Friday, December 23, 2011


                      Generation Trader Bud Fox & Gordon Gekko

I graduated from college and came of age just a few short years before the financial revolution was about to hit the world with a vengeance.

The first derivatives that hit the financial scene were the introduction of currency futures in 1973-1974. In rapid succession came the precious metals, and then interest rate futures. By 1982, when stock index futures were introduced, the world was being reshaped

When I first started my trading apprenticeship under Bert in early 1977, he introduced the concept of  volatility to me and how very important it was in trading.


And while I had a handsomely looking college degree under my belt from a few years earlier, I didn’t know jack-squat what made traders rich or how they viewed markets.

                                   Doing What You Gotta Do

On Saturday’s, when the stock-peddlers were taking the day off, Bert and his staff [including me] were at the brokerage house at 7:00 A.M. sharp. As a few of his secretaries found out, getting there at 7:05 was an invitation to find another job.

I mainly helped with calculating various technical indicators he used for his charts. Bert had a literal vault of charts, all meticulously done by hand in various colored pencils on 3ft. X 3ft. charting paper he had a local printing company make for him via special order, that he kept in his drafting table.

After doing charts, we then would talk about how I was doing building my book of business, what markets I was trading [or attempting to trade], what indicators I was using and how, mapping out volatility, what if any problems I was having, etc.

When I hit the trading floor years later, I was under the impression that I could then ignore what Bert had taught me. After all, you could just walk in there, wave your hands around and make some gestures and walk out with money. Gee, what could possibly go wrong?

“Aw man, the guy trades eggs and lumber. This is fuddy-duddy old-timer stuff. What does he know about currencies, interest rates, and gold? Guy trades eggs for cryin’ out loud! I’m part of a new generation of traders.”


In reality of course, I’m generation dumb-ass, with just enough knowledge to be dangerous and enough cash to get myself in trouble trading with the “big boys”. Who needs Bert when you got guys like “Magic” flipping Kruggerands before the gold opening, and making more money than I have ever seen in my life? [12/9/2011 – The “Magic” Market As Illusion]

                                            Big Losses Hurt

After I crashed and burned, and got a good dose of reality stuffed into my head, one of the first trading concepts I set about putting into my trading algorithm was volatility. It is a critical component of “The Vegas BFSG Algorithm”. It is the primary reason we only trade one side of the market during a trading session.

Volatility almost insures you will run out of money before it has finished taking the market to a place you hadn’t thought was possible.

So, while we have the luxury of looking at a computer screen that visually represents the thousands of computations necessary to give us the algo, behind the numbers is rock-solid logic and market experience.

We don’t deal in certainties; we deal in volatile probability distributions. At first glance, this may seem risky, but “The Marble Game” [free download at link] we play has much higher profitability than any Las Vegas casino could ever hope to dream.

Today’s Action & Weekly Wrap Up

                                             Waiting To Eat

We are still in neutral mode, awaiting a fresh signal from the algorithm. Since we are well into the US session, and nothing is happening on the last business day before Christmas, the prudent course of action is to go home.

No trading today, so $ 0.00 gain.

Weekly Wrap Up

            Monday           $ 8.00
            Tuesday           $ 5.00
            Wednesday      $ 0.00
            Thursday          $ 0.00
            Friday              $ 0.00          

Total For Week            $ 13.00

Running Total Since November 1, 2011

11/02/2011 – 11/04/2011        $ 25.00 / oz.,
11/07/2011 – 11/11/2011        $ 86.00 / oz.,
11/14/2011 – 11/18/2011        $ 49.00 / oz.,
11/21/2011 – 11/25/2011        $ 11.00 / oz.
11/28/2011 – 12/02/2011        $ 41.00 / oz.
12/05/2011 – 12/09/2011        $ 26.00 / oz.
12/12/2011 – 12/16/2011        $ 34.00 / oz.
12/19/2011 – 12/23/2011        $ 13.00 / oz.

Total                $ 285.00 / oz.

Have a Merry Christmas everyone!


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