kasun73 asks:
Good answer on volatility!! Look at what oats did two weeks ago!! spiked up! thankfully- I was using another of YOUR stragities (break-out) and made $350 per contract up! and then rode the spike down too!! Thanx Ken!!
at 7:24:59 PM
You da man, kasun73! Good goin'!
Ruder asks:
What exactly got you so interested in Jim Rogers and his market commentary/forecasts? Isn't he just another "guru" devoted to "funnymentals?" I do appreciate his success in the quantum fund though, but why not recommend one of soros's books? (is it his politics?)
at 7:33:40 PM
Funny you should ask, Ruder . . . .
First of all, I consider Jim Rogers a DOER (not a "guru" or one who's just all talk). He's made the money trading. I do NOT agree with all he says about fundamentals (and then shows us a monthly chart to illustrate his point!!!), or even that he says he doesn't know many technical traders who are successful at trading when over $100 BILLION is managed in commodity funds in the U.S. and the vast majority of those funds is managed using technical analysis!!!
I recommend Jim's book(s) (www.fourstarbooks.com) because it's always nice to get a new perspective (and a POSITIVE perspective) on commodities for a change, since I've endured such negative reactions from newsmakers and the press since I first began this in 1983!!!
Where did you hear "Commodities can't go to zero!" first? From ME! Twenty-two years ago! But the press ignored and pooh-poohed that fact! Now, all the newspapers and magazines are quoting Jim Rogers saying the very same words and praising his book! Go figure . . . .
And just this week, I found this quote in a market commentary online:
"Very few, as Soros implies in his comment in the book, Soros on Soros, about his former partner, Jim Rogers (fund manager and author of The Investment Biker): "The big difference between Jim Rogers and me was that Jim thought that the prevailing view was always wrong, whereas I thought that we may be wrong also."
So here you go, Ruder: Soros, a billionaire trader, and Jim Rogers, partners in one of the most successful commodity funds of all time, DISAGREEING!!!! It just shows you that each of us must make this business our own.
grantman asks:
Ken, should I be concerned about thin volume in options markets?
at 7:40:41 PM
The thinner the market (even those listed "0 Volume and 0 Open Interest" may take a bit longer to get filled in, but work with your broker using LIMIT orders. This is called "working the market", and it's how a good broker earns his or her commissions!
kevin asks:
Hi Ken,
Over the past 20 years what market moves that you were involved in surprised you the most? Winners and not such winners.
at 7:43:47 PM
Biggest winner: Coffee (on its way up to 318).
Biggest drawdown (nearly $3 million): Palladium (on its way up past 1000 the end of 2000).
As Gomer Pyle would say, "Shazaam, shazaam, shazaam . . . ."
Tradeoholic asks:
Ken, Do you still consider open interest in a contract/market to be less important when using options....or do you check to see if the particular contract is fluid enough to enable you to get filled in a reasonable amount of time?
at 7:44:58 PM
I just give my broker a limit order (without referring to volume and/or open interest), and if it's not filled that day, I reconsider . . . .
Contrarian Ron from Alaska asks:
Ken: Both the CRB and the Energies were (still are) extremely high. Did you short either of these markets on the way up as you might have done in the old days (pre TOVI) or are you waiting for the retracement to get going and be confirmed by TOVI before you consider taking a position?
at 7:46:43 PM
I'm still long, Contrarian Ron from Alaska, but I plan to be shorting these markets when I see more topping action/formations. And yes, I'll let TOVI confirm this too. Good question. Thanks!
Mike asks:
Hi Ken I am a bit challenged with determining the monthly 50% for OJ, there have been many highs to pick from going back to the year 90. Which one do you consider the last major downward move, and if it is in 96 or further back have you been able to take any profits while waiting?
Thanks
at 7:49:30 PM
I use OJ's high price of about 205 in 1990 and its recent low of about 55 last year. This gives me a 50% Retracement target of 130.
Use the two chart points (high and low) that give you the GREATEST 50% Retracement target, Mike. That's what I do.
