Value Investing in Commodity Futures

Download Value Investing in Commodity Futures

Post on 14-Apr-2018

213 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

  • 7/29/2019 Value Investing in Commodity Futures

    1/224

    VALUE INVESTINGIN COMMODITYFUTURES

    How to Profit withScale Trading

    HAL MASOVER

    JOHN WILEY & SONS, INC.New York Chichester Weinheim Brisbane Singapore Toronto

  • 7/29/2019 Value Investing in Commodity Futures

    2/224

  • 7/29/2019 Value Investing in Commodity Futures

    3/224

    VALUE INVESTING

    IN COMMODITYFUTURES

  • 7/29/2019 Value Investing in Commodity Futures

    4/224

    Wiley Trading AdvantageBeyond Candlesticks / Steve NisonBeyond Technical Analysis/ Tushar ChandeCampaign Trading/ John Sweeney

    Contrary Opinion/ R. Ear l HadadyCybernetic Trading Strategies / Murray A. Ruggiero Jr.Day Trade Part-Time/ John Cook and Jeanette SzwecEncyclopedia of Chart Patterns/ Thomas BulkowskiExpert Trading Systems / John R. WolbergFundamental Analysis/ Jack SchwagerGaming the Market/ Ronald B. SheltonGenetic Algorithms and Investment Strategies / Richard J. Bauer Jr.Intermarket Technical Analysis/ John J. MurphyLong-Term Secrets to Short-Term Trading / Larry Wil liamsMacro Trading and Investment Strategies / Gabriel BursteinManaged Trading / Jack SchwagerMcMillan on Options / Lawrence G. McMillanNeural Network Time Series Forecasting of Financial Markets / E. Michael Azof fNew Market Timing Techniques/ Thomas R. DeMarkNew Trading Dimensions / Bill Wil liamsNonlinear Pricing / Chr istopher T. MayOption Market Making/ Alan J. BairdOption Strategies, Second Edition / Courtney SmithPattern, Price & Time/ James A. HyerczykPoint and Figure Charting/ Thomas J. DorseyProfits from Natural Resources / Roland A. JansenSchwager on Futures/ Jack SchwagerSeasonality / Jake Ber nsteinStock Index Futures & Options/ Susan Abbott GidelStudy Guide for Trading for a Living / Dr. Alexander ElderStudy Guide to Accompany Fundamental Analysis / Jack SchwagerStudy Guide to Accompany Technical Analysis/ Jack SchwagerTechnical Analysis/ Jack SchwagerTechnical Analysis of the Options Markets / Richard HextonTechnical Market Indicators/ Richard J. Bauer Jr., and Julie R. DahlquistThe Day Traders Manual / Will iam F. EngThe Dynamic Option Selection System/ Howard L. SimonsThe Hedge Fund Edge / Mark BoucherThe Intuitive Trader/ Robert KoppelThe Mathematics of Money Management / Ralph VinceThe New Market Wizards / Jack SchwagerThe New Money Management/ Ralph VinceThe New Options Market, Fourth Edition / Max AnsbacherThe New Science of Technical Analysis / Thomas R. DeMarkThe New Technical Trader / Tushar Chande and Stanley S. Krol l

    The Option Advisor/ Ber nie G. SchaefferThe Options Course/ George A. Fontanil lsThe Options Course Workbook / George A. Fontanil lsThe Traders Tax Survival Guide, Revised Edition/ Ted TesserThe Traders Tax Solution / Ted TesserThe Trading Game/ Ryan JonesThe Ultimate Trading Guide / John Hill , George Pruitt, and Lundy HillThe Visual Investor/ John J. MurphyTrader Vic II/ Vic tor SperandeoTrading Applications of Japanese Candlestick Charting / Gar y Wagner and Brad MathenyTrading Chaos/ Bill Wil liamsTrading for a Living/ Dr. Alexander ElderTrading on Expectations/ Brendan MoynihanTrading Systems & Methods, Third Edition / Perry Kaufman

    Trading the Plan/ Robert DeelTrading to Win/ Ar i Kiev, M.D.Trading with Crowd Psychology / Carl Gyl lenramTrading without Fear/ Richard W. Arms Jr.

  • 7/29/2019 Value Investing in Commodity Futures

    5/224

    VALUE INVESTINGIN COMMODITYFUTURES

    How to Profit withScale Trading

    HAL MASOVER

    JOHN WILEY & SONS, INC.New York Chichester Weinheim Brisbane Singapore Toronto

  • 7/29/2019 Value Investing in Commodity Futures

    6/224

    This book is printed on acid-free paper.

    Copyright 2001 by Hal Masover. All rights reserved.

    Published by John Wiley & Sons, Inc.Published simultaneously in Canada.

