filtering idea

wonkabar · Post by **wonkabar** » Mon Jan 17, 2005 4:27 pm

Has anyone ever explored filtering trade signals based on the price of the commodity? Say for example the government starts to buy corn from farmers at 195 to "protect them." Entering a short trade just above such a level would have a much different risk reward profile. I am sure there are othe exmples but the basic question is if people ever eliminate short trades on certain commodities.

Obviously this does not work for products such as currency, fixed income, stock index.

Post by **Tim Arnold** » Mon Jan 17, 2005 4:45 pm

Hi Wonkabar,

I have done some research using VeriTrader where I filter trades that are near "historical" levels. The concept being that you might not want to buy something at its all time high, or sell at the all time low. My research so far has indidcated to me that this type of filter does not enhance results. So I have so far been unsuccessful in using this type of filter to create a better system.

Hope that helps,

Tim

Roscoe · Post by **Roscoe** » Tue Jan 18, 2005 6:53 pm

This thread sure interests me, particularly the Corn example as I am still short there

For physical commodities it makes sense that there is a cost of production below which the price will not go (or below which the government will bail out producers by buying), but determining that cost is difficult. Would any kind soul care to point me/us towards the light?

TC · Post by TC » Tue Jan 18, 2005 11:12 pm

Picking a price, such as cost-of-production, below which your money is "safe" is a very hazardous proposition. If commodity prices are approaching their cost of production it is unlikely that there are many rational players left in that market, and as Keynes reminded us many decades ago "The market can remain irrational for longer than most of us can remain solvent"