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3 hours ago, Jjapp said:

Autocorrellation is when the values in a time series are correlated with their previous values.

In general you want to add as many assets as possible to a trend system for diversification.   Stocks are a legitimate asset to add.  

So if I understand correctly, if a commodity has trended for a week it will continue doing so the following weeks, until it reverses.

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3 hours ago, RapperT said:

one caveat is that he is talking about adding longer term trend factors to an equity index position.  This probably wasnt the best example, i know there is some research out there on stock based systems...will post some links either here or in the resource thread

 

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3 hours ago, RapperT said:

one caveat is that he is talking about adding longer term trend factors to an equity index position.  This probably wasnt the best example, i know there is some research out there on stock based systems...will post some links either here or in the resource thread

 

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1 hour ago, EmilyF2 said:

Is IB still the platform SO would recommend for trading futures? Or there are better ones? Thank you. 

We use IB...im not super informed on other platforms.  I know a lot of people here use tradier too but not sure if they offer futures trading or not

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@RapperT, thanks for the recommendation. 

@EmilyF2,

I like Tastyworks for it's easy of use and options commission structure. Its mobile platform isn't bad

I like TOS for charting and analysis, plus it's mobile platform is very good. Since I'm a smaller trader the commissions are cost prohibitive for me, so I switched to TW.

Because I'm learning a strategy requiring SPAN margin and I signed up for IB because their futures commissions are very good. Man, the TWS platform has quite the learning curve. I've called the IB help desk more than I ever did with TW or TOS. They do have some really high quality training videos and I think I'm getting used to the Trader Workstation platform. I still haven't gotten as comfortable monitoring calendars with IB as compared to TW though. I do have to figure the IB platform out because I'm moving my trading over to IB until I can get any account big enough for TOS to consider negotiating lower commissions.

I'm going to start IB's mobile platform course soon

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18 hours ago, EmilyF2 said:

Is IB still the platform SO would recommend for trading futures? Or there are better ones? Thank you. 

As far as I can tell IB has the widest range of futures available with decent fees (I read somewhere that they have slightly higher margin requirements but I think that had to do with direct futures trading, not necessarily the options).

Tastyworks also has some futures (+options) available, but the list is a bit short (at least for international investors) so you won’t find some of the ones SteadyFutures has already started using like for example coffee (and I assume they won’t have some of the futures they will expand to in the future either).

I tried looking at Tradier but haven’t seen any mention of futures.

I have just today come across a broker(?) called DeCarley Trading which seems to specialise in futures, but I have not checked it out yet. They seem to offer a paper trading account for free so I might subscribe and give it a spin.

OptionsExpress (Charles Schwab) also seems to have futures options available but I think they have higher commissions (also not sure if they have all the futures that SteadyFutures uses)

Another one to check out would be TOS (which I will not look at as they do not serve my country).

If you already have an account with IB it might be simpler to go with them at the beginning, although I am annoyed at them for liquidating some of my positions without proper notification due to an assignment, I think I will be stuck with them too as they seem to offer the best balance between cost and available futures. 

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On 12/23/2018 at 4:09 AM, drcruz said:

@RapperT, thanks for the recommendation. 

@EmilyF2,

I like Tastyworks for it's easy of use and options commission structure. Its mobile platform isn't bad

I like TOS for charting and analysis, plus it's mobile platform is very good. Since I'm a smaller trader the commissions are cost prohibitive for me, so I switched to TW.

Because I'm learning a strategy requiring SPAN margin and I signed up for IB because their futures commissions are very good. Man, the TWS platform has quite the learning curve. I've called the IB help desk more than I ever did with TW or TOS. They do have some really high quality training videos and I think I'm getting used to the Trader Workstation platform. I still haven't gotten as comfortable monitoring calendars with IB as compared to TW though. I do have to figure the IB platform out because I'm moving my trading over to IB until I can get any account big enough for TOS to consider negotiating lower commissions.

I'm going to start IB's mobile platform course soon

What are reasonable commissions for futures since I am new to them ? I have $0.50 per contract with no flat fee commission structure for options from ToS which I think is a good price. For futures it is $2.25 per contract plus $1.20 exchange fee. Is this considered reasonable ?

 

Thanks.

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Something interesting happened the past 2-3 days.

Sugar has had a very high correlation to crude over the past 6 +/- weeks. ( the whole "ethanol" thing)

Many days they even moved together almost tick for tick.

But sugar appears to have made a break with crude the past few days.

3 straight days of crude plummeting , and sugar holding then rising on a $3.00 down day in crude.

