ugh its changes and come back around again and the method will work. It must be this way or else everyone would eventually be using the same trading system or method over time.

Why is it when we check out the latest high-priced commodity futures trading “system” performance listings, every year there are different ones on top, and the previous winners are often at the bottom? This is because rigid optimization does not work. Well, not for long. It's “optimized mush” as one futures trader calls it.

The perfect trading system would be one that continuously changed in sync with the futures market. It’s not hard to design a great trend

Finding your very own unique commodity trading edge is a worthwhile goal. Without one you are lost in the masses, struggling to push your head above the sea of expenses. Trading edges do exist, though for short periods of time. Psychological edges are more permanent. You need many. Here's how to find yours.

First let's talk about a good market for day trading. Next, we'll talk about finding a trading "edge."

The S&P 500 Index futures contract market may be the best futures game around for day-trading. It’s liquid and the swings are usually large enough every day to make it worthwhile. The electronic e-mini futures market (the mini S&P 500) is lightning fast for executions that rival or even exceed the floor-trader advantage. However, it would be even better if someday they would make a big “e-maxi” equivalent to the e-mini to help keep the commissions and expenses lower.

After all, five e-minis are equivalent to one present "pit-maxi." But with the pit maxi, the price skids and delay of pit executions can easily add from ? to a full point at times. This makes paying the extra commissions of five e-minis well worth it in the end. After all, a one-point skid is $250 for a maxi while the extra commissions for five e-minis are a fraction of that.

Price skids in electronic e-mini futures contracts happen sometimes, but are rare and simply due to heavy buying or selling, compared to illiquid “air pockets” that can occur in the pit at times. The day has come where you see big guns doing 500 to 1,500 e-mini lots electronically. It’s a beautiful thing.

A look at a simple bar chart of the S&P 500 futures contract can look like Jaws V to the person without a method. What's needed are custom technical indicators and recognized patterns to present this market information to your trained mind. On any time frame, from monthly to one-minute bars, the futures price action can look random and treacherous.

But if it was an easy, trending market all the time, everyone would be rich… or better said, there would be no market because everyone would be trend following – doing the same thing, thus an impossible scenario. There must be occasional trending, chopping, extreme volatility and dullness to keep everyone on their toes. We think we have discovered a “system” (edge) and then the futures market changes.

I think change is the most important concept for a commodity futures trader to accept. As hard as we may work to find and discover the perfect trading method, the market will then change to make it worthless at times. Then it will go through its changes and come back around again and the method will work. It must be this way or else everyone would eventually be using the same trading system or method over time.

Why is it when we check out the latest high-priced commodity futures trading “system” performance listings, every year there are different ones on top, and the previous winners are often at the bottom? This is because rigid optimization does not work. Well, not for long. It's “optimized mush” as one futures trader calls it.

The perfect trading system would be one that continuously changed in sync with the futures market. It’s not hard to design a great trend

S&P 500) is lightning fast for executions that rival or even exceed the floor-trader advantage. However, it would be even better if someday they would make a big “e-maxi” equivalent to the e-mini to help keep the commissions and expenses lower.

After all, five e-minis are equivalent to one present "pit-maxi." But with the pit maxi, the price skids and delay of pit executions can easily add from ? to a full point at times. This makes paying the extra commissions of five e-minis well worth it in the end. After all, a one-point skid is $250 for a maxi while the extra commissions for five e-minis are a fraction of that.

Price skids in electronic e-mini futures contracts happen sometimes, but are rare and simply due to heavy buying or selling, compared to illiquid “air pockets” that can occur in the pit at times. The day has come where you see big guns doing 500 to 1,500 e-mini lots electronically. It’s a beautiful thing.

A look at a simple bar chart of the S&P 500 futures contract can look like Jaws V to the person without a method. What's needed are custom technical indicators and recognized patterns to present this market information to your trained mind. On any time frame, from monthly to one-minute bars, the futures price action can look random and treacherous.

But if it was an easy, trending market all the time, everyone would be rich… or better said, there would be no market because everyone would be trend following – doing the same thing, thus an impossible scenario. There must be occasional trending, chopping, extreme volatility and dullness to keep everyone on their toes. We think we have discovered a “system” (edge) and then the futures market changes.

