Toby Crabel: A Famous Contrarian Trader

LEARN FROM THE GENERALS OF THE MARKETS - PART 62

“When it comes to playing the markets. After all, it’s all about making money, not about being right.”  – J. C. Parets

Toby Crabel is an American trader who’s made himself successful by his own efforts. He studied finance at the University of Central Florida. He got his feet wet in the markets while still a student. He was even a professional tennis players for a few years.

Toby has written many articles about short-term patterns in trading. In 1992, he worked as a trader for Victor Niederhoffer in New York. After leaving Niederhoffer he continued other series of speculative activities. In 1998, he began to run his own funds from his residence, and he’s been making decent profits since then.  The Financial Times has referred to him as "the most well-known trader on the counter-trend side."

His firm, Crabel Capital Management, LLC, has been ranked among the big funds with nice profits.  His website is:  Crabel.com. According to the website, Crabel Capital Management is a global alternative investment firm specializing in futures and foreign currency trading. Pioneers of short-term, systematic trading, the firm has evolved over the last two decades to offer broadly diversified, unique products that are valuable complements to sophisticated portfolio design. Crabel Capital Management has delivered over 20 years of uncorrelated returns to its worldwide customer-base. For example, the firm made a profit of 16.7 per cent in the year 2005. The assets under management are about $3,200,000,000, and there are many employees working at the firm.

In the year 1990, he wrote a helpful book titled “Day Trading with Short-term Price Patterns.”

Lessons

These are some lessons that can be learned from Toby Crabel:

1. Toby is referred to as a self-made millionaire, meaning that he didn’t inherit millions, but he made millions for himself. In fact, he’s a multi-millionaire. You can make yourself successful by your own efforts as a trader. You can work your own miracle of financial freedom, tapping from the riches the markets offer all of us.

2. He’s a living testimony that it’s possible to make consistent profits from the markets. For many years, he’s made profits on annual basis. It’s cleanly possible not have a red year as a trader, and therefore it’s imperative that you find a way to achieve the goal of attaining green years successively. I admit that some years will have more profits than others, like making 35 per cent last year and only 11 per cent this year. Like making 5% last year and making 23% this year, but a red year can be avoided. If you haven’t achieved this goal, then you’ve a job to do. Toby Crabel is a human being like you.

3. Please see the quote at the end of this article. Risk is best controlled by taking a large number of small trades versus making a few large bets on a small number of trades.”

4. Trend following works, and so do contrarian trading systems (especially the ones with good expectancy). There are no everlasting trends in the markets, which means there’ll always be turning points. These turning points tend to surprise many people while bringing satisfactory rewards to those who correctly anticipate the turning points and capitalize on them. Some turning points may be temporary pullbacks which would be strong while they last and some pullbacks may portend the beginning of new protracted biases. The best mix is to know when to follow the trend and when to go against it.

Conclusion: It’s very interesting when one knows how to trade deceptive price movement. Since price sometimes moves very furiously against the majority and nets some contrarian traders huge gains. The reason for occasional contrarian moves is clear, for many who’ve gone long because of a transient rally have quickly smoothed their positions and they’re entering the market again as a result of a sharp dip in price. The recalcitrant bulls who stubbornly stick to their positions are either getting stopped out or are being forced to close their portfolios; otherwise they’d suffer more devastating damage. When a deceptive bullish movement becomes a snare to the unwary traders, the trader sells in a hurry and thus causes further dip in the market.

This piece is ended by a quote taken from Crabel website (Crabel.com):

“Our core trading philosophy is that strategies should capture enduring and explainable market participant behavior… We also think that risk is best controlled by taking a large number of small trades versus making a few large bets on a small number of trades.

Source: www.tallinex.com

Learn from the Generals of the Markets: Market Generals