Episode 45: Cynthia Kase, CMT, MFTA
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Welcome to Fill the Gap, the official podcast series of the CMT Association, hosted by David Lundgren and Tyler Wood. This monthly podcast will bring veteran market analysts and money managers into conversations that will explore the interviewee's investment philosophy, their process, and decision-making tools.

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Hello and welcome to episode 45 of Fill the Gap, the official podcast of CMT Association. My name is Tyler Wood, and I am joined as always by David Lundgren, the master of inquisition here on Fill the Gap, a CFA and CMT charterholder. Talk to us, Dave, about this interview that we just had with Cynthia Case. What jumped off the charts to you?

Oh, man, it was a bit daunting only because she's got such a level of depth of experience in just the different directions that the conversation with somebody who's a scientist, a theologian, a successful trader, a successful practitioner or business person.

could go in any direction. But what I found interesting was one of the things that she said in our conversation, despite the variety that she brings to this discussion, she is yet another one of our guests who has said that fundamentals win in the long term, but it's technicals that ensure you're able to get to the long run.

Yeah. Right. So here's somebody with a completely different perspective so much so she created her own form of bar charting. She created her own form of stops and all these things that just kind of she felt necessary within the craft of what we do. But the core essence of it is still the same, that this technicals is what gets you to be able to survive the long run because it's unpredictable and

We had a little bit of an interesting discussion around that as well. It's just a very, very different conversation compared to other things we've had on Fill the Gap, which is why I was so excited to have it. But in the end, we end up with the same conclusion that it's technicals that get you to the long run.

I think that's the main driver for this podcast is understanding that a lot of these tools and techniques and concepts and approaches, you know, if Cynthia is focused on originally in her career with spot traders, eventually moving to spec traders in the futures markets and covering a lot of risk management disciplines for complex hedging strategies, predominantly in the oil and gas business, then

There are still so many things that are universally applicable to investors across all other asset classes and have very different timeframes. And the idea of the fact that you could work for companies who have a significant asymmetrical information flow, who have a distinct advantage about where the long term is. And as you said, Dave,

They're still very interested in technical analysis to help them mitigate, stabilize, dampen risk along the path from A to X, and knowing that there could be a lot of volatility in between. So to all of our listeners of Fill the Gap, enjoy episode 45 with Cynthia Case, CMT.

Welcome to Fill the Gap, the official podcast of the CMT Association. My name is Dave Lundgren, and as always, I'm joined by my partner in crime and fellow CMT charterholder, Tyler Wood. In this episode, we are joined by Cynthia Case. Cindy is a CMT charterholder and founder of Case & Company. It's a leading technical advisory service specializing in the energy markets.

So Cindy earned her bachelor's and master's in chemical engineering, which she put to use over her decades in the business, building various trading models and forecasting algorithms for major institutions and sovereign wealth investors. Somehow, in her spare time, she also managed to create case bars, charting methodology. She's written a couple of books on technicals, and somehow she also received her second master's in Catholic pastoral theology.

So, wow. All I can say is wow. Lots to talk about here. So let's get started. Cindy Case, welcome to Fill the Gap. Thank you. It's wonderful to have you here. You and I, as you recall, we had a

before this that was supposed to be about 45 minutes. I think we talked for about an hour and a half, and I think I got to maybe like 25% of my questions. Just a fascinating conversation, and hopefully we can convey a lot of that in today's discussion. So be careful what you ask me. So why don't we get started with just a quick overview on your background? How did you get into financials? And perhaps most importantly, how did you get into technical analysis? I was

I was an engineer working as an engineer for the first 10 years of my career. In 1980, I went to work for Standard Oil Company of California, which merged with Gulf and is now Chevron. I went to work in the corporate engineering department and

And Chevron has what they call the Management Development Program. I don't know if they still had it. So they tapped me to go into the Management Development Program. It took a couple interviews in different organizations. And I wound up in Chevron International Oil Company. The crude oil contract just came out that same year.

1983. I think it was the summer of 83. I don't remember exactly. So I was transferred into international oil trading. Wow.

writing contracts, physical cargoes, worrying about shipping and all the bells and whistles that goes into international oil trading. And one of the things that I did was to begin to computerize some of the functions that were done at the company. Back then, people either had to use a handheld calculator or go and use a mainframe. I convinced them to get their first PC in the workplace. It was an 8086 with two floppy disks. Yeah.

