How to Make Money with Twitter

Making Money with Twitter
How to Make Money with Twitter

Every time we turn around we’re hearing about another social networking site offering users unlimited possibilities. Twitter is just such a site. Twitter is a very popular site that’s gaining more popularity every day. Members are constantly “tweaking” their friends, family members and even work associates! It seems like almost every one of all ages has a Twitter account today and many are making money doing it. Yes, you can make money with Twitter. Join the thousands of others that are doing that very thing. While you won’t become a millionaire overnight, Twitter offers you a great chance to earn some real cash!

Twitter Profits: "Start Making Money With Twitter Instantly, Following These Fast Action, Proven Strategies!" AAA+++

Twitter Offers Many Money-Making Opportunities

There are several ways you can make money with Twitter. Before you can begin making money on Twitter, you will need lots of contacts the better. It’s been shown that Twitter users are getting as many as 20,000 followers within just the first month or two of joining. Imagine if you made a sale to just 1% of these followers: you’d have sold to 200 people. The opportunities to make money are endless with Twitter. So make as many friends as you can on Twitter and develop a good trusting relationship with these users. The more Twitter friends you make, the better your opportunity to make money.

Become an Affiliate on Twitter

Affiliate marketing is a great way to make money online while doing very little in the way of work. Most online companies offer an affiliate program to anyone interested. Find a company that offers affiliate marketing (it will be on the bottom of their website). Sign up and wait to hear from them. They’ll check out your Twitter page and make sure it offers good opportunities for sales. Once they’ve accepted you as an affiliate, you’re all set to go.

Put up an attractive ad for the business and promote it to all your followers. The more of your followers you can get to purchase the product, the more money you’ll make. Since Twitter is such a large social networking site, the possibilities just keep getting bigger and bigger. Some companies will even pay if a person just clicks on the ad without making a sale, although these are rarer. Affiliate marketing is a very popular way to make money and if you have a Twitter page anyways (who doesn’t?), you may as well make some money at the same time.

Make Money on Twitter with RevTwt

Making Money with Twitter

RevTwt is a platform that deals with CPC (cost per click) and allows you to make money from your tweets. For those unfamiliar with Twitter, tweets are messages and posts you put on your Twitter page.

Sign up for an account with RevTwt and they’ll check out your Twitter profile. After doing this, they’ll allow you to put ads for different products or services on your Twitter page. Each time someone clicks on these ads, you can make money.

As you can see, there’s a lot of money to be made off of Twitter but the key is to get as many followers as possible so make all the friends you can!

Make Money Forex Trading – Learn How To Trade Forex

Make Money Forex Trading – Learn How To Trade Forex

Whether you’re new to trading or you are what’s considered a “seasoned” trader, there is a lot of money to be made trading Forex markets. Although instantly trading with real money is not for beginners or people that have never traded before, you can quickly learn the ropes with a little help and commitment.

What is Forex Trading?

Finding Profits in Forex: Combining Elliott Wave and Fibonacci to Pinpoint Winning Trades

Forex trading is the buying and selling of currencies. In much the same way that you’d buy and sell stocks on the stock market, traders exchange currencies they’ve purchased. If you’ve ever traded on the stock market, you should have no problem getting the hang of trading Forex.

The purpose of Forex trading is to exchange a currency that you’ve purchased for another with the hopes that the price of the newly purchased one will go up in value. Whether you’re new to this or consider yourself an old pro, you’ll find it very exciting and a lot of fun. The value of currencies is always quoted in pairs such as USD/JPY or GBD/USD. The reason for this is because you’re always buying one and selling another.

It is recommended, however, that until you get the hang of what you’re doing you should set up a “demo” account where you may be buying and selling currencies but they’re fake. By doing this, you’re learning how it’s done and giving yourself a chance to learn more about it without losing real money.

Signing up for an Account

Signing up for an account is very easy. You can register for one of the training courses on the Forex web site where you can “pretend” trade in a demo atmosphere or you can participate in their workshops where you’ll have real experts teaching you everything you need to know about Forex trading. You’ll also have webinars at your disposal where you can watch demonstrations of Forex trading, take part in discussions with beginners as well as experts in the field. Signing up for an account is not only fun and exciting by the best way to learn the ropes so you’ll soon be ready to begin making money trading Forex.

Getting started is Easy

FOREX Best Selling Trading Robot - Trade Currency online 24 hours a day with the same system the Pros use to scalp the market.  Fully automated - No programming required - Plug & Trade. Make Money from home with No stress

You’ll find that it’s easier than you thought to get started. Banks and financial institutions have been doing it for years and now with the internet available to everyone, it’s easy for you to make money at home by trading Forex. Because there are so many different theories behind trading Forex, it’s to your advantage to talk with someone that knows what they’re doing and has participated in Forex trading in the past.

Why Trade Forex?

If you don’t know anyone with enough experience to help you, consider signing up for some of the online webinars and Forex workshops. They’re very helpful and will take you through any scenario you can imagine and are available to answer any questions you may have. You can continue to be part of a “demo” trading market until you’re ready to strike out on your own with real money. That’s when you’ll see how much money you can truly make trading Forex.

