How a Pro Looks for Trading Opportunities
02/07/2013 7:00 am EST
As a long-time veteran of the commodity markets, John Person explains how he is always looking for trades and focuses on one market that seasonally tops before the end of the year.
I’m here with John Person, a veteran of the fast-moving futures markets. John, are you a short-term trader or a swing trader, or a long-term trader; what do you prefer in your own trading day-to-day?
I think I’m a diversified trader. I take all aspects of different markets, and sometimes I can take a day trade and turn it into a swing trade. Or a position trade, and a lot of times when I’m looking for a day trade that just doesn’t materialize, I’m always looking for opportunities since I do a lot of research and work with seasonalities.
I’m looking for either a sector or a stock, or a commodity that’s entering or exiting a seasonally strong or weak period of time, so I’m always utilizing my time to look for trading opportunities down the road, and to monitor for current opportunities.
Well, that’s one of the subjects of your new book coming up; this sector analysis and this seasonality analysis.
How important is that for a trader to incorporate a sector analysis or a seasonal analysis into their trading strategy?
When we do the Commodity Trader’s Almanac and having a commodity trader’s background, back in the early 1980s you learned real quickly if you’re trading grains, harvest lows are in the fall, and when I first got my start, I was fascinated by trading the financials, so I had a knack for trading the Treasury bonds. When they first introduced options on commodities, the very first market was on bonds, so I really have a background in options strategies.
And on the financials, so for me there were certain times of the year that for the years you’ve realized that there is a supply and demand function in the financial markets, and so for bonds, just like most people may not realize, but seasonally bond prices tend to peak out towards year-end, and that decline in price; in other words, yield goes up, price goes down on a 30-year or the long end of the yield curve. We tend to see prices decline going into April; tax time.
So, if you think of the adage, “Sell in May of the stock market and go away”, people will come out of bonds and into equities, so therefore you’ll see a diminished exposure in bonds, and so when people are maybe selling out their stock portfolio in May, you start to see people come back into the bond market, so that might be some of the aspect of the seasonal tendencies.
So, for me as a trader, looking at that seasonal aspect is paramount; it’s critical, and a lot of markets tend to have those seasonal tendencies, but people forget. If you’re like me, I don’t know what I had for lunch two days ago, let alone that if you think about the drug sector. Do people buy cold and flu medicine in August? Or do they buy cold and flu season in the peak flu season in January or February.
So, there is a certain time of the year that you look to buy semiconductors. There’s a certain time of the year that you buy energy stocks. Certain time of the year you see more demand than supply and that’s when these sectors have a more powerful boost, or they run out of steam, so to speak, so if investors had a road map of looking at a sector analysis and seasonality, then I think they might be able to pick some of their stocks or some of their trades or sectors to be in a little bit more efficiently.
Well, I’ve read every other book you’ve written, and I can’t wait for the new one to come out; I’m going to grab a copy as soon as it’s out. Thanks John.
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