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A Strategy for Uncertain Markets

September 17, 2012 by Jonathan Williams| Tips & Strategies

Entrepreneurship, to me, is the perfect concept for the retail trader and investor to consider before committing time and capital in the futures markets. The terms trader and entrepreneur are synonymous and are used interchangeably in this article. Noted Austrian Economist and recently fancied proponent of the free market, Murray Rothbard eloquently explains:

“Entrepreneurship [in markets] is the dominant characteristic of buyers and sellers who act speculatively, who specialize in anticipating higher or lower prices in the future. Their entire action consists in attempts to anticipate future market prices, and their success depends on how accurate or erroneous their forecasts are.”

—-Murray Rothbard; Man, Economy, and State.

What should particularly stand out from that passage is the definition of an entrepreneur – one who organizes, manages, and assumes the risks of a business or enterprise. The term reflects individuals whose conviction to cause, diligence and innovation can be rewarded with fortune and recognition. Yet, how many people do you know are successful entrepreneurs and how many are not? Typically more individuals become “failures” rather than proclaimed visionaries. Failure is a critical component to the concept as well. It illustrates to potential entrepreneurs that being successful does not come easily, and there is probability that you may lose. Not to say that these inherent disclaimers are not lost.

To compete in the futures market, which is full of sophisticated traders and high frequency trading machines, one needs a solid plan, such as a business plan, detailing the operation of the venture. How will one deal with the rapidly changing landscape as well as analytically expand/diversify operations? Here’s the critical part — accepting risks. Smart entrepreneurs know they will lay everything on the line and potentially lose everything and then some. The trader applies blood, sweat, tears and TIME to achieve a particular goal.

Daniels Trading wants to set the expectation that speculating is not an easy proposition. Who can speculate on future prices when there is so much uncertainty in the market? Fiscal cliff, Euro region issues, election season, Iran, global slowdown and hundreds of other headlines that are easily and expeditiously priced in because of advancements in technology. If you are a trader, specifically investment minded, and will entertain a possible solution in these times, consider harnessing the power of black box trading systems. Investors can compare participation in an automated trading system to a franchisee purchasing an existing business. Retail investors have limited resources and may lack the ability to properly compete. Trading systems offer such individuals the ability to participate in a structured trading program without dedicating significant time and capital in the process.

A black box, robot, machine or more commonly known as automated strategy are computer based software programs that generate entry and exit signals and execute trades. The DNA of such trading can be associated with a professional trader, one who is unemotional, sticks to the strategy, always searching for opportunities while managing risk to reward consistently and effectively.

Now imagine a professional trader who never sleeps, never blinks, and executes his plan flawlessly on the markets he traded. This trader has no opinions on USDA reports, elections or European debt issues. Such things have no bearing on the implementation of the tested strategy; only mathematical organization of data points generated from market activity are relevant. That is black box trading at its finest.

Algorithms, which are the brain of automated trading systems, are composed and vary depending on strategy. The formulas analyze metrics like price action, momentum, divergence and many others. Our automated strategy office has analyzed countless strategies, and a select few are offered to clients. These systems are available in our proprietary database called Strategy Center, where entrepreneurs can view hypothetical performance, review detailed reports, and even combine multiple strategies to create a diversified portfolio of these instruments.

Daniels Trading works directly with independent system programmers; we understand the methodology and execute an assortment of strategies to the developers’ specifications. We do even more than that! We work one-on-one with clients to identify which systems are best for your particular goals. We actively monitor the system and provide easy-to-use technology to transparently provide access to your system. If you are already a prudent trader, we can program your strategy into this format.

Trading markets can be a fun and costly hobby if a trader only participates to be a part of the “club.” Trading is difficult, and many people have inordinately destructive expectations that little time and effort will bear fruit. Simply stated, beginning and experienced traders are human and have certain limitations, computer based trading systems are engineered to give us an edge.

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Filed Under: Tips & Strategies

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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