How Seth Godin Helped Me Understand The Entrepreneurial Mindset

Seth's Blog: Moving beyond teachers and bosses

Almost daily I find myself thinking about the meaning of "The Entrepreneurial Mindset". As I think about trying to help a baby boomer make the transition to from employee to baby boomer entrepreneur, the definition of the entrepreneurial mindset is always an issue.

Seth Godin, one of my favorite writers recently helped me bring this concept into a tighter focus. If you follow the link to his blog, you will learn how we get conditioned to please teachers and bosses. In the process we forget how to take initiative.

Grasping this simple concept shared by Seth will help you, just as it helped me. It brought me to a new level of clarity. It can do the same for you as you make the transition to becoming a baby boomer entrepreneur.

Shallie Bey

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The Only Way to Day Trade

The Only Way to Day Trade
There are four cardinal principles which should be part of every trading strategy. They are: 1) Trade with the trend, 2) Cut losses short, 3) Let profits run, and 4) Manage risk. You should make sure your strategy includes each of these requirements for success.
Trade with the trend relates to the decision of how to initiate trades. It means you should always trade in the direction of recent price movement.
Mathematical analysis of commodity price data has shown that these price changes are primarily random with a small trend component. This scientific fact is extremely important to those desiring to pursue commodity trading in a rational, scientific manner. It means that any attempt to trade short-term patterns and methods not based on trend are doomed to failure. It also explains why day trading is darned difficult and why almost no day trader is a long-term success.
The shorter the time frame in which you examine price action, the smaller the trend component is. Commodity price action is fractal. That means that as you shorten or lengthen the time frame, price action remains similar in behavior. Thus, five-minute charts have roughly the same appearance as hourly charts, daily charts, weekly charts and monthly charts.
This similarity in chart appearance convinces traders that you can day trade successfully with the same tools you use on longer-term charts. Of course, they try to use much of the arsenal of technical analysis that doesn't work on long-term charts either. Things like Oscillators, Candlesticks and Fibonacci numbers.
However, even trend-following tools that work in intermediate to long-term time frames won't work in day trading. This is because the trend component is so very small in short-term data that you must use a highly effective method to overcome the costs of trading.
In longer-term trading, you can let your profits run. You do it by definition or it wouldn't be long-term trading. In day trading you can only let your profits run to the end of the day. This means your average trade (the average profit of both your winning and losing trades) must necessarily be much smaller than if you could let your profits run for days, weeks or months. However, your costs of trading--slippage, commissions, the bid/asked spread and mistakes--stay roughly the same on a per trade basis. Thus, your day trading system must be much more consistent and robust to stay ahead of the costs of trading than would an intermediate to long-term system. There are few day trading approaches that meet this test.
Since market price action is mostly random, successful trading methods must somehow exploit a non-random feature of market price action. The tendency of most markets to trend is the only possible edge in trading, so a winning approach must harness trend in some way. Tradeable trends do not show up often in the very short term. They certainly are not present every day. That is why the person who tries to day trade at least once every day, and perhaps even more often, is doomed to failure. The more often you day trade, the more likely it is that you will be a long-term loser.
There is a wonderful fantasy about day trading. You get up in the morning, have a nice breakfast and go to your home office. There you have a powerful computer with fancy software that brings you real-time intraday charts and quotes. You look over the day's market activity and find some promising situations. You watch the markets for awhile until a suitable trade presents itself. You pick up the phone and call your broker to make your trade entry. Then it's time to relax and grab a hearty cup of coffee or a frosty glass of juice while you watch your profits mount. By the end of the day, you are out of your position with a nice profit. Most days are profitable, although not all. You seldom have a losing week. Never a losing month. You make as much money as you need. Some days you don't bother with trading at all. You have better things to do. You play golf, sail, do lunch. You take extended vacations whenever you want. Life is sweet.
There are plenty of people out there ready to sell you a day trading course or system for thousands of dollars that will show you how to implement this fantasy. The only problem is they haven't been successful traders. They make money only by selling their losing methods to others.
Here's what trading legend Larry Williams said about day trading: "If you're day trading, you're going to end up frying your brain. When you go home, you're not going to be a nice person to be around. I'm already not too a nice a guy to be around. So when I do a lot of that type of trading, who would want to be around me?
"All the day traders I talk with are losing money. The oscillators, the supposed support and resistance levels, all that other technical analysis stuff out there doesn't work very well in day trading. Plus I found I make more money by holding overnight and trading out of positions in the next day or two. If I've really got a strong signal, it should last for more than a few hours."
Gary Smith is the only person with a documented long-term success record in day trading. He made money consistently for over ten years. However, he trades relatively infrequently, maybe once or twice a week. "Successful day trading is not an everyday affair and not a multiple trade affair," he cautions. "Inexperienced day traders simply refuse to accept this." Gary's book, published by Reality Based Trading, is called Live the Dream by Profitably Day Trading Stock Futures.
I have been day trading successfully for the past couple of years using a system that trades on average only two or three times a month. I have also recently published a second day trading system that trades only once or twice a month. Of course, I make almost all my money trading with my more effective long-term systems. For me, day trading is only for fun and for a little diversification. These systems are available from our company.
If you want to be a successful trader, your best chance is with a long-term, trend-following system. If you must day trade, don't do it very often. The more you trade, the more likely it is you will lose.

