I majored in English literature, one reason why my trading system is light on such quantitative tools as regression analysis and chaos theory.  Even so, I’m unaware of any other system that consistently yields swing points more precise than the hidden pivots I serve up here each day.  The propietary method I use is idiosyncratic to the extent it employs mainly pattern-recognition skills and other right-brain tricks to interpret stock charts.

I’ve considered automating my forecasts and trading by way of a rules-based system but have been told by my friend Mike Barna that the end result would probably not improve on the laboriously achieved results I’m already getting. Mike is arguably one of the world’s most skillful and successful trading-system developers. He and his partner John Ehlers have developed and marketed numerous commercial systems that continue to dominate FuturesTruth magazine’s “Top 40” rankings. One of those systems, R-Mesa, is an index futures-killer whose capabilities have evolved to the point where Mike and John no longer sell it but instead partner with institutional clients for a percentage of trading profits.

No Holy Grail

Mike has been hard at work lately developing a very powerful system that he says will encompass and supersede thousands of other trading systems he has developed over the years. Still, he does not claim to have found the Holy Grail, for even the most profitable systems need to evolve as market conditions change, as do the hand-wrought strategies that I bring to you each day in Rick’s Picks. At some point, I hope to be able to offer you algorithmically generated trades. Their main advantage would be to greatly expand the number of issues I can track and trade. For now, though, other format changes are in store that will emphasize detailed and specific trading advice over commentary.

I often receive mail from subscribers telling me how much they enjoy my daily commentary. But I would guess that if the service were to proffer good trading ideas alone and no essay, most of you would continue to subscribe. Over the next month or so, it is toward a middle ground that I intend to move, with somewhat less verbiage and more emphasis on money-making trades in options, stocks, futures and mini-contracts. The changes should be considered experimental, but they would happen anyway because of next week’s wrist surgery. My right arm will be immobilized in a cast all summer, making typing considerably more difficult. The opportunity this will present for me is to say less but provide more.

Essays Will Continue

This doesn’t mean I plan to abandon the daily essay – only that there will be fewer of them and that they will be shorter in length. Meanwhile, I invite your comments via the suggestion box to help me tailor my recommendations so that they fulfill the main goal of Rick’s Picks: to help you to trade more profitably and with less stress. Concerning our weekly, real-time Q&A sessions, I haven’t yet settled on a plan, but they will continue in some fashion These sessions have attracted a growing following, as you are surely aware. Yesterday’s Q&A encompassed five hours of real-time analysis and recommendations and covered no fewer than 20 issues ranging from July Lean Hogs to Smith & Wesson, Google, Fannie Mae, Tyco and Newmont, to the query “What are mini-contracts?”  

Below, I have reprinted a letter from a subscriber that helped catalyze my thoughts concerning change. It contains much useful criticism as well as a few practical ideas. I hope that other subscribers will take the time to offer similarly provocative criticism so that Rick’s Picks can better serve your goals. Here’s the letter, from J.T., a trader of long experience:

Letter from a Subscriber

“This is the second time that I have tried a subscription to your service.  I stopped very early the first time because I could not point to anything that was making me money.  That's where I'm at right now - trying to figure out how to make money from your advice.  I do not trade commodities, although I have done so in the distant past.  I have a core holding of stocks for longer term investment purposes, and then I actively trade a smaller percentage of the total.  I trade a lot of options, especially the QQQQ's.  I'm a bit of a gold bug, being close to age 60.  I still work as an accountant, but I can keep an eye on the market during the day and I use a real-time charting service.   

“It seems to me that your service is primarily designed for day-traders and other people who can closely watch the market during the day.  Am I wrong here?  A lot of your suggested trades call for trying to pick tops or bottoms based upon your pivot strategy, using tight stops to closely limit losses.  This type of trading is hard to implement without watching the market like a hawk. I also understand your option strategy - basically, bet a little to win a lot, try to get to a "free" position - and I believe that strategy is a winner.  But again, this requires close attention to the markets.

Q&A Advice Differs

“However, I note that in response to the weekly subscriber questions, you are giving advice that typically has a much longer time frame.  I wonder what that says about your subscribers' wants and needs?  Maybe I am not the only one who wonders if they are a fit for your service.

“I enjoy immensely your daily editorial-like posts that you also give away on web sites like Goldseek.com and 321Golf.  I learn much from them even if I don't always agree with the conclusion.  Don't stop that part of what you do.  You are a clever writer and very enjoyable to read.  But how does that make me money? When you make a recommendation to short the S&P at a certain level and the trade works out to within just a tick or two and you are looking like a genius, I feel left out, to be honest, because I don't trade commodities.  I wonder if would be possible to tie the pivot point in a monthly contract to the actual index?  I get that index information in my real-time charting.  I could then set an alarm in my charting software and when the magic point is reached I can take time from my work day to see if there is a potential trade in options or other stocks that I follow that closely mirror the market.  Just a thought.

“Another thing is that I don't know what size account you think your subscriber is trading.  When you recommended buying CDE, I did, but much more than the 400 shares I think you recommended.  Then I saw a comment later from you that you bet a lot of your subscribers probably bought more than 400 shares.  Well, shouldn't you have some idea of how many shares your subscribers are buying (perhaps as a percentage of their account?) so that you can formulate what the size of the next trade should be?

“Hope some of this useful to you.”

It most surely will be, Jon. Thanks for helping to get the ball rolling.