Based on the past 6 weeks, sugar "should" have plummeted along with crude today, and the past few days.

 

I don't know what to read into it yet. I have to do some exploring.

I know this has no relevance to a strict TF system which just follows the numbers.

But I just thought I would mention it.

Edited by cuegis

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15 hours ago, Manish71 said:

What are reasonable commissions for futures since I am new to them ? I have $0.50 per contract with no flat fee commission structure for options from ToS which I think is a good price. For futures it is $2.25 per contract plus $1.20 exchange fee. Is this considered reasonable ?

 

Thanks.

Futures options fees seem to be at $0.85 per contract all in on IB based on this page https://www.interactivebrokers.com/en/index.php?f=1590&p=futures2 , however I cannot confirm as I have not traded anything yet. (sometimes there are exchange incentives that impact the price)

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I attached one paper which also included in the book. In the paper, they used two indicators to generate trend signals. One is the SMA cross and another one is channel breakout. These two indicators look very simple and easy to use. Curious have you compared the quality of these two indicators with your current ARIMA forecasting system (e.g. Annual compounded return, worst peak-to-trough drawdown, sharpe ratio et al..)?   Thank you! 

10 hours ago, RapperT said:

Great book.. really interesting to read about the origins and evolution of the strategy.  

 

Quest-Research-Notes-Trend-Following-Sep-2010-2.pdf

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3 hours ago, EmilyF2 said:

I attached one paper which also included in the book. In the paper, they used two indicators to generate trend signals. One is the SMA cross and another one is channel breakout. These two indicators look very simple and easy to use. Curious have you compared the quality of these two indicators with your current ARIMA forecasting system (e.g. Annual compounded return, worst peak-to-trough drawdown, sharpe ratio et al..)?   Thank you! 

 

Quest-Research-Notes-Trend-Following-Sep-2010-2.pdf

Hi Emily,

I haven't tested the two systems in that paper.  If you look at our initial intro post I talk about trading a 100 day breakout system which is basically the channel breakout they're talking about but with a longer look back period.  I also used the 25 day hi/low as a stop (they stop and reverse).  The system worked well but I thought the risk was too high for my account size.  On some trades I opened with 20k in risk.  At 2 percent portfolio risk per trade that implies a 1M minimum account size.  For the breakout in that paper I'm guessing opening risk could be as high as 40k for some contracts.  That being said channel breakouts definitely work if you want to experiment with them.  You probably want to go with longer term options if you use options and not the futures contract.  I found most losing trades lasted around a month and most winning trades 9 months.  

We're working on a full backtest with the arima model but because we're refitting the parameters every week it is going to require a server (it will lock my laptop) so I'm having to rewrite pieces of the code.  It will be a couple of weeks.

I personally like the arima model and the way we're approaching this better for a whole bunch of reasons but in the end I'm guessing the returns will look similar.  I'll try and write a full post on that soon.

Merry Christmas!

-John

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RapperT, Jjapp,

 

1) A fundamental question: Let me ask with an example. Let us say you have two tickers for using TF, Gold and Oil. Lets say whenever gold is down for the week oil is up or vice versa. In that case won't your overall returns drastically reduce because returns from one are negating the returns from the other ? If the idea is to catch a trend, shouldn't you do it with only one ticker week after week.

 

So diversifying across tickers reduces your returns because some tickers will be up for the week when the others are down ?

 

2) This leads to my 2nd question. I really don't want to move from ToS. If I cannot trade coffee and sugar in ToS, what happens if I trade four out of six commodities every week ? Or in the future when you add more, I trade eight out of ten commodities ?

 

Thanks.

 

 

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4 minutes ago, Manish71 said:

RapperT, Jjapp,

 

1) A fundamental question: Let me ask with an example. Let us say you have two tickers for using TF, Gold and Oil. Lets say whenever gold is down for the week oil is up or vice versa. In that case won't your overall returns drastically reduce because returns from one are negating the returns from the other ? If the idea is to catch a trend, shouldn't you do it with only one ticker week after week.

 

So diversifying across tickers reduces your returns because some tickers will be up for the week when the others are down ?

 

2) This leads to my 2nd question. I really don't want to move from ToS. If I cannot trade coffee and sugar in ToS, what happens if I trade four out of six commodities every week ? Or in the future when you add more, I trade eight out of ten commodities ?

 

Thanks.