Market Disinformation

Market Disinformation
How long would a gambling casino be able to stay in business if most of the customers won instead of lost? The markets are no different. In order to continue to exist, the markets must operate in a way that causes most participants to lose. There would not be enough money available to pay the winners if the majority were consistently taking profits out of the markets.
Gambling casinos have an advantage over the markets in that they are able to setthe rules of the game to insure that the house has a mathematical edge. The markets cannot directly control how the individual participants will play. Most commodity traders are intelligent, competitive individuals. There are seemingly unlimited sources of information about how to trade. There are powerful computers within everyone's reach to help conquer the markets. Why is it then that such a high percentage of traders still end up losing?
A well-known answer is that traders cannot overcome their emotions well enough to succeed. That is certainly true. Another less well-understood reason is that the markets constantly send out "disinformation." I could not find disinformation in my dictionary, but it is a term coined in the intelligence community and now in broad use. In intelligence parlance it means false information designed to mislead and confuse the adversary.
I am not suggesting that the markets have any volition or that there is a conspiracy among insiders (like the "evil" floor traders) to fool the rest of us. This is something that just happens because of the nature of markets.
William Eckhardt is one of "wizards" Jack Schwager interviewed for his book, The New Market Wizards. Eckhardt was the partner of mega-millionaire Richard Dennis. It was his bet with Dennis about whether trading skill could be taught that led to the formation of the famous "turtles." Eckhardt put it this way. "The market behaves much like an opponent who is trying to teach you to trade poorly."
A common formulation of this phenomenon is the concept of random reinforcement. Traders are not rewarded with a profitable trade every time they do something right, nor are they penalized with a loss every time they do something wrong.This makes it exceptionally difficult to figure out what is right and what is wrong. Compare this to an electric fence. Every time you walk by and don't touch it, you feel fine. Every time you touch it, you receive a painful shock. It doesn't take a man or animal long to learn how to relate to an electric fence.
Think how much easier learning to trade would be if you automatically took a loss every time you failed to follow correct decision-making procedures. At the same time, what if you were always rewarded with a profit when you traded correctly? You would be able to learn the correct trading rules much more easily.
As your opponent who is trying to trick you into trading incorrectly, the market is constantly sending you disinformation. One important piece of disinformation it sends is that the market is constantly changing its behavior so the successful trader must be vigilant to change his approach to keep pace.
Have you noticed what a constant refrain this is from various trading experts? It is a common piece of conventional wisdom that no mechanical approach can be successful very long because the markets change. You are advised, therefore, to change your system to keep in tune with recent market behavior.
It is in the expert's self-interest to preach this gospel. Anyone who tells you that the markets are always changing no doubt has found a "solution" to how to keep his trading method up-to-date. He probably wants to sell it to you in one form or another. If he is not selling his system, he at least can appear incredibly wise and resourceful to his audience. It is a sure thing his audience hasn't found such an elegant solution to beating the markets or they would be rich and would not have to listen to any experts.
Another reason experts invariably claim the markets are forever changing is that it is a convenient excuse for poor performance. Every successful trader has numerous periods when his system or method doesn't seem to work. It is more palatable to say the markets have changed than my system isn't working right now. If your system isn't working, it implies you have failed. On the other hand, if the markets have changed, that is beyond your control. You can just "fix" your system.
This is the origin of the pernicious practice of re-optimization. Let's say you have a great trading system using three moving averages. During the last five years, it has made beaucoup bucks in hypothetical historical testing. Naturally, you use a different set of moving averages for each market because each market "has its own personality." You are in tune with the markets and ready to trade.
But wait! You know that the markets are constantly changing their personalities to keep traders off balance. It is only reasonable to expect that the correct moving average values will change over time in the future. So as part of your approach, you set a schedule for yourself to re-optimize the moving average values every so often.
How often you decide to do this will depend on how industrious you are and how often you think the markets change their spots. Do the markets remain stable for six months, three months, one month, two weeks, two days? Whatever your answer, you will dutifully re-optimize your moving average values to keep up with those elusive markets.
Let me tell you a little secret. Your system will always trade the past perfectly, but it will probably be lousy in real trading no matter how often you re-optimize it. Oh yes, you will have some extended periods of good profits. This will encourage you. The market is just sending you some of that good disinformation, encouraging you keep it up. In the long-run, absent some extraordinary luck, you will surely lose.
I am not saying the market don't change. They clearly do. One of my favorite sayings about the markets is, "The future will be just like the past, only different." What I am saying is that any attempt to modify your approach to "keep up" with this change is like a dog chasing his tail.
When you re-optimize your system every two weeks, you are making the assumptionthat during the next two weeks the markets will behave like the last two weeks. This is a comforting idea, but where is the evidence to support it? Research has shown just the opposite. The best system parameters for the next period are most likely not the best parameters from the previous period, regardless of the period length you choose. You are as likely to be successful choosing your parameters at random from previously profitable parameters as you are choosing the most profitable parameters.
When people ask me how a system has performed in the last twelve months to get an indication of how it will perform in the next twelve months, I ask them a question. What makes you think 1997 markets will be more like 1996 markets than like 1987 markets or 1993 markets? In fact, 1997 markets are more likely to be similar to some previous year other than 1996.
The purpose of this market disinformation is to cause people to be suspicious of successful trading methods and abandon them too soon. One of the most reliable traits of professional traders is the ability to stick with their system much longer than the typical loser. We all go through losing periods, no matter what type of approach we choose. We cannot increase our chances of success by constantly changing our approach. Since there are many more losing approaches than winning ones, we actually decrease our chances of success by frequently changing our system.
The correct solution is to find a non-optimized approach that works over a long period of history in a wide variety of markets. To avoid over-curve-fitting, use the same rules for all markets. If you can trade it for an extended period in the future in a wide variety of markets, you are likely to be successful, although success in never guaranteed.
The reason this works is that although the markets change their short-term patterns, they are still trending overall. That is your edge. If you play the trends, you will succeed in the long run. Attempting constantly to modify your system to mimic the changing patterns of the recent past will not improve your chances of success. It will more likely insure failure.
Human nature is such that we are always trying to improve. I am not suggesting that you might not be able to create a better system in the future. Just don't fool yourself into thinking that it is better because it is somehow adapting to ever-changing markets. It is better because it is more profitable over a long period of time or because it trades more markets profitably.