SDTrader asks:
Hey Ken, getting back into this after a LONG absence. I'm seeing a bottom in the corn market. I'm wondering if this is a good time to purchase call options based on the weekly target of 364. I'm looking at March 06 options. Just wanted your input on that plan. Thanks.
at 7:52:10 PM
Hi SDTrader (and welcome back!): We're still waiting for TOVI's Trend Tracker to confirm Corn's uptrend before we trade its 1-2-3 Bottom formation. BUT, you may trade differently, take a more contrarian approach to this trade, purchase your call option(s) now (while they're still cheaper), wait. Which suits you? It's YOUR business. (I wonder how George Soros and Jim Rogers are approaching this one . . . ?)
Brenda from QC, Canada asks:
Ken I have a July 170 call in copper. I noticed when prices went down this option went up. When the price went up the option went down. I have been trying to get out of this market but having a tough time. I am asking to liq. at 2.20 a week ago and now its down to 1.55. Should I settle at this price or be patient a few more days as this market is going up. I also realize Tovi says this option is red.
at 7:54:48 PM
You're trying to get out, and we're trying to get in (actually we JUST got in early this morning)! I do abide by TOVI turning any of my options RED, but I'm not URGENT about it --- just diligent. So I'd continue to work that limit order awhile longer. Let us know how it turns out. Thanks!
lupio asks:
hello ken, this is lupio on this end. iam new and green at this but i been reading your matieral and i feel that it is somthing that i can learn to do. but some where along all the reading there was a place there it said that " with a few hundred dollar you can get started. well i start paper trading and when i call the broker that you recomented ,they tell me that there is a limit of 2500.00 to set up an account, well i liked to fell off my sit. thank you.
at 7:57:09 PM
That's not a COST, lupio, just the minimum amount that brokerage required to open an account (which is very costly to a brokerage, to be fair). I've heard of other brokerages that'll open an options account for $1,000, so you may want to shop around. Thanks.
MJ asks:
MJ in Austin Texas. I am completely new to options. How long (ballpark figure) will it take me to get up and running?
at 7:57:48 PM
How 'bout it everyone: How long did it take YOU?
lets go corn!! asks:
Hey Ken,
Could you please clarify the break-out strategy that kasun73 talked about?
Thanks
at 8:02:11 PM
Yes, lets go corn!!, log into the Members Center at www.kenroberts.com and click on the "Hi-Lo Breakout" Strategy icon for a complete set of instructions on it! Thanks ---
Ranger asks:
I want to address the issue of risk management. I have asked you this in the past and you seem to gloss over the importance or shift away from the topic. I want to know waht you have learned over your 15 plus yeara at trading, what is the most important component of managing a trade or trades that are moving against you? What do you do and when do you do it, whatever "IT" is?
at 8:06:34 PM
Hello Ranger. This is a question I simply cannot answer for YOU --- it's too personal! This is why I stress paper trading and keeping records. What's YOUR risk tolerance? What's YOUR budget? What are YOUR trading plans? What are YOUR exit strategies? You HAVE seen me emphasize all these over and over, and that's why: So YOU can learn what's best for YOU. What's "IT" for me isn't the same as what's "IT" for you! So let me ask YOU, Ranger: What do YOU do when a trade's moving against you? (Did you have an exit strategy in place BEFORE you entered that trade?) Great question, but sorry, it's just not possible for ME to answer it for YOU!
Bonita Joe asks:
Ken - for MJ it took me ONE look at TOVI and I picked the best sugar CALL it had and made 300%. Bonita Joe
at 8:07:26 PM
Hi Bonita Joe! How's Florida? What cigar are you smoking tonight? Thanks!
LeeS asks:
Hi Ken, I have been in and out of the program for several years. I am overwhelmed by the amount of information available to us now. I love the interactive charts, the TT and the ability to look over your shoulder to check my approch to each market. My only question is how can you and do you plan top this?
at 8:10:04 PM
... just stay tuned, LeeS, and I KNOW you'll be very, very surprised . . . ! Thanks.
Well that's it for another month. Check out my favorite web sites: www.tovionline.com (Have you taken my personal tour yet?); www.uschartco.com ; www.fourstarbooks.com ; www.historictrees.org ; www.billoreilly.com ; www.wildlifeimages.org ; www.salestax.org (Let's abolish the IRS!); www.LP.org (Take The World's Smallest Political Quiz and see where you stand!); www.VOTE.com (Make your voice heard!). My next chat will be Tuesday, May 10th. As always: Use these newfound powers only for Good. Good night, God bless, and watch where you step!
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