 

 

Good questions:

1) No.  The winners are much bigger than the losers.  We also don't know where the trends will be.  I'll post a histogram of my returns on the test tomorrow (if I forget ping me). Yes, on some weeks I made less because my oil trade was up and gold down...but gold is roughly flat to slightly  up in that time...oil is up 8k or so.  We're betting on a statistical distribution...the more bets we make the better. (Btw...gold seems to be starting a trend as well...just hit 6 month highs).  This is a good point though...we could trade an underlying for years that never wins big and we would keep trading it.

2) We're trying to focus on CME contracts for the ones we add.  We're doing that analysis now.  You should be ok but maybe we'll go a few over ten so those who can't trade ICE contacts can still get a hit more diversification.

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12 minutes ago, Jjapp said:

Good questions:

1) No.  The winners are much bigger than the losers.  We also don't know where the trends will be.  I'll post a histogram of my returns on the test tomorrow (if I forget ping me). Yes, on some weeks I made less because my oil trade was up and gold down...but gold is roughly flat to slightly  up in that time...oil is up 8k or so.  We're betting on a statistical distribution...the more bets we make the better. (Btw...gold seems to be starting a trend as well...just hit 6 month highs).  This is a good point though...we could trade an underlying for years that never wins big and we would keep trading it.

2) We're trying to focus on CME contracts for the ones we add.  We're doing that analysis now.  You should be ok but maybe we'll go a few over ten so those who can't trade ICE contacts can still get a hit more diversification.

Ok. thanks for the explanation.

 

So assuming you will add more CME contracts, can I start trading the four commodities and leave out sugar and coffee starting this Friday ? And keep adding more CME contracts in the future ?

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1 hour ago, Jjapp said:

Good questions:

1) No.  The winners are much bigger than the losers.  We also don't know where the trends will be.  I'll post a histogram of my returns on the test tomorrow (if I forget ping me). Yes, on some weeks I made less because my oil trade was up and gold down...but gold is roughly flat to slightly  up in that time...oil is up 8k or so.  We're betting on a statistical distribution...the more bets we make the better. (Btw...gold seems to be starting a trend as well...just hit 6 month highs).  This is a good point though...we could trade an underlying for years that never wins big and we would keep trading it.

2) We're trying to focus on CME contracts for the ones we add.  We're doing that analysis now.  You should be ok but maybe we'll go a few over ten so those who can't trade ICE contacts can still get a bit more diversification.

1) I was listening to the Jerry Parker podcast that @RapperT posted the other day and noticed he mentioned the same thing re investing in "long time losers" (I think he mentioned wheat and cocoa beans). i get why it is done (diversification and because you don't know when a trend may start) but what i was wondering is this: since the SteadyFutures (SF) system seems to "reset" weekly wouldn't it be worth considering a "parking" signal associated with some commodities? for example, if a commodity has losses for, say, 4 consecutive weeks/trades we stop investing in it but keep monitoring the signals and once 2 consecutive signals are successful we start reinvesting in it (obviously the triggers can be tweaked). in my ignorance of the trendfollowing system i would assume this would avoid investing in long term losers. or is SF a slightly different method than "classical" trendfollowing because by using put options we can take advantage of down movements too? (i must admit i not 100% sure why Parker called wheat and cocoa beans "long time losers" as I have not yet learned how the trendfollowing system works and how many variations there are)

 

2) do you pick contracts trying to reduce correlation as much as possible? if so, do you measure correlation also against ES to avoid correlation with the other SO systems?

Edited by ales19

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On 12/25/2018 at 10:03 PM, ales19 said:

since the SteadyFutures (SF) system seems to "reset" weekly wouldn't it be worth considering a "parking" signal associated with some commodities? for example, if a commodity has losses for, say, 4 consecutive weeks/trades we stop investing in it but keep monitoring the signals and once 2 consecutive signals are successful we start reinvesting in it (obviously the triggers can be tweaked).

 I think it is a worthwhile thing to research.  I haven't been able to figure out a way to signal ahead of time for trending vs mean reverting periods in a way that didn't hurt my returns.  I still go back and test various filters though. 

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On 12/25/2018 at 10:03 PM, ales19 said:

2) do you pick contracts trying to reduce correlation as much as possible? if so, do you measure correlation also against ES to avoid correlation with the other SO systems? 

We're trying to keep the correlation between underlying contracts low.  Some will be more correlated than others though.  We are adding some more agricultural futures this week and they may show some correlation with each other from time to time.  There is a limit how much we can do with that information without making the portfolio larger. 

We're not worrying too much about correlation with ES.  In fact, we may add ES at some point to the system. 

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The problem with resetting only once a week is that, on some positions, there will be an initial huge paper gain, which if not locked in at least a partial, can be a loss one week later.

Gold is notorious for this.