I think change is the most important concept for a commodity futures trader to accept. As hard as we may work to find and discover the perfect trading method, the market will then change to make it worthless at times. Then it will go through its changes and come back around again and the method will work. It must be this way or else everyone would eventually be using the same trading system or method over time.

Why is it when we check out the latest high-priced commodity futures trading “system” performance listings, every year there are different ones on top, and the previous winners are often at the bottom? This is because rigid optimization does not work. Well, not for long. It's “optimized mush” as one futures trader calls it.

The perfect trading system would be one that continuously changed in sync with the futures market. It’s not hard to design a great trend

lectronic e-mini futures contracts happen sometimes, but are rare and simply due to heavy buying or selling, compared to illiquid “air pockets” that can occur in the pit at times. The day has come where you see big guns doing 500 to 1,500 e-mini lots electronically. It’s a beautiful thing.

A look at a simple bar chart of the S&P 500 futures contract can look like Jaws V to the person without a method. What's needed are custom technical indicators and recognized patterns to present this market information to your trained mind. On any time frame, from monthly to one-minute bars, the futures price action can look random and treacherous.

But if it was an easy, trending market all the time, everyone would be rich… or better said, there would be no market because everyone would be trend following – doing the same thing, thus an impossible scenario. There must be occasional trending, chopping, extreme volatility and dullness to keep everyone on their toes. We think we have discovered a “system” (edge) and then the futures market changes.

I think change is the most important concept for a commodity futures trader to accept. As hard as we may work to find and discover the perfect trading method, the market will then change to make it worthless at times. Then it will go through its changes and come back around again and the method will work. It must be this way or else everyone would eventually be using the same trading system or method over time.

Why is it when we check out the latest high-priced commodity futures trading “system” performance listings, every year there are different ones on top, and the previous winners are often at the bottom? This is because rigid optimization does not work. Well, not for long. It's “optimized mush” as one futures trader calls it.

The perfect trading system would be one that continuously changed in sync with the futures market. It’s not hard to design a great trend

But if it was an easy, trending market all the time, everyone would be rich… or better said, there would be no market because everyone would be trend following – doing the same thing, thus an impossible scenario. There must be occasional trending, chopping, extreme volatility and dullness to keep everyone on their toes. We think we have discovered a “system” (edge) and then the futures market changes.

I think change is the most important concept for a commodity futures trader to accept. As hard as we may work to find and discover the perfect trading method, the market will then change to make it worthless at times. Then it will go through its changes and come back around again and the method will work. It must be this way or else everyone would eventually be using the same trading system or method over time.

Why is it when we check out the latest high-priced commodity futures trading “system” performance listings, every year there are different ones on top, and the previous winners are often at the bottom? This is because rigid optimization does not work. Well, not for long. It's “optimized mush” as one futures trader calls it.

The perfect trading system would be one that continuously changed in sync with the futures market. It’s not hard to design a great trend

ugh its changes and come back around again and the method will work. It must be this way or else everyone would eventually be using the same trading system or method over time.

Why is it when we check out the latest high-priced commodity futures trading “system” performance listings, every year there are different ones on top, and the previous winners are often at the bottom? This is because rigid optimization does not work. Well, not for long. It's “optimized mush” as one futures trader calls it.

The perfect trading system would be one that continuously changed in sync with the futures market. It’s not hard to design a great trend following method or one that cleans house during a choppy market. But there has never been a computer program designed that can anticipate WHEN to toggle on and off the various methods to match the changing market. It’s like trying to predict the next tick - up or down? And what happens if the market does a half trend and half chop? Or, what if it goes quiet and then has tremendous spikes cleaning out the stops in a classic “search and destroy” session?

The bottom line is highly optimized commodity futures trading systems are doomed to failure, or break-even results at best. It doesn’t matter how elaborate your software is, using fuzzy logic, neural nets or any of these high tech optimization methods; they are doomed to be a wash. A wash! That’s what happens when the majority is average. The commissions and spreads take their “rake” just like the casino.

The harsh reality: You need a UNIQUE edge of some kind to pull you above the average commodity trading crowd. And if you don’t know what your edge is, then you don't have one. Think about this, because it is important. I'll cover some interesting methods that you can explore in greater detail in future articles.

Part Two of Three Parts

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.