Yeah. But we were... What's an 886? What brand is that? I think it was HP. It had two floppy disks. No hard drive. So anyway, I got involved with programming some stuff. So I began to appeal to my technical side. But

But I was frustrated because when I was working as an engineer, I used to read Chemical Engineering Magazine from cover to cover every issue. But there was nothing like that for trading oil. It was all seat of the pants, pretty much non-speculative. And so in the early days, in 83 and 84, we were focused on, you know, what does long mean? What does short mean? What's a futures contract? You know, that kind of stuff. And to me, it was all daunting at first.

And then I did well in that role. And in 1985, I was formally promoted into corporate management and transferred to the company's training office in New York City.

And working for a major oil company, being, quote-unquote, the customer of brokers, whether it's physical brokers, futures brokers, whatever, gave me entree into a lot of perks, some of which were that futures brokers who had been exposed to technicals were willing to share their expertise in technical analysis with

And so that was one thing that happened. The other thing was, is I had lobbied for a charting service. I found out about technical analysis through some of these brokers gave presentations and I lobbied for a charting service. So I got a market view back then and it came with a typewritten Xerox manual with hand-drawn pictures in it. And that's how I became aware of technical analysis. And I really liked it because I had something to read.

I found out about Stockton Commodities Magazine, the TAG conferences that Tim Slater used to run and became a self-taught technician. In late 89, I decided to leave Chevron and

I didn't want to take a transfer to Houston. And so I went to work for a chemical bank. I was their first commodity derivatives trader there. So I learned a lot about over-the-counter derivatives. I worked for a chemical bank four days a week. They wanted somebody with a major oil background that could program

So I cut a deal four days a week, no travel, no overtime. So it was no coming in early for meetings or anything like that. So it was good for me. And on my day off, I started consulting. And after not quite two years at Chemical Bank, they were merging with manufacturers Hanover. I didn't want to go through another merger. So I took a one-year consulting assignment as an advisor to the Saudi oil ministry on

on technical analysis and price-first management. And during the time I worked for them, I developed a propane hedging program.

that Tom Hartle, he programmed my ideas in Prodigy or Perfection or whatever the heck the name of that was. And I learned how to program in code as opposed to Excel spreadsheets and stuff like that just by copying what he did and looking at what he did. And after my one-year assignment with the Saudis was up,

I was invited to start speaking at TAG, and then I went on a world tour with them. And during that time, I had already written about the DevStop and my ideas about TrueRange to some degree. I had the idea of a screen.

a moving timeframe screen that I was able to say to Tim, what do you think about this idea? And he said, that's great. And at that point, I had purchased a bunch of Omega Research products. They used to have a back testing in DOS. Mm-hmm.

In DOS, they used to have a backtesting program. And so I started developing a lot on TradeStation. When you're kind of describing all this, what comes to mind is the science of complexity and how you can get some pretty spectacular outcomes from some very basic techniques.

rules and very basic agents and inputs. Right. And so, and so, so as a result of that, the, the future is unforecastable because you, because of the concept of emergence. And so when, when you're trying to apply your science mind to a world that is very unpredictable, I'm curious when you, when you assign these probabilities and you make your projections based

First of all, how do you assess those probabilities in a very uncertain world? And then how far out are you actually forecasting when you do? So it's my contention that you can forecast short term. Yeah. Because you don't have too many big splits in the road over the course of a week or maybe even a month. So if you're forecasting what's going to happen over the next week or two, which is what I always did, I wrote my forecast before computers were really going to spit out thousands of numbers.

So I wrote a lot of prose about what was going on with the market and what the patterns were and all of that. But my time horizon was one to two weeks.

And within a one to two week, if you base your performance on not being wrong, I was not wrong 95% plus at the time. What do you mean not wrong? Isn't right the opposite of not wrong? No. You could say that the market won't go below a certain number and it will probably on balance go up.

and hit whatever number. So let's say it doesn't go down at all, but it only goes up a little bit and kind of goes sideways. Well, we weren't wrong. It didn't go below whatever that support number was, but we weren't super right. So I used to give myself points for not being wrong, points for getting the exact numbers right, and all this kind of stuff. But summerish '92, the crude oil market volatility was like zero.

I mean, you could trade all day and it would go up five cents or something. So the market kind of made up my mind for me to some degree what I was going to do. And then when I went on this world tour with Perry Kaufman, he gave me some ideas. He said, don't just forecast the market.

