A successful futures trading strategy

Back in 1989, I was 42 and living in Java. I decided it was time to do something about my old age. I knew the traditional pension wouldn't be enough. Nor would buying and accumulating physical stock. It had to be leveraged, but at the same time it had to be safe. My argument went like this :

~ All trading systems are bunkum - no better and no worse than reading steaming entrails.

~ Most market movements are too complex to be reliably predictable simultaneously in both timing and price.

~ The only certainty is that, for the last 400 years, market indices have almost always risen over a period of 5 years or more. One notable exception was 1929 (over 20 years to recover), and almost certainly by now December 1999 (for the FT 100 and the Dow, for example). Raise this to 10 years and it's hard to find an exception except for the years following 1929.

~ So the only reasonably reliable approach is to buy and accumulate over at least 10 years, leveraging one's position only by as much as one can afford assuming a fall of up to 50% in the value of the market at some time during the first five years.

~ Proof that it works, and in spades: look at any long-term graph of the Dow or FT 100 - it doesn't take a mathematical genius to work out that you would have made spectacular profits over almost (and there's your risk : almost) any 10-year period in documented history. And of course you would accumulate as you went, in small increments starting from a humble single futures contract, until after ten years you had a portfolio worth millions in any currency.  

Then you continue as before for another 10 years - so you really need to start this before, say, your 50th birthday.  Otherwise all you'll get is a very nice funeral.

 

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