(Kitco News) - Jimmy Tintle has been involved with markets since he began paper trading stockswith his grandfather as an elementary-school student.
Now, a quarter of a century later, he has gravitated toward the commodities and has hit upon the following formula: Monitor fundamentals such as economic news for the overall trend, then use technicals—with an emphasis on moving averages—to pick entry and exit points.
Tintle, 35, is a broker and market analyst with Transworld Futures in Tampa, Fla. He trades a number of commodities, including metals and the agricultural markets, as well as currencies.
Fundamental analysis, which includes news and supply/demand factors, and technicals, which is chart analysis, are both parts of his repertoire.
“I take the fundamental and economic news worldwide and use that as the key basis of where I think the metals may go,” Tintle said. “And then I use technical basis as my entry and exit points on trades.”
Most of his technical work involves moving averages. He relies largely on the eight- and 10-day for short-term averages, and the 100- and 200-day for long-term averages. In particular, he looks for instances in which the short-term averages cross over the long-term averages, seen as a sign that momentum is accelerating either to the upside or downside.
Say Tintle is bullish on a market fundamentally. He would be most inclined to establish a long position on pullbacks to the 8- and 10-day moving averages, provided they in turn are above the 100- and 200-day averages.
Back in July 2010, the 8- and 10-day averages came back and tested the 100-day average, Tintle said. But when they never crossed below the 100-day average, he established a long position. “We rallied all the way into December,” he said.
Tintle also establishes positions when the short-term averages cross the long-term ones. For instance, he said, the 8-day average crossed below the 100-day average in February. That signaled a short position in the futures, but not for long. The 8-day soon crossed back above the 100-day average again on Feb. 11, so Tintle reversed and went long. Gold was around $1,370 at the time, and he remained in a long position for around three weeks until the market climbed to his price target at a swing high of around $1,430.
Tintle notes that when the short- and long-term daily moving averages all suggest a market is in a bull trend, he will sometimes “shrink the charts” and take positions using the same techniques but using averages on four-hour and one-hour charts. These would be shorter-term positions he only intends to hold for maybe three to five days.
He figures one of the keys to succeeding in commodity markets is risk management. Rule No. 1 – don’t put too much capital in any one single trade, betting on a home run. For instance, for a client with a $50,000 account, he probably would never risk more than 8% on any single trade.
“All of us do place bad trades, and the market does go against us (at times),” he said. “So managing the loss is a key.”
Another rule: “When you do have winning trades, lock in some of the profits,” Tintle said. In other words, don’t hold out for so long that a market reverses against you.
Tintle also manages risk in futures positions by using options, such as selling call options against a long position or selling puts against a short position.
Tintle developed an enthusiasm for markets somewhere around age 11, when his grandfather taught him about equity markets and some of the ins and outs of business and banking. Tintle began paper trading stocks with his grandfather.
“My whole summer was always at my grandparents’ house,” Tintle said. “He was a banker through the Depression and was trying to teach me what I needed to learn for throughout life.”
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