Put a table in and say whether you'd be long or short. So I developed a like long plus long, long minus neutral, short minus short, short plus, you know, how strong you'd be. And I think we started giving the numbers and the probabilities at that point, too. And then and what number was our number that we'd say, OK, we're wrong. We publish that.

And I did it for first three nearby contracts in crude and gas for short-term trading, people that take maybe two, three trades a week. And you're talking 250 to 1,000 contracts, the big trades. And most of the business, if they do well with a short-term trade, they'll just scale it up and hold it longer term.

So, we gave short-term and long-term. And to us, trading a daily chart is long-term. Even the fact of a daily chart is long-term. So, yeah. Yeah. So, let's explore that for just a second. You said before we started recording, trading, not investing. Yeah.

And so for all of our listeners, I think maybe it helps to connect the dots that your long-term investment record is merely the summation of a lot of correct or incorrect trades and the appropriate size and risk management tools around them. So for your clients, they're talking about creating long-term value for shareholders or for their company, but your timeframe is only two weeks.

And talk a little bit about, I mean, you're talking 250 to 1,000 contracts. How much of that is to the short side? Are they all spot trading or are they predominantly futures and derivatives markets? Okay. Well, I would say the clients that we've had that were energy futures traders, of course, were the SPAC. We had shops that were SPACs.

And they were really making physical and future decisions. But the thing is, is that you say, well, long term for the stockholders, well, an oil company during any given month might have millions and millions and millions of barrels of products and or crude to buy or sell.

I mean, some oil companies have crude that doesn't meet their specifications. So they'll still produce that crude, sell it to whomever, buy whatever they need, you know. And so there's lots of transactions. So when you say, well, that's very short term. Well, most of the oil contracts that I was involved with, the price is calculated over a three-day window.

For example, a three-day window, which is usually a pricing window it takes to offload a cargo. So it depends whether you're pricing at the origin or pricing at discharge. But it's three days. And so somebody that is buying that cargo that doesn't get priced out until two months from now,

they might go in the futures market and buy those contracts to, because they like the price. And then, uh, when the car was being delivered, they pro rata sell those contracts back over the three days, you know, or vice versa, depending on the buyer, the seller. So, um, so, uh,

the traders that we were involved with were either spec, but you still have to manage your risk if it's in physical cargo, pricing dates, and all this other stuff. And hedging your cargo, playing against the cargo with futures contracts benefits both the seller and the buyer. So, for example, if both parties

think prices are going to go up, then the seller doesn't have to do anything. He can wait until it prices or let's say it spikes way up and then starts coming down. He can sell then get that little extra boost and then take it off. So so we have clients on both sides of things.

So hedging, long-term hedging, I'm not talking about that in the current discussion. What I'm talking about in the current discussion is optimizing particular transactions, and an oil company might do 20 of those in a week. People have to price the cargo, maybe they're buying the cargo. They have to do something with the risk of that cargo. And so it's important to know whether the market's going up or down that week, what you should look for, and all that kind of stuff.

And when you think about it, 25 cents for a cargo of crude oil, which is nothing, it's a very small margin. You know, if you're trading a futures contract, you'd expect to make, you know, some big money. But 25 cents, $250,000.

which for which you can certainly pay a trader's salary if that trade is making 25 cents a week or whatever it is so i guess i was saying that consumers longer term it's easier for a consumer to hedge because prices can only go to zero so their risk is known where for a seller

Prices can go to infinity, so they don't know how much they're risking. I mean, yeah, you can do Monte Carlo simulations. You can do all kinds of things, but it's the Black Swan events that'll get you if you're short. Anyway.

I guess the part that is illuminated out of everything that you've just said is that despite having what you could call asymmetrical information, right, the holders of physical commodities know exactly what they're producing, how much is in the tankers moving around, what the supply is, what the environment is like. And still it's important.

for them to pay attention to price action on these markets over the shorter term at the very minimum to make sure that they are gauging the behavior of buyers and sellers in an open liquid market. Yeah, I mean, they might be right about point. Here we are at point A. We're going to point B. But between point A and point B, there can be all kinds of havoc.

going on and um what i always say is fundamentals always went out in the long run so what makes the market go up on a particular day what changed fundamentally who knows you don't have the information that that quickly and you certainly can't internalize it so i always say to be a fundamentalist you need the mind of god so funding fundamentals always win in the long run

But it's the technicals that keep you alive so you get to the long run. Because you might be right about what's going to happen six months from now. And you might be exactly right. But in the meantime, you have to deal with the market day to day. And the volatility day to day, if you're in the business, that could be a lot of money. And...