The Mechanical Approach to Trading

The Mechanical Approach to Trading
People who come to commodity trading invariably have already had success in some other field. Most of the time they have been extremely successful. Without that success they would not have accumulated the capital necessary to trade. They expect to apply the same rational approach to commodity trading which led to their previous successes. Unfortunately, it is precisely this seemingly intelligent methodology which steers them to disaster.
The markets are designed to take money from the many and distribute it to the few. They could not exist otherwise. It should be obvious under those circumstances that what appeals to common sense and feels comfortable will not work. Otherwise, everyone would be rich.
The amateur assumes that he can conquor the markets through superior analysis. He spends nearly all his time looking for effective ways to predict where the markets are likely to go next. I have been trading since 1975 and spent many years myself on this fruitless quest. Believe me when I say that the markets are not predictable in the sense most traders use the term. Luckily, it is not necessary to predict the markets to make money from them.
The professional has had enough experience to learn the limitations of analysis. While there is a repetitive similarity to market behavior, there is just enough uncertainty to make predicting the future an impossible task. The professional knows the importance of a consistent approach to the markets. He has a concrete plan of attack. He seeks to follow existing trends rather than predict future trends.
The amateur assumes the pros have a good idea where the best opportunities are. Actually, however, professionals consistently admit they have no idea in advance which trades will work. Most often the ones which look the least promising turn out to be the big winners.
There is no favorite time frame for professional traders. Each finds the perspective which matches his or her trading personality. Some become floor traders who seldom hold trades for more than a few minutes. There are some floor traders, however, who hold positions much longer. Professionals trading off the floor may be day traders, intermediate-term traders or long-term traders. What is consistent is that each tends to stick with only one time frame, the one which works best for him.
Each professional has his own unique way to identify potential trades. He enters the market when his plan dictates. He follows the direction of the market in his time frame rather than anticipate a change in trend.
The pros are all ruthless in getting rid of losing positions. You have little to lose and a great deal to gain by exiting losers as quickly as possible. The problem is that this approach results in many small losses. The amateur wants as few losses as possible because to him, they are a sign of failure.
The professional has learned to handle the inevitability of losses. He knows he can never avoid them. He pays almost no attention to losses unless they become bigger than permitted under his overall trading plan. There is little ego involvement for the professional in his next trade. He will seldom let his ego interfere with abandoning losing positions.
For all traders there is a continuum between 0 percent mechanical trading and 100 percent mechanical trading. (You can also think of the continuum as going from 100 percent to 0 percent judgmental trading.) Someone who trades 100 percent mechanically never has to make any trading decision. He has a plan which tells him precisely what to do in any situation. All he has to do is monitor market activity, determine what actions his plan requires and then place the required orders with his broker. Most often, these plans are computerized. The trader inputs market data and the computer program tells him what to do.
At the other end of the spectrum, someone who trades 0 percent mechanically has no fixed rules whatever. He makes every trading decision on the spur of the moment without any particular guidelines except his own idea of what will work best. Although he attempts to learn from previous mistakes, he will be unsuccessful at doing so because correct decisions do not always result in profits and incorrect decisions do not always result in losses.
The emotionalism of trading can only be truly appreciated by those who have tried it. The effects of fear and greed are remarkable. Human nature is such that left to your own devices, these twin villains will invariably cause you to make the wrong decisions in the speculative arena. The most outstanding trait of professional speculators is that they have learned to control their fear and greed. They do this through self-discipline, which of necessity means their decision-making has a certain structure.
I believe that successful traders all have a relatively mechanical approach even if they do not know it themselves. Therefore, all professional traders are grouped in the top half of the mechanical trading continuum. Most amateurs, on the other hand, will be found in the bottom half. Many professional money managers have a system which is 100 percent mechanical. Those who do not operate 100 percent mechanically usually allow only a small amount of personal judgment to override their system.
The average person has the best chance to be a profitable trader if he or she adopts a 100 percent mechanical approach. If profit is your goal rather than massaging your ego or having fun, I recommend that you find one or more good mathematical systems and trade them in a diversified group of markets. You will also need sufficient capital and courage to withstand the inevitable equity drawdowns which occur regardless of trading approach.
Here is what I mean by a strictly mechanical approach. You will have a predetermined group of markets which you will follow. You will have mathematical formulas to apply to previous prices which will tell you when to buy and when to sell. There will be entry rules, exit rules for losing trades and exit rules for profitable trades. There will be rules for when to start trading and stop trading each system. Your only tasks will be to choose initially the systems and markets to trade, to apply the system rules to market price action and to decide how to spend the (hopefully) resulting profits.
If your system is computerized, you will have to provide data to the computer, run the system software and place the orders the system dictates. This should not take very much of your time. You can hire someone else to do it for you if you want. My broker has my computerized systems and places the orders for me. I run the systems myself every day to keep track of what is going on. However, I do not have the responsibility to place the orders. I can travel or take a vacation without worrying about missing something.
Not only have I been successful, but I believe I have been more successful than I would have been choosing my trades with more of my own judgment. If you are truly trading commodities to make money rather than have fun, give my 100 percent mechanical approach some consideration.