The purpose of a TF market is to "shake out", and get rid of, position holders, so that it can continue to it's ultimate destination.

You can buy gold on Friday at $1260, and on Monday it is $1280, on Tuesday it is $1250, and Friday back to $1260, and you missed the chance to lock in a $20 gain along the way.

I know it would disrupt the ultimate enormous gains by not following the entire longer term trend but, maybe there should be a plan to scale out of say 20% of the position on x amount of gain along the way. You could even attach to that a plan to buy that 20% back if there is a movement back down a certain percentage.

 

A week is a very long time. Many of these initial positions did experience significant gains since Friday, and some have given it all back......Coffee and Crude are 2 examples.

 

 

 

At worst, could help turn losers into break evens, and at best, it could increase the returns...... the price you pay would be to have a slightly less oversized gain on the trends that you ultimately catch.

 

Edited by cuegis

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9 hours ago, cuegis said:

 

I know it would disrupt the ultimate enormous gains by not following the entire longer term trend but, maybe there should be a plan to scale out of say 20% of the position on x amount of gain along the way. You could even attach to that a plan to buy that 20% back if there is a movement back down a certain percentage.

 

A week is a very long time. Many of these initial positions did experience significant gains since Friday, and some have given it all back......Coffee and Crude are 2 examples.

 

 

 

At worst, could help turn losers into break evens, and at best, it could increase the returns...... the price you pay would be to have a slightly less oversized gain on the trends that you ultimately catch.

 

Respectfully,

these are exactly the kind of discretionary calls we avoid in a systematic approach.  Whipsaws are part of the game and, while frustrating, we know ( empirically ) that trying to adjusting positions ( outside the parameters of the system)  in between signals will hurt nearly every trend following strategy over time.

 

I would probably disagree with your assertion that the worst case scenario is that losers would be turned into breakevens.  That could be the case in many instances but the disparity between the average win and average loss is what makes this system and similar systems successfull.  Increasing win percentage at the the potential cost of decreasing the overall positive expectancy of the system may be good for our psyche in the short term but would not be good for performance in the long.

 

 

 

Edited by RapperT

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3 minutes ago, gowthamn said:

Can you give some idea of what is considered a reasonable commission per contract? in TOS I see the commissions are 15 + 22 for a naked contract of /CL. That seems too high?

Yes, that seems high.  Maybe consider switching to IB?  I pay around 2 to 3 per contract there...sometimes less.

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9 minutes ago, gowthamn said:

Can you give some idea of what is considered a reasonable commission per contract? in TOS I see the commissions are 15 + 22 for a naked contract of /CL. That seems too high?

It is showing $2.25 per contract plus $1.52 exchange fee for one contract of /CL in ToS. So total showing is $3.77 for one contract.

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3 minutes ago, zxcv64 said:

@RapperT, maybe it's my eyes playing tricks on me, but this post suggests that the signal for ZC is 'up' - so, why is this weeks trade buying a Put? 

 

 

Im on the road trying to do this remotely from a tablet.  Please close that trade if you took it, was an error.  I updated trade thread. 

Edited by RapperT

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1 hour ago, Manish71 said:

Gold has a nice weekly gain in TF whereas the other commodities had a weekly loss. I guess this is how it will be. You need to be mechanical and keep on trading ?

Yes.  We're not targeting a high win percentage.  The win in gold was approximately 80 percent so it more than made up for the other losses.

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On 12/26/2018 at 10:12 AM, Jjapp said:

Good questions:

1) No.  The winners are much bigger than the losers.  We also don't know where the trends will be.  I'll post a histogram of my returns on the test tomorrow (if I forget ping me). Yes, on some weeks I made less because my oil trade was up and gold down...but gold is roughly flat to slightly  up in that time...oil is up 8k or so.  We're betting on a statistical distribution...the more bets we make the better. (Btw...gold seems to be starting a trend as well...just hit 6 month highs).  This is a good point though...we could trade an underlying for years that never wins big and we would keep trading it.

2) We're trying to focus on CME contracts for the ones we add.  We're doing that analysis now.  You should be ok but maybe we'll go a few over ten so those who can't trade ICE contacts can still get a hit more diversification.

@Jjapp, are there any studies done on what is the minimum number of commodities to be traded using TF for diversification ?. Like below six would be too concentrated and above ten should be fine. 

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The corn trade was entered for Feb 19 / Dec 19. Is that Dec 2019? That's too far right? Am I missing something here?

 

How does one determine what futures expiration and options expiration to choose?