The other thing about technicals is technicals will tell you when you're wrong. But if you're holding on to a losing position because five months from now, you know, such and such a consulting company that's had a good track record say it's going to X. Yeah. And we always used to laugh whenever a particular big broker. And now, you know, everything's been kind of wind down. People don't have their own trading platform.

arms anymore. But this big broker would come out and say, this is happening in oil. And we'd all know, oh, it's just, okay, it's over now. It's done. We also, when it gets to the front page, it's done. Hey, Cindy, can you speak to some of the situations in your analysis in the past, maybe even some market setups in the past that you've witnessed where you've been able to do the analysis and come away with this view that

there's a 90% chance that this is going to go up or down. Can you characterize that? Because that's a really, really high odds assessment. So how did you come to that kind of a probability? Well, first of all, let me just back up and say that some patterns do have high probability.

If you see a topping pattern, kind of a sideways triangle topping pattern, I forget what it is. Symmetrical triangle, I think it's called. And it lasts for six weeks. It's a six-week pattern. So it's a significant major high pattern. Those are pretty reliable to break to the downside. The problem is they just don't happen that often. So...

So I would say it's a combination of things. But one thing is, it's our practice when we do forecasting to look at a lot of waves. You know, we call them ABC, the three points in the waves, or XYZ, the three points in the waves. And so we have a program that goes through different bar lengths and looks at all the waves and then calculates a bunch of Fibonacci extensions. Okay.

And I don't have time to go right now into Fibonacci numbers, but the way the universe is set up, if you have any two numbers at all, any two integers at all, the Fibonacci ratios will come out of those two numbers if you do certain mathematical operations on them. So this is not voodoo.

Or numerology or anything crazy. So I look at the 0.621, 1.38, 1.62. Yeah. A lesser, 1.89. And then...

the logarithmic spiral projection, 3x you call it. So we look at all those numbers. And then we also look at the numbers that are projected from the yz. So if you have x, y is the main part of the wave, and then retracement is yz, there are certain projections that come out of the yz function.

And those are waves share those because you can have different origin points with the same YZ. And we look at the significance of the waves. If we have some instant significant ways, we take them out and we look at a couple of things. We look at how we look at the confluence points, which are calculated at this point. I used it all by hand.

we look at the confluence points, that is, prices that come up within a certain narrow range with high frequency. So we have the high frequency numbers, and we have the number of occurrences of the high frequency numbers. And so that begins to generate some probabilities just based on how many times that particular number came up. And then you've got... You look at things like...

Oh, I remember what I was going to say. So what I do is I look at the wave and then I look at all the numbers it generates across a row. And then I look at the numbers differently. I have whatever the targets are. I have the target and underneath the target, I have listed the projections that it projects to.

So let's say from one wave it projected to the smaller than target, which is 0.62. And the next wave it projected to the equal to target, etc. And I do that for all the targets across. So if you get a situation where we have five targets across,

And on one row underneath those targets, you've got the first number is the smaller event, the second number is the equal to, the third number is the 1.38, the fourth number is the 1.62, and the fifth number is the 1.89. Let's say it's straight across. So you've got what I call a cascade. So there's different ways that the numbers...

that different waves can be related to each other because they're all the Fibonacci extensions of one wave kind of thing, one major wave. So this begins to give particular targets increased probability. In addition to that, I've done studies like if it gets to the smaller than extension, what's the probability to go to equal to? If it gets to the equal to extension, what's the probability to go to the intermediate, 1.38?

If it gets to the intermediate, what's the probability to go to the larger than 1.62? And so those probabilities play into the judgment as well. And there's a book on patterns and probability. I forget the gentleman's name. Starts with a B. Olkowski. Yeah. Yeah. So I use his stuff for reference. And then you've got your you've got your wave. Now, I was a big wave count person.

And I should just say parenthetically, the shorter the timeframe, the better waves work. And in commodities, we have ABC, ABC, ABC, ABC, DE. We rarely have 1, 2, 3, 4, 5. Rarely have 1, 2, 3, 4, 5. Usually we have nested three-wave patterns. Or if they're a five-wave pattern, the relationships among the waves are...

lend themselves to being ABCDE as opposed to 12345. So that's, and I haven't written a book about this or anything like that. But, and so that's part of it. Then we look at the case dev stops and we flip them both directions. So we kind of see what they are. Did you give us a sense for what the dev stops are?