Implementing A Mechanical Approach to Trading Commodities

Implementing A Mechanical Approach to Trading Commodities
In my article in the last issue of Trader's World, I argued that "The average person has the best chance to be a profitable trader if he or she adopts a 100-percent mechanical approach." This is the only surefire way to minimize the emotional influences that inevitably destroy nearly every trader. I know that in my own case, the more mechanical I am, the better my results are. Assuming you have decided to try the 100-percent mechanical approach, how exactly should you proceed? You would think that the most important step would be to find the perfect system. Strangely, finding the system is only a small part of the job. In the first place, you must abandon the idea that you will ever find the "perfect" system. The perfect system this month may be lousy next month. It will definitely have many difficult periods. A system can only exploit one time frame at a time. (What traders think of as a non-trending market is really a trending market in a shorter time frame.) There is no indicator now, and there never will be one, that can predict what type of market you will have in the future. You can never know which time frame will be optimal to trade in the near future. The best an indicator can do is tell you what type of market you are in now. You should pick a system that has done a good job historically over a long period of time. You hope and expect that if you trade it long enough in the future, you will eventually achieve approximately the same level of profitability.
One key to success is to diversify as much as your capital will allow in markets and (perhaps) time frames. Up to about $50,000 in capital, I suggest you pick a relatively long-term system and use your diversification power to diversify in markets only. One system should be enough, but there is nothing wrong with trading several systems using different markets. If you have more than $50,000, you can begin to think about adding additional systems to diversify into shorter-term time frames.
Long-term trading is the most efficient. In long-term trading, you hold winning trades longer, so your average profit per trade will necessarily be larger than in short-term trading. As your time frame becomes shorter, your holding period becomes shorter and your average profit per trade becomes smaller and smaller. However, your costs of trading (slippage, commissions and the bid/asked spread) stay the same. Thus, your system has less margin for error. A long-term system may give you an average trade of $500 to $2,000. A short-term system may yield an average trade down to $50. If, because of adverse market conditions, your system's efficiency decreases by $500 per trade, your long-term system may still make money, but your short-term system will be in big trouble. [To the extent that you may need intraday quote equipment for very short-term trading, your general overhead increases as well. This may or may not be offset by an increased number of trades creating additional profit.]
The purpose of diversifying into a shorter-term time frame is to smooth out the equity curve by being able to take advantage of periods when the markets are congesting in your long-term time frame. Trading shorter-term can also make better use of capital if your system can move from market to market seeking the best opportunities.
Depending on your trading personality, you may prefer to use additional capital to diversify in long-term systems or just add additional contracts in the markets you are already trading. I believe this approach offers the highest probability of making long-term profits and the highest expected value of profits earned. The key to benefitting from the long-term statistical advantage is to trade a well-selected group of diversified markets and to have the discipline and courage to keep trading your system until you reach the long-term.
Almost all traders fail to exploit the statistical advantage of following trends in the futures markets. They do not trade their system religiously, they choose a poor group of markets to trade or they overtrade their capital and are forced to quit too soon. An essential thing to avoid is trading with an over-curve-fitted system. Nearly every system is curve-fitted to some extent. The minute you test an idea and then change it at all to improve performance, you have engaged in curve-fitting. The more you bend your system around to improve performance on past data, the less likely it is your system will trade profitably in the future. This is very hard for inexperienced traders to accept. They expect that methods which worked well in the past will probably work well in the future. Past performance will only approximate (and I emphasize approximate) future performance to the extent the system is not over-curve-fitted.
The best way I know to guard effectively against over-curve-fitting is to make sure your system works in many markets using the same parameters. Successful system traders use the same system parameters for each market no matter how counter-intuitive this seems. The more markets and the longer the historical time period your system can trade profitably, the more robust it is. But don't expect your system to trade all markets and all time frames profitably. This will not happen. I trade one of my systems in fourteen markets using the same parameters for each. So long as a system tests well over a large number of markets, there is no requirement that you trade it in all of them to diversify. You could have ten systems that all tested profitably in fifteen markets over the last six years and choose to trade each of them in only one market. That would allow you to trade ten diverse markets using a non-curve-fitted system in each. It would be just as acceptable theoretically as trading one of those systems in the same ten markets.
For myself, I am not concerned about finding the perfect system. I want to trade a good system, an adequate system that is not over-curve-fitted. I then spend considerable time choosing a good portfolio of markets to trade. I will discuss that process in my next article.

