Magazine article Modern Trader

Calvin Beal: Trading Stupid Looks Smart

Magazine article Modern Trader

Calvin Beal: Trading Stupid Looks Smart

Article excerpt

For the last seven years, Calvin Beal has been making "a decent living" by making "stupid-looking" crude oil trades.

Well, it's not quite that simple.

Full of hope, Beal and two associates started Entrade, in New Jersey, to trade then-new energy futures in early 1984.

The only active principal, Beal had over 30 years' experience in the cash oil business. At Exxon, he rose to vice president for Venezuelan operations. And from 1973 to 1984, he had been involved with two trading companies.

But cash market dealing exposes traders to implementation problems like "off spec" cargoes and payment defaults, and he decided paper markets fit his style better.

"We expected the combination of that cash background and the tools of technical analysis to be dynamite. Not so. That background proved a disadvantage. Part of the problem -- short-term moves in futures are not at all what fundamental background leads traders to expect," he says.

Deciding his background was a definite hurdle, Beal shifted to a 100% technical approach by mid-1985. And he had to discipline himself to ignore the impulses that came from his grounding in fundamentals.

"Of course, fundamentals do determine long-term market moves," he says, "but they keep changing. The assumptions you start with aren't any good when you get there. The give and take of short-term price moves has more to do with market dynamics."

Beal soon learned it was a mistake not to do the trade when the computer signaled "enter" or "exit." In fact, he says, "We began to feel good if it seemed a stupid trade (given his fundamental background), because we knew we'd make money."

He uses fundamentals to decide when not to trade. In chaotic situations -- around an OPEC meeting, during the Gulf War -- he wants to be on the sidelines.

Emphatically not a trend-following approach, Beal's proprietary system combines different elements from various technical approaches to produce hourly signals. …

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