Pardon? Give us a sense for what the dev stops are. DEV, right? Okay, what dev stops look at is the average true range, double true range, what the standard deviation of true range is, and how much, if you looked at a bell curve, it's not a real bell curve. It's skewed to the right, and what the right-hand skew of those bars are. And given the information of the average, the standard deviation, and the skew,

It looks at standard deviations of true range away from an average excursion, away from reversal type of thing. It looks at a reversal of a two-bar reversal and whether it's at a particular threshold. So let's say if you had a normal bell curve and you put a stop, three standard deviations

away from the price activity as a reversal and it hit your three standard deviation mark, statistically, you'd only have a 0.1% chance of having it be random. But the problem with the markets is that it's not a normal bell curve and it's skewed on infinitum, or at least that's how it seems to us. It's skewed to the right and the degree of skew to the right is skewed to the right.

And that skew to the right. Yeah, so it ends up calculating, it's kind of like a trailing stop based on... It's a trailing stop based on the variability of true range and its variability and skew. And the skew, right. Yeah. So you can approximate what the probability is. So if 2.2 standard deviations is equivalent to...

two standard deviations. So if at two standard deviations the curve is generally skewed 10% to the right,

Two standard deviations is, if my memory serves me correct, encompasses 97.5 of all observations. So theoretically, you only have a 2.5% chance of it being random. So anyway, I did studies. I used to like to study stuff all the time. So I did lots and lots of studies about the probability on a reversal.

of hitting this first dev stop, second dev stop, third dev stop. And it's like this. Once you hit the first one, what's the probability of hitting the second one? Once you hit the second one, what's the probability of hitting the third one? And also, if it's preceded by a momentum divergence, then all the probabilities go up.

because of probabilities of market turning. So we've got all those probabilities, and we know what the death stops are, and we use those. We look at candlestick completion. So let's say you have a huge up day. If it's followed by a very narrow range inside day, that's an evening star. It's an evening star. But you know what the number is. You know what the midpoint is in a big up day.

So regardless of whether or not it happens, you know that that's big support because that would be kind of completing the – you'd either have a dark cloud cover or in a golfing line or whatever.

So we'd look at the Kansas to complete. So that a bunch of numbers, it all goes into the computer, prioritizes different stuff. And we make basically a judgment call overriding, you know, overriding what the computer is saying as as we deem appropriate.

Right. And how does the, because the other, well, first of all, the DevStop, is that available on different charting packages? Is that just something that you've created that you use internally? No, no, that's available on lots of different packages. NinjaTrader, TradeStation, Bloomberg. Yeah. Monk, Monk.

Those are the three that come to mind. CQG. Those come to mind. But I think anybody who's interested can just call Case and Company. And I think they'll give a free... Oh, TradeStation. Give a free... NinjaTrader, did I say? Give a free trial. Give a free trial of...

of that okay we'll put those uh we'll put those contact notes uh contact information in the in the uh show notes at the end um okay another uh significant innovation that you came up with was the case bars which which i find quite interesting um because it does it does address one of the the big issues that i think that uh you've kind of alluded to which is this notion of time

Yeah. So how did you how did you come up with the case bars and how do you distinguish their efficacy relative to, say, the point and figure chart in terms of what it's trying to do? Well, I mean, right off the bat, you know, if you like to look at candlesticks, you like to look at a bar chart, you can't get a point and figure chart to do that for you. And I don't know, but I would imagine it would be pretty hard to look at a stochastic on a point and figure chart.

So with the case bars, you can look at, uh, bars, you can look at candlesticks, you can look at, you know, anything that uses open high, low close, you can look at. Yeah. And so if you think about the market as a tube, let's say where this is, you know, a slice of time, time goes, goes on like this. Um, and, uh, let's say the, the, uh, uh,

diameter of the tube is proportional to volatility. So if you're looking at it just like this, and you've got this tube running across, and the volume inside the tube gets bigger, the tube's going to go like this. So if you're looking at a bar painted on the side of this tube, it's going to go like this. And then let's say the volatility comes back, it's going to be like this. So what you end up with is bars all different sizes.