Chaos Theory and Market Reality, Part One

Chaos Theory and Market Reality, Part One
When a new trader examines the trading problem, his first reaction is that in order to be successful, he must learn to predict the markets. Minimum research will teach him that you use fundamental analysis to make long-term predictions and technical analysis to make short-term predictions. If our new trader examines commodity market price history, he finds what appear to be repetitive patterns. Over the long term, the markets move up and down in broad cyclic waves. If he looks carefully, he can find certain short-term chart patterns that occur over and over. Once he discovers the world of mathematical indicators, he finds that certain configurations of the indicators and price patterns repeat themselves--often at major tops and bottoms.
At the same time as he is discovering these repetitive patterns of various types, he is also learning to appreciate the incredible profits that are possible if one takes action at the right time.
It should not be surprising that our eager beginner concludes that the markets are entities that keep repeating themselves over and over in various ways. If he or she can learn the patterns and cycles, large profits should be easy. Maybe the markets are so organized that they repeat themselves perfectly over and over in a highly disguised way. If our trader can crack this secret code, not only will huge profits be possible, he or she can eliminate almost all losses.
Our trader pursues these goals using the available literature. Profits are usually elusive. Eventually, the mail brings offers of special systems that do in fact take advantage of these patterns known only by a select group of insiders. Since these systems are often priced in the thousands of dollars, our trader assumes they must in fact be valuable trading tools. These system brochures often contain stories of legendary or reclusive traders who discovered secrets of the markets and made millions. Through various means, the seller has acquired these secrets which he now agrees to share with only a few lucky traders. These stories reinforce the belief that the few traders who are making the big money are successful because they have discovered something about market behavior that only the insider super traders know.
In spite of the abundance of such prediction methods in books, systems and software, during any given year about 75 percent of commodity traders lose money. In the long run, probably 95 percent of traders lose. Nevertheless, almost no traders question the proposition that exploitable, repetitive price patterns exist. We saw a recent article titled "The Magic of Charting Price Patterns and Projections." There was nothing in the article itself that showed any performance, much less "magic."
People are naturally succeptible to wishful thinking. They believe what they want to believe in spite of obvious evidence to the contrary. Short-term luck causes many such faithful traders to reinforce their invalid beliefs. In a recent interview, I was asked what is the greatest skill a trader can possess or develop. My answer was as follows: "There are obviously a number of different skills that a trader needs in order to be successful. They are all important. If I had to to pick just one that is most important, I would say it is the ability to perceive true reality.
"Unsuccessful traders have a distorted view of the markets, themselves and what they are really doing when they trade. It is very difficult for them to shed these misconceptions so they are doomed to long-term failure.
"The whole market universe is constructed in a way that reinforces their misconceptions. This compounds the challenge of overcoming them."
Enter Chaos Theory. It turns out that it is possible to examine historical market price action with mathematical and statistical tools and determine whether such repetitive patterns and cycles exist.
According to respected authorities, the markets are non-linear, dynamic systems. Chaos Theory is the mathematics of analyzing such non-linear, dynamic systems. Chaos analysis has determined that market prices are highly random with a trend component. The amount of the trend component varies from market to market and from time frame to time frame. A concept involved in chaotic systems is fractals. Fractals are objects which are "self-similar" in the sense that the individual parts are related to the whole. A popular example is a tree. While the branches get smaller and smaller, each is similar in structure to the larger branches and the tree as a whole. Similarly, in market price action, as you look at monthly, weekly, daily and intraday bar charts, the structure has a similar appearance. Just as with natural objects, as you move in closer and closer, you see more and more detail.
Another characteristic of chaotic markets is called "sensitive dependence on initial conditions." This is what makes dynamic market systems so difficult to predict. Because we cannot accurately describe the current situation and because errors in description are infinitely compounded in the future by the system's overall complexity, accurate prediction becomes impossible. Even if we could predict tomorrow's stock market change exactly (which we can't), we would still have zero accuracy trying to predict only 20 days ahead.
A number of thoughtful traders and experts have suggested that those trading with intraday data such as five-minute bar charts are trading random noise and thus wasting their time. Over time, they are doomed to failure by the costs of trading. At the same time these experts say that longer-term price action is not random. Traders can succeed trading from daily or weekly charts if they follow trends. The question naturally arises how can short-term data be random and longer-term data be deterministic in the same market. If short-term (random) data accumulates to form long-term data, wouldn't that also have to be random?
As it turns out, such a paradox can exist. A system can be random in the short-term and deterministic in the long-term. The trachea in human lungs are an example in nature of just such a system.
For those willing to plod through some fairly technical, jargon-loaded language, I recommend Edgar Peters' two books on Chaos Theory and the markets, Chaos and Order in the Capital Markets (992) and Fractal Market Analysis (1994). Both are published by John Wiley & Sons.
In my next article I will explore this subject further and suggest some practical applications

