Frustrated with my break-even trading results, I made my first foray into the futures market in June 1971. Like most small-time traders with big dreams and limited capital, I was attracted by the leverage of futures and the allure of multiplying my money many fold if I hit it right. Hogs and pork bellies were where I thought my fortune would be made.
Instead of making a fortune, though, my account was nearly wiped out on my second trade in the commodities market. I learned the hard way what it meant when a market makes a limit move against you. I bought two pork belly contracts the day before an important report. During the next two days I watched in horror as the market moved against me and I was unable to close out my position. Still, I felt this was just a beginner's mistake and that futures would someday bring me the fortune that trading stocks had denied me.
Working for Sears interfered with my futures trading, so I left the management training program there after one year and took a position as a manager at Spencer's Gifts outside Rochester, New York. I thought that being a manager would allow me the freedom to call my futures broker whenever and as much as I needed. It should come as no surprise that I wasn't a very productive store manager since I was so focused on trading futures. After a year and a half at Spencer's, I was released for lack of production.
Eventually, I moved back to my hometown of Louisville, Kentucky, and became a commodities broker at Clayton Brokerage. At the time, Clayton was one of the largest futures firms in the country. I thought being a broker and watching the prices change after each trade would improve my trading results. This was 1973, the year of the Russian grain purchases and the beginning of a decade-long inflationary spiral. There were times during the summer of 1973 when grain prices traded limit up day after day after day. Even though I was there in the heat of the action, I still couldn't make any money trading.
Stumbling Through the Seventies
I left the brokerage business in late 1973. In an attempt to increase my trading stake, I participated in an assortment of get-rich-quick schemes. Some actually worked, at least for awhile. When silver began skyrocketing at the end of 1973 and the beginning of 1974, I ran newspaper ads seeking to buy silver coins. The public had hoarded a massive amount of silver coins after silver ceased being used in the mintage of coins. They were more than willing to part with some of their hoard when dealers like myself offered two and three times face value. I then shipped the coins to a large buyer in the South who had contracts with smelters in New York.
In 1975 and 1976 1 became affiliated with several southern California companies that were marketing work at home franchises. For a fee of $3,000 each, investors could become jewelry manufacturers by producing wooden pendants and necklaces from their homes. The southern California companies then guaranteed they would buy whatever was produced and retail the merchandise to department stores.
The trouble with these work-at-home schemes was that many of them were scams operated by fly-by-night companies. When I realized the investors would never see their money again, I contacted the local FBI office in Louisville. This led to an interview on a local television evening news program, where I warned the public to beware of work-at-home business opportunities.
It seemed like I spent the entire decade of the seventies seeking ways to add capital to my trading account. When I wasn't involved in some get-rich-quick scheme, I was working at menial and low paying jobs, such as being a security guard. At various times in the 1970s, I was a watchman for a local fireplace accessory manufacturer, a nursing home, and, of all things, a convent. I spent many a lonely night dreaming of the day I would finally make it as a trader.
My only positive trading experience in the 1970s involved equity options on the Chicago Board Options Exchange (CBOE). After my father's retirement in late 1975, he gave me $30,000 to manage for him. I ran the account up to $70,000 during the first few months of 1976, primarily trading Merrill Lynch call options. Then I spent the remainder of 1976 giving it all back.
The 1970s was the decade of the commodity trader. Many of those profiled in Jack Schwager's Market Wizards attained their fame and fortune by riding the bull markets of that decade. I was trading during all those stupendous bull markets of the 1970s—soybeans in 1973, sugar in 1974, coffee in 1976, and gold in late 1979. Yet what did I have to show for it? Nothing, absolutely nothing.
While I certainly wasn't getting rich trading in the 1970s, I also wasn't losing. Treading water would be a more apt description. Futures brokers considered me a winner since I was able to survive so long without going broke. From my viewpoint, considering the time, aggravation, and lack of trading profits, I was hardly a success story.
If there was one thing I did right in my early trading years that enabled me to stay in the game, it was that I always learned from my mistakes and never repeated them. For instance, the losses I incurred holding those pork belly contracts through a Pig Crop Report taught me never to hold futures through a major report unless I had a big profit cushion going into the report.
In another trade I vividly recall, I got decimated trading six wheat contracts, even though the market had made only a small countertrend move against me. I learned then and there what can happen when you overtrade by loading up on too many contracts.
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