"Is he worth it?" Have you ever asked yourself this question after doing a transaction with a full service broker? If you could make a list of things he must do to earn your business, what would they be? There certainly IS a point where he is worth his salt. See if these ideas make sense for you.
I was talking with a commodity broker friend today. We were discussing how to provide the very best service to full-service speculative clients. In other words, just what services would someone value enough to gladly pay full-service commissions? What could the commodity futures broker do for a client that would make himself indispensable?
I told him if I were a futures or options client, first I would have to fully trust the broker and believe he had my best interests at heart. The broker would suggest a trade only when he had a darn good reason. He would be at least 90% technically oriented. He would be experienced trading his own account and have his own disciplined methods that he lived by and stuck with. Over the last few years, his methods should have been tested through both bull and bear commodity markets.
After these requirements, the next most important quality is how selective he was with his trade choices. I would like him to always be monitoring the full universe of U. S.commodity markets and ANTICIPATING when the next opportunity was about to present itself. This may be his biggest value . . . to be diligently using an effective method to flag low-risk, high probability market opportunities for me. I'm not talking about some canned moving average program, but something that is sophisticated and takes a certain amount of human experienced input.
Let’s say there's twenty-two major commodity futures markets. On average, I would expect him to be bullish on two and bearish on two markets. If I asked his opinion of the other eighteen, he would tell me to wait and be patient until they produced the “set up” he uses to signal a trade. If I had done my own homework on a market and I was very bullish, he would recognize this fact. After telling me his opinion, he would step aside and let me put on a light position without further attempts to sway my opinion. He would monitor my actions for signs of emotion and let me know if I was beginning to think carelessly.
To me, having someone always watching the major futures markets for a low risk set up is worth the price of full service commissions. This is assuming my advisor uses a reasonably sophisticated method that stays out of most markets most of the time. The opposite of this is a common moving average technique that is either long or short all the time. This is what I call a weather vane method that swings with every wind, big and small. This method always has a bullish or bearish opinion on all markets.
The problem is that commodity futures markets chop in a range most of the time or present few low risk, high probability opportunities to enter. By default, this means losses. In my opinion, it is far superior to have a selective and disciplined method and a commodity trader who adheres to the plan.
I believe TimeLine Trading™ passes these tests. It gives a high probability future window of when to expect a move of substantial proportions. It attempts to forecast an intermediate, low risk turning point. It attempts to keep us out of sideways, chopping commodity markets. It also attempts to give us an exit time frame. For selectivity, on average, it will signal a bullish or bearish trade for two to six markets taken from twenty-two candidates. This selectivity keeps trading efficiency higher. (meaning less commissions, bid/offer spread expenses, errors of high volume trading, etc)
Part Two of Two Parts - Next!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Thomas Cathey directs the managed futures division of Thomas Capital Management, LLC. Get FREE, the complete 44+ lesson, “Thomas Commodity Trading Course" by visiting: http://www.thomascapitalmanagement.com/commodity/welcome.htm It's brand new and fun reading. . . a “street-wise" trading e-course. Visit the main Thomas Capital Management trading website at: http://www.ThomasCapitalManagement.com