The Correct Way to Optimize Commodity Trading Systems

The Correct Way to Optimize Commodity Trading Systems
In previous articles in this space I have made the case that the average person has the best chance to be a profitable trader if he or she adopts a 100-percent mechanical approach. This is the only surefire way to minimize the emotional influences that inevitably destroy nearly every trader. It is also the only way to know whether your method has been profitable historically. Abandon the idea that you will ever find the "perfect" system. The perfect system this month may be lousy next month. It will definitely have many difficult periods in the future. Just as every trader and every methodology has losing periods, every system, no matter how brilliantly created, will encounter periods of market price action it cannot trade successfully. Thus, I am content with a good system. I define a good system as one that has a low enough drawdown and sufficient profitability in hypothetical historical testing to satisfy me as well as being robust enough to trade many markets profitably using the same parameters.
In creating a system, the designer must not fall into the trap of over-curve-fitting the system to back data. The more you bend your system around to improve performance on past data, the less likely it is your system will trade profitably in the future. This is very hard for inexperienced traders to accept. They expect that methods which worked well in the past will probably work well in the future. Past performance will only approximate (and I emphasize approximate) future performance to the extent the system is not over-curve-fitted.
The best way to guard effectively against over-curve-fitting is to make sure your system works in many markets using the same parameters. Successful system traders use the same system parameters for each market no matter how counter-intuitive this seems. If you doubt me, read the two "wizards" books by Jack Schwager. Jack himself manages money using systems that employ the same parameters for each market.
The more markets and the longer the historical time period your system can trade profitably, the more robust it is. I trade one of my systems in fifteen markets using the same parameters for each. It is historically profitable in even more markets over the last ten years.
So long as a system tests well over a large number of markets, there is no requirement that you trade it in all of them to diversify. You could have ten systems that all tested profitably in fifteen markets over the last six years and choose to trade each of them in only one market. That would allow you to trade ten diverse markets using a non-curve-fitted system in each. It would be just as acceptable theoretically as trading one of those systems in the same ten markets.
That principle permits a kind optimization that will allow you trade one system using a different set of optimized parameters for each market. Those who want to optimize each market separately can do so without fear of over-optimizing.
Here is the correct process. Decide which markets you may want to trade. To be safest, you should trade only markets which test profitably using the same set of parameters (the system default parameters perhaps) for at least the last five years. Let's say your system trades twenty markets profitably using the default parameters. That will be your universe for testing.
You may optimize the system on each market individually. Go ahead and knock yourself out trying to maximize the profit and minimize the drawdown in each market. You will probably come up with twenty different parameter sets. Now comes the hard part. Take each one of your twenty optimized parameter sets and use it on the entire universe of twenty markets. See whether the optimized parameters hold up as well as the default parameters in trading all the other markets. If an optimized parameter set trades all twenty markets profitably, you can be confident that you have not over-optimized to the point of curve-fitting. You may use that parameter set to trade the market you have created it for.
If an optimized parameter set has a hard time trading other markets profitably, that is a warning signal you have over-optimized. You should start over with the commodity it was designed for and create another parameter set that does a better job on the rest of the markets.
Whether you require an optimized parameter set to trade all markets profitably that the default parameters do or just a certain percentage of them, is a question of judgment. You may want to use an optimized parameter set that trades profitably most, but not all, the markets in your universe. The more markets you require, however, the greater the chance that your system will work in the future and not just on past data.
While I have described this hyper-optimization process, I am not personally convinced that it is worth the effort. I know of no evidence that suggests such individually optimized parameter sets are likely to be more profitable in the future than an unoptimized single parameter set. If it makes you feel better to show larger hypothetical historical profits, however, it probably won't hurt.
When you are satisfied with the parameter sets for all the markets in your universe, you are ready to create the portfolio you will actually trade. I arrange the markets in order of profitability using the average trade as the benchmark. Then I experiment with different portfolios trying to create one with as much diversification as possible while maintaining a low maximum drawdown in relation to the average annual portfolio profit. The proper starting account size should be equal to or greater than twice the maximum historical portfolio drawdown plus the total portfolio initial margin.
My software allows the portfolio selection process to be expanded even further by testing and including multiple systems in the total trading plan.

