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Seasonals Plug-in

Developing Strategies

Video Transcript

In this Track 'n Trade Trading Training video, I want to take you through and just talk about a couple of seasonal strategies; based on the Seasonals Indicator.

Now, what we want to do, is we want to go through and analyze each market, that we're interested in trading. Then, finding an area in which they have a tendency to trend, year after year, after year. So, we'll go through and we'll open up our different contracts.

Now, it's very important to also understand that different contract months trend differently, even though it's in the same commodity. So, what we have here, is we have an area that I like to look for, of extreme highs, followed by extreme lows. Now, how do I know it's an extreme high or an extreme low? It's because I use these thresholds, over here. These thresholds are set to 80 and 20. You can set them to whatever you want, I like 80 and 20, it seems pretty good. Whenever I see an extreme high followed by an extreme low- so, that's going to give me a nice downtrend, or vice versa. What if I see an extreme low, followed by an extreme high? This is a time frame, in which I can anticipate a rise in price.

Now, I like to look at the extremes. Because, those are the times in which I want to be active in the markets. When the markets are sideways, I don't want to be active in the market, because it's very difficult to make money in the sideways markets, right?

So, traditionally speaking- starting in January, we generally see a price drop in this market, followed by a drop, all the way into around the first of April. So, seasonally speaking, that's what I'm going to look for. I'm going to start looking for an opportunity to go short the market.

Now, a lot of people will ask me- they'll say, 'Lan, how do I know when I'm supposed to trade with more contracts, than 1 or 2? How am I supposed to know if I'm supposed to trade with 4 or 5, or 6, or 7?' (Or however many you can afford, given your different strategies based on your risk and money management levels). But when people ask me that question, the best thing I have for them, the best answer I have is that when the probabilities are more in your favor, that's when you load up on your different contracts.

It's just like, I don't know how many of you saw the MIT special on television the other day; but these guys would count cards in Las Vegas. What they would do, is they would go down and play very small hands, every single hand. But then they would count the cards, and when the odds were in their favor, they would load up, big time. They would start putting lots of money on the table, and this is how they had successful venture at going down and gambling. Now, I hate to associate trading commodities with gambling, but nonetheless, there are some similarities in the fact that we're looking to put the odds in our favor. What we want to do, is have the odds in our favor.

Now, the odds say that over the last 10-15 years, from January to March, the market has dropped in price quite significantly during this time-frame, in this particular commodity. So, that's putting the odds in our favor. So, if you've got the odds in your favor, that's when you want to load up on different contracts.

Now, many of us, won't even trade, and that's the great thing about trading vs. gambling. When you're gambling, you're sitting at the table; you have to gamble every single hand, don't you? You have to stay at the table, you have to put money down every single time. You can't just sit there, and wait for the big hand to come along. Then, you know, throw all your money on the table. We can do that, here in the commodities market. We can wait, and wait, and wait, have patience.

That's a very key component. Don't over-trade. Only trade the very high probability time frames, when the market has a tendency to do what it is we want it to do.

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