    No part of this publication may be reproduced, stored in a retrieval system ortransmitted in any form or by any means, electronic, mechanical, photocopying,recording, scanning or otherwise, except as permitted under Section 107 or 108 ofthe 1976 United States Copyright Act, without either the prior written permissionof the Publisher, or authorization through payment of the appropriate per-copy feeto the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923,(978) 750-8400, fax (978) 750-4744. Requests to the Publisher for permissionshould be addressed to the Permissions Department, John Wiley & Sons, Inc.,605 Third Avenue, New York, NY 10158-0012, (212) 850-6011, fax (212) 850-6008,E-Mail: PERMREQ@WILEY.COM.

    This publication is designed to provide accurate and authoritative information inregard to the subject matter covered. It is sold with the understanding that thepublisher is not engaged in rendering professional services. If professional adviceor other expert assistance is required, the services of a competent professionalperson should be sought.

    Designations used by companies to distinguish their products are often claimed astrademarks. In all instances where John Wiley & Sons, Inc. is aware of a claim,the product names appear in initial capital or all capital letters. Readers, however,should contact the appropriate companies for more complete information regardingtrademarks and reg istration.

    Library of Congress Cataloging-in-Publication Data

    Masover, Hal.Value investing in commodity futures : how to prof it with scale trading /

    Hal Masover.p. cm. (Wiley trading advantage)

    ISBN 0-471-34881-3 (cloth : alk. paper)1. Commodity f utures. 2. Futures. I. Title. I I. Series.

    HG6046.M337 2001332.6328dc21 00-043739

    Printed in the United States of America.

    10 9 8 7 6 5 4 3 2 1

  • 7/29/2019 Value Investing in Commodity Futures

    7/224

    v

    FOREWORD

    Congratulations! You are about to embark on an exciting journey ofopportunity aboard the ship we proudly call Scale Trader. We allshare the desire to realize the full potential of our lives. Unfortu-nately, this desire goes unfulf illed in most people. Fear of failure is amore powerful motivator for many than is opportunity for success.The very fact that you have picked up a book on the emotionallycharged topic of commodity investing indicates that your personal lifeequation is courageous; that is, you have the courage to leave no stoneunturned in the search for opportunity. It is for this quality ofcourage that I congratulate you. After reading this book, you may de-cide that this particular journey does not serve your goals. If so, thiswill have been a successful exercise in getting you one step closer tothe opportunity you seek.

    By the time Hal and I came across the methodology of scale trad-ing, we had both been in the broker role for four years. It does nottake long in the hot seat to verify what we all have heard: Most com-modity traders lose money. On the surface, this fact may lead you toput this book down right now. For Hal and me, it is the compellingreason to explore further. The key word here is most. In fact,some ofthe players in this zero-sum game do succeed. If you are anything atall like me, that fact is all you need to know to step aboard and makea thorough investigation of the integrity of Scale Trader and deter-mine for yourself if it will carry you to the personal and financialgoals you have charted.

  • 7/29/2019 Value Investing in Commodity Futures

    8/224

    vi FOREWORD

    For me, the beauty of scale trading is that it is not a system but amethodology. For many this is bad news, as the quest is for that HolyGrail black box that magically spits out profits without any input oremotional involvement from them. Yes, when I fall into a lethargic at-titude about life, I also wish for such a system. If you really thinkabout it, though, you may not really want a life where it is that easy.

    Many are the examples of individuals who have it all (inheri-tance, title, etc.) but live chaotic lives, desperately seeking some con-firmation that their actions make a difference. Scale trading putsyou in the role of captain of the ship, where the quality of yourstrategic planning directly determines the success of your voyage.Without question this takes courage and discipline. However, the dif-ference it makes between you and the average commodity trader isdramatic. Unlike the common trader, you are never lost out at seabecause Scale Trader provides you with a strong fundamental frame-work from which to chart your journey.

    The principles on which this ship is built are the most sound onesthat I have come across. Indeed, they are timeless and immutable.Whenever the sea gets rough, you can revisit the plan, making surethe rigging is sound and secure. If necessary, you can alter course abit if new information requires, but stay the course confident that theprinciples on which you launched the voyage are the anchors that willhold you through most any storm.

    Scale Trader does not pull through without testing you, however.These storms will tempt you to believe that this time the principlesare not working and are not going to work. When this happens,reread this Foreword and these words: The Principles Work! The jour-ney may take longer than expected, and you may have to make an ap-praisal as to whether you have enough food and water to get you toyour goal. At these times, you as the captain may have to ration sup-plies, eating one meal per day instead of three, for example. But assure as night follows day, the storm will break.

    The rewards of such experiences are high. Not only are your po-tential profits compelling, but you get the taste of being the masterof your destiny. In my opinion, this taste is the real reward of a suc-cessful voyage aboard Scale Trader. Af ter all, once you truly knowyourself to be the master of your destiny, then