My First System
by John Sweeney
As a novice trader, newly equipped with a price monitor, personal computer, and a fresh reading of
Kaufman's Commodity Trading Systems and Methods, I was looking for some steady money in
day-trading. In May of 1983 I was focused on T-Bills. I was afraid of what I called "overnight risk" in the
financials especially given market antics over the money supply. I wanted a way to generate a small
amount of money from the market on a regular basis. I could always, if successful, increase the number
of contracts to get into more serious money.
Treasure Bills were just the ticket, my buddies in the cash markets told me. Their volatility was notorious
which made sense to me given their short-term nature. "Short-term = volatility", I thought.
My buddies and I were wrong. T Bills had entered a period of relative stability in October, 1982 — as
measured by daily range and intra-day closing price differences. The monitor also told me that the T
Bond prices were changing far more often. By July, I was keeping two charts instead of one. LESSON: If
you can articulate your assu mptions, test the m yourself and don't try to study more than one thing
at a time.
What was my thought here? I had the idea, as I've learned is common amongst novices, that if I couldn't
see how to take a large but highly uncertain profit from a large move, I'd try to take a small but highly
certain profit from those large moves LESSON: The larger moves are more predictable. To make this
idea economically viable, I had to be able to take a lot of small profits which meant constantly looking
for opportunities. This is my novice's mindset: daytrading would expose the opportunities and protect me
from taking "overnight risk." With this and the desire to get into nits and grits, the stage was set to start
watching my monitor hypnotically while drawing charts!