Edited by gowthamn

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On 12/26/2018 at 10:12 AM, Jjapp said:

Good questions:

1) No.  The winners are much bigger than the losers.  We also don't know where the trends will be.  I'll post a histogram of my returns on the test tomorrow (if I forget ping me). Yes, on some weeks I made less because my oil trade was up and gold down...but gold is roughly flat to slightly  up in that time...oil is up 8k or so.  We're betting on a statistical distribution...the more bets we make the better. (Btw...gold seems to be starting a trend as well...just hit 6 month highs).  This is a good point though...we could trade an underlying for years that never wins big and we would keep trading it.

2) We're trying to focus on CME contracts for the ones we add.  We're doing that analysis now.  You should be ok but maybe we'll go a few over ten so those who can't trade ICE contacts can still get a hit more diversification.

@Jjapp, @RapperT, I got the following email from ToS regarding trading of ICE contracts like sugar and coffee. My question is in the near future, how many from the following nine  contracts will you be adding to the TF portfolio for trading ? Will there be enough from the following contracts to make the $110 monthly fee worthwhile ?

=====================================================================================================================================

 

Hello,

It looks like you are trying to view the ICE Market Data future symbols. 

Unfortunately, TDA had a change in company policy and no longer pays the fees to view or trade the products. There is a monthly fee on $110 per month that was passed along to end users if they wish to trade these products. 

If you agree to pay the fee here are the steps you will need to take: 

Log into tdameritrade.com -> Client Services -> Forma & Agreements -> type in ICE  in the search form -> You can download the PDF and send it in or attach it to this e-mail. 

Here is a list of the symbols listed with ICE: 
  
/TF (E-mini Russell 2000)
/DX (Dollar Index)
/CT (Cotton)
/CC (Cocoa)
/OJ (Orange Juice)
/SB (Sugar)
/KC (Coffee)
/YI (Mini-Silver)
/YG (Mini-Gold)

I hope this information helps and if you have any additional questions or concerns please don't hesitate to ask.

==========================================================================================================================================================

 

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On 12/25/2018 at 8:42 PM, Jjapp said:

Good questions:

1) No.  The winners are much bigger than the losers.  We also don't know where the trends will be.  I'll post a histogram of my returns on the test tomorrow (if I forget ping me). Yes, on some weeks I made less because my oil trade was up and gold down...but gold is roughly flat to slightly  up in that time...oil is up 8k or so.  We're betting on a statistical distribution...the more bets we make the better. (Btw...gold seems to be starting a trend as well...just hit 6 month highs).  This is a good point though...we could trade an underlying for years that never wins big and we would keep trading it.

2) We're trying to focus on CME contracts for the ones we add.  We're doing that analysis now.  You should be ok but maybe we'll go a few over ten so those who can't trade ICE contacts can still get a hit more diversification.

Can you post the histogram of your returns?

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On 12/29/2018 at 9:26 AM, Manish71 said:

My question is in the near future, how many from the following nine  contracts will you be adding to the TF portfolio for trading ? Will there be enough from the following contracts to make the $110 monthly fee worthwhile ?

Depends on correlation.  We're trying to stay away from NYBOT futures to avoid the fee.  Both soybeans and wheat are traded on the CME.

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9 minutes ago, Jjapp said:

Depends on correlation.  We're trying to stay away from NYBOT futures to avoid the fee.  Both soybeans and wheat are traded on the CME.

ok. So looks like only cotton, cocoa and orange juice are the ones left on ICE which might be included. Because for mini gold and mini silver you can always substitute with the regular gold and silver contracts. correct ?

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23 hours ago, gowthamn said:

Can you post the histogram of your returns?

This is on the larger account we've been trading since August.  Units on the x axis are percent gains on the debit.  Y axis is number of instances.

 

image.png

 

Edited by Jjapp

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8 hours ago, Manish71 said:

ok. So looks like only cotton, cocoa and orange juice are the ones left on ICE which might be included. Because for mini gold and mini silver you can always substitute with the regular gold and silver contracts. correct ?

Correct and we may replace gold with silver so we don’t have to trade 20 deltas etc.. still looking at that 

Edited by RapperT

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@Kim, other mentors,

 

If you don't mind me asking, have you and other mentors also started trying out for your own portfolios the TF strategy for commodities given here ? Atleast for me, commodities trading is a completely new thing and it just gives more confidence to know that experts here are also giving it a shot.

Specially in these market conditions, it is tough to try out new things.

 

Thanks.

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coffee acting a little strange today volume wise.  I have a close order for last week's trade in at .0107 and will let it sit for a bit.  I just realized I don't have a coffee discussion thread so will add after I place new trades

Edited by RapperT

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