Chaos Theory and Market Reality, Part Two

Chaos Theory and Market Reality, Part Two
In my last article I discussed the natural progression of learning for a new trader. He or she quickly determines that in order to be successful, one must master market predicting. After reading some books in the conventional literature, he attempts to find repetitive market patterns and cycles using price bars or mathematical indicators. He may fall prey to various expensive system promotions. In spite of the abundance of such prediction methods in books, systems and software, in the long run, probably 95 percent of traders lose. Nevertheless, almost no traders question the proposition that exploitable, repetitive price patterns and cycles exist.
People are naturally susceptible to wishful thinking. They believe what they want to believe in spite of obvious evidence to the contrary. Short-term luck causes many such faithful traders to reinforce their invalid beliefs. Unsuccessful traders have a distorted view of the markets, themselves and what they are really doing when they trade. It is very difficult for them to shed these misconceptions so they are doomed to long-term failure.
It turns out that it is possible to examine historical market price action with mathematical and statistical tools and determine whether such repetitive patterns and cycles exist. Chaos Theory is the mathematics of analyzing systems such as market price action.
For those willing to plod through some fairly technical, jargon-loaded language, I recommend Edgar Peters' two books on Chaos Theory and the markets, Chaos and Order in the Capital Markets (992) and Fractal Market Analysis (1994). Both are published by John Wiley & Sons.
Chaos analysis tells us that market prices are highly random with a trend component. The amount of the trend component varies from market to market and from time frame to time frame. Short-term patterns and repetitive short-term cycles with predictive value do not exist. The patterns of prices and indicators traders use to predict occur as readily in random data. Thus, you have about as much chance to predict short-term market prices using technical analysis as you do to predict future numbers on a roulette wheel.
In writing his second book Edgar Peters examined four years of tick data in the S&P. He concluded that while short-term data is not totally random, the deterministic element is so small as to be barely measurable. He concluded that "it is highly unlikely that a high-frequency [short-term] trader can actually profit in the long term." He also found that there are no cycles in intraday data.
As I read the literature, this is not opinion. It is scientific fact. Traders who ignore it do so at their financial peril. Does this mean the markets are a random walk and that eventually all traders will lose because of the costs of trading? No.
Traders can exploit the longer-term trend component of commodity market price action to obtain a statistical edge. This is precisely what trend-following systems do. It explains why good trend-following systems traded in diversified market portfolios tend to make money year after year while day-traders invariably lose in the long term. To be a successful speculator, you must put yourself in the same position as the house in casino gambling. On every bet the house has a statistical edge. While the house may lose in the short term, the more gamblers bet, the more the house will eventually win. If you trade with an approach that has a statistical edge and if you follow your approach rigorously (a big if), like the casino, you cannot lose in the long term.
My calculation of the trading success quotient is that one-third depends on the system, one-third on the portfolio of markets traded and one-third on the trader's discipline to follow the system precisely. We can never know for sure whether our system has a statistical edge. The best we can do is create it without over-curvefitting and test it historically. If the system has been over-curvefitted, any historical testing will be pre-ordained and worthless. A simple way to guard against over-curvefitting is to use exactly the same rules for all markets and test your system on as many markets as possible. If it is profitable in a wide variety of markets in a long historical test that generates a large number of trades, it is probably not over-curvefitted.
To maximize your edge while minimizing your risk, it is crucial to select an optimal portfolio for your system and account size. Since a market's price trend component is what gives you a statistical edge in the first place, you can increase your edge by concentrating your trading in markets with the highest historical trend component. I have written a book called Trendiness in the Futures Markets which is a systematic examination of the tendency of 29 popular markets to trend in all time frames between 5 and 85 days.
While we can measure the various markets' tendency to trend in history, we cannot know for sure which markets will trend the most in the next six months to a year. Thus, to reduce short-term risk, we must diversify as well as concentrate. My research has shown that optimum portfolios for trend-following systems have between 10 and 20 markets. I personally trade 19 different markets with various trend-following systems.
Another aspect of managing risk is keeping drawdown in relation to account size under control. Because drawdown and profitability are closely related, to reduce drawdown, you must accept smaller profits. It is impossible to evaluate the optimum portfolio for your system unless you compute the joint historical drawdown when trading the entire portfolio. I suggest a starting account size representing twice the maximum historical portfolio drawdown plus the total margin for the portfolio.
Contrast this rigorous, scientific approach to the way most traders operate. They have no idea whether their methodology has a statistical edge. They assume that if it is in a book or came from a famous guru or cost a lot of money, it must be good. They trade with highly subjective methods that can never be tested. They are too lazy to create some hard and fast rules and perform proper historical testing. If this is you, don't be surprised if your trading produces losses. For you, trading may be fun, but you will pay for your entertainment.