Those kind of bars, all different sizes, can wreak havoc because they're noise on your indicators. You know, they can cause noise on the indicators. You have to be aware of exactly what's going on. Did you have a big bar? Was it a mistake? Who knows what's going on? And so the other way that you can look.

at this tube. It's like this. Let's say this is the diameters. So you're looking at something that's this high. And the volatility goes up, same diameter, while the volatility goes down. So rather- This is just essentially, you're not creating another bar

to the right based on time, you're creating the next bar based on the achievement of some true range expansion. Equal volatility. So if you think of the diameter as volatility, if the diameter is staying the same and you're elongating the time dimension, you're just going to get more bars irrespective of time.

for a given volatility. And true range is a pretty decent proximity in the short run to volatility. Right. So... Yeah, that was one of the questions I was going to ask you. Obviously, in your analysis, you settled on the average true range as being the proper way to assess volatility. I'm curious if there was any...

competition between average true range and other volatility metrics and then you settled on average true range? Did you consider doing all this analysis using standard deviation or did you just stick with average true range? Well, it depends on what we're talking about. The standard deviations and all that go into the stock system. Because even if you have the intention of having all the bars be the same height, unless you insert fake data,

You can't make all the bars be the same height. You have to use the ticks that come in. So you're still going to get a variation. But you use the true range as the target. And you can do that a couple of different ways. You can say, I generally trade a 10-minute bar. The average true range of a 10-minute bar is 50 cents.

So I am going to target 50 cent bars. In reality, you have to target a little less because you get outliers coming every once in a while. So you use the average true range to set your target. So you can emulate a time bar, use a true range of a time bar that you want to emulate, or you can pick a fixed value, or you could even pick a fraction of a daily average value.

So you can do it a bunch of different ways. But the idea here is that all bars more or less the same height. And if you get... Rule of thumb is you can't go too short term or you end up with, you know, 100 bars in a minute. So if you have too short of a... If you have too small of a true range, you're going to get a bar every couple of seconds. You don't want to do that. So I have a...

a version of true range bars on NinjaTrader that's available through case. And we have a filter, have time filter on it. So you can't get a bar that's less than whatever you set that. So if you're used to trading half an hour bar, you know, you might set your threshold. Well, no shorter than five minutes, even if it blows through my true range, I don't want it to be shorter than five minutes.

Or if you're trading a five-minute chart, you might set that to 30 seconds. But to me, 30 seconds is a practical minimum. You don't want more than two bars in a minute.

One of the things you said that you wanted to discuss was, and you thought it was an important topic, to discuss the difference between trading and investing. And I know Tyler mentioned it briefly earlier, but did you get a chance to really flesh that out? Well, if you'd like me to comment more on it, investing is a longer-term project. You know, I mean, I have my investments to last me. I guess my...

My time horizon at this point is age 98, although I think that's in a way it's cheating because, of course, the the performance of a portfolio kind of averages out over that many years. But, you know, you have longer time horizons and your intention is to have different. I mean, if you're going to have anything, if you're going to have equities in your portfolio.

Or you're going to have funds, those sorts of things. You're not actively getting in and out of these things, you know, three times a week. This is a long-term investment in, let's say, real stuff. A lot of it's real stuff. You know, what a company is really doing, selling, whatever it is. Where in the short term, as a trader, what you're doing is...

evaluating what a price move might be in a relatively short time horizon, either for short-term profit or medium-term profit, which to me means you have a position for six weeks, or for hedging physical exposure that a company has, which may last two weeks, six weeks,

But certainly nobody that's delivering a cargo of crude oil, you know, or even let's say futures contracts, futures contracts. If you look at if you hold a position for years, you have to be willing to sit through extremely large swings. And you don't know what's going to be 10 years from now. You know, things are going poorly. You might switch up stuff. But, yeah.

Trading is you identify short-term trends in a market. It could be futures like the S&P, S&P Mini, short-term trends. And what you're taking advantage of are these short-term ebbs and flows that happen day to day, hour by hour. And you're taking advantage of these short-term trades. And let's say, for example, all you can –

can risk is X dollars. Well, if you're trading short term, shorter the term, the shorter the risk, right? Well, it's not directly proportional. Risk is proportional to the square root of time. So,

Going shorter and shorter to cut down the risk is diminishing returns because of that. But anyway, the risk you can take on a per unit basis is so much higher. If you're trading short term, you don't have to take that much risk per unit. So you can trade a lot more units. And the more units you can trade, the more you can scale into positions, scale out of positions. You know, you can kind of finesse it.

Where if you're trading the same risk long term, you can't invest that much money. You can't go near the volume and you can't really finesse anything. It's really more of a get a decent portfolio together, which all the different things complement each other and just kind of look at how it's going and, you know, sell some stuff, buy some stuff.

Trading is I get in today, maybe I'm going to get out four days from now. I'm going to get in today. If four days from now, making so much money, I think it's fabulous. Maybe instead of trading this on a 30-minute chart, I'm going to go up and I'm going to trade it on a daily chart or whatever. And then you might go a little longer. But to me, trading is...

is for the most part anywhere from multiple trades in a day, which my shop was never really involved with, but we have clients who've done that, like private investors who've done that. And maybe as long as six weeks for a longer term position. But it's actively managing a position with market timing. And it's kind of the difference between

Oh, I don't know. You know, taking a jet from LaGuardia to SFO versus getting there by by maneuvering through all the little back roads and size detours and all that kind of thing. So, Dave and Cynthia, final question is kind of to both of you.

So discussing shorter term trading and the practicality as well as the application. Dave, I know you've been on the long only side through most of your career. Do you find some overlays or areas where the short term trading applies no matter what somebody's time horizon might be?

It always applies. But what's most important is the proper perspective of the short-term trend. So if you're trading short-term, then that's your trend. But if you're longer-term investing and you have short-term setups that are, you know, one of the things I always like to say is that

One person's bear market is another person's oversold uptrend. And so it's just it's being mindful of what's happening in a shorter term time frame so you can characterize and qualify the decisions you're making in the long term. And, you know, most, you know, what you basically want to do in all cases, at least in terms of what I do, is make sure you're on the right side of trend.

And as long as you can endure a short term pullback that somebody else may be trying to capture on the short side and it doesn't violate the trend parameters in your long term trend that you're following, that's actually a buy signal. So it's it's I think all time frames are relevant. It's just are they actionable to you or they're just informational? And then I guess the other big difference between the asset classes I see on social media all the time, some analysts or some wealth managers are talking about, well,

US stock market returns the equities are You know, there's a 70% chance of it being higher 12 months from now, which I don't think is a big secret to most investors that there's a general upward drift to equities investing because of the innovation and technology and value creation from those companies and owning shares in them on the commodity side

by very definition, you are trading in a mean reverting asset class. That's right. So there is no, you know, we'll take all the downside that we have to because eventually this is just going to improve higher. So do you think that risk management is innate to your process because of the asset class that you were sort of born into as a professional being in the oil markets?

Yeah, I certainly certainly one thing I should say is futures expire. A lot of people don't get that. So because futures expire, your your time horizon is set for you in some ways. And the market is.

It's cyclical. You could say it cycles around a long-term trend, but that trend can be down as well as up. And we can have very high highs and then come way off.

And you have to really trade both sides. You have to be as comfortable trading on the short side as on the long side. And if you are trading your own, one thing I should say to everybody, never trade without a stop. Don't ever say, I didn't think it would hit my stop, my get out point. You know, you could have an appendix attack.

and not be there to get out of your trade. Never, if you're afraid of having too narrow a stop, put it at, I'll shoot myself, it goes above this number point. And one of the things that people should know about getting out of markets that don't have limits in the front contracts is you can always trade spreads

to mitigate your losses. So if you're, I don't know, what is this, November? If you're short a December contract and it starts going through the roof, then you can buy two times next June or something. So anyway. Very well said. The thing that could never happen often does.

Right, right. Be prepared for it. Cynthia, this is so fantastic to have you as a guest here on Fill the Gap. And I'm looking forward to seeing you in person in Tampa, Florida at the CMT's Midwinter Retreat in January. Just for all of our listeners, best place for them to find Case & Company, Dean Rogers, or yourself if they have other questions, social media accounts or websites, what would be preferable?

Well, people could write to me at Cynthia at Caseco.com, K-A-S-E-C-O.com or C144case, K-A-S-E, at gmail.com. It's kind of my personal independent consulting email right now.

And otherwise, go to the case and company website, www.caseco.com, and it will have my phone number. And if you call it, it'll give you my extension, Dean's phone number and his extension. And, you know, whatever else you need to know, it should be on the Caseco website.

Fantastic. We'll make sure to put that in the show notes below. Thank you so much for your time this afternoon. Looking forward to seeing you again really soon. Stay dry in Florida. Don't let any more hurricanes come through this season. Well, it's getting to be winter, so not very much rain in winter. Good, good. Thanks, Cynthia. See you soon. Thanks so much, Cindy.

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